§ Mr. Ioan Evans (Aberdare)
I am pleased to raise the subject of Amersham International. We have just been dealing with the problems of financing the European Community. Now we turn our attention to what I beleive to be a financial scandal—the way in which the Government handled the sale of Amersham International.
The company has been an outstandingly successful nationalised business, the world leader in its high-technology field. Its sales have grown by 50 per cent. in the past three years. It produces radioactive chemicals, mainly for medicine. Biotechnology has become a fashionable industry for investors to back, but most of the companies in it have still to show a profit. That is not so with Amersham International. In the year to last March its pre-tax profits reached £4.1 million on sales of £48.5 million, and more than 80 per cent. of that was earned abroad. Its only big rival, New England Nuclear of America, was bought by the chemicals giant du Pont.
Amersham International employs about 2, 000 people, not only in this country and Europe but in America and Australia. Its headquarters are in Amersham, but there is a large development taking place in Cardiff, one which is of particular interest to all hon. Members from South Wales.
The company now produces and sells 2, 500 types of radioactive chemicals for laboratories and hospitals, and other radioisotopes used to measure the thickness of industrial steel and—perhaps a less mundane use—to trigger off nuclear reactors. It is a very important company.
Evidence of the company's strength is that it had no difficulty in persuading the State shareholder—then the United Kingdom Atomic Energy Authority, although the ownership was transferred to the Department of Energy for it to do what it has done with the company—to help finance an ambitious £20 million expansion programme in Cardiff alone. The new Cardiff facilities, which effectively double Amersham's production capacity, were opened only last May. I emphasise that £20 million of public funds was put into the Cardiff development, doubling the company's productive potential. There is no doubt that that was a strong commercial undertaking fulfilling all the criteria that the Government have talked about, being competitive, productive, efficient, profitable and with good industrial relations. There was no reason why that company should have been handed back to the private financial speculators other than the doctrinaire dogma that has been pursued by the Government. Eleven of the 18 hon. Members who have requested debates under the Bill have chosen this subject. That shows the deep concern felt about the way that the Government have dealt with the issue.
On 22 December—a Christmas present for somebody, I suppose—the Under-Secretary of State for Energy, in a written answer, stated that the Department of Energy had decided to offer shares in Amersham International for sale to the general public. On 11 February the Under-Secretary announced, again in a written answer, that arrangements had been made to offer on the Stock Exchange all the shares of Amersham International at a price of 142p a share. That implied a market capitalisation of £71 million.
261 On 24 February, in another written answer, the Under-Secretary stated that the offer for sale of Amersham International had been 24.6 times over-subscribed.
That is the background to the scandal of the sale of the company. I believe that the Government's privatisation policies are against the national interest. Even if one were to decide to sell off public assets, it was against the national interest to sell that highly financed industry during the middle of a recession because, although the Prime Minister talks about seeing the light at the end of the tunnel, it seems to be a very long tunnel. It was wrong for the Government to sell that national asset when the market was depressed. It is major scandal that national assets are being sold at knock-down prices. That is the accusation that we make against the Government. It must be looked at against the background of other measures already taken by the Government to dispose of public assets.
The sale of shares in public sector companies since May 1979 is as follows: between 1979 and 1980—as soon as they took office—the Government sold part of British Petroleum, a national asset of the value of £276 million, Drake and Skull Holdings, £1 million, and Suez Finance, £22 million; during 1980 and 1981, British Aerospace, £43 million; between 1981 and 1982, British Sugar Corporation, £44 million, Cable and Wireless, £184 million and the National Freight Company, £53 million.
§ Mr. Evans
I will come to those in a moment. The Government talk about wider share ownership, but we should realise that if firms are held in public ownership every man and woman has a share in the company. If, however, the firm is put on the market, only those who are able to finance the purchase of shares become the owners. To talk of wider share ownership is a deception; it is dishonest. The Government should not perpetrate the lie on the British public that they are giving wider share ownership by putting up these companies for private grabs.
§ Mr. Geoffrey Robinson (Coventry, North-West)
It might interest my hon. Friend to know that, according to one newspaper report, at least 50 per cent. of the purchase costs of Amersham was loaned to potential investors by the Bank of England. It had nothing to do with small investors.
§ Mr. Evans
I hope that my hon. Friend will develop that point.
The sale of Amersham International has provided financial speculators with handsome profits on the Stock Exchange. The miscalculation, it is estimated, could have cost the Government £21 million. Interruption. My right hon. Friend the Member for Leeds, South (Mr. Rees) says that the amount could be higher. This is money that has been lost due to the manner in which the Government have dealt with the matter. It is a massive scandal.
Over £1, 750 million flooded in to bid for the £71 million worth of shares offered in Amersham that has been 262 publicly owned since the war. It was taken over under a Tory Government. Churchill may have been the Prime Minister when it was brought into public ownership. Under successive Conservative and Labour Governments, the company has been kept in the ownership of the British people. Only this extreme Right-wing Tory Government have adopted different policies. The debate is needed to expose what the Government are doing.
§ Mr. Hugh Dykes (Harrow, East)
Is not the hon. Gentleman being wise after the event? Did he raise some of these points before the plans were promulgated? Did he object to the issue price? Did he read the newspaper comments suggesting that the price was high enough?
§ Mr. Evans
If the hon. Gentleman reads the Committee proceedings of what became the Competition Act 1980 he will find chapter and verse of the Government's approach on the sale of these companies. The view was that the problems of Britain would be solved by increased competition. The Government outlined how assets would be sold off. I defended public ownership.
The need to sell a highly successful company at this stage of an economic recession at a give-away price has to be justified by the Government. They are in the dock. It is not the Government of the right hon. Member for Sidcup (Mr. Heath) who are in the dock. The right hon. Gentleman did not try to do away with the firm. Nor did Harold Macmillan, Eden or Churchill when they were Prime Minister. They did not seek to share the spoils of public ownership in the way that this Government have done. That is our indictment of the Government.
The company has been publicly owned since the war under the wing of the United Kingdom Atomic Energy Authority and Governments of various political persuasions. When dealings in the shares the following day jumped on the Stock Exchange to 190p, that represented a one-third premium over the initial offer price of 142p. The company could have been sold for £85 million, but was disposed of for £63 million. That is why we come to the calculation that £21 million has been handed to those people who, of course, held the shares for a few days, disposed of them and consequently made a financial packet.
They were not the only people to draw a financial benefit. The Government handling of the sale of Amersham shares must be exposed. The two merchant banks involved were N. M. Rothschild and Morgan Grenfell. As I understand it, the Social Democratic Party candidate for Glasgow, Hillhead is involved with Morgan Grenfell, although I do not know whether he was consulted. It is strange that the Government should be consulting the Social Democratic Party candidate about the state of these shares. However, Morgan Grenfell is not so much the evil villain of the piece. Rothschild was the Government's adviser. The two banks received £310, 000 between them for disposing of this considerable national asset; putting this successful company on the market: and carrying out the Government's financial dogma.
§ Mr. Robert C. Brown (Newcastle upon Tyne, West)
Does my hon. Friend not find it remarkable that these bankers, with money running out of their ears, get £310, 000, which is almost the total cost—£386, 000—of shares allowed to the employees?
§ Mr. Evans
I am glad that my hon. Friend has mentioned that point and I hope he will develop the idea 263 of dangling a little bit to the workers in the company to try and prevent them from taking industrial action that would be of disadvantage to everybody.
I will not stop with the involvement of Morgan Grenfell or Rothschild because the stockbreakers Cazenove—I almost said Casanova, and said "stockbreakers" as a Freudian slip—earned a commission of £89, 000. The expenditure did not stop there. A large group of leading investment institutions in the City offered to underwrite the new shares and were paid a commssion of £887, 000. When my right hon. Friend the Leader of the Opposition said, "Somebody has made a million here", the Prime Minister said she hoped that he would repeat it outside the House. I will repeat these figures outside because over £1 million has gone to the stockbrokers and financial agents to dispose of this company.
It can be argued that when a private concern sells off its shares to go on the market, it is normal City practice to underwrite the sale. Surely the Government do not have to do that. The Government, who are hell-bent on selling off the company, do not have to pay £887, 000 to underwrite its sale when the company has been oversubscribed by £25 million. That situation is a scandal and it was obviously unnecessary to underwrite this share as an insurance against the issue going badly.
The Opposition are concerned and raise the sale of these shares because the Government have other proposals in the pipeline. They will not stop with the financial speculators getting their greedy hands on this publicly owned company. Such examples are the sale of British gas interests in Wytch Farm oilfield in Dorset—estimated to sell at £200 million to £300 million—the sale of 51 per cent. of Britoil and BNOC oil industries for £750 million to £900 million and, in addition, the sale of British Gas offshore oil interests at £700 million. They are all scandalous examples and are a form of national corruption. Churchill defined the Tory Party as a group of organised corruption. There will be a sale of shares in British Telecom for about £1, 200 million. In that industry there will be tremendous technological development and it would be to the great benefit of the British people that it should be kept in public hands.
Much has been said about the crime rate, which has increased massively since the Government came to power. I believe that the biggest bunch of criminals are those who sit around the table in the Cabinet room and are beginning to dispose of our national assets. The appropriate subcommittee of the Cabinet is presided over by the Prime Minister.
Publicly owned industries have played a significant role in the British economy. They account for more than one tenth of the gross domestic product and possibly one fifth of the total fixed investment in Britain. The four largest employers, leaving aside the Government, are the publicly owned industries. They occupy a dominant position in energy, steel, transport and communications. About one third of all plant and equipment produced by British industry is consumed by publicly owned enterprises. They are also the sole domestic customers for several areas of British industry.
The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) knows what a disaster it would have been for Birmingham if British Leyland had collapsed.
§ Mr. Evans
It is absolutely true that if that firm had collapsed, thousands of small private firms would also have collapsed.
The Government took Rolls-Royce, British Leyland and Amersham International into public ownership as loss-makers, but when they became profitable they were put on the market to be sold to private speculators. That is immoral. If the taxpayer must pay for a loss-making industry, why cannot the taxpayer, the ratepayer and the general public have the benefit of publicly owned industries when they become successful?
If we consider the Government's record, we see that a large section of the private sector has been destroyed. In my constituency firm after firm has gone to the wall because of the Government's financial policies. They have abolished exchange control and companies are investing abroad instead of in Britain. There is plenty of scope to invest in the private sector, but the Government are not doing that. They have destroyed a large section of private industry and are now hell-bent on destroying the public sector.
There is a myth that publicly owned industries do not make as much money as the private sector. That is nonsense. Amersham International is a classic example of the many public firms that are highly profitable and which, by being profitable, are beneficial to British people. We must spell out that fact to the general public. From 1940 onwards, that firm earned money for the Government. It was in credit and it meant that the more that we could earn from the public sector, the less we needed to pay in taxes.
From listening to the Tory media, one would almost believe that only Britain has publicly owned industries. Yet the French Government recognise that if they are to achieve economic recovery they must have a programme of publicly owned industries. Mitterrand has put to the people of France the need to develop public ownership. We have seen that in Germany, and intervention in Japan. All our main industrial competitors are using greater and greater economic intervention and yet we have this Government.
Yesterday the right hon. Member for Sidcup said that with the Budget monetarism was dead. It is not—it is alive and breathing. The sale of Amersham International is part of the monetarist policy. If one reads Hayek and Milton Friedman one finds that they talk about the need to dispose of industries owned by the general public.
There is also the argument about monopolies. The danger is, what guarantees are there? Amersham International is a main supplier to the National Health Service. It provides radio isotopes for cancer research, and other things. What guarantees have the Government that the firm—it was owned by the British people and when it made excess profits that excess went back to the people—will not charge increased prices so that the National Health Service will be putting more money into a private firm run purely for speculative profit? The National Health Service may be paying a great deal more in the future than it has so far.
This is a scandal that reminds one of the sale of St. George's Hospital, which is between Hyde Park and Buckingham Palace, and is almost as big as Buckingham Palace. The building, with an estimated value of £20 million, is being sold back to the Duke of Westminster by the Government for £20, 000. If people outside this place 265 realise what the Government are doing, I warn the Government that there will be trouble. There has been trouble before with their policies and if they will not change their ways and begin to govern in the national interest instead of in the interests of the financial backers who put them here, there will be trouble.
