Britoil (Hansard, 10 November 1982)

§ The Secretary of State for Energy (Mr. Nigel Lawson)
With permission, Mr. Speaker, I should like to make a statement about the privatisation of Britoil.
The offer for sale of 51 per cent. of the shares in Britoil will be by tender, with special arrangements for small investors to apply for shares at the striking price without having to bid a specific price in advance.
The shares have today been underwritten at a minimum tender price of 215p per share. Payment for the shares will be in two instalments, a first instalment of £1 a share on application, with the balance due next April.
The prospectus and application form will be available in the Library from today and published in newspapers on Friday. Copies of the prospectus in book form will be widely available through main branches of the clearing banks, Trustee Savings Banks and main post offices from next Monday, 15 November. The application list for the shares now offered for sale will open at 10 am on Friday 19 November and may be closed at any time thereafter.
In order to encourage small investors to retain a long-term interest in the company, they will, subject to the conditions set out in the prospectus, receive one free share, known as the small shareholder bonus, for every 10 still held in three years time.
As I told the House a fortnight ago, the privatisation of Britoil will in no way effect the system of participation agreements, which will remain in place, under 100 per cent. Government control, as a means of safeguarding our national security of supply. But what it will do is enable the people of Britain to take a direct personal stake in the North Sea. It will create an independent British oil company free to seize the opportunities open to it; and it will substantially reduce the size of the public sector in an area where State ownership has no rational justification whatsoever.

§ Mr. Merlyn Rees (Leeds, South)
The right hon. Gentleman's statement represents the final stage in the splitting up of BNOC. It involves the biggest sell-out of our national interests because it involves the sale at half the value of the assets and the dismantling of the instrument through which the United Kingdom has been able to exercise control and influence over the development and use of North Sea oil, depletion policy and so on. It bears no comparison with British Petroleum. BNOC served a different and modern purpose compared with the shareholding in BP of 70 years ago. BP was never the chosen instrument of Government control.
I welcome the statement, following my representations yesterday, but we have been told very little. The Opposition have made it clear that we will one day take BNOC back into public ownership. Moreover, we will keep the House fully informed—unlike the Government.
I accept that we have not had a copy of the prospectus for legal reasons. Nevertheless, I was offered a copy by the media this morning. Hon. Members did not receive a copy. The prospectus is being discussed outside the House. So much for legality.
Is the decision to sell by tender the Secretary of State's own? We shall carefully examine the price. No doubt the Public Accounts Committee will do so too. I shall be surprised if the sale realises anything like the estimate of 548 £1 billion quoted 18 months ago. Will the right hon. Gentleman confirm that the net proceeds of the 51 per cent. sale will be less than half of the £1 billion that they are worth?
On the information that has been given to us, we cannot make a value estimate even on the underwritten price because we do not know how many shares are on offer. What value does the minimum tender price put on the entire company? We should know that so that we can judge what value the Government have set on it.
What does "small shareholders" mean? How small must a shareholding be to be defined as small? What are they promised in three years' time when Britoil will come back on to the market for the reasons that everyone has been talking about?
Why has the Secretary of State ignored the PAC's advice about underwriting? It said: We are concerned that, in the course of this re-examination, the Treasury should look again at the practice of underwriting such sales…We therefore trust that the adoption for sale of publicly owned shares of this aspect of normal City practice will be very carefully re-examined. There is no need for underwriting. It would not matter in the short run if all the shares were not sold. In any event, the issue could have been handled by the Bank of England. What costs are to be paid to the merchant banks and underwriters for the preparation and sale of this asset?
The Secretary of State has decided to go ahead with part-paid shares. That will be risky if the share value rises quickly in the first week. We shall wait and see.
The statement is incomplete. We must discuss the matter again, in Government time, having seen the prospectus. There is no point in hypothetical questions. Everyone else knows what is in the prospectus, but we do not. We shall discuss profits, overseas investments and window dressing soon. [Interruption.] The statement may have been short but it is right that our reply should be long.
Will the balance sheet of the company that has been agreed between the Secretary of State and BNOC and has been the subject of much speculation be published in the prospectus? It will be possible to demonstrate that what the right hon. Gentleman said about window dressing is correct only if the balance sheet is included. We have been far too dependent on information from outside.
The Government and the Secretary of State, fired by ideology, have let the nation down. Only the speculators will rejoice at this Government policy.

