§ Mr. Speaker
Before I call on the Opposition Front Bench, I must announce to the House that I have selected the amendment in the name of the Prime Minister.
§ Mr. Robin Cook (Livingston)
I beg to move,That this House notes that the low levels of investment in manufacturing industry achieved under Her Majesty's Government have been accompanied by increased speculation in the City over company ownership and excessive rewards for their dealers; records its concern at the evidence of insider dealing in the financial markets and the low clear-up rate in those cases referred to the Department of Trade and Industry; rejects Her Majesty's Government's policy of leaving law and order in the City to self-regulation by the City; and deplores the failure of Her Majesty's Government to secure proper supervision of the City in time for its deregulation.It may reassure the House if, at the opening of the debate, I say that the Opposition, in tabling a motion on fraud in the City, were not trading on any inside information that on Monday the Government were about to start a fraud investigation into one of the largest companies in Britain. As a Scottish Member, I am bound to say that for a long time it has appeared to me that Guinness's bid for Distillers was an extremely seedy transaction. As an Edinburgh resident, I am familiar with Guinness's undertaking that it would move the headquarters of the merged company to Edinburgh. The kindest thing that can be said about it is that as yet it has not done so.
I am aware also of the other undertaking by Guinness that, if its bid went through, it would appoint the governor of the Bank of Scotland as the chairman of the merged company. It did not do so. Having reviewed all the options and alternatives available to him, the chief executive of Guinness came to the impartial conclusion that the best man to be chairman of the company was himself.
It is possible, in the light of yesterday's developments, that we shall see a further reason why it was felt that the governor of the Bank of Scotland was an inappropriate person to be chairman of the merged company. I shall wish to return to the subject of the Guinness bid, but it is appropriate to kick off the debate with it. The takeover of Distillers was the largest takeover in the City's history.
§ Mr. Cook
I am happy to agree that it was one of the two largest takeovers. I shall concede that point immediately in a spirit of seeking common agreement and I look forward to seeing the hon. Gentleman with us in the Division Lobby.
The takeover was the high mark of the City's passion for takeover bids this year. Last year, £6 billion in takeover bids was staked in the City. That in itself was a record, beating all previous years, bar none. In the first 10 months of this year, £30 billion has been staked in takeover bids in the City—five times last year's entire amount.
784 We come to the paradox at the root of the problems of the British economy. The City of London is one of the three major financial markets in the world. That major financial market is set in an economy in which output is stagnant, visible trade has achieved a deficit of heroic proportions and investment in manufacturing industry is declining from its earlier miserable level. One of the wonders of the economy is that the City none the less finds it possible to raise astronomic funds with which to gamble with the ownership of the British industry, in which it shows so little interest in investing.
I note that the Government amendment states that the City has raised £6 billion for investment in British industry in the past year. I willingly accept that as a matter of fact. I hope that the Minister will accept that it is also a matter of fact that last year in the City there were transactions in shares to the value of £396 billion. Against that enormous turnover, it is asking the House rather much to expect it to be grateful that £6 billion of that £396 billion went into creating new investment, new plant and new machinery. The fact is that the City, in contrast to the industry around it, appears to be going through what can only be described as its champagne period, reflected in champagne salaries for those who deal in shares in the City.
Last year's accounts for Morgan Grenfell make interesting reading. We discover from them that no fewer than 47 directors of that merchant bank were paid more than £100,000 a year. One hundred thousand pounds a year is a generous reward. It is equivalent to the entire income of five head teachers or four surgeons.
If the directors of Morgan Grenfell want to claim that their output has the value of five head teachers or four surgeons they would expect those teachers and doctors to say in return that the very least that they could accept for not seeking to emulate the rewards of the Morgan Grenfell directors is a high standard of probity on the part of those receiving them. Alas, Morgan Grenfell hired Mr. Geoffrey Collier and paid him a salary of £300,000. That did not appear to prevent him from seeking to have his bit on the side, which, if successful, would have netted him, in an overnight transaction, as much as the Secretary of State for Education and Science is prepared to pay an unpromoted teacher for a full year's work.
I shall not mince words. Insider dealing is theft. I hope that hon. Members in all quarters of the House will accept that. It is appropriate to put that on the record as last week Sir Martin Jacomb, the chairman of Barclays de Zoete Wedd, made a rather curious observation. He observed that insider dealing was "a victimless crime". Of course there are victims of insider dealing. If there were no victims, the insider would not make his killing. Try telling Scrimgeour Vickers and Company, the company on which Mr. Collier practised his sting, that it was not a victim.
It is worth recalling that the money circulating in the City and the wealth in which the City trades every day does not belong to it. The source of the power and the wealth of the City are the pension fund contributions of millions of workers and the insurance premiums of those same millions of ordinary men and women. Ultimately, they are the victims if the bases on which the deals are struck in the City are not honest and above board. I have no doubt that most of those who trade in the City are honest dealers. I accept that most people in the City are even more infuriated than any hon. Member at the revelations of the past three or four weeks.
785 However, it is difficult in the face of the evidence to accept that Mr. Collier was an exception. He was an exception solely in that he was brought to book. There is the evidence of share price movements. Acquisitions Monthly conducted an interesting and compelling study of the movement in share prices preceding the announcement of a takeover bid. During the first six months of this year the magazine discovered that in 78 takeover bids the average rise in share price in the three months beforehand—in the three months before anyone else had heard of the takeover bid—was 25 per cent. In some cases the share price rise comfortably outperformed the average. Bush Radio registered an increase of 80 per cent. in its share price three months before a takeover bid for the company was announced. Spencer Clark Metals registered an increase of 60 per cent. There is also the more recent example of the BTR bid for Pilkington Brothers plc. In the six weeks preceding the announcement of the bid for Pilkington Brothers plc the share price rose by 73p. The revealing aspect of the increase is that during that period when BTR announced its bid, rather frostily it also stated that it had suspended buying shares in Pilkington six weeks beforehand. Plainly the increase was not the result of its bid for Pilkington but the result of someone else, somewhere in the City, continuing to buy after BTR had ceased to apply for shares.
§ Mr. John Evans (St. Helens, North)
Is my hon. Friend aware that Pilkington Brothers plc is the world's leader in the glass industry and that many thousands of my constituents in St. Helens rely for their livelihoods and their well-being on its continued prosperity? is he aware that the allegations of insider dealing and of people in the City of London making fast bucks out of the work which has been put in by those men and women for generations are causing much anger and hostility in my constituency? Will my hon. Friend make it clear to the Minister that this is a classic case that should be investigated by the Government to establish whether there has been any insider dealing in those shares?