We are fully justified in raising the sale of Amersham International. We cannot now undo the damage done by the financial speculators let loose by the Government. What we must do—we can do it in this debate—is warn them that outside the House there will be a growing feeling that the Government cannot justify their continuation in office if they deal with other companies as they have dealt with this excellent company that has served the British public so well.
§ Mr. Merlyn Rees (Leeds, South)
My hon. Friend the Member for Aberdare (Mr. Evans) tempts me when he speaks about central European monetarists' policy. I am as sceptical of them as I have been for 40 years about central European Socialists. Somehow, they breed people who do not understand this country. He also tempts me when he talks about the different types of public ownership, because Amersham International was never a nationalised industry but a 100 per cent. owned company. In that way it is rather like British Leyland. Out of its development over recent years, there have come companies in which the people have owned 25 per cent. shares and so on.
My point tonight is that the procedures of the House do not match up either to the sale of companies in which we have a proportion of shares or to discussions about the way in which we go about the nationalised industries, some of them before the war but most of them since the war.
I agree with my hon. Friend that Amersham International should not have been sold, but it was Government policy and in my view what we are looking at tonight is the method of sale. We are using the Supplementary Estimates and the figures in here to find out what happened and what the true figures are. We are using the debate on the Supplementary Estimates for its proper purpose. We seek from the Minister this information.
I remind the House that on Monday 22 February—that is, before the final sale of Amersham International—I sought leave of the House under standing Order No. 9for the purpose of discussing a specific and important matter that should have urgent consideration".The words that I used on behalf of my right hon. and hon. Friends were:the need for the Government to impose a moratorium on dealings in Amersham International shares until a full investigation has been made into the sale of Amersham International at a price that will lead it to a substantial loss to the British taxpayer."—[Official Report, 22 February 1982; Vol. 18, c. 601.]So it was clear before the sale on the Thursday that there was to be a loss, and that the full amount of money that could have been obtained was not obtained. We did not have to wait until after the event; we knew before the event that the Government would lose money on their sale.
§ Mr. Dykes
I accept what the right hon. Gentleman says for the immediate few days before the issue, but the press began to pay attention to the matter before then, and 266 the bulk of comments were to the effect that the issue price of 142p was enough, or too high, or perhaps pitched on the high side.
§ Mr. Rees
I shall seek to argue in a moment what was said in Committee about Amersham International a long time before the newspapers and financial pundits made their comments. If Governments were to proceed on the advice given by the financial correspondents of newspapers, we should be bankrupt. Most of them are free with their advice, but they do not follow it themselves.
On the previous Thursday, applications worth £1.5 billion were made for a £71 million offer. The shares were 142p. They were sold at 182p. I wonder what the price is now. Perhaps it is 192p. The stags made a killing of £25.5 million. It does not matter what the stags made, who they sold to, or how they bought the shares in the first instance. What matters is how much money the Goverment get. Is it the figure that I have of £63.7 million? The Government have made their decision. They undersold the company in such a manner that the community lost £25 million. What an outcry there would be if, in local government, the nationalised industries or anywhere else £25 million went astray and if it was accounted for in the conventional fashion. The Government are concerned about public expenditure, but this loss is not accounted for in the Beige Book, the Red Book, the Blue Book, or any other coloured book that we get around Budget time. It is our job tonight to find out the facts.
The method of sale was decided by the Secretary of State for Energy. I remind the hon. Member for Harrow, East (Mr. Dykes) of what my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) said on 7 April 1981 —nearly a year ago:The danger of public flotation, as has been mentioned by many members of the Committee—and, I hope, taken on board by Conservative Members—is that if it is done in an uncontrolled way, it will allow nominee buying of all kinds, and, in time, the company could effectively be in the hands of an organisation, which was not the Government's intention and certainly not the wish of the staff. Therefore, we cannot support the principle of an uncontrolled public flotation of the shares in The Radiochemical Centre Limited."—[Official Report, Standing Committee A, 7 April 1981; c. 81.]That was what my hon. Friend said nearly a year ago—long before the newspapers got hold of the story.
In our view, different methods must be used in any future sale of shares. I imagine that we are entitled to use whatever information that we get tonight—the amount of information here is not good enough—to remind us that we must not make the same mistake again. That is the purpose of the Estimates and the reports of the PAC.
Reference has been made to the number of shares purchased by employees. In Committee my hon. Friend the Member for Merthyr Tydfil tabled an amendment which would have given a substantial number of Amersham International shares to the employees. With all the talk about a property-owning democracy and articles of association saying that there shall be an employee share scheme, what is the percentage of shares that can be purchased by employees?
It is 3.7 per cent., or thereabouts. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) was surprised when the figure was given. Skilled scientists working in both plants, and having built up the company in the main plant at Amersham over the years, they can purchase only 3.7 per cent. of the shares.
§ Mr. Rees
No doubt the Minister will confirm the figure.
I am sure that a method of tendering was considered by the Government. Sale by tender would do what my hon. Friend the Member for Merthyr Tydfil referred to in Committee and lead to purchase of the shares by the big institutions—at least, that is what was argued. Therefore, we want to know who did purchase the shares in Amersham International. We have a right to know, and I believe that there is a way of finding out.
We are sometimes guilty of using slogans to describe a belief about which we feel strongly. With privatisation it was said that the community will own the company. Well, we have 3.6 per cent. for the employees.
I checked last week—my information cannot be authoritative as I am not in a position to be so—and was told that in a population of 55 million, knocked down to 18 million to cover people of voting age, there are about 60, 000 people in this country who own shares other than through pension funds or insurance policies. That is one crowd at Manchester United—or a lot of crowds at Leeds United these days. That is not a large number. Therefore, who bought these shares? Apart from the 3.6 per cent. and the odd small purchaser, the shares will be owned by the trusts, the merchant banks and the pension funds.
§ Mr. Rees
My hon. Friend says not the merchant banks. It depends on how far the price will go. However, I want to know who now owns the shares.
There is another thought. If the Government want to sell shares to the general public, why not do so over the counter in post offices? There are thousands of post offices. The sub-postmasters lobbied Parliament because the Government were cutting the amount of work they do. If the people of the country are waiting to buy the shares of the companies that are being sold off, why not sell through the post offices, because most people do not know where Throgmorton Street is? They do not know about the City, but they do know the post office down the road. Therefore, if the Government are to carry on with this policy, how will they sell shares in the future?
I come now to the accounts. We have in 1981–82 Class IV, Vote 25. My hon. Friends have today been devilling around looking for information, but all we start off with is this:A1. Expenses in connection with the sale of shares of Amersham International Limited—£4, 000, 000. This includes financial and legal advice, underwriting (including stamp duty) and other costs.I shall come back to that because the Department of Energy has given broken down information on that:Further expenses may occur in subsequent years, including any arising from indemnities given in relation to the sale.Who was given an indemnity in the sale? Appropriations in aid are £3, 999, 000. The net total is £1, 000. No doubt that is a device that is used in the accounts.
I presume that the real figures emerged only after the notional figures were put in the supplementary estimates. The global estimate is £2.6 million to £2.7 million. Banks, brokers and underwriters are to receive £1, 154, 000. Therefore, the banks are receiving just over £1, 250, 000. 268 I presume that the banks are Rothschild and Morgan Grenfell and Co. As our job is to look at the accounts of Government, we must ask who the brokers are and how much they received. We must ask who the underwriters were. In the Department of Energy figures it is stated that £310, 000 is included for the merchant banks. Stamp duty was paid at £750, 000. That comes back into the Exchequer. The receiving bank is the National Westminster. It played no part with the merchant banks in the sale, but it was the receiving bank. It got £500, 000.
Publicity, solicitors and accountants received £200, 000. If that company were a nationalised industry that was taking over other companies, every scrap of information would have had to be given. I believe that every scrap of information should be given. Who were the solicitors? They performed their task properly, as did the accountants, but who were they? We should know.
It is stated that the cost of publicity is included in the figure of £200, 000. However, what about Rothschild and Morgan Grenfell? Surely publicity was included in their money. Therefore, there were two dollops of money for publicity. I ask the Under-Secretary of State: Is the publicity included in the figure of £200, 000 the only publicity and, if so, who did that part of the £200, 000 go to? Those figures need explanation. I ask for them in the interests of parliamentary accountability.
One other point has been raised in the last fortnight. I believe that I am entitled to raise it as I considered it when I was Home Secretary. It is not a narrow political point. Many firms, which receive fees that are laid down, contribute funds to the Conservative Party, as do trade unions to the Labour Party. This point applies to the trade unions as much as to those firms. Since about 1884 all hon. Members have had to publish election accounts. They must be related to a certain amount per elector. That amount is greater in a county constituency. Every scrap of money must be accounted for, down to the last halfpenny. Larger sums of money are given to the central parties, no doubt also to the regional parties. I do not believe that that is so in the Labour Party, except in a smaller way. That money should be accounted for in the same way. It is no good looking at the constituencies when we are not looking at the overall organisation.
The Government are committed to privatisation. They should ask the Bank of England to be responsible for the sale. I am advised that it would not need a large department, and that it would need to take on a few but it would not be difficult—
§ Mr. Rees
The hon. Member for Birmingham, Selly Oak, who is a stockbroker, thinks that that is not the case. I am advised that the Bank of England would not require many staff. It is the "National Bank" and in future sales it would be much wiser for the Bank of England to undertake the sales. I do not know what part the Bank of England played in giving advice on the recent sell-offs.
Underwriting fees need to be paid only if there is a doubt about the appeal of an issue. That is what underwriting is all about. It is incompetent to underprice an issue substantially and then to pay an underwriting fee. I should like to hear the Under-Secretary's comment on that.
We have been referring to Amersham International, but one or two other companies have been under-sold. British 269 Aerospace and Cable and Wireless are examples, and BNOC is also relevant. The information is available and we must learn from it. The same mistake should not be made again.
An allegation has been made in The Observer about BNOC. I wonder whether the same thing has happened with Amersham International. According to the allegation, Rothschild received £155, 000 even before the House had given its approval for the sale of BNOC, and before Second Reading had been obtained. The device used was to charge the money to BNOC, which is 100 per cent. State-owned. Therefore, we have a new way of going about privatisation. Permission is not obtained first from the House of Commons. The Secretary of State goes to the 100 per cent. State-owned company for which he can give directives and he says to it "Get privatisation under way. I have not got the permission of the House of Commons, but who cares? The advice costs £155, 000 and I may not get it. We may change our minds as we did in the year before when we published a Bill and then did not proceed with it".
Why was that information not given to the House of Commons? What is even worse is that the directors of BNOC were not informed either. The allegation in The Observer states that the board, apart from Mr. Shelbourn and Mr. Danzig, was not told what was happening. Was the same thing done with Amersham International? We shall have our chance to discuss BNOC, but I should like to know whether this happened with Amersham International. No paliamentary authority was obtained.
The Chairman of the Public Accounts Select Committee—a former Conservative Minister—said that if he were Chancellor of the Exchequer there would be an inquiry about Amersham International. At the time of the sale, The Daily Telegraph headline was "Amersham inquiry ordered." The Times story was smaller. It read:Senior sources suggested that the Prime Minister was indeed embarrassed by reports that £20 million profits had been made at the taxpayers' expense and that in such circumstances, an internal inquiry would naturally follow. It was stated, therefore, than an inquiry could be expected in both the Treasury and the Department of Energy".I do not believe that for a moment, because it applies to the couple of days during which the stories were running. This is on all fours with the material in the past few days about the Prime Minister leading the fight against crime. Apparently it will be nothing to do with the Home Office. The right hon. Lady is to lead the fight against crime and she is to have an inquiry. I do not believe that. I know that the Under-Secretary will tell us that the reports that appeared in the newspapers, which came from briefings, were untrue and that the press produced the usual old hokum when it was concerned about the issue. One can visualise the briefings that took place, during which it was probably said "Tell them that we shall have an inquiry". Of course we shall not be having an inquiry.
