PRELIMINARY

HC Deb 15 July 1985 vol 83 cc115-46

Lords amendment: No 1, in page 1, line 9, "banks" insert other than Trustee Savings Bank Scotland Limited which is hereby excluded from this Act

Read a Second time.

Mr. Gordon Wilson (Dundee, East)

I beg to move, amendment (a) to the Lords amendment, in line 2, leave out from 'which' to end and add 'shall not be included in this Act unless a majority of depositors of Trustee Savings Bank Scotland have first given their assent in a postal ballot.'.

Mr. Speaker

With this, it will be convenient to take Government amendments (b) to (d), plus (i) and (ii).

Mr. Wilson

I thank you, Mr. Speaker, for that ruling. Although I may disagree a little, I acknowledge that your view must prevail in these matters. I am grateful for the attention that you have given to my point of order.

I only wish that it were not necessary for me to move this amendment. If the Government had been prepared to accept the Lords amendment itself, or its spirit, TSB Scotland would have been able to continue its separate existence and I would not be moving the amendment, which suggests that the matter should go to a ballot of the depositors of the company.

I make it clear to those hon. Members who have not followed the debate that has been going on for so long that we are not dealing with a small subsidiary. TSB Scotland is the 11th largest company in Scotland and the most profitable bank by a long way, with £10,500 to £11,000 worth of earnings per employee. That compares with the Royal Bank of Scotland and the Bank of Scotland, for which the relevant figure is between £6,500 and £7,500, and the Clydesdale bank at the lower figure of £3,000 per employee. The Lords amendment is right. TSB Scotland is viable in its own right and should be deleted from the Bill. I shall give the reasons in due course.

The directors of the Edinburgh chamber of commerce passed a unanimous motion asking the Government to accept the Lords decision on the grounds that it was important to retain the autonomy of financial institutions in the city of Edinburgh. On 20 April 1985 Mr. Souness, the manager of the Life Association of Scotland and the chairman of the Edinburgh chamber of commerce, referred to the cosmetic formula that had been agreed with Lord Taylor of Gryfe, who a few months ago was instrumental in and deserves credit for derailing the Bill in the House of Lords. He said that the assurance would not count for much and that the issue was about where power lay. Criticism was made of the attitude adopted by the chairman of the Trustee Savings bank's central board. Sir John Read, when he visited Scotland. An editorial in The Scotsman described him as holding "the obdurate belief" that he and his fellow directors had got it right.

The Government's compromise in their intended replacement of the first Lords amendment is not worth a row of beads. I described it at the time as a spineless surrender and I do not retract that statement. The various assurances that are to be found in the letter addressed by Sir John Read to the Chancellor of the Exchequer on or about 16 May 1985 amount to very little. Sir John Read tossed to the Scots a string of beads to keep the natives happy.

The compromise suggests that the registered office of the group should be in Scotland. I am not sure what advantage the Government see in that proposal. The headquarters office, where the power lies, where decisions will be taken and where most of the money will be turned over, will be in London, so the conclusion must be that, like the Distillers Company or Burmah Oil, although nominally the registered office will be in Scotland, the real power and the real headquarters will be in London.

It is also suggested that there will be proposals to ensure that all banks in the TSB group remain as separate banks. This was always intended, so I do not know what advantage TSB Scotland, the banking fraternity in Scotland, the customers of TSB Scotland or the financial institutions in Scotland will derive from the proposals.

Another suggestion is that the trustees will be the directors of the new company. No more ridiculous suggestion could be made. The trustees of TSB Scotland have no credibility whatsoever. They cannot be trusted, apparently, to look after the interests of the Scottish bank. They do not intend to allow it to continue to have an independent existence. If that is so, how can they be trusted further?

I must make some comment on the strange ethics of the situation. Having willingly sacrificed themselves to the predator, the TSB Group, they appear willing to remain in the saddle to be appointed directors of the new banking subsiduary in Scotland. I am not sure what remuneration they will receive for that, whether it is 300 or 3,000 or 30,000 pieces of silver for betraying the birthright which should have been theirs after the creation of the trustee savings bank movement in Scotland two centuries ago. That pecuniary interest sits ill with the role of trustees. Even if it had been independent at the outset, the group will retain the veto, which it can exercise over the choice of new trustees. Any initiative which TSB Scotland might have been able to maintain under the new regime, will be killed off over a period if the TSB Group so wishes.

10.30 pm

There are also managerial problems associated with the changes which have been suggested. At present, these directors will not be elected by anyone: they will be appointed, if we agree with Sir John Read, the chairman of the TSB Group, as new directors of the company, without election. They will not be responsible in any way to any independent body of shareholders. Under that kind of regime, TSB Scotland will go into slack and supine managerial hands. That is because, without responsibility to shareholders, there will be little reason for management to exert itself.

If one looks at the comparison which I gave at the beginning of my remarks between the earning capacity per employee of the Scottish banks, it is noticeable that the one with the lowest figure of £3,000 per employee, is the Clydesdale bank. It is the only Scottish bank which is a fully owned subsidiary of an external bank, the Midland. Much of the profitable work which could be undertaken by the Clydesdale bank goes to the Midland and to its specialist investment companies and merchant banks. The Clydesdale is therefore denuded of some of the more lucrative sections of the market.

Yet this seems to be the area to which we will be condemning TSB Scotland if the House succeeds in overturning the Lords amendment to cut TSB Scotland out of this bad Bill. These directors will be a self-perpetuating oligarchy. They will be appointed by no one, elected by no one and responsible to no one. That is bad in itself. As for the proposal that 75 per cent. of the directors will have to live in Scotland, that is the merest token that could ever have been devised, and in relation to the safeguarding of the net worth, it can be overtaken in the course of time.

We have a thrusting, dynamic bank at present, but the picture will change dramatically if the Lords amendment is over turned. The Government are on very uncertain ground over the Bill. The amendment I have suggested in lieu of the Lords amendment which the Government intend to demolish, is intended to ensure that, before any precipitate or final action is taken, there should be a decision by the depositors of the bank in a ballot. A majority of the depositors should agree to the changes which have been suggested by the TSB. There are specific reasons why that is desirable.

I do not feel it necessary to rehearse some of the background information I gave you, Mr. Speaker, in my point of order earlier today. If one looks at the opinion expressed by Mr. John Murray, QC, to the Trustee Savings bank central board—that is, the London body—one sees the assertion that under Scots law the trustee savings banks in Scotland are owned by the contributors. The contributors are the depositors and the depositors are the members of the bank. Therefore, the ownership of the bank rests with the depositors. If the opinion is correct, they are entitled to the produce, the reserves and assets, of the bank. I should have thought that extending wealth within the community and ensuring the widest possible ownership of the assets of this successful institution would be welcome to the Government. It is surprising that the Treasury was prepared to say in the White Paper that there was doubt about the ownership.

Some of the matters that I raised during the earlier points of order about the information given to the House require answers from the Treasury. Did the Government receive a copy of the opinion? Did they conduct their own legal inquiries into ownership? If the central board had received such an opinion, suggesting that ownership rested with depositors, would not it have been desirable for the bank to go to the Court of Session with an action of declarator asking the court to declare as to ownership, so that that was cleared out of the way at the start?

No attempt has been made by TSB Scotland or by the central board to apprise the depositors, the prima facie owners of the hank, of their rights. It was surely essential that they should have done so. The bank was established for the customers and they have put their faith and money into TSB Scotland. Over successive generations, they have built up a very successful business which is now to be destroyed.

Given the opinion that has been received and the fact that there is to be an action in court tomorrow, it is all the more regrettable that the Government have precipitately determined to drive on regardless. Many people will regard it as legalised theft if, by an Act of Parliament, the ownership and resources of the bank are taken away from the working people for whom it was established and distributed to speculators, which is what will happen if the flotation goes ahead.

Many people in Scotland who have no objection to flotations and joint stock companies feel that this example of exploitation should not be allowed to proceed.

The Government wish to defeat the Lords amendment. My amendment suggests that before any other action takes place, the owners of the bank—the depositors—should be consulted in a postal ballot to get their views. The Government are keen on postal and other ballots in other areas. Before transferring the bank's assets to their friends in the City, they should at least test the strength of their position.

I cannot see what objection there can be to getting the agreement of the depositors. If the depositors, deemed the owners, agree to the demutualisation, if that is the correct term, of the company, at least TSB Scotland, the TSB Group and the Government will be on far stronger ground. That will be the result of a majority vote in favour. It is incumbent on the Government to tell the House whether they will accept the amendment which I have tabled. If they do not respond and if they fail to say yes, I hope that they will explain why insufficient information about this sordid affair has been placed before the House.

We are dealing with an important Scottish company. When I started my opposition to the Bill, I did so primarily on the basis that it would be a loss to the Scottish economy and the financial scene if this huge unit were to be taken out of our control. Its removal would inflict considerable damage on us.

Mr. Robert Hughes (Aberdeen, North)

I am following the hon. Gentleman closely. He is making a strong plea for the bank to be left in Scottish control. However, earlier in his remarks he was critical of those in control of the bank's affairs for apparently selling out. The hon. Gentleman cannot have it both ways.

Mr. Wilson

Indeed I can have it both ways. I usually do, and I am usually right. I have explained that my objection to the Bill at the outset was based on the economic and financial loss that the Scottish economy would face. However, we have run into a more fundamental issue, which is whether such a company, which has had successful mutual control in the past, should have that form of control unilaterally dismantled without the consent of the depositors, who I believe to be the true owners of the bank.

We in Scotland have had successful mutual companies in the insurance section which have done very well. I would not trust the trustees as directors in controlling the future of TSB Scotland, especially if they are answerable to no one—except ultimately, I suppose, the TSB central board. I accept that the bank has built up extremely well in recent years, has served its customers and expanded its services. One can recognise work well done of that sort but it is still possible to criticise the trustees of TSB Scotland for their ultimate lack of vision. It appears that they have close sight but no long sight of the future.

Many Scottish companies have been taken over in the past and when that has happened the vitality has often seeped out of them and has not been replaced. Eventually these companies have either been entirely absorbed—that happened to many individual insurance companies which were based in Scotland—or closed, with job losses and a loss of leadership in the Scottish community.

If the Government insist on opposing Lords amendment No. 1, which I consider to offer the best solution, they should consider the formula which I have outlined in amendment (a) which provides that, before TSB Scotland is included in their proposals, consent should be obtained from the depositors by way of a postal ballot. In that way the Government would emerge with great credit. It is still open to them to take that course rather than to find that they have disappointed the Scottish community' in the unfortunate way in which the Bill has been prepared.

I could accept from the Minister the view that he has asserted in the past that the Bill is not one in which the Government have a pecuniary interest and that he is acting as agent for the TSB Group and, through that, TSB Scotland, but an agent is responsible to a principal. In this case, the principal is not necessarily the TSB trustees but the owners of the bank, the depositors. If that is so, the Minister would be acting in dereliction of his duty as agent if he accepted instructions from the wrong principal.