§ Mr. Cook
I heartily echo my hon. Friend's conclusion that it is plainly a matter which merits further investigation and we hope that it will be pursued vigorously.
Of course we accept that, given the salaries that are paid in the City, companies in the City expect to command the best brains in the country. Nevertheless, it would require remarkable purity of soul to believe that the share price increase which I mentioned, and which the hon. Member for St. Helens, North (Mr. Evans) has confirmed, and the other average rises to which I referred earlier, were simply the product of dispassionate analyses of the financial pages. That would require remarkable innocence on our part. Plainly, much of it turned on well-placed information.
There is also another source of evidence of insider dealing. I am sure that the Minister will recall that I put down a written question on 24 November asking how many cases of insider dealing had been referred to him by the Stock Exchange Council. The reply was "about 100". There is a disappointing degree of imprecision there. We shall not catch the financial jugglers in the City unless we can count up to 100. I am indebted to the Financial Times for revealing yesterday that the full figure is 110. I accept that 110, with a reasonable degree of of extension, is about 100. However, the figure that I find much more arresting 786 —if I can be forgiven the term—is the other figure, that out of the 110 only nine were prosecuted. No wonder the Financial Times yesterday referred to the Department of Trade and Industry as the Inspector Clouseau of insider dealing. If we allow the Department of Trade and Industry to count in its statistics not simply prosecutions for insider dealing but all forms of fraud in the City, we are still left grubbing around in single figures.
Last year there were only five prosecutions for all forms of fraud in the City. Indeed, JMB, the largest scandal to have hit the banking world in the City for a long time, has resulted as yet in not a single prosecution within the City. Yet the Government have hauled 138,918 social security claimants before the courts and prosecuted them for fraud. There was no imprecision there. The total figure has been carefully logged and recorded. Each of those people were prosecuted for a figure that would barely pay for a lunch in the City.
It is difficult to consider that figure of five and that figure of 138,000 without seeing double standards leaping out from the pages. The Government are not pursuing fraud in the City with the same resources, the same commitment and the same energy as they dedicate to fraud in the social security system. The real City scandal is not that some people in the City grab their chances when they see them but that too many of them during the past six years have been allowed to get away with that.
It is necessary only to look at the pages of Time and Newsweek International during the past month to see how much more ruthlessly and successfully the sin of insider dealing is being prosecuted on Wall street. The basis of comparison is not unfair. Mr. Boesky, who gave rise to the headlines about Wall street in Time and Newsweek International, was also active in the City of London. He deliberately limited his involvement in the City of London because, as he said in a diverting comment he found the City of London too leaky. Nevertheless, he was active.
He was especially active in the Guinness bid for Distillers. He built up a large holding in Distillers, which is rumoured to have reached $100 million. He assembled that figure well in advance of the announcement of the bid. At a critical stage in the takeover battle he dumped on the London market—not on Wall street—a large block of shares in Argyll. That had the effect of depressing Argyll shares and therefore depressing the value of its share offer for Distillers. That was especially relevant since the cash offer of Argyll was always better than the cash offer of Guinness.
Surprisingly, at the same time, Schenley, the United States distributors for Guinness, bought Guinness shares in large quantities on Wall street, thus driving up the price of Guinness, and improving its share offer. Even more surprisingly three months after Guinness was successful in acquiring Distillers, Schenley, no doubt by pure coincidence, was awarded the contract for the distribution of Gordon's Gin which Guinness had acquired from Distillers.
I do not ask anything quite so crude of the Minister as to reveal to the House the nature of the allegations which led to the current inquiry, but I ask him for an assurance that that investigation will look fully into the circumstances of the bid for Distillers. He must accept that if we now uncover improprieties in the bid by Guinness for Distillers, it will take us back to questioning the prudence of the Monopolies and Mergers Commission in giving the green light to the second bid from Guinness.
787 Before leaving the topic of Guinness, I must ask the Minister to recognise that, if he proposes to leave the markets in their present state of ignorance as to the nature of the allegations, it is intolerable to allow trading to continue in Guinness's shares. Given the ignorance of outsiders about the scope, severity and cost of the allegations, it is impossible to give any meaningful value to the shares. Unless the Minister can tell the House the nature of those allegations, I must urge him to press the Stock Exchange Council to suspend trading in Guinnesses shares.
§ Viscount Cranborne
The hon. Gentleman said that the investigation instituted by my right hon. Friend the Secretary of State into the Guinness bid concerned fraud. Does he have any evidence for saying that, or does the investigation have a more general remit?
§ Mr. Cook
The appointment of inspectors has been made under a catch-all provision in the Companies Act, as I think the hon. Gentleman knows. In the light of the strong suggestions made in the financial pages and in the American press, I should be extremely surprised if the appointment was not related to developments during the past months in America. I should also be very surprised if the hon. Gentleman was willing to wager with me that there is not an investigation into fraud at the bottom of it all. We await the Minister's reply, but the hon. Gentleman may wish to press the Minister on that point, as the wider world would appreciate some elucidation of the facts.
It would be unreasonable to expect the Minister to confirm whether investigations into Boesky prompted the current investigation. However, the key to the success of the Boesky investigation into Wall street was the ability of the United States Securities and Exchange commission to press the Swiss bank to divulge the owner of a numbered account. It was the threat of prosecution of the New York branch of the Swiss bank Leu that persuaded it to reveal that the account was held by Dennis Levine, which in turn led to the door of Boesky.
If the Department is serious about stopping fraud and halting insider dealing, why do we not try to negotiate the same arrangement with Swiss banks as the United States SEC achieved? A fortnight ago, that very question was, according to The London Evening Standard, put to a spokesman from the Department of Trade and Industry, who replied:Maybe we will one day".That does not smack of ugency or immediacy. If the Government are serious about cracking down on fraud, we are entitled to expect them to begin by blocking off the ways in which fraudsters maintain their anonymity.
There is another lesson to be learnt from investigations in the United States. There is the clear evidence of the SEC's success under its new management, in contrast to the SIB, which the Minister proposes, and which will have the status in the City of a private company, limited by guarantee. Law and order in the City will, as it were, be privatised to that company, and sub-contracted to the City. After the events of the past month, the proposal that the regulation of the City can be left to self-regulation by the City appears to be even more inadequate than when 788 the Minister mooted it last spring. That is particularly so, since the structure that will give effect to self-regulation will not be set up until halfway through next year.
