HC Deb 20 February 1985 vol 73 cc1129-35

'During the first five years following the vesting day no one individual may own more than five per cent. of the Group's ordinary shares nor after a five year period has elapsed may any one individual own more than 15 per cent. of these shares.'. —[Dr. McDonald.]

Brought up, and read the First time.

Dr. McDonald

I beg to move, That the clause be read a Second time.

Hon. Members who have studied the Bill and the White Paper will be aware that new clause 2 is part of the letter which the chairman of the Trustee Savings bank wrote to the Chancellor of the Exchequer. In it he made it clear that when the TSB had been set up in its new form the draft memorandum of association would contain these provisions. We have transferred them to the new clause in an effort to include them in the Bill.

There are two reasons for that. One of them, the future of the TSB, has been discussed at great length in the press. Views were expressed as far back as last July. In a typical example, the Glasgow Herald stated: Quite how the TSB empire with total assets above £9.5 billion and owners of United Dominion Trust, TSB Trustcard and TSB Trust Company (insurance services and unit trusts) can be guaranteed against a future takeover bid, is unclear. If first-time buyers should prove amenable to a buy-out, then what kind of ring-fence would the Government erect to stop them? That quotation illustrates that the Government should erect some kind of ring fence against a possible takeover. No ring fence against a takeover is contained in the Bill.

The Government have accepted the assurances about the nature of the draft memorandum which were contained in the letter from the TSB chairman. The Opposition's disquiet about that arises from the fact that, although we accept that it may be difficult to change the draft articles of association, it is not impossible to do so. Although that seems to be a long-term guarantee against a takeover, it is not as secure as at first appears. My first point therefore is that we need to include the ring fence in the Bill rather than depend upon the assurances in the chairman's letter.

My second point relates to the speculation about a takeover. In the earlier part of last year it seemed that the TSB would be ripe for a takeover. Its attractions were spelt out, for example, in the Glasgow Herald article. The TSB has wide outlets and a large number of personal customers, which could prove attractive to an American bank trying to find a secure foothold in British personal banking. Many people felt that the TSB was in danger of being taken over.

I find it interesting to note that towards the end of the year, when it was fully appreciated how much the share flotation was likely to raise—between £700 million and £1 billion is most consistently quoted—it was felt, as the Daily Telegraph put it: that the TSB will suddenly have a lot of money to spend, and may go on a City shopping spree to pick up, say, a fund management company and a stockbroker to go with existing banking, trustee and insurance business. The speculation changed towards the end of last year when it became apparent that the TSB would have spare cash and might consider taking over another company. That would not be excluded by new clause 2.

To sum up, the reasons for introducing the new clause are to provide a secure ring fence against a takeover and to ensure that the history and traditions of the bank, which have been firmly rooted in this country, continue. It has been a domestic bank. That is especially true of the bank as it exists in Scotland, where 45 per cent. of bank outlets are controlled by the TSB. The bank has involved itself with the local community and we would not wish to see it taken over by one of this country's major financial institutions or by an American bank, which would use it solely to gain a foothold in this country's banking sector. Whereas the Minister is prepared to accept assurances, for which we respect him, of course, we prefer to include them in the Bill because we feel that this will ensure a more secure future for and be better way of preserving the history and traditions of, the TSB.

Mr. Craigen

I wish briefly to support my hon. Friend the Member for Thurrock (Dr. McDonald). It is always pleasant to hear one's own words of wisdom quoted, and the article in the Glasgow Herald happens to have been written by me.

The flotation of the TSB is one of the give-aways of the decade. It is essential for the Committee to approve the proposed clause in order to avoid the TSB being parcelled out to the various institutional interests that want to buy the shares.

I have heard reference to cloth caps in connection with the TSB. I personally have never worn a cloth cap or, indeed, a bowler hat. I am simply a bare-headed Scot.

It is important for the Committee to recognise the community of interest that has developed in the TSB and to ensure by acceptance of the clause that there is a safeguard for the development of greater customer satisfaction, at the same time avoiding the potential dangers of a takeover.