Now that he has the information and opinion that I have supplied, I hope that the Minister will acknowledge that the Government should not wish to be involved in a scandal of this sort and, even now, will accept a solution which would remove them from the hook on which they have been placed.

10.45 pm

Mr. Donald Dewar (Glasgow, Garscadden)

The new TSB's difficult birth is being attended with much doubt and uncertainty. I have no wish, in what I thought optimistically would be a short debate, to rehearse the whole history of the affair. The central issue with which we are concerned in this group of amendments is whether the exclusion of TSB Scotland from the Bill, as brought forward in another place, should survive and whether, if it does not survive, how adequate will be the Government's replacement provisions.

The debate in the other place represented an interesting episode. Lord Taylor of Gryfe apparently has an unbounded enthusiasm for devolution in the world of banking, though that enthusiasm does not have a wider application, if I remember the noble Lord's history.

I do not go all the way with the hon. Member for Dundee, East (Mr. Wilson) or with the depositors in writing off as totally worthless the concessions that have been extracted. In one of the depositors' circulars, those concessions were described as an insult to the intelligence of the Scottish electorate. While that was an overstatement, a number of questions need answering about those concessions and I hope that the Minister will provide the answers.

I am sure that I speak for many hon. Members when I say that we have no enthusiasm for the self-perpetuating board, as envisaged. The board of TSB Scotland will renew itself. It is the equivalent in the world of nature of the amoeba in the sense that it is self-generating, needing no outside help, although there is a negative check in the approval of the main board. I did not have the privilege of serving on the Standing Committee, but I expect that there was an explanation of whether they would be executive directors and whether they would be part-time or full-time. The Minister might wish to clear that up.

More helpful is the fact that the chairman and chief executive of each subsidiary bank will serve on the main board and that there will be no reduction in the worth of the bank without the consent of two thirds of that subsidiary bank's board of directors, although a cynic might ask what the worth of that is, given their silence on present events.

The real question concerns the value of the safeguards. The Minister said that there would be no vesting order until all the alternations in the articles of association had been made and the promised safeguards were in position. However, articles of association can be altered at a later date. The trouble is that the safeguards offered are immediate and there is no guarantee that they will stand the test of time. The Minister may wish to comment on that important matter, especially when we consider the adequacy or otherwise of what he proposes to put in place of the Lords amendment.

It is difficult to be objective about these issues. As we contemplate the scene, one can hear the creaks of bandwagons rumbling, and certain sections of the SNP—I am careful to say "certain sections—have been shamelessly jumping aboard. Last week it was wreaths in memory of the Labour party at the Royal High building; this week it is the Trustee Savings bank. Goodness knows what it will be next week. We must look at the arguments. There are two main areas of contention—one is the form of ownership proposed for the new organisation and the second is the loss of Scottish identity subsumed in the larger United Kingdom organisation.

I am not convinced by some of the rather romantic visions of the TSB as presently constituted, which have been used to buttress some of the debates during the course of the Bill. I do not want to go back to the philosophy of the Rev. Henry Duncan of Ruthwell and his famous strongbox with its three separate locks. However, I must tell the hon. Member for Dumfries (Sir H. Monro), whose peon of praise for the good cleric I read with interest, that he is a rather unlikely hero for a Conservative Member because his other characteristic was a decision to defy an interdict from the Court of Session during the famous legal proceedings in the Strathbogie case running up to the disruption. I would have thought that that would not have commended itself to Conservatives.

In any event whatever the Rev. Henry Duncan may or may not have done, there is a somewhat rosy coloured glow as people look at how the status of depositors has developed during the course of the TSB movement. I remember an interesting chapter in Olive Checkland's book "Philanthropy in Victorian Scotland", which deals with this at some length. I recommend it to anyone who is interested. I shall weary the House with only one sentence, which is: The concept of trusteeship was an elitist notion: depositors had no voice in the management of the Savings Banks. That holds true today, even as it did in the days of Victorian philanthropy that are sometimes beloved of Government Back Benchers.

I am confident that the average depositor—one of the nameless 1.25 million, of whom there are several on the Benches behind me—thinks that he has a substantial stake in the management of the TSB as presently constituted. However, it is fair to concede that there is a big difference between management and ownership. Whatever the position of the depositors in terms of management, they have a special position in the bank that is not fully recognised in the scheme embodied in this legislation.

There has been a great deal of talk about the Page committee. The findings on ownership were quoted effectively by my hon. Friend the Member for Thurrock (Dr. McDonald) on Second Reading. The House will remember that when that committee considered something very much like the solution that has now been adopted, it reached the conclusion that it was neither practical nor desirable.

There is also the open question whether the bank is or is not, in the law of Scotland, owned by its depositors. The hon. Member for Dundee, East quoted the opinion of a well-known Queen's counsel at the Scottish Bar, Mr. John Murray. We are led to understand—and I have not seen a copy of the document—that his view was that, as an unincorporated body, it was owned by the depositors. Of course, that is not the law of the land. It is an educated guess about what the courts might find if they were invited to consider that question. But it underlines that we are in a peculiar position tonight because we are all aware that there is an action pending in the courts—an application for interdict—that is likely to be heard tomorrow. None of us know the outcome of that. It will be strange if the Court of Session says tomorrow that ownership is with the depositors and grant an interdict on that basis.

Perhaps the Minister can tell us the Government's view of the effect of such an interdict. If he has doubts, he can obtain an instant opinion from another QC sitting on his left—the Solicitor-General for Scotland.

Will Parliament override the court and make the interdict useless? What will be the effect of that interdict? What will happen to depositors who have been established in ownership and have a tangible right, which we are alienating, who will have no rights in the courts because Parliament is legislating to destroy their right to pursue their claim? That raises interesting questions which are not academic and which might become horribly relevant tomorrow.

I hope that the Minister will give us the benefit of his thoughts on the matter. If he cannot do that, I hope that we shall hear from the Solicitor-General for Scotland.

The Page committee, the opinion of counsel and the atmosphere of the trustee savings bank movement has been referred to. I believe that a substantial shift is envisaged in the Bill. It is not a matter that involves only a technical reconstruction of company status.

Leaving aside the question whether the bank is thrusting and dynamic, the TSB has served its depositors and its existence is based upon offering certain services. No one apart from salaried professionals, makes a profit or obtains a fee.

Under the new arrangement trustees will have a different remit. They will be bound by the Companies Act. Their job will be to maximise profits for the benefit of a different body of people—the shareholders. There might be an overlap. They will do that by extracting profit from the depositors. That will create a different atmosphere.

The important position now held by depositors was recognised by the Minister in his recent letter to Mr. R. A. G. Bennett of the depositors' association when he said that the preferential share option scheme was a recognition of the special place of the depositors in the TSB set-up.

Depositors are in a special position. The evidence for that is contained not only in the Page report, but in the way that the bank has been operating. To that we want to add the Scottish dimension. Scotland has a long and distinguished involvement and a well-developed network. Central funds have been gathered there. We have come a long way since the Rev. Henry Duncan's banks were established to ameliorate the conditions of the lower orders in Scotland.

I am told that 3,000 employees are involved, that the operating profit is £32 million, that there are 2 million accounts and 1.5 million depositors. There is no doubt that the Scottish bank would be a substantial entity if it existed in its own right. That was tacitly admitted by an authority that might appeal at least to Conservative Members—Lord Bruce-Gardyne—who said on 16 April 1985 that TBS Scotland would be well able to stand on its own two feet. I do not think that there would be any argument about that.

I do not want to argue that case at this stage at any length, but there is an understandable anxiety. It was referred to by my hon. Friend the Member for Thurrock on Second Reading, when she pointed out that there was a danger of the bank, weak in the south, using the vast majority of its resources over the opening years to try to cover the areas where it had not a long and well-established tradition. She rightly said that that should not be at the expense of Scotland and the north.

11 pm

We have here a fair amendment that calls for consultation. There is clearly a case for that consultation, based on the Scottish experience. There may be an argument about whether it is right to go ahead on the present arrangements, but that should be tested. I hope that I have established that the depositors are people who have a particular interest and should be consulted.

I have no doubt that substantial arguments can be put forward by the promoters of the scheme. They can argue that the employees are, as I understand, largely in favour of the reorganisation going ahead. They can talk about a better service for the customer from a commercial bank with a more competitive system. They can argue that the depositors' association is unrepresentative. It has not hidden the fact that it came late in the field and has only about 200 members out of the 1,250,000 depositors. The promoters can argue that an independent bank would be open to a substantial possibility of takeovers and would be in a weak position. There are all sorts of arguments, and it is not for us tonight to come to a conclusion on them.

I have tried to put some arguments and the hon. Member for Dundee, East has done the same. On both sides there are arguments that should be decided by the depositors, and they should be consulted before we come to a final conclusion on the matter. The very fact that they are entitled to preferential treatment perhaps underlines the case for consultation of the kind that I have mentioned.

I am a member of a building society. I was surprised to discover that I am a member because I have only a few pounds in an ordinary share account. A couple of days ago I received a voting slip, because the building society is about to amalgamate. It is asking me to vote on whether I want that amalgamation to go ahead. I accept that a building society has a very different structure from that of a trustee savings bank, but it is thought not inappropriate that everyone who has a deposit in the building society should be allowed to vote on whether the Alliance should join with the Leicester. All we are asking is for the same sort of basic right for the depositors in the TSB.

I hope that the Government will look sympathetically at the amendments. I hope that they will accept that there is a case for consultation, given the Scottish dimension that we have been talking about and given the undoubted change in the status of depositors that would result from the Bill. If the Minister will accept the amendment, or one of them, we can proceed with harmony and consent and there need be no further delay. If he cannot, I believe that we should divide the House upon it and, if we are unsuccessful, mark our disapproval by dividing also on the main Question.

Mr. George Robertson (Hamilton)

On a point of order, Mr. Deputy Speaker. May I ask your advice on the important issue that we are considering? Various privileges are to be conferred by the Bill on depositors with the Trustee Savings Bank. There will be hon. Members in the House this evening who may be intending to vote and who may have accounts and be depositors with the Trustee Savings Bank.

I have an account with the Trustee Savings Bank which contains 81p, but the principle goes beyond that. In view of the lucrative offers that are being patronisingly placed before depositors, Mr. Deputy Speaker, can you advise me—and perhaps the House as well—as to the position of hon. Members if as depositors they were to find themselves in the Division Lobbies this evening?

Mr. Deputy Speaker (Mr. Harold Walker)

The practice of the House is clear. Any hon. Member who has a pecuniary interest in the matter being debated and who is participating in the debate should declare that pecuniary interest. All hon. Members may vote on a matter of public interest. I hope that that is clear.