Let us put a brave face on it, and accept that, as the structure is not now in being, we at least have a chance to abort the whole unsatisfactory project and to replace that structure with something worth while, which will enable the City to have exactly the same sort of statutory Government policing as is now so successful in relation to Wall street.
I anticipate that the debate, like our motion, will go beyond the narrow question of fraud in the City. It will inevitably and should, just as our motion does, touch on the relationship between the City and industry. That relationship has become more difficult as the pace of takeovers has quickened, obliging dealers in shares to shorten still further the time scale on which they base their decisions. Decisions to buy or to sell, which are taken on the momentary flicker of the SEAQ screen, stand in stark contrast to industry's need for investment decisions that will remain stable for up to a decade.
We have the observation of Ernest Harrison of Racal. Last month, he was quoted as saying that he had an infinite number of research and development projects on which he could spend money, but that the effect on his profit and loss account in the short run would be so severe that the investment managers would suspect that the company had hit a particularly sticky patch and perhaps even sell the company out from under him.
It is a bitter comment on the priorities of the City that a decision to invest for the future could become the basis for a decision to sell in the present. Mr. Collier and his conduct stand as an emblem of the City's conduct in that regard. The object of Mr. Collier's speculation was AE, an advanced engineering firm specialising in advanced engineering components, with a record of high investment in new technology, which was beating off a hostile bid for its ownership.
Mr. Collier's contribution to the company's dilemma was to gamble with its ownership via speculation that was launched through a tax haven. It is a sorry tale of greed, sort-sightedness and lack of patriotism. It must be set in the context of the Government's monumental failure to halt such actions or even to set up a structure in the City that could detect or catch that form of fraud. Most of all, it must be set in the context of the Conservative party's connivance with the City's priorities in gambling with the ownership of British industry rather than investing in its future. For that reason, we shall vote for the motion tonight.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard)
I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:'congratulates the financial services sector on its contribution to invisible earnings, to growth in employment and on the efficient and effective way it raised £6 billion for industry and commerce in 1985; congratulates Her Majesty's Government and the financial services sector on their prompt and effective action against insider dealing; and reaffirms its support for self-regulation within the statutory framework of the Financial Services Act as the most effective system of regulating the City.'.I am grateful to the Opposition for initiating this debate. It gives me, on behalf of the Government, an 789 excellent opportunity to make very clear in words what we have already demonstrated by our actions. No one can be in any doubt that we regard insider dealing as a thoroughly pernicious practice which is damaging to markets and unfair to individuals, and which we are determined to do all in our power to root out. I remind the House that it was a Conservative Government who first introduced legislation to make insider dealing a criminal offence—in the Companies Bill of 1973. That fell with the general election of 1974. It is fair to say that the previous Labour Government also tried and failed. But some indications of the priority which they attached to this issue when in Government can be derived from the fact that, having been elected in 1974, they waited until 1978 before making their attempt. That attempt also failed with a general election. But despite those somewhat inauspicious electoral precedents this Government did not wait long before trying again, and insider dealing became a criminal offence under part V of the Companies Act 1980 on 23 June 1980.
This criminal offence has not been easy to prove. This is not due to any lack of effort on the part of my Department or any lack of willingness to prosecute where the evidence was available. The basic problem was the difficulty of establishing the evidence needed to meet the high standard of proof required to secure a conviction for a criminal offence. To prove insider dealing it is necessary for the prosecution to prove beyond reasonable doubt that the accused dealt while he was in possession of information which he knew was both unpublished and price sensitive. The difficulty of proving these matters has by no means been limited to this country. These difficulties have been widely recognised in other countries too.
The hon. Member for Livingston (Mr. Cook) referred in glowing terms to the actions of the SEC in the United States. It is no part of my function to criticise the SEC, but some right hon. and hon. Members may have seen in this morning's edition of The Times an interview with Senator William Proxmire, the new chairman of the Senate Banking Committee. In it, he referred to the SEC's recent record, and said:The SEC, in 1982, fined nobody for violating inside information. The same thing in 1983 and 1984 and 1985. It wasn't until 1986 that they came along with Boesky whom they hit between the eyes.Those are not my words; they are Senator Proxmire's. Is it on that basis that the hon. Member for Livingston is urging us to move away from our system towards that of the SEC?
It is noteworthy that on 6 March 1986, when the then Opposition spokesman, the hon. Member for Dagenham (Mr. Gould)—since promoted in the councils of the Opposition—was discussing the Financial Services Act 1986 in Standing Committee, he said that in looking at the models for a regulatory system he hadnever thought in terms of the Securities and Exchange Commission".—[Official Report, Standing Committee E, 6 March 1986; c. 520.]Perhaps the hon. Member for Livingston should have a word with his hon. Friend the Member for Dagenham, before he jumps to conclusions about the model we should follow.
§ Mr. Austin Mitchell (Great Grimsby)
Given the record of a body which is stronger, more effective and more firmly 790 based than the body that has been established in this country to deal with similar situations, how effective does the hon. and learned Gentleman expect our body to be?
§ Mr. Howard
The truth is that the SEC is none of those things in relation to the system that we have put into place. During our deliberations in Committee on the Financial Services Bill, the hon. Member for Great Grimsby (Mr. Mitchell) was accustomed to refer, in glowing terms, to the tutorials, as he put it, to which his hon. Friend the Member for Dagenham, then Opposition spokesman, subjected the Committee on these matters. Perhaps the hon. Member for Great Grimsby could suggest to his hon. Friend the Member for Dagenham that the hon. Member for Livingston, the present Opposition spokesman, could have similar tutorials.
§ Mr. Evans
I understand the point of the need to acquire positive proof before one prosecutes for insider dealing. Is the hon. and learned Gentleman aware of the widespread allegations concerning insider dealing in relation to the BTR bid for Pilkingtons? Will he consider examining this bid and, if necessary, set up an inquiry?
§ Mr. Howard
All dealings of that kind which give rise to suspicion are looked at by the stock exchange. If the stock exchange confirms those suspicions it refers the matter to the Department of Trade and Industry. The Department will, in every proper case, not hesitate to make use of the new powers which are available to it and about which I shall tell the House.
The Financial Services Act contains new powers to investigate insider dealing. These powers can, without exaggeration, be described as draconian. The Secretary of State may appoint inspectors if it appears to him that there are circumstances suggesting that there may have been an insider dealing offence. In other words, the Secretary of State has a wide discretion and he does not have to have a high level of proof before he can act.
