§ 'On the vesting day employees of the TSB Group and holders of deposits in the TSB Group shall be offered 55 per cent. of the shares of the Group.' —[Dr. McDonald.]
§ Brought up, and read the First time.
§ Dr. Oonagh McDonald (Thurrock)
I beg to move, That the clause be read a Second time.
1115 The purpose of the new clause is to take account of the history and traditions of the TSB, which has been closer to a mutual organisation than to a public limited company, and of what was once the expressed hope of the TSB. The banks gave evidence to the committee that reviewed the functioning of financial institutions in 1979. The summary of evidence stated:The Trustee Savings Banks have demonstrated a will and ability to adapt to modem commercial requirements and the changing needs of their customers, whilst retaining a fundamental purpose which is not dictated by purely commercial interests.The TSB not only acknowledged its traditions, but outlined what it hoped that its future would be: it hoped that it would not be devoted entirely to commercial interests. That theme has been continued in the comments on the TSB's change of status and in the TSB's own hopes that depositors and employees will wish to take up shareholdings. The Sunday Times on 11 November 1984 referred to the need to resolve the TSB's legal structure. The article stated:The first preference (and one to which some"—others would say many—members of the TSB adhere) was to retain mutuality. But this received an official thumbs down, because of accountability problems.I do not believe that the term "official" is intended to refer to the Government's attitude. The Government's role in the Bill is to facilitate the changes that the TSB's management wishes to bring about. The management has stressed the problems faced in setting up a mutual organisation. The TSB's existence as a mutual organisation is not clearly defined in the way in which building societies are.
The Sunday Times article went on:For a start, by abandoning its mutual status, the TSB jettisons its basic difference from the high street clearing banks. Other attractive babies, too, could disappear down the plughole with the mutual bathwater.The TSB's great strength has always been the traditional loyalty of its 6 million customers. Personal customers account for over 95 per cent. of its customer base.More interestingly, and certainly more surprisingly to Conservative Members, the Financial Times leader of 17 January echoed and developed that theme. It accused the Government and the management of the TSB of being too unimaginative in their consideration of the TSB's future status and organisation. When the Financial Times puts the matter as a choice between a mutual organisation and a public limited company, it is being unimaginative.
The new clause says that, even if the future organisation has to be a public limited company—first, because of accountability and, secondly, because of the need to raise capital—it does not have to conform exactly to the form taken by other high street banks and other companies. We believe that consideration should have been given to forming a plc in which the majority of shares are held by the employees and holders of deposits. To some extent, that would have taken account of the TSB's traditions, the hopes that it would not be a purely commercial enterprise and the fact that, until now, the TSB has been different from the high street banks in its relationship with its customers. Personal customers account for much of its business. If the majority of the shares were offered to employees and depositors, they, too, would have an opportunity to continue those traditions.
1116 The Banking Insurance and Finance Union, 98 per cent. of the membership of which are employees in the TSB organisation, would like to see a preferential share issue of this kind. They would regard it as being similar in some ways to the British Telecom and Jaguar flotations. However, when we discussed a similar issue on Second Reading the Economic Secretary to the Treasury said:I do not think that it would be appropriate for the legislation itself to include specific provisions about the flotation or about the subsequent conduct of the TSB as a private sector company …I believe that the overall purpose of the Bill is helpful to the TSB and its depositors."—[Official Report, 14 January 1985; Vol. 73, c. 71.]Opposition Members must part company with the Minister on that. There is no reason why shares should not be offered in the way suggested in new clause 1. It could be done within the scope of the normal mechanisms of share flotation and transfer. There would be no particular problems if all of the 55 per cent. laid down in new clause 1 were not taken up, because the unsold shares could be the vested property of the board.
It may be suggested that there may be pricing difficulties about insisting that the share flotation should take place in that way. That is true if one accepts the view that institutions are prepared to pay more for shares than individuals are. The TSB may lose out on the sale of shares, if it has to sell a significant percentage of them to individuals. However, that is not an unavoidable outcome. If individuals and, in this case, the employees and depositors, to whom the issues involved could be spelt out, as the TSB can easily inform them, realise that institutions have been rationed on the flotation, they can expect the value of their shares to increase in future.