I want to see this provision enshrined in the Bill. I am not taken in by letters from chairmen and the optimism of the management about what is likely to happen with regard to the flotation. I had the impression earlier in the debate that the Treasury had moved from its position of neutrality into one in which it was utterly neutered by the TSB management. I therefore hope that the Minister in reply will accept the principle behind the proposed clause.

Mr. Ashdown

I support the proposed clause and commend hon. Members for their restraint and skill in drafting it. The wording is substantially that contained in the White Paper, as reflected in the letter from Sir John Read. Indeed, it takes its words almost directly from the Minister's mouth. I seem to have the habit of quoting the Minister in Committee, but it is important that he should be invited to honour what he said by the action that he takes in the Bill. On Second Reading, the Minister said: for the first five years … there should be a limit on a shareholding by any one shareholder of 5 per cent. of the capital, and thereafter a limit of 15 per cent."—[Official Report, 14 February 1985; Vol. 71, c. 33.] Thus the Minister agrees in detail with the wording of the proposed clause. In that sense, the clause enacts the Minister's own rhetoric.

Unhappily, the Minister said in Committee and on Second Reading that he considers the matter to be one for the TSB and not for the Government. Indeed, in Committee he said that it did not require legislation. His arguments for supporting that conclusion, judged by my reading of the Committee proceedings, are deeply unconvincing. If the safeguard is so important as to be expressed as a cardinal principle in the White Paper and referred to by the Minister as a matter to which he gives weight, why not enshrine it in the Bill? What has the Minister to lose by inserting it in the Bill? I hope that he will explain why it can be included in his statements but cannot be enshrined as a safeguard in the Bill.

The Minister has claimed that as a result of the general belief that he has expressed, it would be many years before the TSB might be taken over. I am not sure that I share that view. At 15 per cent., it would require only 11 investors at a modest £50 million or so to reach the point at which they could control the TSB. Indeed, some of them might be the very banks with which the TSB will be in competition. The Minister has said that he wants safeguards against takeovers. Let him prove it by accepting the new clause.

11 pm

Mr. Austin Mitchell

We have a paradox in the way in which the world economy is moving. It is that the banks grow fat when the world goes wrong. Because under the Conservatives the world has gone more wrong than ever before, the banks—thanks to the Government's policies of high interest rates and an emphasis on money—have grown fatter than ever before.

The world is full of predatory banks, and that is the phenomenon that the new clause attempts to control by erecting a ring fence round the TSB. Just as our banks are taking over banks in other parts of the world — most notably the Crocker bank in California, which must have been the purchase of the century; how anybody could ever again believe the advice of the Midland on investment policy, given its astuteness in respect of the Crocker bank, is a question we might ask in this context—so foreign banks want to get into Britain.

They want access to a banking world which is at present closely controlled and dominated by the big four. In that situation, the TSB must present an object as desirable as the Prime Minister at Holyrood House on a wet Friday. The TSB is a desirable bank for a takeover because it has a large number of high street outlets, the trust of a large body of customers who are accustomed to a close and satisfactory working relationship, and because the Government are treating it as if it were a piece of lost property being sold at police auction to make a bob or two.

They are sending it out into the world cash rich with all those desirable characteristics. In that situation, it is almost certain that foreign banking organisations which want to get not just a toehold but a major position in the banking world in this country will find it a most desirable object. It would be a disastrous outcome of our deliberations if the loved and trusted TSB, the people's bank, became the Manhattan TSB or the Jihad TSB.

Mr. Craigen

It occurred to me, when my hon. Friend was referring to the Prime Minister at Holyrood, that the right hon. Lady is at present in the United States. Does he foresee a situation in which the flotation of the TSB could be a dollar earner for the economy, given how well the dollar is doing?

Mr. Mitchell

I must not be tempted to go down that path, given how well our competitors, particularly West Germany and Japan, have done with the over-valued dollar and how badly we have done, and we could do with the dollar earnings. I acquit the Prime Minister of the charge that my hon. Friend levies against her, of the desire to flog off British assets, but I do not acquit foreign bankers of an insight into an opportunity such as the TSB group presents, unless protected by provisions such as those in the new clause. I would not want the TSB in Grimsby to be hoisting a sign saying, "The Gaddafi Bank of Grimsby", which is possible without the protection afforded by the new clause.

