Britoil (Hansard, 22 November 1982)

§ The Secretary of State for Energy (Mr. Nigel Lawson)
I wish to make a statement on the outcome of the offer of shares in Britoil.
The lists opened and closed at 10 am last Friday. Valid applications were received in respect of just under 70 million shares. They have been accepted in full at the minimum tender price of 215p per share. The balance of the underwritten portion of the offer for sale, some 185 million shares, will be taken up at the same price by the underwriters and sub-underwriters, who comprise some 500 pension funds, life offices and other investing institutions, who will hold the shares on behalf of their members, policy holders and shareholders.
Ninety-nine per cent. of all applications came from small investors and employees. There were a little over 35,000 applications for 2,000 shares or less, 90 per cent. of them being striking price applications. These will all be eligible for the small shareholder bonus subject to the terms and conditions set out in the prospectus.
Under the special arrangements made by the Government for employees of Britoil, 92 per cent. of eligible employees will hold a total of some half million shares between them. I will circulate a more detailed breakdown of the applications in the Official Report. Dealings in Britoil shares will open tomorrow. Following the sale, the Government will be left with approximately 49 per cent. of the share capital of Britoil.
The total share issue will raise a gross sum of £548 million. In addition, Britoil will shortly repay, with interest, a debenture of ¤88 million. Total gross proceeds will be approximately £640 million.
The latest estimate of the costs to be borne by my Department since preparations began in January up to the end of the current financial year is £11½ million, exclusive of VAT. This sum includes expenses incurred in connection with the scheme transferring assets to Britoil, as well as costs of the sale itself. Parlimentary approval to expenditure in connection with the main expenses of the Britoil sale will be sought in the Winter Supplementary Estimates. Pending that approval, the necessary expenditure will be met by repayable advances from the Contingency Fund.
In all, the total net proceeds from the disposal of Britoil are estimated to be in excess of £625 million.
Britoil has now been successfully privatised on eminently fair terms for the taxpayer, and I am sure that all sides of the House will want to wish this important new British company every success in the years ahead.

§ Mr. Merlyn Rees (Leeds, South)
The Secretary of State has now been responsible for two acts of privatisation—Amersham, which was oversubscribed 23 times, and Britoil, which was undersubscribed by more than 70 per cent. The right hon. Gentleman will recall that he is constantly accusing others of failing to understand the workings of the free market. How can he judge others when his own record is one of dismal failure?
Along with Mr. Shelbourne, the right hon. Gentleman has presided over one of the most sensational financial flops of recent times. One mistake is bad luck, two is sheer incompetence. The right hon. Gentleman has got his timing wrong. Is not his reliance on a fickle market—or, 597 as he put it, a "volatile" market—an absurd way to value the nation's assets? Is the right hon. Gentleman not aware that even on his own terms he had responsibility for ensuring that Britoil—his own creation—was a strong, soundly based company, yet shareholders, a small United Kingdom group, including merchant bankers, the institutions and the pension funds, after reviewing his statements, gave him only a 30 per cent. vote? Does he not accept that this is a vote of no confidence from the share-buyers, his own chosen constituents?
Is not the total of 35,000 small shareholders who purchased on Friday a pitifully small number, bearing in mind the fact that the whole nation used to own the shares? What percentage of 255 million shares is now held by small investors? The Labour Party has opposed the sale of these shares from the start. Does the Secretary of State not accept that his own over-confident salesmanship convinced small shareholders to buy shares at a price which will look very high tomorrow?
Does he not now accept that there must be a Select Committee inquiry into all the issues arising from the Britoil question and that such an inquiry should consider the recent report of the Public Accounts Committee? First, there should be a full debate on the Floor of the House on the privatisation of Britoil. Statements and applications under Standing Order No. 9 have their place, but before an inquiry there must be a debate in Government time—certainly well in advance of the sale of Wytch Farm oil and the British Gas Corporation's oil assets.
The sale of Britoil was no ordinary flop. This was supposed to be the showpiece of privatisation. Earlier this year, two Ministers honourably resigned over a misjudgment. The Secretary of State has misjudged privatisation twice—on Amersham and Britoil. The Lawson North Sea bubble has burst. There is no doubt in our minds that there is only one option open to the Secretary of State: he should resign.