Inspectors may ask any person whom they think may have information relating to an offence to produce any documents in his possession, or to attend before them or otherwise to give them all the assistance which he is reasonably able to give. Inspectors may examine on oath any person who may be able to give them information about an insider dealing offence. If the person does not tell the truth, he commits the offence of perjury. A statement made by a person in response to such examination can be used in evidence against him. Taken in conjunction with the inspector's power to compel persons to assist them, which I will describe shortly, this means that the right to silence, a cardinal principle of our criminal law, has been substantially eliminated for this offence.
If a person refuses to co-operate, the inspectors may certify that fact to the court, which, after inquiring into the case and satisfying itself that the person did not have a reasonable excuse, may punish him as if he had committed contempt of court. The penalty for contempt is at the discretion of the court and is unlimited. If the person concerned is an authorised investment business and the court so directs, the Secretary of State may also serve a notice cancelling or restricting his authorisation and prohibiting him from entering into certain types of 791 business. Alternatively, the Secretary of State may prohibit other authorised businesses from transacting business on that person's behalf. This will effectively bar that person from our financial markets. Furthermore, it is not a reasonable excuse for a business to say that it did not know the identity of the beneficial owners of shares or that it was subject to banking secrecy laws if, under those laws, it could have obtained the consent of the beneficial owner to be identified. I think few people would disagree that these powers well deserve the description that I applied a few moments ago—they are draconian. Indeed that was the word applied to them by the Opposition spokesman in another place. It is notable that no additional powers were suggested by the Opposition in relation to insider dealing when the Financial Services Bill was before the House. The hon. Member for Livingston—
§ Mr. Alex Fletcher (Edinburgh, Central)
I congratulate my hon. and learned Friend the Minister on the new powers that have been taken to improve investor protection in the United Kingdom and especially the new exchange of information between the regulatory bodies in other countries such as the SEC and his Department. In response to yesterday's decision to appoint inspectors to study the Guinness group, will he assure us that the inspectors will undertake their task on a full-time basis and not simply as just another brief—something which some barristers tend to do—as it is important that they complete their business within months, rather than years. Can my hon. and learned Friend tell the House when he expects to receive their report?
§ Mr. Howard
I cannot respond to the last request made by my hon. Friend, but I can certainly tell him that the inspectors into Guinness, to which he referred, are in no doubt whatever about the urgency with which it is desired that they approach this task.
§ Mr. Robin Cook
Although I appreciate that the Minister may find it difficult to say when he expects to receive the report, it may help the House if he uses his imagination and gives us some clue to exactly what it is the inspectors are supposed to be investigating. In view of his withering contempt of the activities of the SEC, can he assure us that the current investigation into Guinness was not prompted by information received from the United States?
§ Mr. Howard
I have not expressed any contempt for the SEC; I have merely quoted, for the benefit of the House, the words of Senator Proxmire as reported in The Times today. I am surprised that the hon. Member for Livingston expects me to add anything to what was said in yesterday's statement about the investigation into Guinness. Of course I cannot add anything to what was said in that statement and it would be quite wrong and improper for me to do so. On reflection the hon. Gentleman will recognise that it would be quite wrong for him to press me on these matters.
§ Mr. Robin Cook
If the Minister intends to rest on yesterday's Delphic statement, which tells us nothing, would he accept the point that I put to him earlier that if he leaves the shareholders and other dealers in ignorance about this financial inquiry it is unrealistic and irresponsible to allow shares in Guinness to continue to be traded?
§ Mr. Howard
That is entirely a matter for the Stock Exchange, which has statutory responsibility for those matters.
§ Mr. Tim Yeo (Suffolk, South)
First, I apologise for not having been present at the start of the debate. I welcome the greater powers and I share my hon. and learned Friend's description of them as draconian. Would he agree that nevertheless, the acid test is whether prosecutions and, ultimately, convictions follow? It is one thing to have powers but another to bring offenders to book. The best deterrent to insider trading will be a few prison sentences.
§ Mr. Howard
I appreciate my hon. Friend's interest in this matter. He was responsible for the amendment which contributed, in large measure, to some of the powers which we have taken. I do not think I can respond to the rest of his observations. I am anxious that the powers which are available are used. I shall have a word about that in due course.
In different broadcasts today, the hon. Member for Livingston has separately alleged that the Government responded less than adequately during the passage of the Financial Services Bill, as it then was, to concerns expressed about offshore dealing. On the "Today" programme this morning the hon. Gentleman said that the Government had resisted such measures. On the 1 o'clock BBC television news, he said that the Government response was a watered-down version of the Opposition's proposals. This allegation is entirely untrue.
First, the original amendment on this issue was put forward by my hon. Friend the Member for Suffolk, South and not by the Opposition. Secondly, the Government's response was given an unqualified welcome by the then Opposition spokesman, the hon. Member for Dagenham. He said:This is one of those welcome occasions when it is appropriate to congratulate the Minister on his response to an expression of opinion in Committee… We have here a determined and fair response to the Committee's concern."—[Official Report, 12 June 1986; Vol. 99, c. 525.]I hope that the hon. Gentleman will stop making this entirely unfounded allegation. If he will not take the truth from me, I hope that he will take it from his hon. Friend the Member for Dagenham.
It is true, as my hon. Friend the Member for Suffolk, South said, that any statutory power is only as effective as the use that is made of it. We have already brought into effect the new investigation powers, which were in the Financial Services Bill when we introduced it into the House. This was in order to make them available to investigate a suspected insider dealing case. The Stock Exchange referred to my Department certain information on the evening of Thursday 13 November. The order implementing the investigating powers was laid on 14 November to come into effect the next day, Saturday 15 November. Inspectors were appointed on the same day.
I shall refer to some recent events in the City which no doubt prompted Opposition Members to initiate the debate. These events have given rise to considerable interest and much comment. The House will not expect me to comment on cases that are under investigation; it would be improper and irresponsible of me to do so. The timing of the report by the inspectors appointed under the Financial Services Act is a matter for them, but I have made it clear to all the inspectors who have recently been appointed that I expect them to address their task with the 793 greatest possible urgency. Earlier this afternoon I made an announcement that criminal proceedings have been commenced against Mr. Geoffrey Collier in respect of certain alleged insider dealing offences.
The case of an employee of British and Commonwealth, which was reported in the press, is under consideration by the Stock Exchange, which has just completed a preliminary investigation. The results were received yesterday and are being discussed between my Department and the Stock Exchange.
