§ The Minister for Information Technology (Mr. Geoffrey Pattie)
With permission, Mr. Speaker, I should like to make a further statement about the privatisation of British Telecom.
This morning, Kleinwort Benson Ltd. on behalf of my right hon. Friend the Secretary of State has offered for sale 3,012 million ordinary shares in British Telecom plc at a price of 130p per share. The issue has been fully underwritten. Discussions are now taking place with a group of financial institutions, and I am hopeful that, within the next few hours, the shares being offered in the United Kingdom will have been fully applied for. Subject to the successful outcome of these discussions, the institutions will retain just over half these shares and the remainder will be made available for public offer next week. Prospectuses will be published on Tuesday 20 November, and the last date for applications will be 10 am on Wednesday 28 November. Copies of the prospectuses will be placed in the Library of the House today.
Of the shares on offer, 415 million, which is just under 14 per cent., have been provisionally allocated for issues to be made in New York, Tokyo and Toronto, and these are being underwritten by the Bank of England.
§ Mr. Alan Williams (Swansea, West)
I thank the Minister for coming to the House to make the statement, although it is marginally disconcerting, as the hon. Gentleman will understand, to be handed a revised version two minutes before the statement was delivered.
This is an incredible day—a day when a Government who pretend to be worried about the future of high technology are announcing the price at which they intend to hand over to the whims of short-term profit maximisation the very industry that will be at the centre of the information technology revolution. It is a day when the Government are taking a public monopoly, which is answerable to Parliament, this House, the Minister and the Select Committees, and are creating a private monopoly that will control 95 per cent. of the telecommunications network and will be answerable to no one other than its shareholders. [Interruption.] Well, at the moment it is answerable to 55 million people.
While the price of 130p is precisely what I forecast in a broadcast two days ago, I repeat what I also said at that time: it is the wrong price. Are the Government aware that the very City experts who are advising the Government firmly expect that when those shares are traded on the stock exchange they will start trading at a premium of at least 10 per cent.? Does the Minister realise that that price will mean that the Government are selling control of more than £16 billion worth of public assets for less than £4 billion?
Will the hon. Gentleman confirm that, in addition to his price error, the combined cost of advertising by British Telecom this year and by the Government in relation to the launch and the commissions that will be paid to the underwriters and the banks will be at least £100 million and probably nearer £150 million — all to the Government's friends in the City? Is it not true that, behind the Government's boast that they intend to extend share ownership, they are taking this asset, which will earn £1.3 billion in profit this year, from the 55 million people 916 of Britain who own it at present in order to sell it at a knockdown price to a relatively small proportion of those people?
Finally, is it not already clear, before British Telecom is sold, that the Government's guarantees are absolutely meaningless? The Minister has said that 14 per cent.—415 million shares—have been provisionally allocated for sales overseas. Is the hon. Gentleman aware that another 3 per cent.—90 million shares—will be bid for within this country out of the British tranche by an overseas consortium? Is there any control over such bids by other consortia? What action do the Government intend taking to stop the erosion of any control on the sale overseas?
Finally, in relation to these guarantees—
§ Mr. Williams
Yes, I am referring to the same guarantees. Have we not already seen the hollowness of the Government's pledge to domestic users that privatisation will mean that, for five years, prices will be cut to at least 3 per cent. below the cost of living? We have already seen, in anticipation of privatisation, increases of 7.1 per cent. for domestic rentals and 6.8 per cent. for domestic unit charges — both well above the cost of living — and reductions in prices for primarily trunk business users.
§ Mr. Pattie
The right hon. Gentleman has told the House that this announcement will have the remarkable effect of making British Telecom answerable to its shareholders, which, in his mind, is supposed to be a retrograde step. The Government believe that this step, which shows that it is bigger than all the Government's privatisation measures so far, will make British Telecom even more commercially aware than it has been. In future, British Telecom will have to satisfy both its customers and its shareholders. Apparently, the right hon. Gentleman thinks that does not matter.
The message that should go from the House is that we wish the chairman of British Telecom, his employees and the new shareholders after 3 December every success in making this the vigorous enterprise in the private sector that we know it will be. The right hon. Member for Swansea, West (Mr. Williams) will understand the reasons why I cannot enter into any speculation about price considerations at this stage.
§ Sir Anthony Grant
Will my hon. Friend totally disregard the niggardly and preposterous objections from the Opposition about a policy that is entirely welcomed by Conservative Members and is designed to get the clammy hand of the state away from future technological industries? Conservative Members wish the policy every possible success.