§ Mr. Lawson
Unlike the right hon. Gentleman, I shall not resort to personal abuse. Rather, I shall confine my remarks to some of the points that he made.
The right hon. Gentleman mentioned the report of the Public Accounts Committee. I am happy to see the distinguished Chairman of that Committee in his place. I have made it clear all along that if the Public Accounts Committee wishes to undertake an inquiry into the sale of Britoil shares I shall be more than happy that it should do so. It might enable the right hon. Gentleman to be educated in these matters, which he clearly is not at present.
Less than a week ago, the Opposition complained that the shares would be sold too cheaply and that there would be a City rip-off. Now, when there is no City rip-off and when the underwriters are left holding a substantial proportion of the shares, they complain about that. A few weeks ago, they complained about the dreadful possibility of Ministers or their families subscribing to the shares. I suppose that we shall now be told that that should be made compulsory. The Opposition cannot have it both ways.
There is always a risk that a share issue will be undersubscribed. That is precisely why I insisted that the issue should be underwritten. It was underwritten, and 598 successfully so. The right hon. Gentleman could not understand why the share issue was to be underwritten—

§ Mr. Merlyn Rees
indicated dissent

§ Mr. Lawson
Yes, it is in Hansard. He said that it should not be underwritten at all. Now that the issue is underwritten, he knows precisely why—to ensure the success of the sale.
The right hon. Gentleman should also understand that there is a gap of nine or 10 days between the conclusion of the underwriting and the announcement of the share issue on the one hand and the final date for application on the other. During those nine or 10 days, there could be changes of sentiment in the market one way or the other. That is why the vast majority of share issues—not merely Government share issues but all share issues—are either substantially oversubscribed or undersubscribed. Nobody who understood the market would say that it is possible to predict precisely the price at which shares will be fully subscribed.
Labour Members are fond of quoting with approval the noble Lord Kearton. They appointed him chairman of BNOC, as it then was, and regard him as a great authority on such matters. When he was asked yesterday whether he thought the sale could have been better conducted he said: Obviously it could have been managed differently, but I do not think it was managed badly at all. He was then asked by the interviewer whether he would buy shares in Britoil, to which Lord Kearton replied: I bought my maximum allocation. Of course I did.
I am sure that the small shareholders will not regret their puchase. I regret that there was not a full application, but I am sure that in future small shareholders will take the opportunity to buy further shares in the company. That would not be possible if it remained in State ownership, as Labour Members want.

§ Mr. Anthony Nelson (Chichester)
Is my right hon. Friend aware that there will be a widespread welcome for the fact that, even though the issue was undersubscribed, the majority of this major British compay has been privatised? Is he further aware that the main reason it was undersubscribed was because of deliberate conspiracies among Labour Members to sabotage the scheme and to leak misleading information, thus deliberately undermining public confidence in a major British company?
Will my right hon. Friend bear in mind the advice, which several Conservative Members gave him before the share offer, that it would have been preferable, as it will be on future occasions such as the privatisation of British Telecom, for such events to be made the subject of an offer for sale rather than a tender, which is clearly inapplicable and unsuccessful in offers of this size?

§ Mr. Lawson
My hon. Friend is right to say that the Opposition did their best to talk the issue down. They did so not just because they are opposed to this issue but because they are opposed to the whole privatisation programme. They hope thereby to prevent the privatisation programme, but they will fail to do so.
It is hard to say whether a fixed price issue would have been undersubscribed or not. Bearing in mind events in the oil share market, which caused all oil shares to fall by 10 per cent. or more between the completion of the underwriting and the final application, it is likely, in a period when the Indonesian Government announced a 599 reduction in the price of its oil, and fears were aroused in the City as a result of reports from Saudi Arabia, that a fixed price issue might also have been undersubscribed. In those circumstances, I suspect that it would have been. However, I fully accept my hon. Friend's consistent line on this matter.

§ Dr. J. Dickson Mabon (Greenock and Port Glasgow)
Is it not distressing that less than 1 per cent. of the shares have been acquired by employees, and that tomorrow the small investors will take a hammering, although they acted loyally and patriotically in responding to the Secretary of State's appeals?
Is it not more alarming that foreign penetration will be all the more serious tomorrow when shares will be sought on the exchange? Should there not be some form of parliamentary scrutiny before any future privatisation scheme?

§ Mr. Lawson
As the House will be aware, this matter has been fully debated several times. Therefore, I do not know what the right hon. Gentleman's complaint is. Nor do I understand his comments on foreign penetration. As for employees owning 1 per cent. of the company, that is 1 per cent. more than they did before the offer.

Several Hon. Members
rose—

§ Mr. Speaker
Order. In an effort to protect the following debates, I shall call three more hon. Members from each side and then move on to the main business.

§ Mr. T. H. H. Skeet (Bedford)
Would the Secretary of State be surprised if Labour Members started buying the shares now that they cost less? Will he acknowledge that BNOC, a State corporation, set the price of oil at $3 below the market price for Saudi crude in March this year, which annoyed Saudi Arabia and possibly caused that country to torpedo the flotation?