Nor do I propose to comment on what information may or may not have been exchanged under the memorandum of understanding between the SEC and my Department on the activities of Mr. Boesky or anyone else. The memorandum of understanding which my right hon. Friend the Secretary of State for Trade and Industry signed with the SEC on 23 September requires the Department and the SEC to keep confidential any information provided under it, except for use in the investigation or prosecution for which it was obtained, and also to keep confidential any request for information made under the memorandum. The Stock Exchange has already taken steps to prohibit members from entering into any association, either direct or indirect, with Mr. Boesky and to require members to report any transactions that they carry out for Mr. Boesky or any of his companies.
I give the House the assurance that, in line with the Government's commitment to vigorous enforcement of the law against insider dealing, my right hon. Friend the Secretary of State for Trade and Industry is always ready to appoint inspectors where there is good reason to do so.
The Opposition have shown a fundamental misapprehension about regulation in the City. The hon. Member for Livingston argued in a recent article, and again today, if I followed him correctly, that he would scrap the present plans for leaving law and order in the City to self-regulation, and that he would appoint a public agency with powers of prosecution along the lines of the SEC. That is the way that he puts it. I remind the House, and especially the hon. Gentleman, that insider dealing is a criminal offence for which the prosecuting authorities are the Secretary of State and the Director of Public Prosecutions. The Secretary of State is responsible for appointing inspectors to exercise the investigation powers that I have described. Penalties for non-co-operation are imposed by the courts. This is hardlyleaving law and order to self-regulation by the Cityto quote the words of the motion.
The motion tackles a number of other issues and it is as wide of the mark on these as it is on insider dealing.
§ Viscount Cranborne
My hon. and learned Friend has been most eloquent, and satisfactorily so, about the rigour with which the Government will pursue fraud, insider dealing and other transgressions under the auspices of the Stock Exchange. Will he give an undertaking that the Government will be as rigorous in their approach to criminal offences in the Lloyd's insurance market?
§ Mr. Howard
I can certainly give that assurance. The difficulty that has arisen in such cases has been explained fully on more than one occasion by my hon. and learned Friend the Solicitor-General. It arises from some of the difficulties in obtaining evidence from abroad, that will be largely removed when the provisions of the Criminal 794 Justice Bill are enacted. Before that stage is arrived at, these matters are being pursued as thoroughly as possible within the present limitations of the law of evidence.
Finally, I shall deal with some of the other issues that are raised in the motion. It has been suggested that there was some connection between the events to which the hon. Member for Livingston referred and what he has described as the shortfall in investment in industry. That investment rose by 15 per cent. in 1984 to an all-time high, and by a further 7 per cent. in 1985. I do not understand how anyone can argue that shortage of finance for industry is hampering economic growth, and nor would the business community. The latest CBI industrial trends survey found that only 5 per cent. of respondents saw availability of external finance as a limiting factor in their investment plans. Nor do I accept that the Government have downgraded manufacturing industry. Manufacturing is, and will remain, a major contributor to output, wealth and employment. We shall continue to foster a climate in which all wealth creation, including manufacturing, is free to develop and flourish but we do not believe in plundering the nation's pension funds to satisfy the whims of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) in some of the more fanciful of his plans.
§ Mr. Robin Cook
As the Minister does not appear to have brought with him the figures for investment in manufacturing industry, will he confirm that only a fortnight ago his Department revealed that in the last quarter for which figures are available investment in manufacturing industry was 6 per cent. down on the previous quarter of last year?
§ Mr. Howard
It is sometimes possible to prove anything with quarter-by-quarter figures. The figures which I have given provide a much more reliable test in comparing what is happening now with what was happening a year ago.
§ Mr. Alan Williams (Swansea, West)
The Minister complains that my hon. Friend the Member for Livingston (Mr. Cook) used the figures for the last quarter in his intervention. It seems that the Minister feels that that is inadequate because the period is too short. Let us take the opposite extreme, which is the full life of the Government. Will the Minister confirm that the figures remain 17 per cent. below the level that they had reached when the Government came to office?
§ Mr. Howard
I did not complain. I merely observed that it was possible to do almost anything by taking quarter-by-quarter figures. I shall not confirm the figures which the right hon. Member for Swansea, West (Mr. Williams) has presented to me. He knows as well as I that the economy has taken a little time to recover from the damage which was inflicted upon it by the previous Labour Government. He knows also that it was unrealistic to expect an improvement to be seen immediately after the 1979 general election.
Having considered the issues raised by the hon. Member for Livingston, I am left in a state of some puzzlement about the Opposition's purpose in holding the debate. Everyone agrees that insider dealing is a pernicious offence. Everyone agrees also that because of the difficulty of proving it, additional powers have been needed to investigate circumstances suggesting that it has occurred. These powers have been provided and are being used.
No further powers have been identified as being needed which have not been provided. What then is the reason 795 behind the Opposition's motion? Is it a serious concern? Is it a serious attempt to make a constructive solution to the problem? Or is it simply another instance of City-bashing? Is it another example of the Opposition's predilections for attacking at every possible opportunity a sector of our economy which employs over 1 million people, produces 6 per cent. of the total output of the nation and earned £7.6 billion for the balance of payments in 1985? The evidence of the speech of the hon. Member for Livingston suggests strongly that it is the latter, and we shall be scrutinising the remainder of the speeches of Opposition Members in the debate to ascertain whether they enable any other conclusion to be drawn.
§ 5 pm
§ Mr. Brian Sedgemore (Hackney, South and Shoreditch)
I begin on an entirely modest and uncontentious note. Everyone will agree that one of the best pieces written about the big bang in the City is the booklet by my hon. Friend the Member for Bolsover (Mr. Skinner) and myself, entitled "The City: Big Bang 2000". I recommend it to all hon. Members.
Unfortunately, the name on everybody's lips at the moment is not that of my hon. Friend or myself, but that of Mr. Ivan Boesky. I am bound to say that he is a man of class who should be admired. He wrote a book in which he asks for the plaudits of the crowd because, he proclaims, he is a wizard financial psychologist, a probability theorist, an economic forecaster, and a person with the sublimest intuitive judgment. However, all the time he was a crook and fraudster who was betting on certainties because he had inside information. I could name one or two firms of brokers and merchant banks in Britain who might have been pleased to employ Mr. Boesky.
Fortunately, the SEC caught Mr. Boesky. If I had to decide, over the whole sphere of fraud, between the machinery that the Government have set up and the operation of the SEC, I would come down marginally on the side of the SEC. More and more people in the City are saying that the self-regulatory process—whether right or not for insider dealing—will not work. They are deeply suspicious of it. The fact that practitioners are suspicious of it should make politicians suspicious of it, too.