In view of the Government's enthusiasm for wider share ownership and the spread of ownership, will there be any provisions to ensure that the many small investors will not find that their applications are swamped and the issues hogged by big business investors?
§ Mr. Pattie
I am grateful to my hon. Friend for his words of welcome. I can assure him that, as the Government's aim in this matter is to spread share ownership as widely as possible, the requests and applications of the smaller investor will be given priority wherever possible.
§ Mr. Ian Wrigglesworth (Stockton, South)
Will the Minister be a little more forthcoming? He ended by saying, "wherever possible". If the issue is over-subscribed, who will make the decisions on the allotment of shares? On what basis will that allotment be made? There will be many dissatisfied small investors if they find that, having been encouraged to buy shares in this institution, their applications are turned down. Will the Minister comment on the view held in the City that, if any other share issue had been handled in this way, it would have been illegal? Will he consult his colleagues and look into the possibility of extending the type of share offer that has been made in this case to other share offers so that a wider public can come forward to buy shares in other institutions?
§ Mr. Pattie
The precise basis of the allocation to which the hon. Gentleman referred will be decided by my right hon. Friend the Secretary of State. I have said already, and I am happy to repeat it, that the Government are committed to wider share ownership and that we value small shareholders.
The hon. Gentleman made a rather serious point about possible illegalities. I should like to consider what he said. Perhaps he would like to write to me about it.
§ Mr. Rob Hayward (Kingswood)
Does the Minister find the statement from the Opposition Front Bench particularly surprising in view of the fact that, during the Committee stage of the Telecommunications Bill, we were persistently told that the share offer to the public would be grossly under-subscribed because no one would find it attractive? Is it not a reflection of the expertise of all the BT employees that they have managed to convey to the public at large that they are now working for a modern communications system, and that large numbers of people in this country and abroad now wish to subscribe for shares in BT?
§ Mr. Pattie
I am grateful to my hon. Friend. His reference to a change in attitude within BT is well substantiated, not only by the advent of privatisation but by the whole concept of greater competition which results from having other people coming into the market. It has produced a tangible improvement in the performance of BT. He is right in saying that the offer has created a great deal of interest here and abroad, because BT is a very powerful British and international company.
§ Mr. John Golding (Newcastle-under-Lyme)
Is it not a disgrace that BT shares are being sold to the Yanks and the Japanese? Is it not a disgrace also that BT is now inviting three foreign equipment companies to tender for equipment for BT?
Will the Minister make it crystal clear to people abroad that when the Labour party renationalises BT it will do so in the interests of the taxpayer, the customer and the equipment manufacturing industry, and not in the interests of shareholders?
§ Mr. Pattie
The hon. Gentleman's line is somewhat predictable. We believe that investment in Britain is not a disgrace. The investment is not cajoled; it comes here because it wants to come here.
The hon. Gentleman mentioned equipment for BT. I am aware of the contract to which he referred. On the merits of that application, BT has decided that for the 918 second source — the first source having been totally British—it wishes to invite further applications from the three consortia.
The hon. Gentleman mentioned what I regard as the remote and distant — not to say inconceivable —possibility of renationalisation by some future Labour Government. We believe that the interests of the taxpayer, the customer and the British manufacturer are totally safeguarded by the steps taken today.
§ Mr. Michael Marshall (Arundel)
Will my hon. Friend agree that the history of recent privatizations—for example, British Aerospace and Cable and Wireless — shows that the employee shareholding is a crucial element in the operation? The right hon. Member for Swansea, West (Mr. Williams) mentioned accountability. Will my hon. Friend agree that the attitude of people who work in such companies and who have had such opportunities is wholly beneficial? Does it not hold out high hopes in that respect for the future of BT?
§ Mr. Pattie
I am grateful to my hon. Friend for his comments, because he takes a close interest in these matters. People who are prepared to accept the evidence of their eyes and ears wall know that what he said is correct. When people appreciate that they are working for a company in which—as my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) said—the clammy hand of the state is not guiding all the marketing and commercial decisions, and that they have better possibilities and opportunities, their performance and that of the company improves accordingly.
§ Mr. John McWilliam (Blaydon)
Does not the Minister realise that he is flogging off the interest in investment, already made in BT by the 55 million people of this country, to a small number of people for their own private interest? Does he not understand that this doctrinaire attempt to widen the basis of share ownership is bound to fail once those shares become available on the open market?