Sir Hector Monro (Dumfries)

I am sure that Dr. Henry Duncan would be surprised that, 175 years after founding the savings bank movement, his name has been trotted about the Floor of the House at 11 pm. The hon. Member for Glasgow, Garscadden (Mr. Dewar) thought that it was unlikely that I would support Dr. Duncan, but I do. He set a fine example of sticking by one's principles over the disruption. At least a fine monument was erected in memory of his good work. This is unlikely to be reciprocated in the streets of Garscadden.

I think that Dr. Duncan would want the House to bear in mind that he spent much of his time promoting the savings bank movement in England and Wales. He was internationally minded and outward looking—very far removed from the narrow internal views of the hon. Member for Dundee, East (Mr. Wilson).

It is important to delve into the history not of the distant past but of the past two or three months. I should like my hon. Friend the Economic Secretary to marry Government amendment (d) with the important letter from Sir John Read, the TSB chairman, which was printed in detail in the other place on 4 July in reply to a written question by Lord Taylor of Gryfe to the Chancellor of the Duchy of Lancaster. How binding is the letter? How tied into the legislation is the assurance that in Scotland we will have the many factors set out in the letter, especially in relation to an independently managed Scottish bank"—[Official Report. House of Lords,4 July 1985; Vol. 465, c. 1394.] which is registered in Scotland—I think that this is covered by deed—the issues relative to the charitable foundations under paragraph 4 (iii) and the membership of the Scottish board under paragraph 4(v)?

If my hon. Friend the Economic Secretary spells out in detail how he sees the arrangements for conducting the business of the Trustee Savings bank—both the United Kingdom and the Scottish groups—and how they tie together, that may well go a long way towards alleviating the concern in some parts of Scotland. This concern has not been reciprocated by the staff of the TSB nor originally by the trustees when the Bill came before us on Second Reading.

All of us who live in Scotland, who are interested in the bank's success and who realise that a large part of the bank's success in Scotland will go towards making it a great successor in the United Kingdom—[Interruption.]Why does the right hon. Member for Western Isles (Mr. Stewart) laugh at that? Is he not proud that the Scottish bank can take the lead in the United Kingdom? Should he not be pleased, rather than sit there girning away?

Mr. Donald Stewart (Western Isles)

Surely the hon. Gentleman is aware from his experience that that is not the way the scenario will operate. The bank will simply become a branch office without any power.

Sir Hector Monro

Despite all the years that the right hon. Gentleman has served in the House his mind never broadens or becomes more up to date. In some years' time he will realise that tonight he witnessed the passage of legislation that greatly enhanced the prestige of the TSB in Scotland.

I hope that when my hon. Friend replies to the debate, which is broadly similar to the Second Reading debate in the other place, he will spell out how the letter from Sir John Read is tied into legislation. We want an assurance that what Sir John Read said will take place, and is bound as far as possible by legislation.

Mr. Jim Craigen (Glasgow, Maryhill)

My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said that we were in a peculiar position. Indeed, we are, because we are dealing with a peculiar Bill. On Second Reading I declared an interest as a depositor in the Trustee Savings bank, and, as hon. Members know, I opposed Second Reading.

In the other place Lord Gowrie said that the Government could not allow the Bill to proceed to Royal Assent with clause 3. The Bill should not be enacted. Therefore, I would not be unhappy if the Government's motion, that we disagree with the Lords, were refused. It is becoming increasingly evident that serious questions about the ownership of the bank, if not in England and Wales, certainly in Scotland, have not been adequately resolved.

The group of amendments arises from an amendment of Lord Taylor of Gryfe, which succeeded on Report in another place. That amendment, which aroused a great deal of interest in Scotland, revealed the extent to which Edinburgh's financial establishment had been sleeping because it came some time after this House had given the Bill a Second Reading. It does not instil me with much confidence in Edinburgh as the second financial centre in the United Kingdom that Edinburgh took so long to wake up to what was going on.

It is more than anecdotal——

Mr. Deputy Speaker

Order. I am sorry to interrupt the hon. Gentleman, but an unreasonable volume of noise is coming from the vicinity of the Bar of the House. I hope that the hon. Gentleman will be given the opportunity to deliver his speech without too much background noise.

Mr. Craigen

It has been suggested to me that Lord Taylor's amendment might not have been passed in the other place if the President of Malawi had not been visiting the United Kingdom. There was a big dinner in his honour at Windsor Castle and, therefore, many on the Government side in the other place were absent. I am sure that Dr. Banda, who resided in and was educated in Scotland, would have a good old chuckle at that.

The more serious aspect was the flaw in Lord Taylor's amendment. Reference was made to the letter from the chairman of the central board. All hon. Members may not share the simplistic confidence exuded by the hon. Member for Dumfries (Sir H. Monro), but it seems an eggshell of a scheme. The first tap of a wooden spoon would give us a smack of what the scheme amounts to.

We have been told that the head office of TSB Scotland will be in Scotland, and that the TSB Group's registered office will be in Edinburgh. I understand that the Scottish Council (Development and Industry) has already said that it wants the entire operation to be located in Edinburgh. The shareholders' annual general meeting will be in Edinburgh, no doubt at the time of the Edinburgh festival.

11.15 pm

Those assurances, and the supposed safeguards about residential qualification for the directors of the new TSB in Scotland, do not amount to much. They certainly do not overcome the basic problem of ownership, which the Government have not fully resolved, and the question whether it is right for the Government to consent to the flotation of TSB on the stock market.

Lord Taylor in another place said that the concessions that had been agreed with the chairman of the central board of the TSB were more than half a loaf. However, having examined the concessions closely, it seems to me that they are little more than a handful of grain. They provide some managerial assurances, not proprietorial safeguards, because they do not alter the effect of the change in control.

This might be a convenient moment to say why I tabled amendment (ii), which calls for consultative arrangements with depositors. Although the Government are likely to have their way this evening, I believe that there should be adequate arrangements to ensure that the depositors with the TSB have a voice in the new set-up. It is clear from Sir John Read's letter that he envisages that no more than about one tenth of the depositors will become shareholders of the new TSB. We have been told all along that it is desirable to have shareholders because we wish to involve many more people in the running of the bank. yet it is explicitly acknowledged in the letter that not many more than one tenth of the depositors are likely to become shareholders.

Therefore, it is all the more important that some mechanism is written into the Bill so that the other nine tenths of depositors can have some machinery by which their views and complaints can be made known to the board. That should not be left to the whim of the chairman or the board. Since the TSB wished to be different and to involve more people than do the clearing banks, I should have thought that it would have wanted to have some customer representation within the established arrangements. That is why it was important to table the amendment.

Some reference has been made to mutuality. A depositors' association has been set up. Irrespective of whether it has 230 or 250 members so far, the fact is that there must be some recognition of depositors' rights in this exercise.

I noticed with interest that, in the letter which the Treasury Minister sent to the chairman of the Scottish TSB Depositors' Association on 4 July 1985, the Government made their position quite clear on the matter of mutuality. Copies of the letter were issued as a parliamentary answer. The Minister said: I agree of course that there are successful mutual financial institutions. But it is one thing to allow long-established mutuals to continue in business in their traditional fields of activity and quite another to set up brand-new mutual arrangements in modern circumstances. The Government effectively appear to be trumpeting a new arrangement that organisations will be either private or public. In the Government's scheme of fiscal and economic affairs, it seems that there will be no encouragement and precious little assistance to mutuality as a concept. I wonder whether that is entirely desirable.

Many hon. Members have experience of mutuality in other areas. The TSB is not strictly a mutual, but I see no reason why it could not have moved towards the concept of mutuality. I think that the TSB could raise the capital for which it is looking, had it had shares which could be indexed and interest paid. I do not think that it needs to float an unknown business on the stock exchange to raise the capital which it says is necessary for many of these developments.

When the Minister tells the House why we should accept the Government proposal and disagree with the Lords amendment, I should like him to say whether the Government, had they known counsel's opinion, which was apparently given to the TSB in April 1979, would have come forward with a Bill, or would have left it entirely to the Trustee Savings bank to introduce a private Bill.

On Second Reading, I described the measure as closet privatisation. I want to know where the Treasury stands in all this. Many questions have been unanswered in the conduct of this highly undesirable plan to sell off the TSB.

As I said before, it will be a highly lucrative exercise. Those who buy will not be risking anything in the way that they would be in buying equities in a business. The reserves of the TSB are such that it will be an Aladdin's cave. I am not sure whether the Minister is Ali Baba or one of the 40 thieves, but I think it is important that the Treasury should spell out precisely where it stands, given the knowledge that the House now has.

Mr. Nicholas Fairbairn (Perth and Kinross)

I declare an interest. I am, or was, a depositor in the Edinburgh savings bank, and discovered, following the publication of the Bill, that my account, which stood at £1 10s 6d, is now worth £2.68 28 years later. I do not know whether that is in favour of or against the present structure of the bank, but that is the extent of my interest. No doubt I will be one of the thieves of whom the hon. Member for Glasgow, Maryhill (Mr. Craigen) has just spoken, because I would be entitled to shares if the matter goes forward to flotation.

Several matters of important principle are raised. It is obvious that no hon. Member—and it is not yet settled in the courts—is certain about the legal constitution of the organisation of the Trustee Savings bank. Without wishing to give a firm opinion, I would say that the Bill would turn a non-profit-making association into a profit-making company. If I am right, the distinction is that the original association had, under the trusts legislation—that is why it is called a trustee savings bank—a duty to maximise the benefits of the depositors. That is why the name was changed from the Edinburgh savings bank or any other bank to the Trustee Savings bank. Those who were in charge of it therefore had a duty to maximise the benefits of the beneficiaries—the depositors.

The new company has a completely different duty. It is exempted from, even if it is not precisely under, the requirements of trusts legislation, to maximise profits as a commercial organisation. Such a company has an utterly different structure in law in Scotland and in understanding as an organisation. The Government are merely the agent, runner or duty doer for the board of the TSB in putting forward the Bill. I do not believe that the Government would ever have done that if they had conceived of the legal structure of the bank.

We do not know what the legal structure of the bank is. The Court of Session will begin to decide that tomorrow. We know however, that it was called the Trustee Savings bank because it was believed to be such an organisation. It would have been a contravention of the Trade Descriptions Act 1968 if anybody had called it that and it had not been a trustee savings bank.

I do not wish to judge something which, if it is not sub judice, is very nearly sub judice. Let us assume that, as I have proposed, the court decides that the organisation comes under the umbrella of trusts legislation and has a duty to provide for the maximisation of the benefit of the beneficiaries—the depositors. Then the Bill will supravene abante the rights of the beneficiaries. It will be taking a trust and making it into a commercial enterprise without the consent of the beneficiaries, contrary to the duties of the trustees.

11.30 pm

We can take it the other way. The case may go to the first division and then to the other place, so it may be a long process. I am not looking into the motivation of those who raised the action but into the rights and wrongs of the matter. Supposing that the courts decide the other way. Then, have not the depositors, all these years, been misled as to their rights, and the duties of the directors?