To suggest that the TSB should be treated and should operate like every other high street bank is to ignore the history, traditions and importance of its personal customers. It is not like another bank, and many people would argue, as the Opposition argue, that every effort should be made to ensure that the TSB continues to offer a different sort of service. That was in part meant in the Page report in 1973, which referred to a third force in banking.
By tabling the new clause in this way we are saying, "If the TSB must become a public limited company, it does not need to be wholly commercial in its purpose, and shares need not be distributed as they are distributed for other banks and public limited companies".
§ Mr. Robert Sheldon (Ashton-under-Lyne)
My hon. Friend is making an excellent speech and many important points, as expected. Is she aware that not only is the TSB being regarded as yet another clearing bank, making a total of five instead of four clearing banks, but that the clearing banks see it as a main competitor? I have had discussions with a number of banks, and it is clear that eventually there will be a merger either between the TSBs and the other banks, or between the clearing banks because the United Kingdom cannot accommodate five large clearing banks.
§ Dr. McDonald
I thank my right hon. Friend for his intervention. Some of his points will be relevant to new clause 2 which is designed to limit individual shareholdings to prevent such a take over. We can see why other high street banks regard the TSB as a competitor. The Midland's position is a little shaky. Following the 1117 flotation of its shares, the TSB will have roughly the same value or even a little more than the Midland bank, and no doubt the Midland bank will be watching the TSB's operations somewhat nervously.
I want to focus on the difference in the shareholding and the fact that it could make a difference to the way in which the TSB operates in the future. It is essential to preserve what should be preserved from the TSB's past. The matter has been discussed with representatives of the TSB management. Those discussions do not leave one unworried, for two reasons. I received the impression that the TSB management regarded a wide shareholding, spread among the large number of individuals, as extremely expensive to operate. The bank would be required to inform each shareholder about its accounts. They would have to be informed of the date of the annual general meeting, the agenda and such matters.
That reaction makes one fear that the TSB is moving somewhat away from its 1979 statement when it said that its future would not be dictated by purely commercial interests. I was sorry to have that response and a lack of commitment to as large and wide a spread of shareholders as possible among depositors and employees. I understand the reasons for that, but nevertheless I was worried at that response.
Although the TSB has offered its depositors priority pink forms, it does not expect there to be a large share take up from them. It does not see that the majority of its depositors can take up the shares. That is a pity. The TSB should be going all out to encourage shareholdings by its employees and depositors. The new clause will ensure that that happens and that the bank can have a public limited company structure which is rather different from that of other commercial organisations and the banks with which it will compete.
§ Mr. Paddy Ashdown (Yeovil)
I support the new clause which was so ably moved by the hon. Member for Thurrock (Dr. McDonald). My party has had a long and honourable record of supporting and seeking to promote measures to encourage workers and participants in industry to own their own jobs.
It will come as no surprise to anyone in the House that the new clause is one which my right hon. and hon. Friends in the Social Democratic party support. In Committee we were represented by the hon. Member for Stockton, South (Mr. Wrigglesworth). We find the clause advantageous and we support it.
Judging by the Government's rhetoric, it is odd that they cannot support the new clause rather more readily than appeared to be the case from reading the report of the Committee stage.
On Second Reading, the Minister said:I welcome the opportunity that this Bill will provide for spreading share ownership more widely and, in particular, for enabling those who have been involved in the business of the TSB as customers and employees to invest more directly in their future."—[Official Report, 14 January 1985; Vol. 71, c. 31.]That is a sentiment with which we would agree.
It seems that the Minister on that occasion was only paraphasing, perhaps restating, the commitment given in the White Paper, of which it may be worth reminding ourselves. It said:Customers and staff will have priority in subscribing for shares.The clause calls for no more than that to be put into effect.
1118 When the Bill was considered in Committee, the Minister said:it would be a good idea if depositors and staff were to have a really substantial holding in the TSBs.Again, the clause asks for no more than that the Minister put into effect the rhetoric of his speech on Second Reading, his speeches in Committee and the statements in the White Paper.