§ Mr. Pattie
I cannot see why it is wrong for ordinary people in this country to be given the opportunity to own part of a major national undertaking. The hon. Gentleman is making a forecast about the market for share dealing, and I dare say that his opinion is as good as that of anyone else, but the incentives, including those being offered in regard to telephone bills, will persuade people to keep the shares for all sorts of very good reasons.
§ Mr. Fred Silvester (Manchester, Withington)
Will the Minister agree that those who have had a hand in the share issue have stimulated an interest in share ownership which is far beyond that previously experienced? May I suggest that we learn a lesson from the experience? It is not simply the privatisation programme that is important but the use of it to educate people in the holding of shares.
§ Mr. Pattie
I am extremely grateful to my hon. Friend not only for that remark but for his appreciation, which I am happy to echo from the Dispatch Box, of the work of all the people who have been involved in bringing BT to flotation today. We are grateful to our advisers and all the officials who have worked so hard in my Department and in the Treasury. I am also grateful to my predecessor, my right hon. Friend the Member for Mole Valley (Mr. Baker), who laboured long and hard to bring the matter to a happy conclusion.
§ Mr. Laurie Pavitt (Brent, South)
Now that the sole criterion for this huge organisation is to be profitability, what steps can the Government take to protect the millions of pounds that are paid from the DHSS and other Departments for the benefit of the elderly and the disabled? The standing charges for free telephones for those living alone are now paid by the public. Is there any way in which those charges could be reduced, rather than profitability being the only criterion?
§ Mr. Pattie
The hon. Gentleman's points will be matters for discussion between the Departments concerned—particularly the DHSS—and the management of BT. Wherever there are what might be described as social considerations, arrangements will have to be made, and the company will say on what basis it wishes to provide those services. The Government have made it clear that they wish them to continue.
§ Dr. John G. Blackburn (Dudley, West)
Will my hon. Friend agree that this is not just a memorable day but an historic day in this House? Will he agree that it is welcomed by Conservative Members, just as it is self-evidently welcomed by the public, because the share issue will be over-subscribed? It is also welcomed by the staff of BT. Will my hon. Friend agree that it is one of the finest ways of ensuring investment from the private sector and relieving the burden on the taxpayer?
§ Mr. Pattie
I am grateful to my hon. Friend for his comments. I agree with him that it is an historic day—although, as the hon. Member for Bolsover (Mr. Skinner) says, there could have been more people here to witness it. History is sometimes made when the audience is not very large, but I am sure that we are very happy to have the hon. Gentleman here.
§ Mr. D. N. Campbell-Savours (Workington)
Will not the Minister come clean? Is it not true that historically Governments wishing to raise revenue have put up income tax, value added tax or national insurance contributions, whereas this Government cheat by selling off the nation's assets, which have been built up through constant investment over the years? One day the British cupboard of assets will be bare and the Government will then have to face reality. May I say to Labour supporters outside that I hope that they will not buy the shares. If they do, they will be propping up the Government's disastrous financial policies.
§ Mr. Pattie
I am sure that the hon. Gentleman's message will be heard; whether it will be heeded remains to be seen. At the time of the British Aerospace flotation, advice from union circles urged members not to take up the offer. The great virtue of this type of exercise is that it is up to individuals to decide. In that case, individuals decided to take up the allocation of the shares. I am sure that ordinary men and women will take the opportunity that is offered and will disregard the extraordinary advice of the hon. Gentleman. I am sure that they will not regard the exercise as selling off the nation's assets when they will be having a share in those assets.
§ Mr. Eric Forth (Mid-Worcestershire)
I join those who have warmly welcomed the Government's move as part of the programme to restore the nation's assets to the people of the nation. Does my hon. Friend believe that BT 920 employees will subscribe to the shares, and has sufficient allowance been made for that so that they may participate in their own business and have a full sense of involvement and ownership in this great industry?
§ Mr. Pattie
We believe that the employees will subscribe to the shares. Provided that they apply, there is a free allocation of shares for them as well as a special bonus arrangement in a certain ratio to the shares acquired. It is very important indeed that BT employees respond favourably to the offer and we hope very much that they will do so.
§ Mr. Skinner
In view of the international selling, are the Government proud of the fact that there is nothing to prevent the Libyans buying shares in BT? What amending legislation is the Minister prepared to introduce to prevent that? The Libyans might well use for that purpose the money that they have obtained from Britain as a result of the Tories' purchase of an extra 400,000 tonnes of Libyan oil. Has the Minister considered the image that may result, with Mr. Gaddafi on one end of the line, Mrs. Thatcher on the other and Buzby in the middle?