§ Mr. Lawson
I shall do my best to answer the many questions that the right hon. Member for Leeds, South (Mr. Rees) asked. I make no complaint about their number. I acknowledge that the matter is highly complex.
The right hon. Gentleman was right to point out that there have been several leaks today. I regret them deeply. I deplore the leaks that have occurred throughout. Nevertheless, the right hon. Gentleman has been only too happy to seize on those leaks on several occasions. I deplore all leaks. I certainly did not authorise any of them. Indeed, I have given strict instructions throughout that the House is to be informed first.
The right hon. Gentleman said that the sale was for half the value of the asset. That is nonsense. The right hon. Gentleman has no idea of the value of the asset. I challenge him to sustain that assertion. He said that we were losing control of depletion policy. That is untrue. Our powers over depletion policy remain intact and are not in any way affected by the privatisation. 549 The right hon. Gentleman renewed the renationalisation threat. I am aware of the Labour Party's threat. It is referred to on page 4 of the prospectus. Potential shareholders will be free to make as much or as little of it as they wish.
The right hon. Gentleman asked whether the decision to go to tender was mine. Indeed, it was. I have long been a supporter of tenders. I was the Minister most closely responsible earlier in the Government's term of office for the innovation of selling gilt edged by tender. When the right hon. Gentleman examines the prospectus, he will see that we have sought to square the circle to achieve a method of sale by tender which does not deter the small shareholder. I believe that we have achieved that.
The right hon. Gentleman said that a year ago I estimated that the proceeds would be £1 billion. There is no truth in his suggestion. He can find no such assertion on the record. When asked a year ago, I said that the sum would be substantial but that it was impossible to say what it would be. The right hon. Gentleman said that the proceeds would be less than £½ billion. Again, he is wrong. [HON. MEMBERS: "What will they be?"] Given a chance, I shall explain. It is impossible to say what the proceeds will be because that depends on the striking price of the tender. The minimum proceeds, at the minimum tender price, will be £548 million gross for the equity, plus £88 million for a debenture, of which £55 million will be paid into the national oil account, giving total proceeds of over £600 million.

§ Mr. Edward Rowlands (Merthyr Tydfil)
That is bogus.

§ Mr. Lawson
It is not bogus; it is genuine. It is the hon. Member who is bogus through and through.
The right hon. Member for Leeds, South asked for a definition of a small shareholder. A small shareholder is defined in the prospectus as anybody who applies for not more than 2,000 shares.
The right hon. Gentleman asked about underwriting. Of course, following the PAC report, we reconsidered whether the issue should be underwritten. We are confirmed in our belief that it is right to underwrite the issue, for two reasons. The first is that it is essential to complete the privatisation. The second is that the knowledge that the issue is underwritten assists in obtaining a better price for the taxpayer, about whom the right hon. Gentleman purports to be concerned. The total commission for underwriters and sub-underwriters is 1.55 per cent. [HON. MEMBERS: "How much is that?"] The figure in the prospectus is £8½ million. It is a substantial issue and hon. Members should be able to work out their percentages without aid from me.
The right hon. Member for Leeds, South asked whether the balance sheet appears in the prospectus. Of course it does. I am astonished that he should suggest otherwise.

Several Hon. Members
rose—

§ Mr. Speaker
Order. Many right hon. and hon. Members seek to take part in the main debate. I therefore propose, out of fairness to the House, to continue these questions only till 4 o'clock. I remind the House that we are asking questions, not debating the issue.