The Minister also said in Committee that fixing a figure to how the Government would put their commitment to wider share ownership into practice would be rather difficult. He then said:it is impossible now to mention figures. I have talked figures with the TSB".—[Official Report, Standing Committee D, 31 January 1985; c. 91.]What the Minister did not state was the conclusions that he had reached. Since the Minister said that it was impossible to talk figures when he was discussing these matters with the TSB, it may be possible for him to give us an indication now of the percentage of shares he envisages being offered to the employees and to the contributors of the TSB. If he were able to mention some figure—no doubt less than 55 per cent., but at least an indication of how far the Government wish to make a commitment to honour their own rhetoric — many Opposition Members would doubtless feel satisfied without pressing the clause.
I ask the Minister to clarify his statement that he did not see it as appropriate to offer figures then, although he implied that at some time in the future he would be able to say how far he was able to commit himself. However, if the Minister cannot do that, I think that we are entitled to believe that what the Government are expressing in terms of wider share ownership and all the great ideas that we now hear them articulate are hollow rhetoric. Rhetoric comes cheap. It is by the actions of the Government in the matter that we will determine their true intentions.
As the hon. Member for Thurrock said, there can be no clearer case for a commitment to the concept of wider share ownership than the TSB. No cause was ever more suitable for the Government to show their sincerity than in respect to the TSB, an organisation founded on the concept of mutuality, which is at the heart of the organisation, and one which has involved itself in group and community activity in a unique way — to use the Minister's words:a unique organisation in today's world."—[Official Report, 14 January 1985; Vol. 73, c. 36.]Under the proposed clause, the Minister has the opportunity to preserve and build on that uniqueness and to give the work force, the contributors and those involved with the TSB a chance to begin to own the estate in the future of the TSB.
The Government claim that they want to see wider share ownership. If they reject the clause, hon. Members will suspect that they are giving not wider share ownership to employees and those involved with the TSB, but a wider opportunity for the established banks to own a chunk of the TSB and to do with that chunk what they will.
What has the Minister to lose by accepting the clause? It is drafted in a reserved fashion. It does not require that members of the work force of the TSB or, indeed, contributors of the TSB should own 55 per cent.; it asks only that they be offered 55 per cent.
If the Minister means what he has said consistently throughout the debates on the Bill, he should accept the new clause. If not, will he allay some of our suspicions by 1119 at least indicating what proportion he means to allow to be offered to the work force and contributors of the TSB? In the absence of such an assurance, many of us will believe that the Government's rhetoric on the matter is hollow and that they have no intention of putting their assurances into practice in a realistic fashion.
§ Mr. Stuart Randall (Kingston upon Hull, West)
I, too, support the new clause, which is a modest proposal. It merely suggests that on vesting day employees and holders of deposits in the TSB should be offered 55 per cent. In view of what the Government have said about the notion of wider share ownership—about the so-called property and share-owning democracy that they want to see—it would make sense for them to accept the new clause.
The TSB has been an unusual banking institution. Historically, it provided merely a mechanism by which people could save. They deposited money on which interest accrued, but the organisation did not make a profit and did not have shareholders. It existed solely for the activities of those who held accounts with the TSB.
As my hon. Friend the Member for Thurrock (Dr. McDonald) pointed out, many of the 6 million account holders are in the lower income groups. Those are the people the bank has aimed to serve. I fear, therefore, that something important could be lost in the shift away from the traditional mutual type of organisation to the new plc arrangement.
The TSB has changed considerably, away from its previous personal form of banking and into the new range of services about which we have heard so much since the mid-1970s. The banks have moved into cheque accounts and Trustcards, thus putting themselves into high interest lending and connections with UDT, an organisation for financing consumer spending. The whole range of banking is broadening.
I do not know what will happen when flotation takes place and the bank receives the money from that flotation, perhaps £500 million to £600 million. What it does with it will be within the prerogative of the new management. For those who have been account holders, and the employees who have served the TSB ably in the past, it seems not unreasonable to give them the opportunity to buy shares in the bank.
I should like to see the organisation, because of its mutual roots, providing the basis for a democratic form of management. In particular, I should like to see the employees having a say in the types of service that the new plc group will provide, especially in relation to the way in which it will fit in with the current joint stock banks.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made an interesting point about the possibility of mergers. I cannot see where this will go. Will the TSB become part of the joint stock banks, or will it be absorbed? We know that in the 1960s—
§ It being Ten o'clock, the debate stood adjourned.