I know that there are political motives. I know that there are those who say that anything that is Scottish must remain Scottish, and those who want to know whether the ban will be more Scottish if Sir John Read's letter is implemented than ever it was before. I am unimpressed by either the one side or the other. I am impressed by the fact that the defensive letter of Sir John Read has no force in statute and that any allegation that it is an earnest of eternal will has no force.

I am certain of various matters that concern me. The directors sought the opinion of counsel, which they were always entitled to reject, and which has regrettably—because it is a confidential matter—been revealed. It has been revealed, and we understand that they were informed and did not challenge that information, that the bank belonged to the depositors and that they were trustees for the beneficiaries. The directors then came to the Government to ask them to derogate their duty and later the function of that charity—trusts are charities. That raises serious poblems. If we are then told that the same adviser is advising them on the matters in which they are trying to reverse his opinion, that also raises serious matters.

We are told that Lord Taylor of Gryfe in the other place acts for Morgan Grenfell, which is, after all, acting with Noble Grossart in the Bell's whisky deal. The day after Lord Taylor accepted the advice, who was it that Sir John Read said would be a satisfactory director? It was Angus Grossart, of Noble Grossart. That raises other matters.

I am not, and hope will never be, able to understand anything about finance. I hate alligators, and I hate predators, and I hate everything about finance. However, if the financial institutions of Scotland are to be run on the basis that the TSB gets the advice of top counsel, hides that advice from the Government and asks the Government to bring in a Bill that contradicts it, then asks the same counsel to advise it in the opposite direction, and then in the other place the Government accept a compromise from a noble Lord who is in the financial institution of Morgan Grenfell, and the bank of Morgan Grenfell, in league with Noble Grossart says that the safeguard is to appoint one of their directors, all I can say is that the scepticism of a natural Jacobite Episcopalian is confirmed.

I am not a little Scotlander, but I am a little depositor in Trustee Savings Bank Scotland. I am very sceptical about constitutional arrangements whereby a trust becomes a public company when the question whether or not it is a trust has yet to be decided by the courts. The principles I have raised tonight ought to give a great deal of thought to a great number of people.

Mr. Barry Porter (Wirral, South)

On a point of order, Mr. Deputy Speaker. Although I am not an accountant, a Scot or even a Pict, I have listened with great interest to this debate and have become increasingly disturbed by the points about interest that have been raised. I am a partner in a firm that is a substantial customer of the Trustee Savings bank. Originally, Mr. Deputy Speaker, you made a distinction between declaring an interest and speaking and then voting on a matter of public interest. I am not entirely certain about the distinction between the public interests and the private interests of a firm like mine. If this flotation takes place, my firm and I, as a partner in that firm, will have a substantial interest in it. I should welcome a ruling about how you make a distinction between public and private interests in a matter of this nature. At the moment I am reluctant either to speak or eventually to vote upon it.

Mr. Deputy Speaker

Order. I am surprised that the hon. Gentleman has taken such a close interest in this matter, since I have been disturbed by the unreasonable noises that have been disrupting the debate from below the Gangway. I doubt whether I can usefully add to my earlier ruling that all hon. Members have a right and a responsibility, in accordance with the practice of the House, to declare any pecuniary interests that they may have in the subject under debate.

Mr. Porter

Further to that point of order, Mr. Deputy Speaker. On behalf of my hon. Friends the Members for Macclesfield (Mr. Winterton) and for Birmingham, Selly Oak (Mr. Beaumont-Dark) I apologise for the noise that they have been creating, but I have been seeking their advice. I am no wiser, nor am I much better informed about the distinction between public and private interests. Therefore in accordance with my conscience I declare an interest. It would be quite wrong of me to vote on this matter.

Mr. Robert Maclennan (Caithness and Sutherland)

This has been a strange debate. The Bill has followed a very unexpected course. When the Government first introduced it, the matters that have become so controversial tonight, at a late stage in the proceedings on the Bill, appear not to have ruffled the feathers of those who are alleged to be most at risk from the proposals of the trustees of the Trustee Savings bank Scotland.

There has been a penumbra of criticism throughout the debate of the motivation of the trustees in suggesting this flotation and of the Bill that the Government have adopted—a penumbra that became rather more solid when the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) spoke. He implied a somewhat sleazy motivation. It is going slightly beyond what is strictly necessary to impute improper motives to those who have been putting forward these proposals since August 1982. There has been singularly little criticism of these proposals, either from the depositors or from the commercial rivals of the Trustee Savings bank Scotland, or from anyone who might have been thought to be adversely affected by the proposals.

Mr. Fairbairn

I did not say that the motivation of those who proposed this matter was in any way sleazy. I said that once the matter had been proposed and difficulties arose, what happened thereafter might be subject to close scrutiny.

Mr. Maclennan

The House has been subjecting this Bill to ever closer scrutiny, and no doubt will properly continue to do so for a little time yet. What has come out at this late stage in the Bill is that the proposed shape of the new bank is thought in some way to provide less protection for depositors than previously existed.

The hon. Member for Glasgow, Maryhill (Mr. Craigen) has taken a close interest on the Opposition side of the House in this matter for a long time. He complained that there might be under-representation in the new structure because only 10 per cent. of the depositors will be in the shareholding body. But that will be 10 per cent. more than has been represented in management decisions or in the decision-making process of the bank at any stage in its history. It is at least plausible to argue that the principal concern of the trustees in moving towards this new shape for the bank is the interests of the depositors. One must assume from their silence that the depositors have consented to what has been done. Over a period of three years, they have had plenty of opportunity to raise this matter.

For the bank to be organised as a public limited company would be in the interests of depositors. The bank has increasingly become comparable to a clearing bank and has ceased to be primarily a savings institution. It operates in the hight street like other banks and operates accounts that can be drawn upon. I doubt whether depositors really view it as being, in important respects, very different from, shall we say, the Royal bank or the Bank of Scotland. The operations have become very difficult to distinguish for the ordinary depositor who uses the services of the bank.

These facts have been somewhat lost sight of in the understandable and wholly legitimate controversy that has arisen about whether the Trustee Savings bank Scotland should be operated as a Scottish bank in Scotland with all the benefits that might bring to a strenghtened Scottish financial sector. There was a singular lack of criticism from those who have been concerned to see some strengthening of the Scottish financial sector. I suppose that the hon. and learned Member for Perth and Kinross believes that that is because they were in some way competitors and might not be interested in making that case. There were certainly others who, for political or other motives, might have thought it appropriate to boost the case for the independence of the Trustee Savings bank.

I need not go over the facts about the strength of the Trustee Savings bank Scotland. The statistics were cited by the hon. Members for Dundee, East (Mr. Wilson) and for Glasgow, Garscadden (Mr. Dewar) earlier in the debate. It is perfectly clear that the Trustee Savings bank Scotland is by far the strongest part of the whole trustee savings bank coterie. It could have stood on its own feet and I regret that is not what was proposed, because it would have been extremely sensible and we would have given it our support. They said to the Government, "Let us join this new United Kingdom organisation and let us do so without any protection of the separate Scottish interest." That was the point that the Bill had reached when the hon. Member for Dundee, East moved his famous amendment. There are many more hon. Members in the Chamber tonight than there were on that occasion. To give the hon. Gentleman credit, it must be said that he has taken a consistent line on the matter and has pushed the issue further.

11.45 pm

The hon. Member for Dundee, East had only 29 votes for his amendment and the matter appeared to have been lost. It was revived only when my noble Friend Lord Taylor of Gryfe moved an amendment in another place that was given all-party backing, including support from the Labour party in the unexpected person of Lord Stoddart of Swindon and reluctant support from Lord Ross of Marnock. Even at that late stage, they sought to extract a new structure for the Scottish side of the TSB.

It was too late to rewrite the Bill. It would have been desirable for TSB Scotland to be established separately, and that could have been done, but it was not open to another place to unravel the Bill. The political reality was that the Government, with their substantial majority in this House, could have overridden any amendment and left the Bill in its original form. It would have had the wholehearted support of the hon. Member for Dumfries (Sir H. Monro) in that. He was utterly contemptuous of the amendment of the hon. Member for Dundee, East and he suggested that the hon. Gentleman knew nothing about Scottish banking. Events have proved the hon. Member for Dumfries wrong.

The agreement that followed consideration of the Bill in another place has resulted in some important changes. I hope that the Minister will say something about the extent to which those changes can be made to stick. They are consensual and are not written into the Bill. They appear to rest on the somewhat shaky foundations of the articles of association of the new company.

However, the changes that were agreed and are set out in Sir John Read's letter are not insubstantial. They show that it is at least the present intention of the TSB to establish a separate Scottish management, located in Scotland and with its registered headquarters in Scotland. The board will appoint its own members and they will not be appointed by the central board in London, although the members will be subject to the board's approval. There will also be a right of representation on the main board.

The provision that 75 per cent. of the Scottish board should be resident in Scotland is not a nugatory provision. It is a practical way of ensuring that the management of the board remains in Scotland.

Like the hon. and learned Member for Perth and Kinross, I am interested in the matters that are to be considered in the court in Scotland. However, whatever the findings, proceedings have begun too late. There can be no question of the legislative process being held up by that late decision to raise these issues in the court. The very tardiness with which that matter has been pursued raises the question whether the issues are so pressing and whether there is the threat to depositors' interests that is suggested may be implicit in what is being done, or in the action that is being recommended by the trustees.

I do not feel that Sir John Read has proposed an ideal compromise and I do not regard the guarantees as copper-bottomed. However, at this late stage I do not think that there is an alternative to accepting them. They go a great deal further than the Scottish Members were prepared to go prior to the vote in another place. which was an extremely valuable step in stopping the Bill reaching the statute book without effective consideration of what might be done to safeguard the Scottish dimension of the bank.

The Bill will be seen to have justified the scrutiny role of another place. Those who would wish to see that role eliminated might think fit to read the reports of its debates and consider how effective it has been.

The Government have, for the most part, tried to play the part of an honest broker. When it came to the crunch, I am glad that they were prepared to put some pressure upon Sir John and his colleagues to produce an end result which, though far short of what we would have wished originally, is a great deal better than the Bill as it first appeared before us. I regret very much that TSB Scotland will not, in its new life, be continuing entirely on its Scottish feet.

Mr. Archie Kirkwood (Roxburgh and Berwickshire)

I am pleased to be able to take up the remarks of my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan). I accept entirely the analysis that he has deployed, but I shall take the issue to a slightly more fundamental level.

It is true that the management of the TSB, in its own terms and within its own lights, has acted perfectly properly. It has acted efficiently and prospered in the best interests of the business as it sees them. The Government have probably acted according to their best lights as an honest broker in a difficult situation in their promotion of the Bill. The scrutiny that was given to the Bill in this place and in another place has revealed some difficulties which some of us—I include myself in the number—did not anticipate would emerge. From an operational. pragmatic and commercial point of view, everything that was said by my hon. Friend the Member for Caithness and Sutherland was right, but I am deeply uneasy about the fundamental principles of Scotts law that are at stake.