§ Mr. T. H. H. Skeet (Bedford)
I congratulate the Secretary of State on the transfer of Britoil to private enterprise. How is the mean price established? Is it 550 established by the number of applications put in or by the number of shares applied for? When the company is established in full operation, will it be able to apply to purchase shares in the British Gas Corporation's offshore oilfields?

§ Mr. Lawson
The method of disposing of the British Gas Corporation's offshore oil interests has not yet been decided. The striking price for the tender will be determined in the normal way. The details are in the prospectus, but broadly it will be either the highest price at which applications totally cover the value of shares on offer, or such lower price as I may, in certain circumstances, decide. Anything that I say is qualified by what is in the prospectus.

§ Dr. J. Dickson Mabon (Greenock and Port Glasgow)
I deplore the substance of the matter and the way in which it has been handled. It borders on contempt of Parliament, in view of the Minister's earlier statements. To what extent are foreign companies, and through them foreign Governments, being freely invited to take part in the sale of these national assets? To what extent will the Minister try to ensure that the proportion of shares going to small investors is large rather than small?

§ Mr. Lawson
The prospectus is a large and bulky document, so the right hon. Gentleman will forgive me if I do not quote from it verbatim. The prospectus states clearly that it does not constitute an invitation to anyone outside the United Kingdom to apply for shares.
The right hon. Gentleman asked how we could ensure that small shareholders have a fair crack of the whip. Obviously that depends to some extent on the volume of applications from small shareholders, but the method of allocation is at my discretion. The Government's commitment to wider share ownership and the small shareholder is well known.

§ Mr. Geoffrey Lofthouse (Pontefract and Castleford)
Is it in the best interests of parliamentary democracy that some hon. Members who earlier this year voted for the Bill which paved the way for the bonanza may make a colossal profit or enjoy a rake-off at the taxpayers' expense?

§ Mr. Lawson
The taxpayer will receive a fair price for the asset. Of course, hon. Members will be able to apply for shares, just as any other member of the public will. Whether they will make a profit is not for me to say, because I do not possess a crystal ball.

§ Mr. Tim Eggar (Enfield, North)
I join my right hon. and hon. Friends in warmly welcoming the decision and, in particular, the bonus scheme, which has been cleverly devised to give incentives to small investors to buy and to retain the shares, which is extremely important. What measures are to be taken to restrict multiple applications?

§ Mr. Lawson
I am grateful to my hon. Friend for his welcome. The prospectus states clearly that all multiple applications may be declared invalid.

§ Mr. Douglas Jay (Battersea, North)
Mr. Speaker, would you buy a second-hand car from this Minister?

§ Mr. Gordon Wilson (Dundee, East)
Is the Minister satisfied with the way in which the Department has approached the sale in the past year? Does he agree that the public have been given the impression that he and his Department have displayed all the skill of players in a game of blind man's buff and that there has been a clear 551 refusal to give the House any idea of what possible benefits the sale could bring and, in particular, what sum will go into the national Exchequer? In view of the vagueness about the proportion of the assets to go to small investors, what percentage would the Minister prefer it to be? If he cannot answer, we can only assume that this is a gift to the institutional investors and to no one else.

§ Mr. Lawson
As I have said, I am anxious to see a significant proportion of the issue go to the small investor. As the size of that proportion must depend upon the number of applications from small investors, I cannot say at this stage what it will be.

§ Mr. John Hannam (Exeter)
Will my right hon. Friend ignore the squeals of the Opposition, who will object just as strongly if the sale is successful as if it is not, and will he accept our congratulations on the method that he has devised to help small investors?

§ Mr. Lawson
I am grateful for my hon. Friend"s last remark. I entirely agree with his psychological analysis of the Opposition.