It is essential that this banking group is kept in a close relationship not only with the customers but with the country. It should be kept free of foreign control and takeover.

Mr. Randall

New clause 2 is an extension of new clause 1, in which we offered preference to employees and account holders to ensure that the small man has a say in the TSB group. New clause 2 proposes an arrangement whereby big institutions would not be able to control the TSB arrangement. It is important to enshrine this in the Bill. I hope that the Minister is able to accept it.

To prevent the big battalions of the City institutions from coming in and doing all that they are bound to do, because the TSB group is an attractive organisation, we must say not only that we shall not allow that at the beginning but must maintain the principle. This is why I support the laudable suggestion of the 50 per cent. figure after five years. The great advantage of ensuring that there are small investors is that it will add to the protection of the TSB plc after the legislation has gone through the House. It will protect it from being taken over by the other domestic banking institutions. Therefore, TSB plc will retain the traditions of the TSB group, which have been valuable to the country and its customers, and therefore should be retained.

Although the TSB group has extended its services, it has not invested in the technology and all the other things that are needed to run a fully comprehensive service. In that respect, as the TSB group has a comprehensive range of branches, it is attractive to all the other institutions. It would plug in nicely to the clearing banks which have invested so much into the payment systems and the large computer networks, into which the TSB group has not invested to the same extent because the extension of its services has taken place more recently. Logically, it would make sense to plug the two groups together, but if that happens, it would have serious effects.

In addition, the international aspect needs to be looked at. If there is a takeover, it will be because of the traditional background of the TSB, and it would be undesirable to allow the TSB plc to fall into foreign hands. It will be an attractive banking organisation for foreign banks to take over. The liquid assets of the bank will be considerable if the flotation is successful. Therefore, the bank would be able to embark on a new programme of extension of services and even acquisition. That would be attractive to the big institutions. I do not mean that in a negative sense. We all want to see our financial institutions being successful because they are a crucial part of our economic, business and commercial system. But let us retain the personal element.

I hope the Government will support the ring fence around the TSBs to which my hon. Friend the Member for Great Grimsby (Mr. Mitchell) referred. It is a valuable mechanism which would be appreciated by the 6 million customers who have traditionally banked with the TSBs.

Mr. Ian Stewart

The debate has focused on the provisions for maintaining the independence of the TSBs for the longer term future. During the debate on the last new clause we were talking about the provisions in the Bill as they might affect the TSBs beyond vesting day and the reorganisation which was covered directly by the Bill. I said that I thought it was not right for the Government to lay down specific arrangements for the flotation itself.

New clause 2 would provide a set of rules for the TSBs for the indefinite future. There is perhaps a greater difference between the Government and the Opposition on this new clause. I understand the point made by the hon. Member for Thurrock (Dr. McDonald), who was supported by the hon. Members for Glasgow, Maryhill (Mr. Craigen), for Great Grimsby (Mr. Mitchell), for Kingston upon Hull, West (Mr. Randall) and for Yeovil (Mr. Ashdown). They thought that absolute protection against any shareholder acquiring more than 15 per cent. of the shares should be set down in a statute for ever. They feel that the TSBs should be kept by statute in a special position, which could be changed only by another trustee savings bank measure.

The Government's purpose in the Bill is to ensure that TSBs can have an independent future and not be dependent, as they have been for so long, upon Parliament whenever changes need to be made in the structure under which they operate. I accept that the aim of the new clause to prevent a shareholding greater than 15 per cent. is more limited than the arrangement stipulated in statute up to now. Nevertheless, it would restrict the actions of the banks in areas apart from those about which Opposition Members have spoken.

Dr. McDonald

The Minister is really saying that he is prepared to accept the assurances given in the White Paper. What does he think—

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

On a point of order, Mr. Deputy Speaker. I am trying hard to listen to the important points that are being made. I know that it is difficult at this time of the evening, but could hon. Members pay more attention to what is being said?

Mr. Deputy Speaker (Sir Paul Dean)

If conversations are to take place, I hope they will take place outside the Chamber.

Dr. McDonald

How would the Minister view the takeover of the TSB by another bank or financial institution, particularly a foreign bank?