I followed carefully the interesting speech of the hon. and learned Member for Perth and Kinross (Mr. Fairbairn). First, a trustee savings bank is an unusual institution, and that presents us with a difficulty. If the Government had thought more carefully about that, they may have prevented us from having to face the problem before us.

The duty placed on the trustees of the original TSB institutions was totally different from that described by the hon. and learned Member for Perth and Kinross. My interpretation of their duty is that it was to promote savings, no more and no less. In other words, in small rural areas and in the high streets of small Scottish towns they tried to engender the ethic of thrift. If that was their function, and if they had no similiarity to a company limited by shares under the Companies Act, they were—and, therefore, still are—in a unique position. They do not have a joint stock bank structure, which is what the Bill sets out to achieve. The difference is that the trustees had the duty to promote savings, whereas a joint stock bank is established to make profit for the benefit of the shareholders. The two are totally different and no amount of legislative magic can translate the TSB into a joint stock banking company without considering who owns the assets of between £600 million and £700 million.

The bank has plans to continue, and I have no doubt that the TSB would prosper, if it were permitted to continue as it is. The depositors would benefit from that. While I would not go all the way with the hon. Member for Dundee, East (Mr. Wilson), especially in some of the language that he used, there is a danger that the House may be asked to put constitutional clothing on what is, in effect, an act of appropriation of the worst sort. That makes me uneasy about the whole process.

A small number of depositors have argued for a greater say, but I should have been happier if more of them had backed up the lead that was given by some of their number. While, therefore, the issue can be considered on a commercial or organisation level, on the one hand, it can be considered on a political level, on the other. It can be considered on the level of decentralisation and devolution to Scotland in terms of the amendment, and I join those who say that there is a cogent argument to be made for decentralising the bank and making it an exclusively Scottish institution—a point that I made on Report.

Now that the Government have had time to look at all the ramifications, and now that the Minister has heard the legal opinion, I should be interested to know the Government's attitude, although I have been a solicitor for long enough to know that one should not believe everything in an opinion. What is the Government's solution to how to bridge the gap between the present association and the joint stock bank being created by the Bill?

12 midnight

My only suggestion—and I realise that it is fraught with practical difficulties—is that some way, somehow, the depositors' opinion must be tested. They must be brought into the process. I would feel deeply restive and uneasy going through the Lobbies to support a measure with which in all other respects I agree, but where the legal questions are of fundamental importance to me as a Scots lawyer.

Mr. Craigen

Does that mean that the hon. Gentleman will support the amendment tabled by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) and my amendment which deals specifically with consultation with the depositors?

Mr. Kirkwood

I listened carefully to the hon. Gentleman's speech, and he has made one or two perceptive speeches on this matter. I want to hear the Minister before I decide how to vote. I support the hon. Gentleman's case, but I want the Government to address themselves to the fundamental legal question about the ownership of the assets of the bank.

Mr. Peter Pike (Burnley)

I have spoken during every stage of the Bill. Unlike the hon. Member for Caithness and Sutherland (Mr. Maclennan), who asked what could be done at this late stage, I believe that the Government could withdraw the Bill. Quite simply, irrespective of whether the Government accept the Lords amendment or whether any of the amendments being debated are carried. I believe that we will still be left with a bad Bill. It would be best if the Government withdrew the Bill.

The advertisements of the TSB on television show what it has achieved, so it is hard to believe that it desperately needs the Bill to be passed now. We should allow more time for more thought and come back with a better Bill next year. We should not speed through the Bill when the TSB advertisements show its success over recent years. Rapid progress is not essential. Unlike other privatisations, the Government have no financial gain from this Bill. Any money resulting from the sale of shares will remain with the TSB.

We do not have to accept the proposals for Scotland. We should wait to see what is determined in the court. The amendments on consultation are exceptionally important. Unless the TSB Scotland is very different from the English regional banks, there has not been any consultation with its customers. The hon. Member for Caithness and Sutherland mentioned that the Bill has been under discussion for three years. Therefore, when they have been sending statements to customers, I cannot understand why the TSB in Scotland or any of the regions has not carried out a consultation exercise and informed its customers of its proposals and why it wants to carry them out, and sought their views.

Customers and depositors should be able to express their view. Tomorrow the court will decide whom the trustees represent. If the trustees are acting in the best interests of depositors, they should have the confidence to consult them and see what they want to do.

I support the amendment to the Lords amendment. If it is not accepted I shall support several other amendments, but the best solution is for the Government to withdraw the Bill to allow proper consultation. The Government are acting as agent, so the legislation is not essential to them. Let the Government withdraw the legislation. Let us give the matter a year's thought and introduce a better Bill in the next Session.

The Economic Secretary to the Treasury (Mr. Ian Stewart)

Any Minister called upon to take through the House a Bill relating to a body with no owners of its assets has a formidable task. I am convinced that the Government were right to think most carefully about the basis on which they should legislate. Throughout proceedings I have tried to keep in mind the origins of my family in the manse and to have a generous, liberal-minded approach, particularly to the Scottish question.

The Scottish question has two parts. The first is the question of independence and the operation of TSB Scotland as a bank with a Scottish identity managed and run in Scotland. The second question is about the constitution, the way in which that bank should be accountable and whether depositors should have a different constitutional position. The Lords amendments are also relevant.

Before embarking upon the legislation, the Government considered the legal position carefully. We were satisfied that there was no element of expropriation in the Bill. The contents of Mr. Murray's opinion were known to us at all material times. I am advised that Mr. Murray's opinion was not the only opinion obtained by the trustees of the Scottish trustee savings banks. Before proposals were discussed with the Government, they had considered advice. It would be wrong for us to advise the House to delay consideration of the measure pending the outcome of an action which is taking place at a late stage in the Bill's progress.

Mr. Dewar

There was an intervention from the Government Benches below the Gangway from a certain solicitor. Perhaps I should have said—although I do not think it amounts to an interest—that I am a partner in a law firm which no doubt on occasion has contact with the Trustee Savings bank.

Will the Minister say a word or two about the effect of an interdict, if there were to be such a happening in the courts, based upon a finding that ownership rested with the depositors? What would be the impact of that and what would be the effect on the Government's plans?

Mr. Stewart

If the pursuer—I understand that is the correct term for an appellant in a Scottish court—in this case, contrary to the advice that the Government have received, were to succeed in obtaining a judgment against the trustees of TSB Scotland, we would, of course, consider our subsequent action in the light of that judgment. [Interruption.] As I have already said, it would be wrong for us to defer consideration of the Bill at this stage.

Mr. Eric Cockeram (Ludlow)

May I help my hon. Friend and other colleagues in the House? A similar occurrence took place about there years ago during the passage of a Bill of considerably greater constitutional significance than this one—the Canada Bill. An action was started very late in the courts in an attempt to delay the Bill. The Lord Chancellor in another place ruled that Parliament should not—indeed, could not—have its business put aside because a citizen or a group of citizens had started an action in the courts, and that Parliament must proceed with its business. Furthermore, he ruled that it would be wrong for Parliament to bow to such actions. Otherwise, any citizen or group of citizens could delay Parliament's business on any Bill passing through the House.

Mr. Stewart

That is a helpful contribution. [Interruption.] I am surprised that Opposition Members should find amusement in such sensible comments as I have made. I suppose they would wish me to say that the Government would not consider their subsequent action in the light of such a judgment.

Mr. Craigen

Returning to the assurance that the Minister gave earlier as to what would happen if the declarator were to fall the other way and not the way that the Government expect, will he give an assurance that the Bill will not be sent for Royal Assent until the matter of the court judgment is resolved?

Mr. Stewart

I do not propose to give any specific assurances about the outcome of any action which has not yet been heard. It would be irresponsible of me to do so. I have given the House a reasonable assurance on the point raised with me by the hon. Gentleman. I gave way to him because of the long and close interest that he has had in the Bill. I compliment him on the consistency with which he has put his case. But I think that he and all hon. Members should recognise that there has been a very long period during which it has been open to any depositor to challenge the TSBs on the point of ownership.

The present legal framework of the TSBs goes back to the Labour Government's Trustee Savings Bank Act 1976. The current proposals which are now contained in the Bill were first put forward three years ago in a statement by the TSBs which received extensive press coverage and which was reflected in the annual report of each TSB at that time and subsequently. Details were then spelt out in the Government's own White Paper last December, and the Bill has proceeded through its various stages in the Commons and in another place during the past six months. At no point during that time did any depositor see fit to challenge the legal basis on which the proposals were made, and we consider the present action to be misconceived.

Mr. Wilson

Does the hon. Gentleman accept that the TSB movement made no attempt to contact its depositors to tell them what was happening, let alone to find out whether they would approve such changes?

12.15 am

Mr. Stewart

I am coming to the matter of consultation with the TSB depositors, and I shall take account of the hon. Gentleman's point.

The difficulty with the TSB's constitutional position is that, contrary to what the hon. Member for Dundee, East (Mr. Wilson) said, the depositors are not the owners. The hon. Member for Glasgow, Maryhill (Mr. Craigen) said that the TSB is not strictly mutual. In fact, it is not mutual at all. Had it been mutual, the task of producing a Bill for the future of the TSBs would have been a great deal easier. No legal ownership makes it extremely complicated.

The question of depositors being consulted lies at the heart of the amendments proposed by the hon. Member for Dundee, East and by the hon. Member for Glasgow, Garscadden (Mr. Dewar). In 1976, the Government introduced a provision that 25 per cent. of the trustees of each TSB should be elected by the depositors. Those elections took place, but in almost every case they were not contested. Between 1976 and last year, only two elections were contested. In both cases, the same person contested the elections, and was heavily defeated. That does not seem to demonstrate a great fever of depositor interest in the conduct of the TSBs. In many ways, it would have been healthier if more depositors had taken the opportunity of putting forward and supporting candidates, but in 1976 it was felt that this was a means of allowing some form of participation by the depositors. In practice, the depositors have greeted that provision with comprehensive apathy. That is not a basis on which we could say that the constitutional arrangements for the TSBs should be overturned or qualified in a way that would suddenly give the depositors a decisive part to play by a ballot, as the hon. Member for Dundee, East proposed, or by some other means of consultation.

Mr. Fairbairn

Under the provisions of the 1976 Act no one has ever invited me as a depositor to vote for a person who wished to be a trustee. Surely I am not expected to put forward my own candidates and propose my own ballot. As a depositor, I should have been asked. I assure my hon. Friend the Economic Secretary that I have not been asked, and I do not know of any other depositor who ever has been.