§ Mr. Dick Douglas (Dunfermline)
Does the Minister accept that to the extent that he has made a U-turn since 27 October, when he suggested that a tender issue was so difficult as to be virtually impossible, we welcome his conversion? As he is the sole shareholder in the firm, what value does he put on the nation's assets and what possible public benefit can be derived from flogging those assets in this way? What are his criteria with regard to the national interest? Does he accept that we see no case whatever for putting the nation's assets into the City at this time and that they should therefore be taken back forthwith?

§ Mr. Lawson
I said previously that there had never been a tender of this size, and that is true. I also said that a straightforward tender would deter the small shareholder, which I did not wish to do. That is why I and my professional advisers have spent months working out—I think that we have now reached the right conclusion—a variant of the tender that will not deter small investors. That is entirely new and very important.
As for the hon. Gentleman's comments about flogging national assets, I deeply resent the implication that only the public sector is British, and the whole of the private sector of industry will deplore it, too.

§ Mr. David Penhaligon (Truro)
What special arrangements have been made for the employees, or are they to receive no consideration whatever as they are not mentioned once in the statement?

§ Mr. Lawson
The hon. Gentleman is right to stress the importance of the employees' share scheme. I said frequently in the debates on this that there would be an employee share scheme, and indeed there is. Employees will be entitled to up to £60 worth of shares entirely free and a further number free on a one-for-one basis—that is, for every share for which they apply they will receive a further share free. The offer contains a very generous employee shareholding scheme which I hope will commend itself to the hon. Gentleman and his party.

§ Mr. Peter Rost (Derbyshire, South-East)
I welcome my right hon. Friend's efforts to weed out the multiple 552 applications so that the genuine small investor will have a better chance of an allocation, but will he give an assurance that if the issue is oversubscribed the allocations will be heavily weighted in favour of the small applicant, who will not be subjected to a ballot or a scaling down?

§ Mr. Lawson
If the issue is oversubscribed, preference will certainly be given to the small investor, as in all previous privatisation issues.

§ Mr. John Maxton (Glasgow, Cathcart)
Will the Minister give a guarantee to the employees of Britoil in Glasgow that following this ludicrous sale the headquarters of the company will not be moved from Glasgow to the South-East of England?

§ Mr. Lawson
So far as I am aware, the company has no intention of moving its headquarters, but if the hon. Gentleman is concerned about the company's welfare it is strange that he should talk about it in those terms.

§ Mr. Richard Alexander (Newark)
I accept my right hon. Friend's assurances about sales to multiple and foreign applicants, but what assurance can he give that there will not then be subsales by the smaller purchasers to multiple applicants and to foreign interests?

§ Mr. Lawson
In a free country and a free market, anyone is free to sell his share to anyone else. That is true in every company. My hon. Friend will be aware, however, as we debated this at some length in the House, that the articles of association provide for one special share to be held by the Government, which will ensure that control of the company or of its board cannot pass into unacceptable hands.

§ Mr. Tam Dalyell (West Lothian)
What is the definition of "unacceptable hands"?

§ Mr. Lawson
That is a tempting question, but I think that the hon. Gentleman will have to leave that to the discretion of the Government. I am aware of the point that he makes. I should have thought that my reply was sufficient for his purposes if he understands anything about the subject.

§ Mr. Anthony Nelson (Chichester)
Although many of us wholeheartedly support and welcome my right hon. Friend's initial statement about the sale of the Government's interest in Britoil, is he aware that some of us believe that a far more desirable means of achieving widespread share ownership is not by having differential categories of share bonus schemes but by having an initial share offer as opposed to a tender, which would offer certainty and simplicity and thus attract far more widespread subscription?