However, I am told that the Public Accounts Committee is to have an inquiry. I wrote to the Committee and it told me in reply that it would not hold an inquiry into Amersham International but that the chairman is taking up one of the previous sales when much the same thing happened. Therefore, we shall have an inquiry in the House.
If the Amersham International scandal is repeated with BNOC, there will be losses that would amount to an even greater national scandal. We must learn from the Amersham International scandal. The Government have 270 not thought out the method of privatisation. In investigating the scandal we are performing our watchdog role in an endeavour to ensure that a similar scandal does not take place again. It is not often that the Supply Estimates enable us to perform our proper job, but we are seeking to carry it out tonight and we want information. We do not want the emotional stuff of two or three weeks ago. We want the facts to fill in the bare bones.
§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
I think that everyone knows that I am a member of the Stock Exchange. I have in the past dealt with the house of Rothschild, Morgan Grenfell and Co. and other reputable merchant banks. I had no underwriting on this issue. I did not apply for shares for myself in this issue although my children's trust obtained 200 shares. I did not apply for myself because I believe that in public life as an individual it is often safer not to apply on such occasions, and such proved to be so in this instance.
More nonsense has been spoken on Amersham International and more heat has been generated for so little light than anything that I have heard or seen this Session. The Leader of the Opposition took up almost an entire Prime Minister's Question Time on this issue and the terms that have been used tonight include "financial scandal", "dishonest", "private grabs", "evil villains", and "speculative profits". If these terms are meant to imply that the house of Rothschild is to be linked with them, I must say that such words often speak more of those who say them than they do of those whom the utterers attempt to slander.
I take the House back to another "wicked scandal" that took place in 1977. It was a much easier sale and a much larger one to boot. The Government sold 67 million BP shares. Amersham International was unique in what has become a fashionable sector whereas BP had been around for a very long time. Furthermore, BP was a quoted company at the time. It was much easier to judge the price in the BP sale because there was a public price to judge it by.
What happened in the BP sale? The sale of 67 million shares attracted applications for 315 million shares—another scandal! I do not believe that it was called a scandal at the time. However, the premium between the first day and the second day was between 68p and 85p a share. Some wicked people, with the connivance of an evil and corrupt Government—a Labour Government — made £50 million, which in today's money is about £90 million.
If it was beyond the wit of the Bank of England, which I believe did the issue, to be accurate, with a public quotation there to judge it by, why should Amersham International with all the esoteric sides of its involvement be easy to judge?
§ Mr. Merlyn Rees
This was discussed in various Committees. The hon. Gentleman will recall that Burmah Oil had been in some kind of trouble, and by some chance the Burmah shares had come as part of the BP portfolio. I shall not go into the reasons for Burmah being in trouble, but selling off a company and selling off a proportion of Burmah shares in BP are quite different matters.
§ Mr. Beaumont-Dark
I am delighted that the right hon. Gentleman mentioned that, because he is quite right. A few days makes a tremendous difference when placing 271 stock. A difference of a few days can make a fool look a genius and a genius look a fool. Much the same seems to be true of politics.
The oil market was in a depressed state and it changed. It turned on a sixpence, as we say. What happened with this issue? My right hon. Friend decries financial journalists. People always decry journalists, although they rush to get into print if they possibly can. Let us consider the press comment at the time. As an individual, I believed that The Daily Telegraph was right to say that the shares were "high". The Investors Chronicle, which had a chance to consider the matter for a few days—it is not known to be a highly excitable paper and is usually very accurate—said that they were "a shade ambitiously priced". The Financial Times said that the issue had a "pretty glossy dressing".
The company was issued not at 19 times last year's earnings of £4.1 million, but at 19 times the forecast of £8.3 million—in other words, at 30 times the last real year's earnings. All the rest is promise. The General Electric Company, one of the most successful in the country, with a great track record behind it, stands at about 13½ times earnings. Whatever one may think of particular companies, I think that everyone agrees that Marks and Spencer has a supreme track record in growth, management and labour relations. Marks and Spencer is on 17 times earnings and ICI on 9½ times earnings. So why should issuing a company without a proven record—indeed, with a very patchy record—at 19 times earnings be regarded as so wicked?
The right hon. Gentleman said that we should use the Bank of England to do issues in the future. That may sound a good idea, but the pricing of many gilt-edged issues by the Bank of England shows that it has sometimes been substantially wrong—not because it is venal, wicked or incompetent, but because interest rates and sentiment change on a sixpence. Barclays Bank recently issued a debenture stock for itself at a price which now makes it seem an unwise decision to latch on itself such a high debenture. These things happen. With the benefit of hindsight, of course, I would say that the shares were issued too low, but if I could reconsider every decision in my business life with the benefit of hindsight, instead of being the relatively poor man that I am, I should be as rich as many Opposition Members. If politicians could look back on many of the decisions that they have made and change them, there would be a lot more successful politicians and a much more prosperous country.
What we do with this money is not something scandalous. It is not just speculative profit. It is a Conservative philosophy that the State should not have a womb to the tomb envelopment for people. It is our task to see that successful companies should be returned to the private sector when they can be better run by it. It is only with the hundreds and millions of pounds that are raised by the sale of those enterprises that other companies can be kept going. The hon. Member for Aberdare (Mr. Evans) said that he wanted to see British Leyland kept going—and so do I. However, it will lose £500 million this year and that money must come from somewhere. It can either come from taxes, which causes higher rates of inflation or it can come from the sale of State assets on behalf of the people when continued ownership is not necessary. My answer to the hon. Gentleman is that the 272 year that we get BL onto a sensible, profitable basis, where it can stand on its own feet, BL will be better owned privately than by the British taxpayers.
I feel no shame in saying that the more we can build companies up to be prosperous, the more we can return them to private enterprise, the less taxation we need to impose upon people. The Amersham business is unfortunate for the poor people—I do not use the word "poor" in a financial sense—but the way that some people have been criticised because of the timing of this issue is wrong. The Governor of the Bank of England has not been sacked every time the Bank of England has been wrong about timing. If politicians were held to the same account there would not be many reputations or MPs left in the House today.
§ Mr. Beaumont-Dark
I am just finishing. Other hon. Members wish to speak and the hon. Gentleman had a good 28 minutes.
I hope that the House will not keep latching on to this great argument about scandal and disgrace. The sale could have been done higher, but not £25 million higher. That is a great nonsense. The shares might well have been 10p higher, but that is a different thing altogether. In my professional view, the loss to the taxpayer was more like £5 to £7 million. If one wants to float a company successfully, there has to be a premium and there have sometimes to be issues which are more successful and those which are less.
§ Mr. Beaumont-Dark
I am just finishing.
I hope that the House will get this matter out of its system. Those 11 good men and true do not seem to understand the difference between success and failure because most of their life has been shrouded in failure.
§ Mr. John McWilliam (Blaydon)
I am grateful to the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). It has been made perfectly clear to the House that the Government intend to drag a smoke screen across this whole tawdry issue. I appreciate the hon. Gentleman's professional judgment, but I believe that he made one or two misquotes which I will come back to.
I asked a couple of questions about this which received some interesting answers. I asked the Chancellor if he would take steps to prevent unfair bidding for shares in a public company which is being privatised, whether by fixed price or tender, by virtue of the bidders' special inside knowledge of the likely value of the shares. The Financial Secretary told me that he was satisfied that the existing arrangements were adequate to prevent such abuses.
I also asked the Chancellor of the ExchequerWhether he is satisfied that the present arrangements for the disposal of publicly owned assets are such as to maximise the return to the Consolidated Fund.We all have the book and can see the figures. I received the following extremely illuminating answer:As we made clear, we shall consider carefully the appropriate method of sale in relation to further asset sales. We certainly do not rule out the possibility of different arrangements in future from those we have hitherto employed."—[Official Report, 9 March 1982; Vol. 19, c. 378.]273 That answer at least implies that even the Government were not entirely satisfied that the taxpayer had gained the maximum benefit from the disposal of privatised shares.
The hon. Member for Selly Oak said that it was a good idea to return assets that had been privatised to public ownership. That is not the case with Amersham International.
§ Mr. Beaumont-Dark
I said that assets should be returned to private ownership, not public ownership.
§ Mr. McWilliam
I listened carefully to the hon. Gentleman. However, assets that have been generated and developed with public finance and the taxpayers' money should at least be sold at the maximum return to the taxpayer. I do not for a moment argue that such assets should be privatised. However, if the political dogma of Conservative Members demands that such assets are privatised, they should at least say that while they believe in privatisation they also believe that its price is the maximum return to the taxpayer. I am sure that the hon. Gentleman will agree with me and will agree that the evasive answer to my question to the Chancellor of the Exchequer at least shows that the Government accepted that the arrangements are not such as to maximise the return to the Consolidated Fund.
On 28 February the Investors Chronicle announced that every Amersham share would appreciate by about 30p from the moment that it was bought. If the journalist who wrote that story knew what would happen before the Amersham shares came on to the market there can be no doubt that the Government also knew. Indeed, 30p was an extremely conservative estimate. The figure turned out to be 48p. I can understand why it is said that the Investors Chronicle gave sound advice. However, we are talking not about venture capital but about sure things and about an additional 18p. It is interesting that the Government should choose to go to Rothschild, which has recently been reinforced by the appointment of Lord Soames as its consultant. The Government went to Rothschild and gained advice on the issue price. Therefore, why has Rothschild now been chosen as the bank to manage the sale of the British National Oil Corporation? It is another question the Government will have to answer at a later date, but one which we must ask now. I am currently serving on Standing Committee D on the Local Government Finance Bill. Financial mismanagement on this scale will be dealt with most severely by the penalties which the Government are suggesting, but in this case, where it is their friends who are concerned, there seems to be an entirely different set of principles involved.
Most underwriters involved in the sale of public assets, and therefore making substantial profits, have also made large contributions to the Conservative Party. Barings, for instance, who helped dispose of Cable and Wireless, made a contribution in 1980 of £15, 050. Kleinwort Benson, who disposed of British Aerospace, chipped in with £12, 500. Lazards, who did British Gas, contributed £11, 000. Morgan Grenfell, again involved in Cable and Wireless, contributed £12, 500. In total the accepting houses kicked in £92, 000 to Tory Party funds in 1980. We are expected to accept that there is no correlation between a nonsense such as has been perpetrated and those contributions.
§ Mr. Beaumont-Dark
I should like to ask the hon. Member a point blank question. Is the suggestion that these houses prostituted their professional knowledge in the sense that they got the issues because they gave subscriptions to the Conservative Party? If you are saying so, I think you ought to make it clear.
Mr. Deputy Speaker Mr. Bryant Godman Irvine)
The hon. Gentleman must accept that I am saying nothing.
§ Mr. McWilliam
I am grateful to you, Mr. Deputy Speaker.
The fact that the accepting houses did so is neither here nor there. All I am saying is that these facts must be taken into consideration, together with the facts of the sale which we are discussing.
I quote from the Spectator:There is absolutely no way of knowing beforehand what the `right price' of an issue is.I agree with the Spectator. There is no way of knowing exactly the right price, but people have a good idea. To quote the Spectator again, slightly more against the case which I appear to be making:What got it away to such a fantastic start—was its scarcity value. There are very few glamour companies in technology in the UK. And Amersham had all it takes, medical diagnostic and yet nuclear, all in the one ball.This is true. This is one of the problems which Members on this side of the House face continually when they are trying to say to hon. Gentlemen opposite from the bottom of their hearts and from a completely different standpoint that this nonsense of confidence, this South Sea bubble type mentality, in speculation in shares is ridiculous. If it is going to happen with assets which have been developed as a result of public investment of money which came from the taxpayers, surely it is right that the benefit from such privatisation should go back in full to the taxpayers who made the initial investment.
Various suggestions have been made as to how we should proceed. For my sins, I was once a director of the Local Authorities' Mutual Investment Trust, which probably threw more money into more companies than most trusts in the United Kingdom did. I was well aware of my duty. It was not to the taxpayer but to those local government servants who had invested their pension funds in the trust. My duty was to secure the maximisation of the profits from the trust or the obtaining of sufficient capital growth and profits to enable us to pay the pensions, to pay the unittrust pension entitlement which we had built up. I entirely accepted that duty.