Mr. Stewart

I do not know whether all the depositors in TSBs in Scotland are as active and enthusiastic as my hon. and learned Friend the Member for Perth and Kinross (Mr. Fairbairn). I understood that he had a deposit of £2.68, which he had allowed to sit in the TSB without paying much attention to it. Had he gone to the TSB, he would have seen that notices are put up in the branches about elections. Had he been a keen depositor, he would have asked for a copy of the TSB's annual report and accounts and would have found full details of all these proposals. I do not want to point the finger only at my hon. and learned Friend, because that would be unfair. I was about to say that there are a million or more people like my hon. and learned Friend, but perhaps that would not be credible, and I should say that there are a million or more depositors with TSB Scotland, who are like my hon. and learned Friend in that they have taken no part in the operation and activities of the TSB with which they deposit their money. Faced with such a lack of enthusiasm from depositors, it would not be right at this late stage to introduce half-baked procedures for consultation with depositors who have not taken advantage of the statutory provisions, which were specifically inserted into the 1976 legislation to give them an opportunity to express their opinions.

Mr. Tom Clarke (Monklands, West)

In view of the somewhat nonchalant way in which the Minister dismissed his hon. and learned Friend the Member for Perth and Kinross (Mr. Fairbairn), will he explain where in his argument there is anything consistent with the Government's recent attitude to trade union ballots?

Mr. Stewart

There is a slight difference between trade unions and TSBs, which resides in the fact that trade unions have members and TSBs do not. Earlier I explained how difficult it was to deal with a body which had no ownership or members, because it was not a mutual organisation. TSBs are certainly not constitutionally like trade unions.

I said that the question related to two aspects. The second is that, of the Scottish identity of TSB Scotland. The hon. Member for Dundee, East said that if we did not reject the Lords amendment, we would allow TSB Scotland to continue a separate existence, but that is exactly the opposite of the case. The Bill would then repeal the existing legislation under which TSB Scotland is constituted, and would not provide for it under the new legislation. TSB Scotland would, therefore, have no position in law, be unable to gain recognition as a bank, and presumably, therefore, have to cease business.

The Government have followed a much more constructive approach. Following the proceedings in another place we have endeavoured to ensure that in its final form the Bill will reflect the interests of the TSBs—the management and depositors—be soundly based in law, and reasonably take account of the anxieties expressed in Parliament during the Bill's passage. That is why amendments (b), (c) and (d) seek to introduce a specific provision—the concept of eligibility to succeed—whereby a separate new banking company will be registered in each territory and will take over the assets and business of the previous TSB in that country or territory.

The fact that we must move to disagree with the Lords amendment, and that I must suggest that these amendments should replace it, is purely because of the procedure in another place which meant that these amendments could not technically be tabled there on Third Reading. Therefore, they must be considered by this House.

In addition to the amendment that makes it plain that successor banks will have a separate identity closely related to their country, many hon. Members have drawn attention to the contents of Sir John Read's letter to my right hon. Friend the Chancellor of the Exchequer, which is printed in the Official Report of 4 July. We should recall the undertakings given in that letter: first, that the head office and registered office of each bank should be in its country; secondly, that each bank's board should appoint its members and that they should not be London nominees; thirdly, that 75 per cent. of the directors should be normally resident in that country; fourthly, that the chairman and chief executive of the banks in England and Scotland should be appointed to the group board; and, finally, and importantly, that the holding company should not be able to reduce the net worth or set the dividend policy of the subsidiary banks without the agreement of two thirds of their directors.

As the hon. Member for Caithness and Sutherland (Mr. Maclennan) said, they are important changes. He said that they were not all he wanted, but he fairly recognised that they constituted an important safeguard for the Scottish identity of TSB Scotland in the future. My hon. Friend the Member for Dumfries (Sir H. Monro) asked how independent the bank would be. All that I can say is that, whereas at present the trustees of any bank can merge it with another without an Act of Parliament, after the Bill is passed they could not do so without returning to the House with a private Bill. If this evening's proceedings are anything to go by, they might have great difficulty in gaining the approval of the House.

Mr. Craigen

The Minister mentioned depositor apathy in elections. Will he spell out what accountability there will be in the elections by new shareholders of the directors of banks?

Mr. Stewart

The new shareholders will have a direct say in the nomination and re-election of directors in the group parent bank. They will have no such say in relation to the subsidiaries. It is correct to say that the boards of the subsidiaries will appoint further directors in due course, but that is the normal pattern with subsidiary companies in groups. In this case, there will be greater assurance of the independence of those boards because of the provisions that I have just mentioned. It will be impossible for the parent company to nominate directors to the subsidiary boards of TSB Scotland or any other TSB. Those are important changes.

I accept fully that, although the amendments passed in the other place caused extensive reconsideration, they have resulted in important improvements in the basis on which the Bill will proceed. I willingly acknowledge that all those who have put forward ideas on Scottish independence have played their part in bringing that about. I hope that most hon. Members will accept that, having reached this stage, the Bill reflects most of the concerns that were expressed during its passage. Therefore, I hope that they will support the Government's amendments.

Dr. Oonagh McDonald (Thurrock)

I have felt like an intruder during much of the debate, because despite the way in which some people interpret my surname, I have no connection with Scotland—[HoN. MEMBERS: "Shame."] I have connections with a better place.

The Minister referred to the legal position, and insisted that there was no need to delay the Bill pending the legal action. One can understand his point. However, it was entirely unsatisfactory to say that, if the judgment went against the Government, he would merely consider subsequent amendment. He did not consider the possibility that if the judgment went against the Government, it would mean that the depositors' accounts had been expropriated. Therefore, the Government would have to consider the matter seriously and the Bill would not receive its Royal Assent.

12.30 am

Secondly, the Minister referred to the letter from the chairman, which was published in the Official Report of 4 July. Once again, we find that some of the main commitments are in the articles of association. We had to make the point frequently in discussion of the Bill on Second Reading, in Committee and on Report that those articles of association could be changed, provided that 51 per cent. of the shareholders agreed. As my hon. Friend the Member for St. Helens, South (Mr. Bermingham) pointed out at one stage, given that shareholders are to be limited by the articles of association to 50 per cent., one need only envisage 11 institutions which hold 5 per cent. of the shares getting together to be able to change the articles of association.

Thirdly, the Minister said that the depositors were not owners and therefore should not be consulted. Even so, that does not give a strong enough reason for refusing consultation because the depositors, after all, occupy rather a special position as regards the TSB Scotland. If one in four in Scotland are depositors with the TSB Scotland, this should be an important consideration.

In all the debates, we have emphasised very much the special character of the TSB in Scotland. While one might say that the depositors are not owners and therefore have no right to be consulted, if we accepted the Minister's argument, we could still go on to say that, although they may have no legal right to be consulted, it would be quite in keeping with the whole tradition of the TSB Scotland to consult them.

Finally, the Minister accused the depositors of comprehensive apathy, and gave that as a reason for not allowing them to be consulted at this important stage of the change in status, however ill-defined, of the TSB, and particularly of the TSB Scotland. Like Viscount Whitelaw, the Minister seems to believe that one should not go round the country stirring up what he is pleased to call apathy. The Opposition believe that it would be quite proper to stir up the depositors' apathy on this occasion, and to allow them to be consulted before this important change takes place.

The Minister's replies have been very weak, and he has not given us any of the guarantees which my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) requested. We shall vote accordingly.

Mr. Wilson

With regard to the legal side, as the Minister put it, I have rarely come across such a brazen attitude as that adopted by the Minister. He discards an opinion which states that the ownership of the bank lies with the depositors. He says that the Government took other legal advice, and has given no indication of what that might be. I find that remarkable.

In relation to the amendment, he has not convinced me that the provisions are other than minimal, and they will do very little to safeguard the independence of the Trustee Savings bank.

In summary, there has been breach of trust, in my opinion. There has also been breach of ownership, in my opinion. Having heard the Minister, I think that there has been a breach of the Government's credibility.

Question put, That the amendment to the Lords amendment be made:—

The House divided: Ayes 69, Noes 139.

Division No. 275]	[12.34 am
AYES
Ashdown, Paddy	Ewing, Harry
Beith, A. J.	Fatchett, Derek
Bermingham, Gerald	Fields, T. (L'pool Broad Gn)
Brown, Gordon (D'f'mline E)	Fisher, Mark
Brown, Hugh D. (Provan)	Foster, Derek
Brown, N. (N'c'tle-u-Tyne E)	Godman, Dr Norman
Bruce, Malcolm	Hamilton, James (M'well N)
Buchan, Norman	Hardy, Peter
Caborn, Richard	Hart, Rt Hon Dame Judith
Campbell-Savours, Dale	Haynes, Frank
Carlile, Alexander (Montg'y)	Hogg, N. (C'nauld & Kilsyth)
Clarke, Thomas	Home Robertson, John
Clay, Robert	Hughes, Sean (Knowsley S)
Cocks, Rt Hon M. (Bristol S.)	Hughes, Simon (Southwark)
Corbyn, Jeremy	Kennedy, Charles
Craigen, J. M.	Lewis, Terence (Worsley)
Cunliffe, Lawrence	McCartney, Hugh
Dalyell, Tam	McDonald, Dr Oonagh
Davies, Ronald (Caerphilly)	McKay, Allen (Penistone)
Dewar, Donald	McKelvey, William
Dixon, Donald	Maclennan, Robert
Dormand, Jack	McTaggart, Robert
Eadie, Alex	McWilliam, John
Evans, John (St. Helens N)	Marshall, David (Shettleston)

Maxton, John	Short, Ms Clare (Ladywood)
Meadowcroft, Michael	Skinner, Dennis
Michie, William	Snape, Peter
Millan, Rt Hon Bruce	Steel, Rt Hon David
Miller, Dr M. S. (E Kilbride)	Stewart, Rt Hon D. (W Isles)
O'Neill, Martin	Strang, Gavin
Parry, Robert	Thompson, J. (Wansbeck)
Patchett, Terry	Wainwright, R.
Pike, Peter
Powell, Raymond (Ogmore)	Tellers for the Ayes:
Prescott, John	Mr. Gordon Wilson and Mr. Archy Kirkwood.
Robertson, George
Rowlands, Ted