§ Mr. Lawson
I am aware of my hon. Friend's views and I took them into account when deciding on the method of sale. He is, however, wrong to suggest that the only help given to small shareholders is the special category of bonuses. In fact, there are two other important elements.
First, the small shareholder does not have to bid a price. In a tender, it is often confusing for the small applicant to know what price he should bid. That is why a fixed price offer has often been considered preferable. In the Britoil flotation, however, in the space where he would otherwise have to state a price the small shareholder may simply write "striking price". He will then be deemed to have bid whatever the striking price turns out to be, so he need not worry about that. 553 Secondly, payment will be in two instalments. The first will be a fixed sum of £1. The second, which will not be due until April, will be the difference between that and the striking price. This means that the payment on application will be a fixed price, and the small shareholder will know exactly what it is as in a fixed price offer.

§ Mr. Andrew Faulds (Warley, East)
As the right hon. Gentleman talks about sales to the British people, would he care to forecast how many of my constituents in Smethwick are likely to take up shares?

§ Mr. Lawson
I regret that I am not sufficiently familiar with the hon. Gentleman's constituency to answer that.

§ Mr. Michael Morris (Northampton, South)
I congratulate my right hon. Friend and his team on actually making denationalisation work for once. May I reassure him that the British public behind him? As a member of the Public Accounts Committee, may I also welcome the method of sale? Finally, does my right hon. Friend agree that if anyone is responsible for trading down any price that we receive for Britoil it is the Labour Party, with its insistence on renationalisation of Britoil?

§ Mr. Lawson
I am grateful for my hon. Friend's remarks. He is right to say that during the past few months Labour Members have done their best to talk down the sale and to obtain the worst possible deal for the taxpayers. Despite their efforts, the Financial Times actuaries oil share index today stands 16 per cent. higher than when I made the original announcement in October 1981.

§ Mr. Bob Cryer (Keighley)
As the Minister is so concerned to spread ownership, will he make a special needs payment to the unemployed, the low paid and those who receive supplementary benefit to enable them to purchase shares? Will he recommend that the Health Service workers who take home £50 or £60 a week should have an extra wage settlement to enable them to buy shares? Is it not true that the vast majority of working men and women will not be able to buy shares? The sale is a bonanza for City slickers, with a £9 million commission immediately for the right hon. Gentleman's friends. Does the Secretary of State agree that there are no safeguards for the sale because foreign-owned United Kingdom based companies are not excluded?

§ Mr. Lawson
It is a great pity that the hon. Gentleman should have taken time that could have been given to those who wish to ask serious questions.

§ Mr. Kenneth Lewis (Rutland and Stamford)
Is my right hon. Friend aware that there is everything to be said in Britain now for arranging that Government-controlled industries—this industry is still controlled by the Government—should have the widest possible shareholding among the people of Britain, including those who work in the industry?

§ Mr. Lawson
I agree entirely with my hon. Friend.

§ Mr. Cryer
On a point of order, Mr. Speaker. The Secretary of State is dealing with a serious matter. He does not have the right to shrug aside questions from hon. Members who have been duly elected, as he did with my question.

§ Mr. Speaker
That is not a point of order. It has long been the case that Ministers answer when they wish to answer. That has always been a Minister's right.

§ Mr. Dalyell
On a point of order, Mr. Speaker. During my many years in the House I have not seen a Minister with such deplorable parliamentary manners as the Secretary of State. When he is asked for a definition of a phrase that he used, it is not sufficient to say "If the hon. Gentleman understands"—

§ Mr. Speaker
Order. However strongly the hon. Gentleman may feel about the reply to his question, he knows that it does not raise a point of order for me.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I remind the House that yesterday evening there was some feeling among hon. Members who were not called. Many hon. Members will not be called in today's debate, especially if the points of order are not genuine points on which I can rule.

§ Mr. Dalyell
Further to that point of order, Mr. Speaker. Is it not parliamentary abuse to add gratuitously "if the hon. Gentleman knows anything about it"? I spent many hours with my colleagues in Committee and I have a constituency interest—

§ Mr. Speaker
Order. Honour is satisfied now.

§ Mr. John Morris (Aberavon)
Further to that point of order, Mr. Speaker. Would you be good enough to allow the Secretary of State further time to answer my hon. Friend's question properly, decently and honourably?