§ Mr. Tim Smith (Beaconsfield)
Is not the reverse of that statement true? If the practitioners were wholly happy with the new arrangements, there would be some cause for concern.
§ Mr. Sedgemore
I accept the hon. Gentleman's gentle debating point. Those issues must be dealt with seriously if we hope to reach a conclusion that will help investors, the public, and perhaps even the good name of the City if it is to earn invisible exports.
I was a little disappointed by the Minister's speech. I accept that he does not know anything about macroeconomics, and I shall not pursue that. My hon. Friend the Member for Livingston (Mr. Cook) picked him up on one or two points. The Minister appeared blind to the issue of law enforcement and what actually happens between his Department and the Director of Public Prosecutions. I jotted down some of the words that he used. He referred to "vigorous enforcement" and used the word "determination". He implied that there was a resolute political will to 796 resolve those points. Perhaps he should say that to Peter Cameron-Webb or to Peter Dixon, who are in sunnier climes than Britain at present and who are laughing at the attempts of the law enforcement officers to bring them to justice here.
The Minister should also consider the wider aspects. In a parliamentary reply the Attorney-General told me that Lloyd's had submitted the names of 35 people to the DPP on its standard of proof "beyond reasonable doubt", which is the same standard as is used in a criminal court. In fact, only one person has been convicted, and there have been only a couple of prosecutions. In other words, 34 people, having been proven guilty "beyond reasonable doubt" by Lloyd's, have got off. Most of them have not even been charged or arrested, let alone prosecuted or brought to trial. That does not seem to be resolute political will or "vigorous enforcement", nor does it justify the Minister's use of the word "determination".
If the Minister wishes to consider insider dealing, he should explain the figures which my hon. Friend the Member for Livingston gave to the House about the 110 reported cases, from which there have been nine prosecutions and, I believe, only one or two convictions. I am advised that, in fact, there were six.
It is only a few months since Sir Nicholas Goodison, the chairman of the stock exchange, was critical of the DPP about other issues. However, he was also critical of the Department of Trade and Industry's prosecution policy on those cases. I recently discussed that with one of my friends who defended some people charged with City frauds. They were acquitted. I was surprised about that, because the evidence seemed overwhelming. I asked him how he managed it—I should point out that he also prosecutes City fraudsters—and he replied that it was because of the quality of the prosecution, which treated it as a sort of shoplifting case. I have observed some of the people who prosecute on behalf of the Department of Trade and Industry. I suggest to the Minister that his Department should use its best people. If they are not good enough, it should employ better people and pay them higher salaries to carry out what I agree are difficult prosecutions. It is difficult to pin down people because of the nature of the evidence with which one has to deal.
The change in the regulations for financial institutions—the willingness of the City now to allow mergers between banks, merchant banks, brokers, jobbers and moneymakers—makes insider dealing in the City much more likely and certain, as do the amounts of money involved in takeover bids which now run not into hundreds of millions of pounds, but billions of pounds. I understand that in 25 per cent. of recent takeovers, the price of the shares increased on the day before the takeover was announced, and in 60 per cent. of cases the price increased in the previous six months. That suggests—it is not conclusive proof—that more insider dealing has occurred than has come to light, and certainly more than is being prosecuted.
All hon. Members know that the so-called Chinese walls, which are supposed to protect people under the new structure that has emerged in the City, create major problems. For example, if a customer of Barclays bank wants securities work undertaken, it is likely that he will go to the brokers de Zoete and Bevan and to the jobbers Webb Durlacher Mordaunt and Company. If a bank manager at Barclays has dinner with a company director who wants to borrow money, and if the bank manager gets 797 price sensitive information from the company director, who does the bank manager tell? In theory, he should tell only those who are interested in the money. In a respectable institution such as Barclays perhaps that will happen. However, the problem is that a number of other people at Barclays—for example, the salesman, the fund manager, the corporate financier and the market maker—could have a financial interest in discovering the price sensitive information from the bank manager. It is almost impossible to hold the line between the bank manager and the other four who have a financial interest.
Even if that line is held in a firm such as Barclays through the compliance director or compliance officer, how can that sort of price sensitive information be held if a company is in financial difficulties or is facing bankruptcy? If that is to be a bigger feature of the big bang in the City—I suspect that it will be—it will be almost impossible to hold those invisible walls in the City.
I agree with my hon. Friend the Member for Livingston that most people in the City are not involved in financial scandal or fraud. However, because of the ethos and the rewards, which are now so large, too many people who were hitherto thought respectable are involved. We knew that when the British Telecom applications came out, many people were involved in illegal activities, but none of the big fish was prosecuted and only a few of the minnows were picked out.
I discovered that the Societé Generale Merchant Bank, a French company, put in forged share certificates. A lawyer from the main nationalised bank, Societé Generale, telephoned the merchant bank and told it, whereupon an elaborate cover-up operation was arranged and people were forced to sell off those shares at a loss. The fact that that can happen with a reputable foreign bank in Britain was deeply disturbing.
The Westland affair has been bled dry, but the last point yet to come out about that relates to the purchase of shares, the double prices that were in operation and why some people were purchasing shares behind the scenes but not using them when it came to the critical vote. I and a number of my friends in the City would like to know the precise nature of the activities of Scrimgeour Vickers which has come into prominence recently over the Westland affair. I shall not make any allegations, but the Minister may be able to help us on that.
I served on the Committee which considered the Financial Services Bill. The Minister commented, a trifle unkindly, that none of us put forward amendments to that Bill. However, he knows that I have made two suggestions, which I believe are responsible and sensible, to deal with the problem of insider dealing. I have put them forward by way of parliamentary questions. His answers have been fairly hesitant. If that means that he is prepared to think about them, we shall all be grateful. Those two proposals must be taken in tandem because, although they will not solve the problem of insider dealing, they will go some way to help with what is happening.
My first suggestion to the Minister is that we should prohibit own-account dealing by those who work for firms of stockbrokers, merchant bankers and major financial institutions. Such people would be able to deal on behalf of their clients, but not at the same time deal on behalf of themselves. In one go that would remove an enormous conflict of interest.
798 In his reply the Minister told me, quite rightly, that some firms operate such restrictions and prohibit own-account dealing. But why do we not ensure that the SIB makes sure that that happens with all firms? I have spoken about this to Conservative Members who work in the City and some have said that they have put that proposal forward in their own firms, but the basic response is, "You have made your money out of own-account dealing. We want to make our money out of own-account dealing." But surely the salaries that people earn in the firms of stockbrokers and merchant banks are sufficient to enable them to live reasonably without going into own-account dealing.