NOES
Amess, David	Maude, Hon Francis
Ancram, Michael	Maxwell-Hyslop, Robin
Baker, Nicholas (N Dorset)	Mayhew, Sir Patrick
Beaumont-Dark, Anthony	Merchant, Piers
Bellingham, Henry	Mills, Iain (Meriden)
Benyon, William	Moate, Roger
Biffen, Rt Hon John	Montgomery, Sir Fergus
Biggs-Davison, Sir John	Morris, M. (N'hampton, S)
Blackburn, John	Morrison, Hon P. (Chester)
Blaker, Rt Hon Sir Peter	Moynihan, Hon C.
Boscawen, Hon Robert	Murphy, Christopher
Bottomley, Peter	Neale, Gerrard
Bottomley, Mrs Virginia	Neubert, Michael
Bowden, Gerald (Dulwich)	Nicholls, Patrick
Bright, Graham	Normanton, Tom
Brinton, Tim	Norris, Steven
Brooke, Hon Peter	Osborn, Sir John
Brown, M. (Brigg & Cl'thpes)	Ottaway, Richard
Browne, John	Page, Sir John (Harrow W)
Bruinvels, Peter	Page, Richard (Herts SW)
Buck, Sir Antony	Peacock, Mrs Elizabeth
Budgen, Nick	Percival, Rt Hon Sir Ian
Burt, Alistair	Pollock, Alexander
Butterfill, John	Portillo, Michael
Carlisle, Rt Hon M. (W'ton S)	Powley, John
Cash, William	Proctor, K. Harvey
Channon, Rt Hon Paul	Raffan, Keith
Chope, Christopher	Rhodes James, Robert
Clark, Hon A. (Plym'th S'n)	Rhys Williams, Sir Brandon
Clarke, Rt Hon K. (Rushcliffe)	Ridsdale, Sir Julian
Cockeram, Eric	Robinson, Mark (N'port W)
Coombs, Simon	Roe, Mrs Marion
Cope, John	Rowe, Andrew
Couchman, James	Ryder, Richard
Currie, Mrs Edwina	Sackville, Hon Thomas
Dorrell, Stephen	Sainsbury, Hon Timothy
Douglas-Hamilton, Lord J.	Shaw, Sir Michael (Scarb')
Dover, Den	Shelton, William (Streatham)
du Cann, Rt Hon Sir Edward	Shepherd, Colin (Hereford)
Dunn, Robert	Sims, Roger
Dykes, Hugh	Smith, Tim (Beaconsfield)
Eggar, Tim	Spencer, Derek
Evennett, David	Spicer, Jim (W Dorset)
Fallon, Michael	Stanbrook, Ivor
Favell, Anthony	Stern, Michael
Fraser, Peter (Angus East)	Stevens, Lewis (Nuneaton)
Garel-Jones, Tristan	Stevens, Martin (Fulham)
Gregory, Conal	Stewart, Allan (Eastwood)
Hamilton, Hon A. (Epsom)	Stewart, Andrew (Sherwood)
Henderson, Barry	Stewart, Ian (N Hertf'dshire)
Hind, Kenneth	Stradling Thomas, J.
Holland, Sir Philip (Gedling)	Sumberg, David
Hunt, David (Wirral)	Terlezki, Stefan
Knowles, Michael	Thompson, Donald (Calder V)
Lawler, Geoffrey	Thompson, Patrick (N'ich N)
Lennox-Boyd, Hon Mark	Thorne, Neil (Ilford S)
Lightbown, David	Thornton, Malcolm
Lilley, Peter	Thurnham, Peter
Lloyd, Peter, (Fareham)	Tracey, Richard
Lord, Michael	Twinn, Dr Ian
Maclean, David John	Waddington, David
Madel, David	Walden, George
Major, John	Wall, Sir Patrick
Marlow, Antony	Waller, Gary
Mather, Carol	Wardle, C. (Bexhill)

Warren, Kenneth	Yeo, Tim
Wheeler, John	Younger, Rt Hon George
Wilkinson, John
Winterton, Mrs Ann	Tellers for the Noes:
Winterton, Nicholas	Mr. Ian Lang and Mr. Tony Durant.
Wolfson, Mark
Wood, Timothy

Question accordingly negatived.

Motion made, and Question put, That this House doth disagree with the Lords in the said amendment:—

The House divided: Ayes 138, Noes 57.

Division No. 276]	[12.45 am
AYES
Amess, David	Major, John
Ancram, Michael	Marlow, Antony
Baker, Nicholas (N Dorset)	Mather, Carol
Beaumont-Dark, Anthony	Maude, Hon Francis
Bellingham, Henry	Maxwell-Hyslop, Robin
Benyon, William	Mayhew, Sir Patrick
Biffen, Rt Hon John	Merchant, Piers
Biggs-Davison, Sir John	Mills, Iain (Meriden)
Blackburn, John	Moate, Roger
Blaker, Rt Hon Sir Peter	Montgomery, Sir Fergus
Boscawen, Hon Robert	Morris, M. (N'hampton, S)
Bottomley, Peter	Morrison, Hon P. (Chester)
Bottomley, Mrs Virginia	Moynihan, Hon C.
Bowden, Gerald (Dulwich)	Murphy, Christopher
Bright, Graham	Neale, Gerrard
Brinton, Tim	Nicholls, Patrick
Brooke, Hon Peter	Normanton, Tom
Brown, M. (Brigg & Cl'thpes)	Norris, Steven
Browne, John	Osborn, Sir John
Bruinvels, Peter	Ottaway, Richard
Buck, Sir Antony	Page, Sir John (Harrow W)
Budgen, Nick	Page, Richard (Herts SW)
Burt, Alistair	Peacock, Mrs Elizabeth
Butterfill, John	Percival, Rt Hon Sir Ian
Carlisle, Rt Hon M. (W'ton S)	Pollock, Alexander
Cash, William	Portillo, Michael
Channon, Rt Hon Paul	Powley, John
Chope, Christopher	Proctor, K. Harvey
Clark, Hon A. (Plym'th S'n)	Raffan, Keith
Clarke, Rt Hon K. (Rushcliffe)	Rhodes James, Robert
Cockeram, Eric	Rhys Williams, Sir Brandon
Coombs, Simon	Ridsdale, Sir Julian
Cope, John	Robinson, Mark (N'port W)
Couchman, James	Roe, Mrs Marion
Currie, Mrs Edwina	Rowe, Andrew
Dorrell, Stephen	Sackville, Hon Thomas
Douglas-Hamilton, Lord J.	Shaw, Sir Michael (Scarb')
Dover, Den	Shelton, William (Streatham)
du Cann, Rt Hon Sir Edward	Shepherd, Colin (Hereford)
Dunn, Robert	Sims, Roger
Durant, Tony	Smith, Tim (Beaconsfield)
Dykes, Hugh	Spencer, Derek
Eggar, Tim	Spicer, Jim (W Dorset)
Evennett, David	Stanbrook, Ivor
Fallon, Michael	Stern, Michael
Favell, Anthony	Stevens, Lewis (Nuneaton)
Fraser, Peter (Angus East)	Stevens, Martin (Fulham)
Garel-Jones, Tristan	Stewart, Allan (Eastwood)
Gregory. Conal	Stewart, Andrew (Sherwood)
Hamilton, Hon A. (Epsom)	Stewart, Ian (N Hertf'dshire)
Henderson, Barry	Stradling Thomas, J.
Hind, Kenneth	Sumberg, David
Holland, Sir Philip (Gedling)	Terlezki, Stefan
Hunt, David (Wirral)	Thompson, Donald (Calder V)
Knowles, Michael	Thompson, Patrick (N'ich N)
Lang, Ian	Thorne, Neil (Ilford S)
Lawler, Geoffrey	Thornton, Malcolm
Lennox-Boyd, Hon Mark	Thurnham, Peter
Lightbown, David	Tracey, Richard
Lilley, Peter	Twinn, Dr Ian
Lloyd, Peter, (Fareham)	Waddington, David
Lord, Michael	Walden, George
Maclean, David John	Wall, Sir Patrick
Madel, David	Waller, Gary

Wardle, C. (Bexhill)	Wood, Timothy
Warren, Kenneth	Yeo, Tim
Wheeler, John	Younger, Rt Hon George
Wilkinson, John
Winterton, Mrs Ann	Tellers for the Ayes:
Winterton, Nicholas	Mr. Tim Sainsbury and Mr. Michael Neubert.
Wolfson, Mark

NOES
Bermingham, Gerald	Home Robertson, John
Brown, Gordon (D'f'mline E)	Hughes, Sean (Knowsley S)
Brown, Hugh D. (Provan)	Lewis, Terence (Worsley)
Brown, N. (N'c'tle-u-Tyne E)	McCartney, Hugh
Buchan, Norman	McDonald, Dr Oonagh
Caborn, Richard	McKay, Allen (Penistone)
Campbell-Savours, Dale	McKelvey, William
Clarke, Thomas	McTaggart, Robert
Clay, Robert	Marshall, David (Shettleston)
Cocks, Rt Hon M. (Bristol S.)	Michie, William
Corbyn, Jeremy	Millan, Rt Hon Bruce
Craigen, J. M.	Miller, Dr M. S. (E Kilbride)
Cunliffe, Lawrence	O'Neill, Martin
Dalyell, Tam	Parry, Robert
Davies, Ronald (Caerphilly)	Patchett, Terry
Dewar, Donald	Pike, Peter
Dixon, Donald	Powell, Raymond (Ogmore)
Dormand, Jack	Prescott, John
Eadie, Alex	Robertson, George
Evans, John (St. Helens N)	Short, Ms Clare (Ladywood)
Ewing, Harry	Skinner, Dennis
Fatchett, Derek	Snape, Peter
Fields, T. (L'pool Broad Gn)	Stewart, Rt Hon D. (W Isles)
Fisher, Mark	Strang, Gavin
Foster, Derek	Thompson, J. (Wansbeck)
Godman, Dr Norman	Wilson, Gordon
Hamilton, James (M'well N)
Hardy, Peter	Tellers for the Noes:
Hart, Rt Hon Dame Judith	Mr. John McWilliam and Mr. John Maxton.
Haynes, Frank
Hogg, N. (C'nauld & Kilsyth)

Question accordingly agreed to.

Amendments made to the Bill in lieu of Lords amendment No. 1 disagreed to: (b), in page 2, line 11, leave out from 'and' to end of line 13 and insert 'eligible to succeed them'.

(c), in page 2, line 30, after 'business', insert 'and eligible to succeed it'.

(d), in page 2, line 35, at end insert— '() For a company to be "eligible to succeed" an existing bank it must have been, immediately before the vesting day, a subsidiary of the Central Board or the existing holding company and it must—

1. (a) in the case of the company which is to succeed the existing bank for England and Wales, be registered (and accordingly have its registered office) in England and Wales;
2. (b) in the case of the company which is to succeed the existing bank for Scotland, be registered (and accordingly have its registered office) in Scotland;
3. (c) in the case of the company which is to succeed the existing bank for Northern Ireland, be registered (and accordingly have its registered office) in Northern Ireland; and
4. (d) in the case of the company which is to succeed the existing bank for the Channel Islands, be incorporated (and accordingly have its registered office) in any of the Channel Islands.'.—[Mr. Ian Stewart.]

Lords amendment No. 2: after clause 1, insert the following new clause—Share holdings for deposit holders and employees—

". From the vesting day 25 per cent, of the shares in the TSB Group shall be held in trust for holders of deposits in the TSB Group and employees of the TSB Group, the trustees being elected annually in equal numbers by appropriate Associations of both groups."