§ Mr. David Winnick (Walsall, North)
On a point of order, Mr. Speaker. As many Conservative Members who asked questions clearly have an interest to declare, would it not have been appropriate and certainly honourable of them to declare that interest?

§ Mr. Speaker
Even though hon. Members may have an interest—I am unaware of any—at Question Time it is not obligatory for them to declare it.

§ Mr. Michael English (Nottingham, West)
On a point of order, Mr. Speaker. In his answer to my hon. Friend the Member for Keighley (Mr. Cryer), the Minister implied that he should like another question of a serious nature. May I ask it?

§ Mr. Speaker
Yes, but not now.

§ Mr. D. N. Campbell-Savours (Workington)
On a point of order, Mr. Speaker—

§ Mr. Speaker
Order. We shall move on now in the interests of the House. It is very unfair—

§ Mr. Campbell-Savours
This is another matter, Mr. Speaker—

§ Mr. Speaker
Order. I am standing, so the hon. Gentleman must sit down. It is unfair to hon. Members who are desperately anxious to take part in the debate. If the hon. Gentleman wishes to waste the House's time further, I shall hear his point of order and we shall see what sort of point it is.

§ Mr. Campbell-Savours
You said, Mr. Speaker, that you wished to protect the rights of Back-Bench Members in the subsequent debate. Do you intend to curtail the length of speeches in that debate?

§ Mr. Speaker
That is a matter for hon. Members, who I hope will exercise discipline. I shall ask them to do so.

§ Mr. Gary Waller (Brighouse and Spenborough)
rose—

§ Mr. Speaker
The hon. Gentleman's point of order is about something entirely different. We must finish this matter first.

§ Mr. Merlyn Rees
My hon. Friend the Member for West Lothian (Mr. Dalyell) has been treated discourteously. He served on the Committee. My hon. Friend has a reputation for being a nuisance, which may be a good thing in the House, but perhaps I could ask the same question. We discussed the word "unacceptable" in Committee and it has not been hidden. Is the Secretary of State's reticence about the word something to do with the EEC? The point of having the word discussed on the Floor of the House is to enable other hon. Members to have a chance to know what the problem is.
The Secretary of State gave only a partial answer to the second question. What are the total costs of presentation, not just underwriting? Is the figure £20 million, of which the Government will pay £14 million? The right hon. Gentleman referred to some parts of the prospectus and it may be valuable to clear up that matter. Although it is not an authorised leak, is it correct that the prospectus estimates a profit of £90 million for the first year, with a £45 million dividend?

§ Mr. Lawson
The right hon. Gentleman is approximately right, but he will find the precise figures in the prospectus that will be deposited in the Library within, I hope, half an hour. He will find in the full prospectus much that is of interest; it contains an invaluable amount of information. It is impossible to predict the full cost of the issue. Some costs will depend on the work to be done in processing the applications, which in turn depends upon the volume of applications. As soon as the figure is known, it will be made public in the usual way in the Department's estimates.
The right hon. Gentleman referred to the question raised by the hon. Member for West Lothian (Mr. Dalyell). We debated the matter at considerable length in Committee when both the right hon. Gentleman and the hon. Gentleman were present. We also debated it at some length in the House. The right hon. Gentleman and the hon. Gentleman can refresh their memories by reading the Official Report. It is for the Government to judge whether a potential change in control would be unacceptable. It is arrant nonsense for the right hon. Gentleman and hon. Gentleman to say that when they were in office they did not allow the Government any discretion. The right hon. Gentleman and the hon. Member for West Lothian—whose questions I always welcome—understand the position.

§ Mr. Waller
rose—

§ Mr. Speaker
Order. Before I call the hon. Member for Brighouse and Spenborough (Mr. Waller), who has given me notice of a point of order although not its entire contents, I must apologise to the hon. Member for Workington (Mr. Campbell-Savours). He raised a valid point of order, and I am glad that he made it.