As a result of being a director of the trust, I was involved in taking decisions about underwriting share issues. I thought that for some of the share issues that we were asked to underwrite a fee of 1¼ per cent. was low, given their prospects, but we had a duty as a trust, and within the City such matters are accepted, and I went along with them. However, issuing shares in that way where the entire capital structure of the company is provided and underwritten by the taxpayers, through the Government, is nonsense.
I do not subscribe to the view that tendering for the shares, having a Dutch auction, will necessarily produce the best return for the taxpayers. But I see no reason why the Government should not themselves underwrite such shares, because they have put in the capital anyway, in the form of taxpayers' money. Nor do I see any reason why the Government—if they must do this—should not have their own jobbers, who can judge the market as it goes and 275 run the value of the shares, so that the maximum return comes to the Consolidated Fund and thus goes back to the taxpayers who made the initial investment.
The position is completely different from that of a public company floating shares on the basis of its capital assets. In the case with which we are concerned the company has capital assets built up from hard-earned taxpayers' money, and the company's capital structure is secure and underwritten. If the Government must do what they did, if they did it in the way that I suggested at least the prospective speculative gains, the balance of advantage, would accrue in general—not absolutely, because there will always be a small lag in the jobbers' working out the price of shares—to the taxpayer.
As a member of the Labour Party, I do not regard it as part of my remit to argue that the Government should dispose of assets built up from taxpayers' money. The taxpayers do not have the advantage of being able to vote, as the shareholders in a private company would. There is no way in which they can vote on whether they wish to dispose of the assets. Therefore, I believe that what the Government are doing is morally wrong, but if they are to continue they must consider a number of matters. The first thing they must consider is that those of us on the Opposition Benches, however charitable our approach to things, will look extremely hard at large contributors to Conservative Party funds making large profits out of such disposals.
The second thing the Government must consider is that their duty is not to their political friends in the City but to the taxpayers and the people from whom the money was extracted. I do not believe anyone voluntarily pays taxes. The Goverment's duty is to make certain that if those assets must be disposed of for some politically dogmatic reason then at least the balance of advantage must be in favour of the taxpayer and not the merchant banks or discount houses.
§ Mr. Geoffrey Robinson (Coventry, North-West)
I intend to be brief as I know that several of my hon. Friends wish to speak.
I am grateful to my hon. Friend the Member for Blaydon (Mr. McWilliam), with whom I serve on a Standing Committee and with whose remarks I willingly and entirely associate myself. We are not debating whether Amersham International was sold at the right price. If it were, I might have some misgivings about agreeing with some of the rasher claims which have been made by certain centres in the City and this House about its true value. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who has unfortunately left the Chamber, made a declaration of interest. I am not a member of the Stock Exchange, nor do I have a family trust. Since he has returned, I should say that if I were I would not have bought 200 shares at the price asked.
We on the Opposition Benches would find ourselves totally united in calling this a typical Government mismanagement of a difficult affair but one which they brought on themselves. I do not have a prospectus to hand, but if it is correct that the shares were valued at 19 times this year's prospective pre-tax earnings, which works out at about 38 times stock earnings, then they were grossly over-valued. Perhaps as it has been in the public sector and 276 allowed to build up massive reserves, the Government, who wished to sell the company for purely political reasons, then dressed up the balance sheet and profit and loss account and doubled the profit by adding reserves which had been built in over the years and produced a figure at which it was sold to the public.
I wish those who have invested in the company well. As my right hon. Friend the Member for Leeds, South (Mr. Rees) pointed out, I fear that the stags have made their killing and gone off. They were aided by the Bank of England, which enabled the operation to take place. Where are the shares now? It would be easy to track them down. Those who sold them and made a killing should be required to tell us where they are. They made enough money and in many cases they are underwriting in other fields which would cushion any costs involved. I should like to hear the Under-Secretary on this point.
From the written answer of 24 February it is not clear how much of the 3.6 per cent. reserved for employees under the preferred arrangements was taken up at the full price. Those figures must be immediately available. From that information, hon. Members would know how much of the 3.6 per cent. available at the selling price was taken up. It is normal, natural and desirable that those who have worked in the company and dedicated their time and expertise to it should participate in the sale and benefit from its success.
If one is talking about industrial democracy, co-ownership and co-partnership, 3.6 per cent. is very little to make available. My bet is that the holdings of employees amount to much less, depending on how much of the 3.6 per cent. was offered at the full price. I should be delighted to know whether that 3.6 per cent. is owned by the employees. It is, however, derisorily small. The idea that constituents of Labour Members were queueing up in the unseemly scramble at the Stock Exchange to buy shares to put in the piggy bank for their children is ludicrous. This was a carefully co-ordinated and thought-out strategy among those who deal in these matters, reaching a point at which the Government could have called the whole deal off. An article by Richard Lambert, the financial editor, in the Financial Times stated:Some went to extreme lengths. Around 25, 000 counterfeit forms were printed, recognisable by a smudged dot and a pinhole in the top corner. On the day the applications went in, the Bank of England had to take special steps to smooth the disruption in the money market caused by the huge transfer of funds from the private sector to the Government.This is what the matter was all about. It did not involve people in Coventry where factories are closing daily or those affected by a record rate of 9, 000 liquidations a year throughout the country. It was not the people of Coventry, where unemployment approaches 15 or 16 per cent.—I know that the figure is worse in other areas—who were scrambling in an unseemly, distasteful and probably badly informed way to acquire the shares. It was those in the City, in some ways at its worst, making a profit for themselves and at a cost to the Exchequer.
I should like to put a question directly to the Minister, although I do not expect him to answer tonight. If there is to be an inquiry into the circumstances, the price and the profit and the handling of the matter, serious implications arise for the Government. It would be interesting to know whether a Select Committee was able to elicit the simple fact that it was not the Treasury's view that the issue should be handled in this way. I have heard 277 it stated, and I believe it may even have appeared in print, that the Treasury wished it to be handled in a different way.
It is clear from the point of view of those who now have the shares and also from the point of view of the Government that it should have been handled differently. But, although the Treasury would probably have wished it to be done through the Bank of England by tender or perhaps by the American system, the Treasury was overruled by the Department of Energy. I do not expect an answer tonight. This is a question that will continue to exercise not only Labour Back Benchers but the Treasury.
There is no simple answer. I remember my days at the IRC which was closed by the Government headed by the right hon. Member for Sidcup (Mr. Heath). It is difficult when one has vast mergers to carry through, vast accounting exercises to undertake or flotations of this size, let alone Britoil, which is shortly to come, to decide how one should set about the task. There is any number of organisations such as merchant banks, issuing houses and all the rest, which are simply and properly touting for business. After all, that is their stock-in-trade. How does one, in fairness and logic, choose between them? It is impossible to do so. I do not make a charge of corruption against any of the merchant banks or institutions involved in this unseemly affair; they have behaved with competence and integrity. It is virtually impossible for the Government to choose between them for any definable, sustainable or justifiable reasons.
§ Mr. McWilliam
I apologise for hon. Gentlemen who have had to leave the Chamber. I hope, in saying what he did, that my hon. Friend the Member for Coventry, North-West (Mr. Robinson) did not seek to imply that I had suggested corruption. Nothing was further from my mind. I simply sought to suggest that those in public finance must be similar to Caesar's wife—not only pure but seen to be pure.
§ Mr. Robinson
I am grateful for that intervention, but, of course, it poses all sorts of problems.
When I consider the list of people in a company or institution, I ask whether there are any members or directors that I know. That might be called an inverse prejudice and it poses a real problem. The Treasury must produce an answer to that because, as my right hon. Friend the Member for Leeds, South rightly said, the sums involved are enormous. It is beautiful money;£2.7 million from the total of £70 million—getting on for 4 per cent. of the total cost—is going to institutions chosen, not on a whim, but inevitably at the discretion of the Minister. I would not wish to have that discretion. One can readily understand why there should be differing points of view, but the problem will not go away.
I am particularly glad that the question of Britoil has been raised. We are all glad that my hon. Friend the Member for Aberdare (Mr. Evans) was fortunate in the ballot. If a whole series of enormously valuable public assets are to be sold to the private sector—it is the Government's right, as they stated in their election manifesto to do that, and I make no bones about the fact that they are making an awful mess and are heading for a bigger mess on Britoil—we want clear guidelines on how that will be done, without the thought of unpleasant embarrassment that must now be felt by the institutions that carried out this exercise.
278 Just as the Treasury feels unhappy about it and has been overruled, and just as the Department of Energy has egg all over its face, there is no way round that fact. There were difficulties but, when we get to Britoil, is potentially immensely more complicated and potentially leads to more errors of judgment—
§ Mr. Robert C. Brown (Newcastle upon Tyne, West)
My hon. Friend mentioned Britoil and, as a member of the Standing Committee, I know that we have only two more days in the House to consider the Bill from the end of the guillotine day timetable. We received the articles of association for Britoil only on Monday.
§ Mr. Robinson
I shall not be misled in that direction. We know that the Standing Committee has been abruptly guillotined, that the Government are pushing through legislation and that they are proposing to privatise BNOC. I say, through the Minister, to the Government that I can think of no worse time or circumstance in which to pursue that measure.
Which hon. Member, as owner of that part of BNOC which will be called Britoil, would be rushing around now trying to sell it? I do not believe that anyone in the House, acting in his own interests and in his right senses, would try to sell Britoil in a market where prices are falling,
If we have in the case of Amersham International a consistent record of profit growth and a dramatic record of the doubling of profits in the year up to sale and we still have an error in judgment of such magnitude—in a few years' time it may prove to be an error in the other direction—how much more difficult will it be, if not impossible, to deal with the sale of Britoil when the market is falling? We are talking about sums that will dwarf into insignificance the rightful public anger about Amersham International, which will not go away any more than will the methods of disposing of those assets.
We know that the Government will not deal with Britoil in the same way as Amersham International. We have had a succession of replies to questions put to the Financial Secretary to the Treasury by my hon. Friend the Member for Blaydon. He is in difficulty because of the difficulties M the Treasury. First he said that he was quite happy with the sale of Amersham, but then he saw the mess and said that the Government must consider other methods, one of which is tendering.
The mishandling of Amersham International, the fact that profits have gone to speculators—I do not impugn their integrity because it is straightforward speculation—and the massive sums for underwriting and other services, about which we wish to have more details, make that arrangement totally unacceptable for the disposal of Britoil. That being so, we wish to have a clear and early statement from the Government stating, first, that they will suspend the disposal of Britoil shares until the market rises. That is what any sensible person would do if he was divesting himself of his personal income or assets. Secondly, the delay will give the Government time to come up with a much more satisfactory system which would avoid the sort of financial patronage that I do not believe any Minister wishes to take upon himself.
I do not wish to be entirely negative about the matter. The Spectator, which took a different view from the Financial Times, suggested that we might change to the American system. For a long time I supported much lighter control of the stock market. I believed that we should 279 move through the voluntary principles and regulations towards a form of security commission. As one scandal unfolds after another—I am not referring to the Amersham scandal—I am sure that the Under-Secretary of State knows about some of the matters that have been rightly condemned by his party as the "unacceptable face of capitalism" and in even stronger language.
The Spectator states:On Wall Street a selling syndicate of underwriters and distributors outbids rival groups for the issue and then makes itself responsible for distribution.I do not agree with that, but at least we would know what was going on. We would at least be able to say that there was a competitive tender and that there was no question of patronage. It is an impossible position for the Government.
Some way of handling the situation must be found to avoid that problem. The only sensible thing for the Government to do is to postpone the whole concept of selling Britoil, take the heat out of it, let the market revive and in that time talk to the Governor of the Bank of England and come up with a sensible scheme that we can all support. We might not agree with the objective of the scheme, but at least we should be able to agree that the scheme is in the national interest.
§ Mr. Robert C. Brown (Newcastle upon Tyne, West)
I congratulate my hon. Friend the Member for Aberdare (Mr. Evans) on doing a public service in giving us the opportunity to debate the scandal of Amersham International. It is disgraceful that we have had to wait for this opportunity for a public debate on this disgraceful episode in the history of British industry.