Motion made, and Question proposed, That this House doth disagree with the Lords in the said amendment.—[Mr. Ian Stewart.]

Dr. McDonald

The point of principle involved in the amendment was debated on Second Reading, in Committee and on Report. We support the Lords amendment which proposes that, in order to preserve the traditional character of the TSB, 25 per cent. of shares should be assigned to depositors and employees.

The employees are particularly keen that the amendment should be accepted, because it would give them more weight in their negotiations with the employers. Throughout the discussions about the future of the TSB, the Banking, Insurance and Finance Union has pressed for the flotation of shares to resemble the British Telecom flotation in which a proportion of shares were set aside for employees.

The objection from the TSB and the Government is that the bank hopes to get more than 1 million shareholders, but that seems to be an arbitrarily selected figure and a piece of window-dressing by the TSB management to make its flotation and plans for the future of the bank look more attractive to the Government. We need not take that figure seriously.

On Report we debated an amendment proposing that 50 per cent. of shares should be set aside for staff and depositors. The Economic Secretary to the Treasury said that he would like to see a substantial proportion of the shares of the issue being so allocated".—[Official Report, 20 February 1985; Vol. 73, c. 1129.] It seems to us that 25 per cent. is a substantial proportion and, in view of the Economic Secretary's comment, the Lords amendment should be accepted.

Mr. Kirkwood

Having lost the earlier argument on the ownership of the TSB, we should note that an amendment calling for 49 per cent. of shares to be assigned in the manner proposed by Lords amendment No. 2 was moved by my noble Friend Lord Taylor of Gryfe. That proposed proportion of ownership having been lost, my noble Friend Lord Banks moved an amendment that proposed 25 per cent. ownership which was tested and fell, but it is wrong for the Government to overturn the amendment which was successfully moved by Lord Banks.

1 am

The Government are pressing for wider participation and there is a case for a much broader basis of ownership than the Bill would provide without the amendment. All that it is offering is priority for depositors and staff in the purchase of shares. The amendment would leave 25 per cent. in trust for depositors and employees, with 12.5 per cent. each.

The Minister, Lord Gowrie, considered some objections against the amendment and raised them, but they were all dealt with effectively by Lord Banks when he spoke of the difficulties that were perceived by the Government in having a structure that provided for 25 per cent. to be in trust for depositors and staff. It was made clear in another place that it is possible for commercial operations to survive and prosper with a proportion of a company's shares held in such a way. The John Lewis partnership was cited as an example, where 100 per cent. of the shares are held by employees. That is a very successful commercial operation and there is no reason why a similar procedure should not operate for depositors, especially in an organisation with the tradition of the TSB.

A series of further questions were put to Lord Banks in another place and they were all dealt with effectively and I do not believe that the Government have a case. It is wrong for them to deny the staff and depositors an element of future interest in the TSB as a whole. It is wrong also for the Government to seek to overturn the amendment that was made in another place.

Mr. Ian Stewart

The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) has referred to the debates that took place in another place. I do not think that we need to rehearse all the arguments again. He referred to the John Lewis partnership, which has a trust for 30,000 staff. There is a difference here, because we are talking about many millions of depositors.

The central question is whether the TSBs should be mutuals or in Companies Act form. I do not believe that there should be a half-way house, a sort of pseudo mutuality, for part of the capital of the TSBs. If 25 per cent. of the capital were put in trust in the way that is proposed, in addition to the 5 per cent. for charities, that would create a block of 30 per cent. of the share capital, which would dominate the direct shareholding of depositors and other small shareholders. It would cut across the intention of the TSBs to obtain a large number of depositors and other small shareholders. The hon. Member for Thurrock (Dr. McDonald) poured scorn on the figure of 1 million, but that is the TSB's objective. If we were to accept the Lords amendment, we would make it much more difficult for the TSBs to achieve their goal.

There are great difficulties in practical terms. The two reasons most strongly in favour of a Companies Act constitution are, first, the need for accountability to shareholders, which would be overborne by the combination of the charity holding and the 25 per cent. depositor trust, and secondly, and more importantly perhaps, access to capital. If 30 per cent. of the capital were held in a restricted way, it would be impossible to raise capital from the other shareholders without giving the same increase in capital to the trust, and the trust would not have sufficient resources to respond. It would seriously hamper the activities of the TSBs without giving them the other compensating advantages of a different structure.

Question put, That this House doth disagree with the Lords in the said amendment:—

The House divided: Ayes 132, Noes 62.

Division No. 277]	[1.05 am
AYES
Amess, David	Browne, John
Ancram, Michael	Bruinvels, Peter
Baker, Nicholas (N Dorset)	Buck, Sir Antony
Beaumont-Dark, Anthony	Budgen, Nick
Bellingham, Henry	Burt, Alistair
Benyon, William	Butterfill, John
Biffen, Rt Hon John	Carlisle, John (N Luton)
Biggs-Davison, Sir John	Carlisle, Rt Hon M. (W'ton S)
Blackburn, John	Cash, William
Blaker, Rt Hon Sir Peter	Channon, Rt Hon Paul
Boscawen, Hon Robert	Chope, Christopher
Bottomley, Peter	Clark, Hon A. (Plym'th S'n)
Bottomley, Mrs Virginia	Clarke, Rt Hon K. (Rushcliffe)
Bowden, Gerald (Dulwich)	Cockeram, Eric
Bright, Graham	Coombs, Simon
Brinton, Tim	Cope, John
Brooke, Hon Peter	Couchman, James
Brown, M. (Brigg & Cl'thpes)	Currie, Mrs Edwina

Dorrell, Stephen	Powley, John
Douglas-Hamilton, Lord J.	Proctor, K. Harvey
Dover, Den	Raffan, Keith
Dunn, Robert	Rhodes James, Robert
Durant, Tony	Rhys Williams, Sir Brandon
Eggar, Tim	Robinson, Mark (N'port W)
Evennett, David	Roe, Mrs Marion
Fallon, Michael	Rowe, Andrew
Favell, Anthony	Sackville, Hon Thomas
Fraser, Peter (Angus East)	Sainsbury, Hon Timothy
Garel-Jones, Tristan	Shaw, Sir Michael (Scarb')
Gregory, Conal	Shelton, William (Streatham)
Henderson, Barry	Shepherd, Colin (Hereford)
Hind, Kenneth	Sims, Roger
Holland, Sir Philip (Gedling)	Smith, Tim (Beaconsfield)
Hunt, David (Wirral)	Spencer, Derek
Lang, Ian	Spicer, Jim (W Dorset)
Lawler, Geoffrey	Stanbrook, Ivor
Lennox-Boyd, Hon Mark	Stern, Michael
Lightbown, David	Stevens, Lewis (Nuneaton)
Lilley, Peter	Stevens, Martin (Fulham)
Lloyd, Peter, (Fareham)	Stewart, Allan (Eastwood)
Lord, Michael	Stewart, Andrew (Sherwood)
Maclean, David John	Stewart, Ian (N Hertf'dshire)
Marlow, Antony	Stradling Thomas, J.
Mather, Carol	Sumberg, David
Maude, Hon Francis	Terlezki, Stefan
Maxwell-Hyslop, Robin	Thompson, Donald (Calder V)
Mayhew, Sir Patrick	Thompson, Patrick (N'ich N)
Merchant, Piers	Thorne, Neil (Ilford S)
Mills, Iain (Meriden)	Thurnham, Peter
Moate, Roger	Tracey, Richard
Montgomery, Sir Fergus	Twinn, Dr Ian
Morris, M. (N'hampton, S)	Waddington, David
Morrison, Hon P. (Chester)	Walden, George
Moynihan, Hon C.	Waller, Gary
Murphy, Christopher	Wardle, C. (Bexhill)
Neale, Gerrard	Warren, Kenneth
Neubert, Michael	Wheeler, John
Nicholls, Patrick	Wilkinson, John
Normanton, Tom	Winterton, Mrs Ann
Norris, Steven	Winterton, Nicholas
Osborn, Sir John	Wolfson, Mark
Ottaway, Richard	Wood, Timothy
Page, Sir John (Harrow W)	Yeo, Tim
Page, Richard (Herts SW)	Younger, Rt Hon George
Peacock, Mrs Elizabeth
Percival, Rt Hon Sir Ian	Tellers for the Ayes:
Pollock, Alexander	Mr. John Major and Mr. Archie Hamilton.
Portillo, Michael

NOES
Ashdown, Paddy	Brown, Gordon (D'f'mline E)
Bermingham, Gerald	Brown, Hugh D. (Provan)

Brown, N. (N'c'tle-u-Tyne E)	Kennedy, Charles
Bruce, Malcolm	Kirkwood, Archy
Buchan, Norman	Lewis, Terence (Worsley)
Caborn, Richard	McCartney, Hugh
Campbell-Savours, Dale	McDonald, Dr Oonagh
Carlile, Alexander (Montg'y)	McKay, Allen (Penistone)
Clarke, Thomas	McKelvey, William
Clay, Robert	Maclennan, Robert
Cocks, Rt Hon M. (Bristol S.)	McTaggart, Robert
Craigen, J. M.	McWilliam, John
Cunliffe, Lawrence	Marshall, David (Shettleston)
Dalyell, Tam	Maxton, John
Davies, Ronald (Caerphilly)	Meadowcroft, Michael
Dewar, Donald	Michie, William
Dixon, Donald	Millan, Rt Hon Bruce
Dormand, Jack	Miller, Dr M. S. (E Kilbride)
Eadie, Alex	O'Neill, Martin
Evans, John (St. Helens N)	Parry, Robert
Ewing, Harry	Patchett, Terry
Fatchett, Derek	Pike, Peter
Fields, T. (L'pool Broad Gn)	Powell, Raymond (Ogmore)
Fisher, Mark	Robertson, George
Foster, Derek	Rowlands, Ted
Godman, Dr Norman	Skinner, Dennis
Hamilton, James (M'well N)	Steel, Rt Hon David
Hardy, Peter	Strang, Gavin
Haynes, Frank	Thompson, J, (Wansbeck)
Hogg, N. (C'nauld & Kilsyth)
Home Robertson, John	Tellers for the Noes:
Hughes, Sean (Knowsley S)	Mr. A. J. Beith and
Hughes, Simon (Southwark)	Mr. Gordon Wilson.

Question accordingly agreed to.

Lords amendment No. 2 disagreed to.

Lords amendments Nos 3 to 8 agreed to.

Committee appointed to draw up a Reason to be assigned to the Lords for disagreeing to one of their amendments to the Bill: Mr. Barry Henderson, Mr. John Major, Dr. Oonagh McDonald, Mr. John Maxton, Mr. Ian Stewart; Three be the quorum.—[Mr. Ian Stewart.]

To withdraw immediately.

Reason for disagreeing to one of the Lords amendments reported, and agreed to; to be communicated to the Lords.