If that proposal were instituted in conjunction with my second proposal, which is that we should register the beneficial ownership of all shares, that would help enormously. We know that people get round insider dealing by using nominee shareholders and trusts, so we do not know the ultimate beneficial owner, and sometimes by using their families. Some people would still cheat, but much insider dealing would be prevented if the beneficial owner of all shares had to be registered, whether the beneficial owner was in Britain or abroad, or was a foreign registered company in Lichtenstein or somewhere like that.
§ Mr. Anthony Nelson (Chichester)
I have a good deal of sympathy with what the hon. Gentleman is saying, and he knows that we debated this in Committee on the Financial Services Bill. But one still has to ask: how shall we get foreign banks and nominee companies to disclose the beneficial ownership?
§ Mr. Sedgemore
It would be illegal for anyone to buy or sell stocks or shares in Britain unless they first declared the beneficial owner. That may stop some people buying and selling stocks and shares, but one could make that a precondition of the purchase or sale. I accept that, in the terms in which the hon. Gentleman phrases his question, more international co-operation is needed than exists in the financial world today. One of the lessons on the wider sphere is that there will have to be greater co-operation, even among capitalist Governments, let alone Socialist Governments, if we are to get to grips with many of those problems.
I hope that the Minister will say why he is not prepared to enforce by law, or to encourage the SIB to enforce, the prohibition of own-account dealing and the registration of the beneficial ownership of shares.
Those are the only two points that I want to make. They would be helpful and they would go some way to solving the problem. If the Minister were prepared to accept such proposals, perhaps we would believe that he was determined to enforce the law, that he really was vigilant and that he did have the resolute political will to do something about it. We shall await his reply.
§ Mr. Tim Smith (Beaconsfield)
The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) has made two constructive proposals at which we should look. It is not unreasonable to consider excluding own-account dealing for people who work in the City. If I understand him rightly, he is saying that if they have savings which they wish to invest, they must do it through trustees—through an arm's-length arrangement. The present 799 arrangement is that most employees are required to do their own-account dealing through the firms for which they work. That was certainly the case with Mr. Collier and Morgan Grenfell Securities, and that why he was dismissed. I sympathise with the hon. Gentleman's suggestion. We should consider it seriously.
I agree with much of the theory of the hon. Gentleman's proposals about nominee shareholdings. We need to know the beneficial ownership of shares. It is already possible for companies to demand information from their shareholders on beneficial ownership and in some circumstances it is possible for them to ensure that the rights are removed from the shares—the voting rights, dividend rights, and so on. Therefore, to some extent it is up to companies to take a firmer line. It is wrong that people should be able to hide behind nominee shareholders and avoid prosecution for insider trading.
It is a matter for considerable regret that the hon. Member for Livingston (Mr. Cook) has replaced the hon. Member for Dagenham (Mr. Gould) who spoke on these matters previously. He had few constructive proposals to put forward and, indeed, seemed to be in some ignorance about the Financial Services Act which has only recently passed through the House.
Insider trading is an evil that needs to be stamped out. There are those who would argue that insider trading is somehow no more than a facet of the operation of the perfect market and that it is entirely appropriate that the price of a stock should respond at the earliest opportunity to the latest information available.
That argument is wholly misconceived. Of course it is right that the price of a stock should reflect the latest information, but that information should be made available simultaneously to all actual and potential stockholders. It is wrong that one stockholder should be able to make a disproportionate profit out of information exclusively available to him.
There are those too who say that insider trading is somehow unimportant because it is a victimless crime. The hon. Gentleman referred to that. There is something in that. A number of small investors in McDonald Wheeler lost substantial sums of money. It is difficult to argue that small investors lose money as a result of insider trading, but they are denied the opportunity to profit in the way that the insider does. By the time they become aware of a potential bid opportunity, the price will already have moved up substantially. In that sense, they are victims. Indeed, we are all victims. Everyone other than the insider is a victim of his abuse.
§ Mr. Robin Cook
The hon. Gentleman may be aware that Scrimgeour Vickers, in its deal with Mr. Collier, sold short, and subsequently found that it had to register a clear cash loss on the deal. To that extent it regards itself as a victim.
§ Mr. Smith
It certainly did and it was especially aggrieved as a result of that. I accept that it was a victim. Perhaps the only point that Sir Martin Jacomb was trying to make was that the private investor was not directly damaged. However, I do not accept the description of this as a victimless crime. We are all victims of the crime.
Insider trading has been recognised as an abuse for some time. The stock exchange, to its credit, demanded legislation to make it a criminal offence 15 years ago. In 800 late 1973 the then Secretary of State for Trade and Industry, my right hon. Friend the Member for Worcester (Mr. Walker), introduced a Companies Bill which sought to do precisely that. It was given a Second Reading on 17 January 1974, but, as we have already heard, it was lost with the advent of a general election the following month.
What did the incoming Labour Government do about that? They did absolutely nothing. Their sole contribution to the reform of company law in more than five years was the Companies Act 1976, a puny piece of legislation. For all their protestations of scandal and abuse in the City, they took no action to counter insider trading. How has the Labour party the nerve to criticise today, when all the legislation has been introduced by successive Governments?
It was not until the Companies Act 1980, the insider trading provisions of which are now incorporated in the Company Securities (Insider Dealing) Act 1985, that this matter was dealt with in legislation. We all know that the record of prosecutions since then has not been good. I believe that there are two reasons for that.
First, I am not satisfied that the Department of Trade and Industry has adequate resources for investigating the cases that are passed to it by the stock exchange. Perhaps my hon. Friend would prescribe the resources that are available to him. Does he have either the quantity or the quality of people to undertake these complex investigations?
Secondly, until very recently the Department had insufficient powers of investigation. That has been remedied by section 117 of the Financial Services Act 1986 which enables the Secretary of State to appoint inspectors and then goes on to empower the inspectors to require the production of documents and the attendance of persons and to examine on oath. It is true that during the Committee stage of the Financial Services Act 1986, the only proposals to reinforce those provisions came from my hon. Friend the Member for Suffolk, South (Mr. Yeo) who was concerned about the deals that are organised offshore and overseas. Those were the only provisions put forward; no proposals were presented by the Opposition to strengthen the powers. The fact is that the powers are draconian by any standards, and if they are used, they should be very effective.
More recently, my right hon. Friend the Secretary of State moved with considerable speed to deal with the first case of alleged insider trading to come to light following the enactment of the Financial Services Bill. Mr. Collier was fired by Morgan Grenfell Securities on 10 November. By 17 November, section 117 of the Financial Services Act 1986 had been implemented and inspectors had been appointed.