On Thursday 25 February private investors made millions of pounds profit from the Government's sale of Amersham International. It was wrong in the first place for this successful radioactive materials producer to be sold off. However, the incompetent arrangements for the sale of Amersham mean that the taxpayer has lost over £20 million on the deal.
The Government selling price of 142p per share valued the company at only £71 million. Within two days of the shares being quoted on the stock market they were being sold at 193p per share. At this price Amersham is worth £96.5 million. In other words, the stock market valued the company at £25.5 million more than the Government did. Anyone who bought the shares at the original 142p could have sold them for 193p within a few days. That is a 36 per cent. profit for doing nothing for the economy of the country.
Obviously, many people made huge profits from the sale of public assets. If the company had been correctly valued by the Government there would have been no profit for the speculators and the taxpayers would have been £25.5 million better off than they are today. There was clearly a major blunder by the Government in their handling of the sale. With such a large loss to public funds we are surely entitled to some assurance that the mistake will not be repeated.
Tory Members continually prattle about being the Government of business, and the electorate at large tend to believe that this "Government of business men" have a 280 far better idea of how to manage the nation's finances than the Labour Party. I hope that the electorate take note of what has happened with Amersham International.
Merchant bankers were paid large amounts for the wrong advice. This is another example of wasted public money. The full details of exactly how much the Government spent organising the sale, and the possibility of any refunds, should be investigated. The whole scandal is yet another example of the unacceptable face of capitalism to which the right hon. Member for Sidcup (Mr. Heath) so rightly referred some years ago.
On the Thursday that the shares were first traded on the stock market crowds of brokers jostled for position as millions of pounds were made in speculative profits. I felt a bit sick when I watched those pinstriped bovver boys almost knocking themselves over to get into a position of influence for the shares. By selling off Amersham at cut prices the Government effectively gave £25½ million to private investors. That £25½ million should have gone to public funds, but instead it has been passed to assorted speculators, for that is what they are.
Vast amounts of money are available when speculators see the possibility of a quick kill. The Amersham International share offer pulled in applications worth £1¾ billion. That money was produced because of the desire to profit from the Government's cut-price sale. Surely it would be better if such vast sums were invested in British industry, instead of waiting for speculative profits at the public expense.
The whole policy of selling off public assets has been a disgrace and a scandal. In this case, the public have not only lost the ownership of Amersham International, but Government incompetence has lost over £20 million from the sale. Bankers and financiers may have advised the Government, but, in the final analysis, it is no good the Government or any member of the Government saying that anything other than their incompetence led to this disastrous result for the British taxpayer. The only people who have benefited are a small number of speculators, and they are the last people who, in my view, deserve any help from Government or public funds.
Let us make no mistake about it. This must have been one of the quickest rip-offs that there has ever been in the name of privatisation. I would say here that I object to the word "privatisation", particularly in the context of Amersham International. It is not privatisation; it is piratisation. It is a case of looting the public purse, and ripping off the British taxpayer.
The Secretary of State for Energy should be eternally grateful that he was not born in an earlier age. Clearly if he had been born 300 or 400 years ago he would have been impeached on a treason charge, and he would have finished up hanging by his neck. I am very much anti-capital punishment, so even I would probably have pleaded for the right hon. Gentleman, to prevent him from hanging by the neck. However, I would have urged that his life sentence should be for the rest of his natural life. Certainly, he should never be let loose on the British taxpayer again.
Unfortunately, we are still in the late twentieth century. Here in this House of Commons, upstairs in Committee Room 11, the Secretary of State for Energy continues his rape of the British taxpayer, as the Oil and Gas (Enterprise) Bill guillotine goes rapidly on its way. Two of Britain's few industrial successes—the British Gas Corporation and the British National Oil Corporation—are 281 destined for the knacker's yard of British industry, for purely political dogma, by this Government, who firmly believe that a publicly owned industry that makes a great deal of money for the taxpayer should be treated as a social evil and done away with. That is the philosophy of the Conservative Party, and that is why it is engaged on such a large scale in selling off public assets at rock-bottom prices.
§ Mr. Lawrence Cunliffe (Leigh)
First, at the risk of boring the House, may I place on record the events that took place when this sale was predestined 12 months ago, when my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) and I voiced our objections and accusations in the Atomic Energy (Miscellaneous Provisions) Bill. At the risk of being accused of being a little vain, I must say that we prophesied that the Bill, later to become an Act, would backfire on the Government of the day.
In Committee we constantly and persistently expressed anxiety about what we thought was a fairly predictable situation. Obviously an Opposition fight in Committee on the basis that they represent a given political philosophy. It was obvious that there would be considerable ideological conflict. It was also reasonable to predict that when the Government announced the sale of Amersham International a gilt-edged investment would be presented that would prove to be a bonanza for those who had the most to invest in a "sale of the century".
The reasons were clear. In Committee we were given an exposition of a firm which had shown great initiative, enterprise and impeccable industrial relations, which had been fairly successful in its financial and productivity norms, and which was a classic example of a flourishing enterprise. It is obvious that the speculators, and those with some financial vision, were waiting in the wings for when the market was right for them to come in like financial vultures and immediately pounce on the offer, which has proved to be a terrific blunder by the Government.
Why were these serious errors of judgment made by Morgan Grenfell and the other merchant banks? It was elementary to a sixth-former with any sense of economics that this was an opportunity that would guarantee, as we used to say in the old days, a "Stop me and buy one". The shares were bound to be a profitable investment. This was pointed out time after time in Committee by my hon. Friend the Member for Merthyr Tydfil. He reiterated what is now history.
We presented the case just over a year ago. Amersham International had much to offer. The company had shown tremendous initiative and enterprise. From the time it was established in 1971, the turnover of the company rose from £8 million to £50 million annually—as my hon. Friend said, not bad for a nationalised concern. Its turnover was matched by excellent profits—£26 million in that period, with an average return in group capital investment of 26 per cent. Therefore, this was a company presenting itself as a gilt-edged investment that, frankly, could be backed for win and place with an instant return.
The main shareholder was the United Kingdom Atomic Energy Authority. The dividend for 1971–72 was 10 per cent. In 1972–73 it was 10 per cent., in 1973–74, 7 per cent., in 1974–75, 11…9 per cent., and the same the following year. In 1977–78, the dividend was 8.2 per cent., in 1978–79, 22 per cent. and in 1979–80, 12 per 282 cent. It was obvious that the company was doing extremely well. The taxpayer was getting a return on his investment and there were no risks attached to it.
The company had been making profits and paying good dividends and returns to the Government—in other words, the people. It was the people's firm and the people's investment. It was paying good returns to the people for their confidence. That was the philosophical approach and the political argument that the Opposition presented.
The Government argued that a gigantic privatisation scheme would reduce the public sector borrowing requirement. The Committee that is considering the Oil and Gas (Enterprise) Bill is especially unfortunate in having the present Secretary of State for Energy presiding over the Department. Before he was appointed Secretary of State he was Financial Secretary to the Treasury.
It may be said that Amersham International was a successful venture for the right hon. Gentleman. ft is estimated that when he was a member of the Treasury team there was an overspend of £4 billion to £5 billion, which naturally had had an effect on the public sector borrowing requirement. Treasury Ministers were claiming that they had a magical formula that would lead to a monetarist miracle. Great visionaries were telling us that if we controlled the money supply, gave incentives to the people and made a few artificial tax cuts in Budgets, the result would be that there would be a galaxy of entrepreneurs.
I had some interesting conflicts with the Financial Secretary to the Treasury before he was appointed Secretary of State for Energy. At the end of the day the judgment was not made by the Treasury from which the right hon. Gentleman was exiled. The merchant banks made a judgment that was wrong to the tune of £25 million to £27 million. I suppose that that represented an achievement for the right hon. Gentleman.
Why did the merchant bankers make such a serious error of judgment? Amersham International may prove to be not the only example of an error of judgment of such magnitude. The Government are constantly practising hiving-off and creaming-off operations. I fear that when they come to hive off the BNOC assets there will be a repetition of the Amersham International error. That must not happen, because the British people insist that such an error must not be allowed to recur.
The Amersham International hive-off was not left to the free market mechanism. It became a financial fiasco and a total embarrassment to the Government. I congratulate my hon. Friend the Member for Aberdare (Mr. Evans) on presenting a wonderful A to Z analysis and exposition of the Amersham International disaster.
Let us consider some of the historic events. It was put to my right hon. Friend the Member for Leeds, South (Mr. Rees) that there had been misjudgments and errors by the Labour Government, and he freely admitted that. But of the famous D-day of 25 February this year, it was said:More than half the shares in Amersham International changed hands in hectic dealing … as the radioactive chemicals group it made its stock market debut.That is how the Daily Express, which is certainly not allied to the Labour cause, described it. It continued:To the sounds of cheers from dealers trying to buy and sell stock, Amersham shares began trading at 190p compared with the 142p at which they were offered last week.Overnight, the kill was made and, as my hon. Friend the Member for Aberdare said, the speculators made a very rapid 33 per cent. profit—those lucky enough to get a stake in the group, as it was very limited. My right hon. Friend 283 the Member for Leeds, South has asked who got the shares, what was the percentage take-up by speculators, whether the individuals and firms will be known to us as a matter of public accountability, and so on. That very day, the stake in the group attracted a record £1, 750 million investment for the £71 million of shares. Out of 265, 000 applications, a lucky 65, 000 investors were allocated shares, so the issue was oversubscribed, as we knew that it would be. As we had said, it was the sale of the century.
The Government had had experience in this. There is no doubt that Cable and Wireless was undersold to the tune of £184 million. The Government should have learnt from that bitter experience. But what happened? Once again, in their airy-fairy manner, they went off to the merchant bankers, who were on a very good wicket. As for the conditions offered to the advisers and underwriters, my hon. Friend the Member for Blaydon (Mr. McWilliam) may think that 1¼ per cent. is a minute percentage, but when one considers the capital involved it is clearly a very lucrative return. Included in the fees were substantial amounts for advice and underwriting fees at 1¼ per cent. amounting to £890, 000, making a total of £2¼ million.
That is what can be earned selling shares short. There is no risk. It is a guaranteed return. It does not matter whether one is £27 million out in one direction or £50 million out in the other. It is a very lucrative picking. No penalty clauses attach to underwriters and advisers. My hon. Friend the Member for Newcastle upon Tyne, West (Mr. Brown) suggested that there was a moral commitment, but they do not have to come back and do penance and there is certainly no financial retribution for mistakes of this kind.
The Government argued that they doubted the keenness of the public to buy shares. That is nonsensical. We have already proved that here was the golden egg—the golden calf—ready to be sold off. The over-subscription was five times the expected requirement. A Government who had doubts about the public's keenness to buy shares should have taken steps to ensure that the total shares were not put on to the market immediately but over a period of time. The sale could have been spread out so that it would not have been a straight disaster, as it was in this instance. This is what happens when share prices collapse.
Some of those more professional than ourselves in this field may have said that there is a degree of predictability. It is no use merchant bankers saying that there must be some flexibility. There has to be some margin, but in this case one ventures to say that it was rather substantial. There is a genuine anxiety that this could happen again. If there is a conflict between the Treasury and Energy Ministers on this particular issue, is there any reason why that state of affairs should not exist in the future? Have we any commitment from the Government that that will not be the case? Will they produce a formula for tendering? The amazing fact is that, had it been left to the ordinary market mechanism, who knows what would have happened? Or shall we say that the Government must fix a price? Which way do you play the record? I put it to the Minister that nothing that the Government did or said suggested that they thought that there was any chance that this event would occur. The Government substantially underwrote the issue price. The City advisers got it wrong 284 by 30 per cent. Despite that, the Government still advised that the underwriters should receive £890, 000 at the cost of the taxpayer.