Mr. Stewart

The hon. Lady has asked a question which was raised by herself and other hon. Members in their contributions to the debate on the clause. My view is that the 5 per cent. limitation for five years is desirable because there should be an absolute form of protection for a period after the TSBs acquire PLC status.

11.15 pm

I also think that there ought to be a substantial obstacle to takeovers beyond that time. I do not think that it ought to be an absolute obstacle, as the Opposition suggest. A takeover cannot arise for many years, so we are discussing conditions in the 1990s. After the issue, which perhaps may take place in the early part of next year, there will be the five-year period, taking us into the 1990s. There will then be a requirement for a special resolution with a 75 per cent. majority to change the articles to enable any one shareholder to own more than 15 per cent. of the shares. That is very difficult to surmount.

The fact that it is not impossible is important, otherwise the TSBs will be permanently set apart with a form of protection which will dilute the degree of accountability, and it could limit other activities in which they might want to engage. They might want to link with another body. They might want to have a new holding company holding the TSB roup and some other undertaking. They might wish to have a link with a major shareholder. I shall not speculate on the kind of shareholder that that might be, but I remind the House that a large insurance company recently took a significant minority holding in a British bank. That would be impossible if a 15 per cent. limitation were placed on any shareholding. It might be that, say, a 26 per cent. share holding was thought desirable. That would block any special resolutions and provide an effective means against any unwelcome bidder.

There is a difference of substance between the views of the two sides of the House. The Government do not believe that the TSBs should be held permanently in a special status which does not apply to any of their competitors or to other public limited companies. That is why I ask the House to reject the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 68, Noes 168.