§ Mr. Lawson
My hon. Friend is right. There is no doubt that the interview with Sheik Yamani which appeared in a Kuwaiti newspaper on Thursday morning had an unsettling effect on oil shares. However, I have no reason to believe that that interview had anything to do with a desire to sabotage the Britoil sale. It was a pure coincidence that it came at an inopportune moment.

§ Mr. Dick Douglas (Dunfermline)
Does the Secretary of State agree that one of the difficulties of complying with the suggestion of my right hon. Friend the Member for Leeds, South (Mr. Rees) that he should resign is that, because of his displays in the last few weeks, he would not be able to recover his old job as writer of the "Lex" column in the Financial Times?
Will the Secretary of State concede that anybody who had spent any time analysing the oil market would have known of its uncertainty? The Saudi Arabians were sick of the Iranians, the Libyans and the Nigerians and there was bound to be uncertainty in the oil market. The Labour Party has continually said that in view of that uncertainty the Secretary of State should not sell this British asset. He should be thoroughly ashamed that he has gone through all this to sell the nation's assets to a few private shareholders.

§ Mr. Lawson
The hon. Gentleman fails to remember, as do Labour Members generally, that the issue was successfully underwritten by a wide range of British institutions at a price satisfactory to the taxpayer.
The hon. Gentleman makes claims to omniscience. I make no such claims. It is not only Government share 600 issues that can be oversubscribed or undersubscribed, but private sector share issues too. The Government claim no special expertise. That is precisely why we believe that it is better for business and industry to be in the private rather than the State sector.

§ Mr. Tim Eggar (Enfield, North)
Have not the Opposition been more than usually hypocritical today? Should not those people who have complained about the level of underwriting be congratulating my right hon. Friend the Secretary of State on his decision to underwrite the issue? In view of the foresight now being shown by the Labour Party, should we not be grateful for their advice not to subscribe to the issue?

§ Mr. Lawson
I agree with my hon. Friend that the Opposition have been wholly hypocritical, but I do not agree that that is anything unusual.

§ Mr. Tam Dalyell (West Lothian)
On what basis of comparative political morality does Lord Carrington resign his job but not this Secretary of State?

§ Mr. Lawson
Speaking purely personally, I deeply regret Lord Carrington's resignation.

§ Mr. Frank Dobson (Holborn and St. Pancras. South)
He set too high a standard.

§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
As somebody who neither applied for nor underwrote the issue on the principle that I did not believe it right to do so, and as someone who at least understands the workings of the City, may I ask whether it is not amazing that the Secretary of State should be lampooned and a Select Committee of inquiry called for because he obtained too much for the taxpayer? Does that not show that the City does at times earn its money? It provided £548 million, which could not have been obtained otherwise. The Secretary of State is to be congratulated on his courage and on what he has done. To call for a Select Committee of inquiry shows the hyperbole and hysteria of the right hon. Member for Leeds, South (Mr. Rees).

§ Mr. Lawson
I thank my hon. Friend for those remarks and agree that the City proved itself to be extremely effective in helping to bring to the market the biggest new issue that the country has ever known. The City's institutions performed extremely well. My hon. Friend is also right to say that this issue shows how hypocritical were the Opposition's previous crocodile tears for the taxpayer.

§ Mr. Doug Hoyle (Warrington)
Will not the Secretary of State recognise that his incompetence has led to the mess over the sale of Britoil shares, that it will be known as "Lawson's folly" and that as a result of his actions Britain is the only oil producer in the free world to be without a national oil company and control over production? If the right hon. Gentleman does not do the honourable thing and resign, the country will demand that the Prime Minister should sack him for his actions.

§ Mr. Lawson
The hon. Gentleman is becoming even more absurd than most of his colleagues. If he has a crystal ball that enables him to forecast accurately 10 days or a fortnight in advance changes in sentiment and prices in the oil share market, or, for that matter, in any sector of the share market, he must be a very rich man.

§ Mr. Merlyn Rees
With regard to the Secretary of State's reference to our comments on underwriting—the 601 Chief Whip seemed to understand it at the time—may I remind him that we brought to his attention a report of the Public Accounts Committee, which 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. Will the Secretary of State re-examine that practice before the Wytch Farm and British Gas Corporation shares are sold? The Secretary of State has put the blame on everyone except himself. We are clear about where the responsibility lies—it lies with the right hon. Gentleman.

§ Mr. Lawson
I have not blamed anybody. There is no cause for blame. However, I am sure that the right hon. Gentleman would want the record to be set straight. On 10 November, he said: There is no need for underwriting."—[Official Report, 10 November 1982; Vol 31, c. 548.] He cannot wriggle out of that. Britoil is now in the private sector and I hope that both sides of the House will wish it every success as a private sector company in the years ahead.