I take a fair view and I want to be honest about this. It is true that there can always be a margin of error in this particular field. However, when it comes to guaranteeing £890, 000, regardless of whether there is a return on the investment, there is a serious doubt. In the whole of the Amersham scandal the greatest single indictment of the Government is that they permitted there to be payment of large amounts of money to advisers and underwriters. An ordinary sixth-former could have done as good a job and might—"might" because to a large degree it is a speculative gamble—have returned a better price.
On the Oil and Gas (Enterprise) Bill Committee the hon. Member for Derbyshire, South-East (Mr. Rost), has time and time again produced different formulae and amendments aimed at obtaining a better distribution to the ordinary people. They matter because it was their investment in the beginning; it was their firm until the Government changed the mode of ownership. Some of my right hon. and hon. Friends in Committee would have supported even that kind of formula which would have given a wider distribution to the ordinary British people. We may disagree ideologically and politically about the Government's approach, but if we can salvage something from the wreck for ordinary people, we shall have done a useful job.
§ Mr. Frank Haynes (Ashfield)
I do not believe for a moment that there will be a rake back for the public. Rake-offs will continue as long as the Conservative Party is in power. In the United States of America in the 1920s and 1930s people such as Machine-gun Kelly, Al Capone and Dillenger were known as gangsters. That is what the Government are. They are gangsters, who rob the public to feed, once again, the rich who have supported that party over the years. At the same time, the Government are repaying them for services rendered.
It would be interesting to know how many of those who have joined in the rake-off hold Conservative Party cards. However, the Minister will not give us that information tonight. In my beautiful county, we still hear the story that Robin Hood robbed the rich to feed the poor. In this case, it is the other way round. [Interruption.] I shall come shortly to the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). The Government are robbing ordinary working folk in order to line the pockets of the rich.
§ Mr. Haynes
The hon. Gentleman may say that, but he is one of the rich. I remember some of the things that the hon. Gentleman said to me in private when we first became Members of Parliament. I do not forget. We were talking about money.
§ Mr. Haynes
I remind the hon. Gentleman that a collier who has worked underground for 30 years or so cannot be kidded. Colliers know what life is all about and may know what fiddles are all about too. It is never long before a Government Department nips in to fiddle the ordinary working man. Conservative Members often talk 285 about people overclaiming for social security benefits. They talk about malingerers and scroungers. We do not need to talk about them tonight. We are talking about Amersham International and the rake-off that has been made without lifting a finger or doing a ha'p'orth of work.
Unless the people are prepared to say that enough is enough, such things will continue. The workers of this nation will stand up and be counted in opposition to some of the Bills being debated upstairs, particularly the Employment Bill. The Government will have to take note of that. It is not a question of the Government learning from their mistakes. The Government have a deliberate policy when it comes to selling such companies—they want to fill the pockets of the rich. That will go on and on. We shall argue until the day is long and until the year's end, because it is the Opposition's job to draw such matters to the attention of the people. It is high time that the people woke up to what is going on.
I support everything that has been said by my hon. Friends, and particularly by my hon. Friend the Member for Aberdare (Mr. Evans). It was a first-class contribution. The hon. Member for Selly Oak probably was not here for it.
§ Mr. Haynes
I apologise; the hon. Member was in for part of it. It was a clear picture from A to Z explaining in detail what this was all about. I am glad that I have contributed to the debate.
§ The Under-Secretary of State for Energy (Mr. John Moore)
We have had what can only be described as a lengthy debate. I have to start by saying that I must share with my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) a sense of confusion almost about the nonsense I have heard up until and during the debate on the subject of Amersham.
I would go along with some of things said by the right hon. Member for Leeds, South (Mr. Rees); this reflects part of what is wrong in this country. There has been a sterility about much of the discussion. It has brought out all of the envy that lives within many Opposition Members.
The hon. Member for Aberdare (Mr. Evans), with whom I have had many detailed discussions, as I have with other hon. Members opposite whom I regard as friends, on the subject of coal, almost relished such words as "speculator", "rip-off', "rake-off', "scandal", "diabolical", "disgusting" and "financial vultures". It was the deep relish and joy shown by some hon. Members opposite—I exclude the right hon. Member for Leeds, South and the hon. Member for Blaydon (Mr. McWilliam)—which has created so many of our difficulties. I take no pleasure in having to say that.
The hon. Member for Blaydon made some excellent points that merit attention. The hon. Member for Coventry, North-West (Mr. Robinson), who was courteous enough to apologise for the fact that he had to leave before the end of the debate, also made a thoughtful and useful speech, with many comments and suggestions about the future as opposed to problems that some people might have thought about in the past.
What 1 found most distressing was that very little, if any, reference was made to the company and its potential 286 for those who work for it. The hon. Member for Merthyr Tydfil (Mr. Rowlands) and the hon. Member for West Lothian (Mr. Dalyell) have taken a deep interest in the well-being of the company. I wish more had been said by hon. Members about the company and its future, and the future of the employees.
The right hon. Member for Leeds, South was right to say that it would be wise to try to get as much as possible on to the record and to respond to the opportunity given to us by the hon. Member for Aberdare by raising it in the Consolidated Fund Bill debate.
I make no apology for starting with principle. The Government came to power—and they had electoral support for these principles—with a firm commitment to remove what they saw as the dead hand of State control. I make no apology for the fact that I have philosophical attitudes in politics. The Government wish to do so not in a spirit of malice or destructiveness towards the industries concerned but in a spirit which would give them freedom from public sector constraints which has left them paralysed, as the hon. Member for Merthyr Tydfil would see if he raised his eyes and had a little vision. [Interruption.] I have waited patiently throughout the debate and I shall try to get some aspects of the subject on to the record because the debate merits something being on the record, but I must deal with the principle first.
The policy of introducing private capital into the public sector has been commended on both sides of the House. I have respect for the way in which the right hon. Member for Leeds, South has, in so many debates on energy, seen the possibilities of change in that direction. The present Government were determined to achieve genuine public ownership, as opposed to the prevailing situation in which industries, while nominally owned by the taxpayer, were in fact often nothing more than the chattels of politicians and civil servants.
§ Mr. Moore
Some of us have exercised inordinate patience over the constant sedentary interruptions of the hon. Member for Merthyr Tydfil.
In the light of our policy commitment to free public sector assets wherever this was practicable and in the interests both of the nation and of the company concerned, the Government took powers under the Atomic Energy (Miscellaneous Provisions) Act to enable the sale of up to 100 per cent. of the shares in Amersham International to take place.
The Government believed that Amersham had no sensible role to play in the public sector. Although it was—and is—a successful company, it was not a natural candidate for continued State control. [Interruption.] The Government have the privilege and the right to argue their politics and their philosophy, just as the Opposition have.
There were no national strategic implications involved in the Amersham sale. There were several millions of pounds of public money tied up in the company winch could be more usefully employed elsewhere. The sale of shares offered the prospect of giving Amersham's 287 employees the chance to acquire a real stake in their life's work, a chance that I know was welcomed by Opposition hon. Members. My hon. Friend the then Under-Secretary, now the Minister of State, Department of Industry, successfully took the Bill through the House, and the principles were extensively debated by hon. Members on both sides.
§ Mr. Ioan Evans
Is not the hon. Gentleman condemning every Conservative Government since 1940? It was a coalition Government that set up the firm and kept it in the public sector. In 13 years of Conservative Government it was still kept in public ownership. The present Government are unique in throwing public assets to the financial speculators. No other Conservative Government since 1951 have done that.
§ Mr. Moore
I shall a little later correct the hon. Gentleman's inaccuracies about Amersham. It is part of the reason for the sterility of the debate that Opposition hon. Members are still trapped in a static, unchanging society.
I remind Labour Members of their own actions when in Government. It is worth reminding the whole House that the Labour Administration of 1970 planned legislation to allow the formation of Amersham into a Companies Act company and to permit the sale of a minority stake. [Interruption.] I am trying to put all the facts on the record, which will benefit the hon. Member for Merthyr Tydfil. Obviously, therefore, that Labour Government saw the benefits of private sector involvement.
The Conservative Government who took over in 1970 enacted legislation on much the same lines as had been planned by their predecessors—the Atomic Energy Act 1971. The 1981 Act simply extended the principle established by the 1971 Act but permitted the disposal of 100 per cent. of the shares.
What were the Opposition objections to that extension of principle? So far as one can judge, they were worried that the company's independence could be lost if a majority of the shares were freely traded on the Stock Exchange. That was a proper concern, reflecting the views of the company and its employees, and one to which the Government were very much alive.
Apart from that fundamental concern, the Opposition expressed a wish for the employees to be given an opportunity to participate in the company—again reflecting the known views of the employees—and a fear that the Government were interested only in maximising the proceeds to the Exchequer, regardless of the company's long-term interests. Those are concerns which the Government have been at pains to explain that they share.
The first consideration in the Government's mind was to allow the company the full, independent freedom of the private sector; to offer it and its employees the chance to prosper by virtue of their own decisions—[Interruption.] I accept the political ideology that is at the back of our own philosophy here to release Amersham from the constraints of the public sector and to offer it the chance to realise its potential in terms of growth and long-term employment prospects.
Mr. Deputy Speaker
Order. The hon. Member for West Lothian (Mr. Dalyell) knows that if he wants to intervene there is a proper way to do it. We cannot have a running commentary.
§ Mr. Tam Dalyell (West Lothian)
What precisely were the restraints of the public sector in relation to Amersham?
§ Mr. Moore
The Government believe—it is hard, I know, for those who have totally contrary philosophies—that the innate restraints of being within the public sector diminish the potential for corporations and individuals to grow. That is a belief that the Government hold. They equally decry the Opposition's version as to their own particular philosophy.
I will not mislead the House by claiming that every one of Amersham's employees was wholeheartedly in favour of the share sale at the outset. Their caution was very easy to understand. It was a case I believe of "better the Devil we know" than the risks of the vast unknown.
But, at the end of the day, the staff representatives made it clear to us that they would be more than content for the sale to go through, provided that two important considerations were met. Those considerations were that employees should be allowed fully to participate through ownership of shares and that the independence of the company should be maintained. A crucial feature of the debates in which I have fully participated, visiting offices, as one should, management and employee representatives.
The Government took those considerations very much to heart, and therefore approached the share sale with four key objectives. The objections were, first, to preserve the firm as an independent, British company; secondly, to maintain the sense of commitment by the staff, which has been the mainstay of the firm's success; thirdly, to ensure as wide a spread as possible of share ownership amongst the general public and the company's employees; fourthly, to achieve a good return for the Exchequer.
I gave careful thought to the order in which I would list those objectives in this debate, and I should like to elaborate upon them to demonstrate to the House that they have been successfully achieved because the right hon. Member for Leeds, South quite rightly asked us to explain the thinking at the back of much that has occurred.
I should also like to point out that, happily, there was a marriage of true minds on many of these objectives between Her Majesty's Government and Her Majesty's Loyal Opposition.
I shall come later to the objective of achieving a good return for the taxpayer. For now, I shall simply say that the taxpayer has obtained a very fair deal. But as will, I hope, be clear from my list of objectives, maximising the proceeds of the sale for the Exchequer was far from being the only aim in view. And it has been a source of substantial comfort to me to have had the hon. Member for Merthyr Tydfil confirm the propriety of that stance when he expressed the Opposition's view that sellingto … the highest bidder … would … not be in the interests of those who work there or in the interests of the nation".—[Official Report, 10 February 1981; Vol. 998, c. 56.]The right hon. Member for Leeds, South referred specifically to additional quotes. I have referred to all the relevant Committe proceedings. The hon. Member for Leigh (Mr. Cunliffe) also made a significant contribution in that regard. The right hon. Member for Leeds, South has referred to comments in Committee to the effect that the issues should not be made in an uncontrolled way. The 289 reference to the lack of control was related to the risks of takeover against which the company, as a consequence of Government action, is now protected rather than any suggestion of a major over-subscription or opening premium. There may now be new financial geniuses, but such views cannot be discerned from a close examination of the Committee proceedings.
I recognise the point made by the hon. Member for Merthyr Tydfil. I thought that it was sufficiently important for the Government to take the necessary action to ensure protection in relation to the problems of maintaining an independent company.