Division No. 120] [11.17 pm
Alton, David John, Brynmor
Ashdown, Paddy Kennedy, Charles
Barnett, Guy Kirkwood, Archy
Barron, Kevin Leadbitter, Ted
Beckett, Mrs Margaret Lewis, Ron (Carlisle)
Beith, A. J. Lewis, Terence (Worsley)
Bidwell, Sydney Lloyd, Tony (Stretford)
Blair, Anthony Loyden, Edward
Bruce, Malcolm McDonald, Dr Oonagh
Campbell-Savours, Dale McWilliam, John
Canavan, Dennis Marek, Dr John
Carlile, Alexander (Montg'y) Maxton, John
Clay, Robert Maynard, Miss Joan
Clwyd, Mrs Ann Meadowcroft, Michael
Cocks, Rt Hon M. (Bristol S.) Nellist, David
Cohen, Harry Park, George
Cook, Robin F. (Livingston) Parry, Robert
Cowans, Harry Pike, Peter
Craigen, J. M. Prescott, John
Cunliffe, Lawrence Randall, Stuart
Davies, Ronald (Caerphilly) Redmond, M.
Davis, Terry (B'ham, H'ge H'l) Short, Ms Clare (Ladywood)
Deakins, Eric Silkin, Rt Hon J.
Dormand, Jack Skinner, Dennis
Duffy, A. E. P. Smith, C.(Isl'ton S & F'bury)
Eastham, Ken Snape, Peter
Evans, John (St. Helens N) Stewart, Rt Hon D. (W Isles)
Fatchett, Derek Thompson, J. (Wansbeck)
Fields, T. (L'pool Broad Gn) Wardell, Gareth (Gower)
Fisher, Mark Wareing, Robert
Godman, Dr Norman Welsh, Michael
Hamilton, James (M'well N) Wilson, Gordon
Hattersley, Rt Hon Roy
Haynes, Frank Tellers for the Ayes:
Hogg, N. (C'nauld & Kilsyth) Mr. Allen McKay and
Home Robertson, John Mr. Austin Mitchell.
Alexander, Richard Burt, Alistair
Baldry, Tony Butcher, John
Beaumont-Dark, Anthony Chope, Christopher
Boscawen, Hon Robert Cockeram, Eric
Bottomley, Mrs Virginia Conway, Derek
Brandon-Bravo, Martin Cranborne, Viscount
Brown, M. (Brigg & Cl'thpes) Dorrell, Stephen
Bruinvels, Peter Douglas-Hamilton, Lord J.
Budgen, Nick Dunn, Robert
Fairbairn, Nicholas Mills, Sir Peter (West Devon)
Fallon, Michael Mitchell, David (NW Hants)
Favell, Anthony Moate, Roger
Forsyth, Michael (Stirling) Montgomery, Sir Fergus
Forth, Eric Morris, M. (N'hampton, S)
Freeman, Roger Moynihan, Hon C.
Gale, Roger Murphy, Christopher
Galley, Roy Neale, Gerrard
Garel-Jones, Tristan Needham, Richard
Gregory, Conal Newton, Tony
Griffiths, Peter (Portsm'th N) Nicholls, Patrick
Ground, Patrick Normanton, Tom
Hamilton, Hon A. (Epsom) Norris, Steven
Hamilton, Neil (Tatton) Onslow, Cranley
Hampson, Dr Keith Oppenheim, Phillip
Hanley, Jeremy Page, Richard (Herts SW)
Hannam, John Pawsey, James
Hargreaves, Kenneth Portillo, Michael
Hayes, J. Powley, John
Hayward, Robert Proctor, K. Harvey
Heddle, John Rhodes James, Robert
Henderson, Barry Rhys Williams, Sir Brandon
Hickmet, Richard Ridsdale, Sir Julian
Hicks, Robert Roberts, Wyn (Conwy)
Hind, Kenneth Robinson, Mark (N'port W)
Holt, Richard Rowe, Andrew
Howard, Michael Sainsbury, Hon Timothy
Howarth, Alan (Stratf'd-on-A) Sayeed, Jonathan
Howarth, Gerald (Cannock) Shaw, Sir Michael (Scarb')
Howell, Rt Hon D. (G'ldford) Silvester, Fred
Howell, Ralph (N Norfolk) Skeet, T, H. H.
Hubbard-Miles, Peter Smith, Tim (Beaconsfield)
Hunt, David (Wirral) Soames, Hon Nicholas
Hunter, Andrew Speed, Keith
Jackson, Robert Speller, Tony
Jones, Gwilym (Cardiff N) Spencer, Derek
Jones, Robert (W Herts) Stanbrook, Ivor
Jopling, Rt Hon Michael Steen, Anthony
Kellett-Bowman, Mrs Elaine Stevens, Lewis (Nuneaton)
Key, Robert Stevens, Martin (Fulham)
King, Roger (B'ham N'field) Stewart, Allan (Eastwood)
Knight, Gregory (Derby N) Stewart, Andrew (Sherwood)
Knight, Mrs Jill (Edgbaston) Stewart, Ian (N Hertf'dshire)
Knowles, Michael Stradling Thomas, J.
Knox, David Sumberg, David
Lang, Ian Taylor, John (Solihull)
Latham, Michael Taylor, Teddy (S'end E)
Lawrence, Ivan Terlezki, Stefan
Leigh, Edward (Gainsbor'gh) Thomas, Rt Hon Peter
Lennox-Boyd, Hon Mark Thompson, Donald (Calder V)
Lester, Jim Thompson, Patrick (N'ich N)
Lightbown, David Thurnham, Peter
Lilley, Peter Townend, John (Bridlington)
Lloyd, Peter, (Fareham) Tracey, Richard
Lord, Michael Trippier, David
Luce, Richard Trotter, Neville
Lyell, Nicholas Twinn, Dr Ian
McCrindle, Robert van Straubenzee, Sir W.
McCurley, Mrs Anna Viggers, Peter
Macfarlane, Neil Walden, George
MacGregor, John Waller, Gary
MacKay, Andrew (Berkshire) Wardle, C. (Bexhill)
Malins, Humfrey Watson, John
Malone, Gerald Wells, Bowen (Hertford)
Maples, John Wheeler, John
Marland, Paul Whitfield, John
Marlow, Antony Whitney, Raymond
Mates, Michael Wilkinson, John
Mather, Carol Wintertpn, Mrs Ann
Mawhinney, Dr Brian Winterton, Nicholas
Maxwell-Hyslop, Robin Wolfson, Mark
Mayhew, Sir Patrick Wood, Timothy
Mellor, David Yeo, Tim
Merchant, Piers
Meyer, Sir Anthony Tellers for the Noes:
Miller, Hal (B'grove) Mr. John Major and
Mills, Iain (Meriden) Mr. Tony Durant.

Questions accordingly negatived.

Forward to