§ Mr. Pattie
I am not sure whether the hairdo is appropriate, although I realise that I am not in the best position to make jokes about that. We stand by the conviction of the institutions as to the importance of the offer. Among those institutions we hope that the NUM pension fund will be very important.
§ Dr. Oonagh McDonald (Thurrock)
Has the Minister noticed that, on the day of this important announcement, the Liberal Benches are entirely empty, showing Liberal Members' lack of interest in the Government's programmes and policies? Is he aware that, in selling BT, the Government are turning a justifiable public monopoly into what Lord Weinstock described as an unjustifiable private monopoly? On foreign investment, is he aware that in selling off NTT over five years the Japanese have had the good sense to disallow foreign investment so as to ensure that high technology developments resulting from future developments in their telecommunications industry will remain firmly in Japanese hands and under Japanese control? Why have the British Government not shown the same wisdom?
§ Mr. Pattie
There is no reason why less than 14 per cent. foreign investment should mean that important new developments in advanced technology will go abroad. The company's interest will be substantially to maintain technological developments from excellent establishments such as Martlesham within the United Kingdom, so I see no need for the steps suggested by the hon. Lady.
Referring back to the important point about BT employees raised by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth), I should make it clear that each employee can apply for 54 free shares now, worth just over £70, and receive two free shares for every share purchased, up to a maximum of 154 shares. That is a very important start.
§ Mr. Williams
Is the Minister aware that the new private corporation will be answerable to shareholders, most of whom will have too small a holding to be 921 significant, which is no substitute for accountability to the House, to Select Committees and to Ministers? He said that the corporation would have to satisfy the customers, but as a private monopoly it will have no need to do so. Indeed, the incentive to do so will be reduced because the corporation will not be answerable to the House and the voice of the consumer will be weaker in the new organisation.
Will the Minister now answer the important question that he has so far ignored about the overseas consortium intending to buy from within the United Kingdom tranche to the tune of nearly 100 million shares if it can get its hands on them? Is he aware of that consortium and is he concerned about it? Does he intend to take any action, or will overseas buyers be able to apply indiscriminately within the United Kingdom tranche in addition to the 450 million shares allocated for sale overseas?
On equipment purchases, will the Minister confirm that at present 95 per cent. of BT's equipment needs are met from within the United Kingdom and that £13 billion worth of orders per year are placed with British firms, keeping 70,000 jobs in more than 80 private companies? Is he aware that the chairman has said that as soon as BT is privatised he intends to place more orders with foreign factories?
§ Mr. Pattie
I will take those questions in reverse order. On the last point, I am not aware of the statement by the chairman Sir George Jefferson, to which the right hon. Gentleman refers. Naturally the chairman will wish the company to operate in the most commercially successful way possible. As I know from my many discussions with Sir George Jefferson, he does all that he can to support the British equipment industry and is prepared to lean as heavily as he can in that direction, but he will not be subjected to the clammy hand of Government direction, as my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) described it, compelling BT to make 922 acquisitions from parts of British industry whose equipment may not be the most up to date. We wish to achieve greater efficiency and greater pressure from competitive power. Telling British industry that it can rely on BT orders for ever and a day does not help it to be more effective and competitive in world markets. British companies have the opportunity to tender and will obviously get the lion's share of BT equipment orders in years to come. We are simply letting in an element of competition, in the same way as the Ministry of Defence has done.
I am not aware of the overseas consortium to which the right hon. Gentleman refers. He will appreciate that I cannot comment publicly from the Dispatch Box at this stage about how share prices may move or who might want to purchase the shares. As the right hon. Gentleman well knows, however, there is a limit of 10 per cent. on all applications and that will be very closely scrutinised.
§ Mr. Pattie
With respect, it has something to do with it because the overseas dealings will begin after applications have closed on the London stock exchange at 10 am on 28 November, when 14 per cent. or slightly less than that will be available for overseas investors.
§ Mr. Pattie
I must continue, as the right hon. Gentleman made another important point. He seems not to appreciate that competition will be policed by Professor Carsberg, director-general of the Office of Telecommunications — DG-Oftel — who, through his advice to the Government on the Jove application for the joint value added network service between IBM and BT, has already shown that he takes the need for competition very seriously. That is the best safeguard that we can have.