§ Mr. Rowlands
Does the hon. Gentleman agree that the sum total of all these discussions was that 25 million shares changed hands on the first day? Hon. Members have argued that this was nonsense. We believed that the majority of shares should have been retained by the Government and the staff. The hon. Gentleman must place his quotes within the context of the many debates in Committee.
§ Mr. Moore
I shall not give way again. The debate has been dominated by Opposition remarks completely irrelevant to the long-term interests of the company and its employees.
If maximising the proceeds to the Exchequer had been the Government's sole consideration, we should have set aside the concern of the employees and of Opposition Members and simply sold the company lock, stock and barrel to the highest bidder. This would have been a corporate buyer, and almost certainly a foreign corporate buyer. The truth was seen by both sides of the House. By so doing, we should undoubtedly have achieved a higher valuation. But we should have failed in our highly desirable objective of maintaining the company as an independent British concern.
As it is, Amersham's new articles of association have been devised to prevent any single shareholder or group of shareholders from acting in concert, whether foreign or British, and building up a stake of more than 15 per cent. in the company. Again, I am sure that the hon. Member for Merthyr Tydfil will wish to applaud the Government's success in achieving this objective, by which I know he set great store. I quote him once again. On 12 April 1981 he said:we feel very strongly that we should ensure that either a minority or a majority shareholding should not fall into the hands of a foreign company. We also need to safeguard the integrity and independence of The Radiochemical Centre".—[Official Report, Standing Committee A, 2 April 1981; c. 39.]I hope that the House will agree that the Government have succeeded in meeting that demand.
The Government's second objective was to ensure that the company's employees were given a full chance to participate in their own company through share ownership. Generous arrangements were made to encourage employees to participate. Each United Kingdom employee was offered £50 worth of free shares in the company. 290 Furthermore, for every share bought by an employee, he or she was offered one additional share free up to a value of £500 per employee.
Finally, additional share applications by employees were allotted in full. This met with an excellent response, with the result that employees now own 1, 783, 350 shares, or 3.6 per cent. of the total issue.
§ Mr. Moore
It may appear derisory to the hon. Member, but it is not derisory to those who work and value the work that they do in the company.
The hon. Member for Aberdare and particularly the hon. Member for Coventry, North-West asked me how many were paid for fully and how many were free. In fact, 270, 000 of the shares going to employees were free and the rest—approximately 1.5 million shares—were paid for. The hon. Member for Coventry, North-West and the right hon. Member for Leeds, South asked who owns the shares. The shares register will be available in due course. If asked what "in due course" means, I will say it means in April, for the registration from 26 March, and for inspection in Companies House.
I will not breach the confidence of any individual applicants by revealing even their names or those who have been allotted shares. The record will be clear in that regard. Employees will have the opportunity to build on this by participating in the company's continuing share participation scheme and save-as-you-earn scheme.
I am sure that the whole House will share my satisfication that over 90 per cent. of United Kingdom employees are now shareholders in the company. For the great majority of people, including the hon. Member for Coventry, North-West, the right hon. Member for Leeds, South and many Opposition Members, that is the right sort of public ownership.
It would thus seem that the reasons that the Opposition have put forward over the past year for objecting to this disposal should have evaporated. But has that stopped them trying to find objections? Clearly it has not. Having had the carpet well and truly pulled from under their feet, they have turned in desperation to criticising the manner of the disposal.
The right hon. Member for Leeds, South rightly asked for as much information as possible, on all the areas he correctly questioned, to be put on the record, in contrast with the peculiar ribaldry among other members of the Opposition Front Bench. Their main objection is that they consider that the Government could have raised more money for the Exchequer if they had done things differently. I shall comment in a moment on the misconceptions underlying this view.
However, the first point to make is a much more fundamental one. Opposition Members are saying that we should have maximised the proceeds of the sale. The question I would put to them is whether they think that maximisation of proceeds is the single criterion that should have been adopted in selling this company, or whether other policy considerations should be allowed to influence the decision. The Government have tended to think the latter. I should be surprised if I found Labour Members embracing the former, particularly in view of their earlier statements. I hope it is common ground that financial considerations must be weighed alongside political objectives, and that the maintenance of Amersham's 291 independence, the incentives to employees to hold shares and the encouragement of widespread shareholdings by small private investors are all objectives which may have to detract from the absolute maximum that could have been achieved.
§ Mr. Robert C. Brown
The hon. Gentleman must feel that he is faced by a really unholy alliance tonight. Not only are Her Majesty's Opposition against him; the editor of the Daily Express, who has condemned this proposal just as much as we have, is against him.
§ Mr. Moore
As the right hon. Member for Leeds, South said earlier, we all have to face the press. None of us believes that the press would support us on every issue. However, we are trying to debate, discuss and put on record the Government's views on the subject in detail in response to the debate. I shall seek to do that a little longer and then—
§ Mr. Moore
I shall give way in a moment. The hon. Member for Merthyr Tydfil is impatient, but I hope that he will bear with me.
That brings me to the Government's third objective, which was to ensure a wide spread of participation by the general public. It was for that reason that the Government chose to offer the shares for sale at a fixed price rather than by tender.
Claiming to be wise after the event—it is a legitimate crime of all politicians—Labour Members have had a great deal to say about the merits of tender offers, so I shall take a little time to explain the complex issues involved. I do not know whether I need to do that in quite so much detail with the hon. Member for Blaydon whose remarks on the subject I respected and listened to with great care. These are complex issues which must be faced by those of us who must make decisions rather than those who merely criticise and make debating points after the event.
The tender approach—which we considered very carefully—suffers from a number of disadvantages, mainly stemming from its relative unfamiliarity. Labour Members may not be aware that there have been only four tender issues in the past five years, that the largest one was the Habitat issue last year which raised £26 million, and that the number of applicants that those issues attracted was a few thousand. That last characteristic is the important one. It shows that, however irrational it may be, investors are deterred from applying in the case of a tender. And in all probability the sort of investor who is deterred is the small man who is unfamiliar with the arrangement, while the sophisticated City money man and the institutional investor will know what to do. I wonder whether the critics of the Amersham issue are really saying that they would wish to have seen the issue arranged in such a way as to ensure that the professional institutional investor gets an inside track, and that a relative handful of applications are received from the small investor. Is an initial application list numbering a few thousand the right way to approach the encouragement of wider share ownership? I have no doubt that with a tender the institutions would have snapped up the issue on day one.
But it will be said by Labour Members that at least a tender would have raised more money and, given the 292 enormous response to the fixed price issue, surely we would have expected a very good response to a tender. Not so. The level of subscription for a fixed price issue is no guide to the genuine investor interest. Once the idea that the issue would be significantly over-subscribed had taken hold, due to some fairly speculative long-term profit forecasts being given a great deal of publicity, applicants wishing to acquire a stake knew that they would have to apply for many times the number of shares they genuinely wished to end up with, and the effect was self-generating.
In the absence of that sort of speculative fever, and given the unfamiliarity of the tender approach, I venture to suggest that the level of interest would have been very much less both in terms of shares applied for and numbers of applications, and that it is by no means clear that we would have achieved a striking price higher than the fixed price of 142p. Certainly there was a real prospect at the time when the decision was taken—I shall go into all the details, as the right hon. Member for Leeds, South asked me to—of a tender raising less money than the fixed price.
All those uncertainties point to a greater risk of a flop with a tender. The Opposition may be prepared to gamble with public money, to risk getting the company and its employees off to a bad start, and to deter the small investor and the employees from investing, but that is no way for a responsible Government to behave. It was not an easy decision to make but I have no doubt in my mind that a fixed price offer was the correct decision in the case of Amersham.
§ Mr. Merlyn Rees
The hon. Gentleman is entitled to argue for the decision that the Government took. However, I want to make it clear that nobody on the Labour Benches has argued for the tender issue. All we had was a quotation from The Daily Telegraph, which argued that way.
§ Mr. Moore
I shall recheck my memory of the debate. I have been in the Chamber throughout and I thought that I had heard, at least twice, suggestions to the effect that more money would have been raised in this way. I apologise if I am wrong. It would seem that this is a more than germane aspect. The right hon. Member for Leeds, South, as opposed to other hon. Members who wander into the debate late at night and feel that they can participate from below the Gangway, has rightly asked for as much as possible on the subject to be put on record. In all the debates that we have, that is the right way to tackle the issues of importance.
§ Mr. McWilliam
I must confess to the fact that I raised the tender issue when I argued that it would not have raised the maximum amount of money.
§ Mr. Dalyell
Is it the opinion of the Government that in fixing the price at 142p there was any underwriting risk involved? Is it not the case, as my right hon. Friend the Member for Leeds, South (Mr. Rees) said, that Rothschild, by fixing the price at 142p, was making sure that the underwriting risk—which was amply rewarded—was virtually non-existent?
§ Mr. Moore
It was unwise of me to give way at that point, because I said that I would try to cover thoroughly all aspects of the question and this is one crucial aspect to which I shall come.
By opting for a fixed price sale, the Government believe that they were able to ensure that small investors got a good crack at the whip. Shares allocated to small investors totalled 22.6 per cent. of the issue. As their applications represented only 12 per cent. of the total applications, the House will agree that their interests were well satisfied.
The fourth Government objective, and this is germane to the points raised consistently throughout the debate, was to achieve a good return for the taxpayer. The hon. Member for Blaydon particularly dwelt on this point. I am glad to say that taxpayers have been amply rewarded. The Amersham sale realised about £63 million for the Exchequer and this must be seen against the total Government investment over the years of just £6.3 million, as opposed to loan capital, that is still outstanding with the company. So the taxpayer has got his money back 10 times over. I call that a pretty good deal.
As for the Exchequer's costs for the sale, and I shall be going into as many details as I can, these amounted to about £2.8 million including duty and tax. The Bank of England had the benefit of the application moneys between the allocation procedure being agreed and the posting of letters of acceptance of cheques. That was sufficient to cover the taxpayer's costs. I shall come to the breakdown of the details later.
§ Mr. Ioan Evans
The hon. Gentleman is surely misleading the House when he talks about only £6 million of public money being invested in the firm. As I pointed out, in May 1981 a company opened in Cardiff that is part of Amersham International. It has had public investment of over £20 million. This money has come from the United Kingdom Atomic Energy Authority, which is a publicly owned company. That is public money, so to talk of only £6 million is to mislead the House.
§ Mr. Moore
Investment in the company over the years has been £6.3 million. The tragedy of this debate is that so few Labour Members have recognised, and reconciled themselves to the fact, that this excellent company is in existence and will have a future with its plant and with its loan stock as well as the equity now in the company.
The company was taken into public ownership in 1946. It paid no dividends at all to the Exchequer until 1971, when it was established as a separate company under the Companies Act. Since then, Amersham's dividends have yielded about £3 million to the Exchequer. So the Government can scarcely be said to have sold the nation's birthright for a mess of potage.
The Opposition have moaned loud and long about the price at which the issue was offered for sale. They persist in saying that the present market price of 190p proves that the issue should have been priced at that level—whether through a tender or fixed price, I shall not pursue. They erroneously contend that that created what they described as a loss. That only demonstrates the naivety of the Opposition's thinking. The price set by the market is that established as a result of a few daily transactions. It does not represent what could be obtained for the whole company. Moreover, the price is probably more influenced by the hysteria surrounding the issue and the 294 apparent level of over-subscription than by a considered evaluation of the company. I shall not begin to comment on the value of the company, but I suggest to those hon. Gentlemen who were privileged to be present at our debate, that the comments of the experienced hon. Member for Coventry, North-West are worth reading. Indeed, public statements by hon. Members opposite may have served to encourage the present price level. But I wonder whether hon. Members opposite have paused to consider the salient facts about this issue? We were selling all the equity. [Interruption.] The hon. Member for Merthyr Tydfil has a legitimate right to argue his case as he did last year on Second Reading of the Atomic Energy (Miscellaneous Provisions) Bill. His case was lost when the House voted, and the Government have the right to carry out decisions based on that vote.
We were selling all the equity. That was unusual. The safeguards to minimise an unwelcome takeover might have put off investors. The uniqueness of the company made it difficult to compare its value with others. 'The company's profits were unusually sensitive to exchange rate fluctuations, and profits had been depressed for a couple of years. Indeed, the record does not reveal consistent growth of earnings. Furthermore, the weakening of sterling must have been a major contributor to the forecast improvement in profits in 1981–82. The potential for earnings growth was also sensitive to sterling All this was clear from the prospectus.
The offer price of 142p was agreed by the Government, following detailed discussions with Rothschild, with the merchant bank advising the company, and with the stockbroker to the issue. It was the highest price at which they believed that the issue could be successfully underwritten and subscribed. That answers the specific question of the hon. Member for West Lothian. It was higher than some parties to that decision felt was wise. It was also regarded at the time of the offer as relatively high by informed commentators. I shall give illustrations of what was said by informed commentators at the time of the pricing. The Investors Chronicle of 12 February—[Interruption.] Unpalatable facts and truths may upset the Opposition Chief Whip, but they will be repeated from the Dispatch Box. It is extraordinary that, as soon as one approaches facts which are uncomfortable, this kind of ribaldry returns to the debate. I shall simply repeat the facts again and again, because good facts are worth repeating.
The Investors Chronicle for 12 February, the day after the price was announced, said that it was "a shade ambitiously priced". The Financial Times, on 15 February, said that at a fully taxed price-earnings ratio just under 19—it was 18.9:this looks pretty glossy dressing".The Daily Telegraph on 15 February took the view that the price of the shares "is ambitious" and that "the price is high". The Times of 15 February saidThe merchant bankers seem to have weighed up the interests of the future shareholders and the Government pretty well".Let us consider the figures. The multiple of 18.9 times forecast earnings compares with an average multiple of 10.6 times historic earnings for industrial shares generally—
§ Mr. Moore
I shall have a cue for the hon. Member for Merthyr Tydfil in a moment. I continue with the 295 figures. The multiple of 18.9 times forecast earnings compares with 13.8 times historic earnings for GEC and 17.3 times historic earnings for Marks and Spencer. There were no howls at that time that the price was a give-away, rather the reverse.
§ Mr. Rowlands
Will the hon. Gentleman now answer the question that he has been asked three or four times? Was it the Government's objective, and did the Government accept the consequence, that half the shares of the company on the first day after the launch would change hands? That was the nature of the speculation.
§ Mr. Moore
I have endeavoured to put the record clearly. I have made clear the planks of the Government's objective. The Government's objectives, especially the long-term objectives, have been clear to be seen. The vagaries of the hon. Gentleman in his peculiarly well-informed interest, so he believes, in the financial market place is something that we can discuss on another occasion.
The Government could not have offered the shares at a price even remotely approaching the opening price. To say so, as Opposition Members have implied, is sheer poppycock. The offer price was the highest at which the Government, the issuing houses and the broker could responsibly have encouraged the public to subscribe. The early market price is volatile and is not a realistic valuation of a company. Look what happened to British Aerospace shares. They were issued in February 1981 at 150p. They opened at 170p and rose gradually to the very high price of 251p. Then they fell back to 176p, only 26p above the offer price.
British Aerospace issue was, of course, offered for sale under this Administration. As my hon. Friend the Member for Selly Oak said in a speech that I enjoyed in every sense—[Interruption.] The catcall unisons of the Opposition cannot be fairly compared with the excellent erudition of my hon. Friend. Opposition Members might recall that in 1977 the previous Labour Administration sold off some of the Government stake in BP. The 67 million shares attracted applications for 315 million shares. They opened at an initial premium of 68p, rising to 85p on the second day. The difference between the sum realised, and the value put on the shares by the market, was therefore around £50 million in 1977 money equivalent to some £90 million in today's money. This might be thought a surprisingly high figure given that in the BP case, as my hon. Friend the Member for Selly Oak said there was already a quoted market price. The business of the company was well known and understood with many comparable quoted stocks and only a small part of the capital was disposed of. All these factors made the price fixing exercise relatively easy for BP, but they were absent in the case of Amersham.
Another feature of that BP sale that has not been mentioned this evening, incidentally, was that 20 per cent. of the shares were sold in North America. This is not something that the Government were prepared to contemplate in the case of Amersham.
On 4 March, and in the knowledge of the euphoria and the opening price, the Spectator published a long and considered article on the Amersham offer, that has been referred to by the hon. Member for Coventry, North-West. The article stated: 296On the basis of what is really being offered in this case, Amersham was substantially over-priced by the merchant bankers, Rothschilds, when they arranged the flotation—a price which represents a multiple of earnings of 19 times the prospective profits of the current year, and about double that for last year must strike any reasonable analyst as very top-heavy. On Wall Street a company of this kind would have been lucky to have commanded half the rating that Amersham did here".The article went on to describe how investors threw caution to the wind and there was a stampede. It also took the view that Rothschilds had done "an absolutely brilliant job". It ended by saying:We shall see in due course whether, for buyers of the shares, the issue price, let alone the price which the market has put on the shares subsequently, is justified".That is the point. Had the offer price been higher, the enthusiasm would have melted away, with the result that the company and its employees would have given a bad start. As it would probably have been impossible to get the issue underwritten, the taxpayer would have continued to be forced to keep his money in an enterprise that has no business to be in the public sector. That may be a result attractive to Labour Members, but not to the Government or the taxpayers of this country. I have described the four objectives that the Government set themselves. The right hon. Member for Leeds, South rightly asked me to deal with this issue with the seriousness that it merits. These objectives have been well and truly achieved. Amersham is now genuinely in public ownership, and public ownership of the right and acceptable kind.
A great deal of rubbish has been spoken, particularly in the House, about the commissions received by Rothschilds, who advised the Government. The right hon. Member for Ebbw Vale (Mr. Foot), no less, alleged:some of the right hon. Lady's advisers…have made at least £1 million out of it".—[Official Report, 25 February 1982: Vol. 65, c. 981.]No doubt the right hon. Gentleman gave the prospectus a hasty glance and noted on page 26 that the Secretary of State would be paying £1.155 million in fees connected with the sale, so he jumped to the conclusion that Rothschilds would walk away with that sum. Let me put the record straight. I shall put as many of the details as possible on the record, and I shall write to the right hon. Member for Leeds, South about the others.
Commissions paid by the Secretary of State were: to the underwriters, 1¼ per cent., or £800, 000; to the issuing houses—Rothschilds and Morgan Grenfell—seven-sixteenths of 1 per cent., or £280, 000; to the brokers, A. E. Casenove, £80, 000; making a total of £1, 160, 000. Fees were also paid to others—for example, Coopers and Lybrand, the accountants to the issue; Slaughter and May, the solicitors to the issue; Streets Financial for preparing and paying for the advertisements of the full and abridged particulars in newspapers; and the National Westminster Bank, as receiving banker. The reeiving banker processed 264, 000 applications and handled the allotments and cheques.
I shall write to the right hon. Gentleman giving details of all these fees and those to whom they were paid. The total cost paid by the Secretary of State, including stamp duty and VAT, amounted to some £2.8 million. Obviously, the figure of £4 million in the Amersham Supplementary Estimate was put in in advance of the issue. Naturally, the actual sum charged to the Consolidated Fund will be the actual sum paid. Rothschilds will receive no other fees or commissions.
297 The right hon. Gentleman also asked who has given whom indemnity. The agreements between the Government, the merchant banks and the company in connection with the issue and the prospectus require the parties providing information for inclusion in the prospectus to indemnify the other parties against claims arising from the provision of inaccurate information. My right hon. Friend the Secretary of State for Energy has given such indemnities to the merchant banks and the company, as is perfectly normal practice in respect of information in the prospectus originating from my Department. The reference in the Supplementary Estimate to the possibility of further expenditure in later years is in respect of any claims which might arise under such indemnities or any costs which at the time that the Estimates were drawn up could not be reliably forecast as likely to be met in the financial year. We are—
§ Mr. Moore
I am endeavouring properly to inform the right hon. Member for Leeds, South about the specific questions that he asked. The right hon. Gentleman asked if payments were made to Rothschilds prior to the approval of Parliament to the issue. It is normal practice for Departments to employ outside advisers on specified tasks which the Departments are not equipped to carry out. Such expenditures are met out the Department's money, voted by Parliament for administrative expenditure. In the case of Amersham, the Department commissioned a specific study from Rothschilds to advise on the feasibility of disposing of the company. The fee for that feasibility study, completed in late 1980, was £10, 000. Clearly a feasibility study has to be completed before there is any sense in seeking any necessary parliamentary approval for carrying out the disposal.
§ Mr. Moore
I turn to the references made to an article in The Observer on 14 March suggesting that £500, 000 had already been paid to Rothschilds by BNOC for, its work on the issue of Britoil. That is a matter for BNOC, but I understand that the corporation has so far paid no fees whatsoever to Rothschilds for the work which it has done in the last year in connection with the Government's plan to sell shares in Britoil. Obviously, the appropriate disclusure of fees will be made in the prospectus in the normal way.
Hon Members asked about the choice of merchant bankers. The Department in consultation with Treasury and Bank of England officials, drew up a shortlist of four possible merchant banks to advise them on the planned issue. Presentations were made to the departmental officials by the four candidates and Rothschilds emerged as the preferred candidate. The drawing up of the shortlist was handled by officials and the recommendation originated from departmental officials.
The Secretary of State and Ministers—
§ Mr. loan Evans
On a point of order, Mr. Deputy Speaker. I have a great deal of sympathy with the Under-Secretary, but we have heard scandalous revelations about the costs of disposing of—
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
Order. The hon. Gentleman knows that that is not a point of order for me.
§ Mr. Moore
I have been trying to answer the detailed questions. This might be the moment to say something—it is appropriate in view of the sedentary interruptions—about our advisers on this issue, and about the role of the City in general. I think that that is relevant.
I draw attention to the presence of my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke), who has been with us throughout the debate but who has been unable to contribute. He is as conscious as all hon. Members about the worth of the City. It is easy to stand on the sidelines and criticise City institutions such as Rothschild and to question whether they earn their fees. I hope that the House will acknowledge that the City has an unrivalled fund of expertise on financial matters and that it makes a major contribution to the country's well-being—for example in capital raising for industry, insurance, major international fund raising operations and in providing a wide range of sophisticated services for savers. The City is a major employer and a major winner of invisible earnings for our country.
The House is aware that apart from Rothschild which acted as the Department's merchant bank adviser, Morgan Grenfell acted for the company and A. E. Casenove was the broker to the issue. The Government had advice from those three firms on whether the offer should be made by tender or at a fixed price, and on the issue price. The House should know, however, that while advice on whether to go for tender or fixed price was divided, the Government's advisers favoured the fixed price. The Government decided the matter, taking into account that advice and the considerations that I have mentioned.
As for price, there was unanimity among the advisers that 142p was the highest that they could support, and indeed was perhaps higher than was wise. If we had chosen to go for a higher price, we should have been on our own and run the risk of a problem. I am quite satisfied that the advice that we have received from our advisers on this issue has been of the highest professional standard. It does no hon. Member credit to suggest that the advice was tendered other than in the utmost good faith.
In the end, it was the Government who took the decisions. As I have made clear, we stand by those decisions. We think that they best serve the national interest. I suggest that the Opposition should pay a little more attention to the wider consideration which led to our decisions and a little less attention to those people who tell them that the present market price represents the price that the Government could have obtained for the company if we had adopted a different approach.
In conclusion, it seems to me that in the long term the real argument is not the price at which this issue came to market, but the way in which Socialists believe that met, and women at work should be organised. Despite the past 40 years and all the lessons of history, they have still clearly shown—the hon. Member for Merthyr Tydfil constantly reiterates it from a sendentary posture—that clause 4 lives, that the nationalisation of the means of production, distribution and exchange is the root in back of all this debate.
§ Mr. Moore
That is at the root of the debate—not the price of the sale. The Labour Party never believed that the company should enter the free market at all.
We see in freedom from State control opportunities for the employees and benefits for our country from the energies released in freedom and the responsibility of ownership. Socialists shrink from ownership as they do from all reality. We embrace it, knowing how natural it is to the human condition and knowing what responsibility the spread of ownership brings to our country.