An example must now be made, although not necessarily of Mr. Collier and certainly not of the minnow employed by British and Commonwealth who aspired to make £800 from his insider trading. The exemplary sentence should be meted out to as big a fish as possible and that sentence should be a prison sentence—a fine will not do. A clear message must be sent to those in the City who would abuse their privileged positions, that society will not tolerate their behaviour. A statutory commission is not the answer. The question of a body to deal with these matters is really almost irrelevant. It is not the body but the available powers which is the important point.
801 The existence of the Securities and Exchange Commission has not prevented Mr. Boesky and possibly others from insider trading that makes Mr. Collier's alleged offence look like pilfering from the petty cash box. Indeed, it may be that our present arrangements are already too formal and inflexible and involve too high a burden of proof. For that reason, we may need to consider the introduction of civil penalties with a lower burden of proof. As a further deterrent, we should consider an extension of the disgorgement provisions, such that all the assets of a convicted insider trader are assumed to be the proceeds of his trading, unless he can prove otherwise.
I hope that the Government will resist demands for a statutory commission and instead review the resources and powers available to combat insider trading. It is in the City's interest as much as anyone else's that that evil should be stamped out.
§ Mr. Doug Hoyle (Warrington, North)
There is an amazing difference in the view taken by the Minister and the view generally taken by the Government in relation to criminal offences. It appears that, as usual, the Government have one law for the rich and another for the poor.
We should not mince words in this matter: we are talking about immaculately dressed spivs who are engaging in criminal activities. The Minister referred to the vigorous action that is being taken, although he did not deny the truth of the figures that were put to him. I hope that we shall receive some explanation as to how, since 1980, there have been 300 cases of insider dealing of which 110 were referred to the Department of Trade and Industry, yet in only six cases have there been guilty verdicts, involving only nine people. That is the sum total. That does not appear to be very vigorous action; rather, it is lethargic.
Several explanations have been made by Tory Members as to what ought to be done—whether there should be better professional expertise or whether more help should be given. However, it is certainly true that the really big fish who are fraudulent in our society are getting away with it. It is simply not good enough to claim that suddenly bringing in legislation will deal with the problem if it is given the chance. In response to the Minister's claims about the Labour Government, I can tell him that this Conservative Government have created a casino society which makes it far easier for people to carry out these dealings.
When we begin to consider the position, we find that people in City institutions are setting up offshore companies. These are the really big fish who are getting away with it. What are the Government doing about that? It is not good enough to allow these people to set up companies in Liberia and the Caribbean. It appears as if crime does pay. These people believe that if they are going to commit a crime, they might as well commit a big one. They will not commit a small one because they believe that there will be a hand at their backs which may fall on their shoulder and they will be put away for it. I agree with Conservative Members who say that there is a real need for one of the big sharks to be caught and put away. These sharks are allowed to swim merrily in the sea and to gain from their criminal activities. The Minister is far too complacent about that.
802 There was a case not long ago involving an offshore company in Liberia that had never dealt on the stock exchange before. However, in its first dealing, it bought £60,000 of shares that were part of a takeover bid. That is the magnitude of what is happening. They have no fear that they will not get away with it. They operate the set-up and know that they will not be prosecuted. The figures show that that is what is happening.
Of course, these companies are encouraged to do that because the Government are not prepared to take much action over mergers and takeovers. In 1985, £9 billion of deals were completed. This is another way of getting a fast buck. Some 75 per cent. of the suspected cases of insider dealing have involved the purchase of shares shortly to be subject to a takeover bid. If the statistics revealed that such crimes were committed elsewhere in society, there would be an outcry from the Conservative Benches for more action. We would then hear the Minister say that the Government would do something. However, despite the vigour which the Government are acting now, it appears that most of the people will get away with their ill-gotten gains and many more such dealings will take place.
What is happening in relation to Guinness? The Minister made an announcement yesterday about that, but he told us nothing at all. My hon. Friend the Member for Livingston (Mr. Cook) was right to ask whether anything would have happened if the Boesky file had not been passed to the DTI from the United States Securities and Exchange Commission. We are entitled to an explanation as to whether it is because of that that the inspectors have gone into Guinness. We ought to know what is happening It is not good enough that we should be left to speculate. If we examine the Boesky connection and the connection between Collier and Morgan Grenfell, we are bound to draw conclusions.
The Minister and many others have spoken about Ivan Boesky. The Investors Chronicle of 21 November states that Mr. Boesky has been barred from participating in the United States securities industry. It continues:This does not prevent him from investing privately or acting as a professional overseas, unless specifically barred. London Stock Exchange members have so far only been instructed to consult the Exchange before dealing on Boesky's behalf.Can the Minister say whether that is true? Is Boesky to be barred from dealing in the United States, but allowed to get away with such activities in the United Kingdom? If so, that is not good enough.
The Government talk about people's capitalism and privatisation bids. People are making a killing and getting away with it. The British Telecom flotation certainly benefited greedy operators. I understood, as did many others, that investors were allowed only one application and a maximum of 800 shares, but close to 7,000 of the 2.3 million applicants were multiple applicants and got away with it. One or two of the minor fish were caught, but big names in the City were involved and nothing has been done about them.
The matter does not stop there. Already 6,000 cases of multiple dealing have come to light in the flotation of the Trustee Savings bank. At the end of the day such people will make a killing. Soon there will be the flotation of British Gas. Will there be more multiple applications? How many fraudulent Sids will there be? Will they again get away with it? That is happening all the time.
803 The Minister talks about what the Government have done, but we know that they have been reluctant to act and have been shoved into action. We know that the measures that have been taken are half-baked and weak, and will not have much effect. So long as we allow a voluntary system of self-regulation, we shall not do much about the problem. That is the truth of the matter. Tory Members may say, "Even with all the powers that were given to the Securities and Exchange Commission in the United States, look what has occurred there." But look what is happening here, where hardly any powers have been taken.
It is clear from the Minister's remarks that he is not prepared to do much and that the measures will not stop the avarice in the City, those who are out for a quick buck and those who are making the real profits. That is not good enough. Moreover, the salaries of those people are vast. They should be condemned. They should be above suspicion and should not engage in such dealings. They are tarnishing the name of the City of London. They may be a minority, but if nothing is done, they will be a growing minority.
The number of cases of insider trading that have been reported by the stock exchange is disappointing. The stock exchange is extremely disappointed and believes that in many cases there was sufficient evidence to bring a prosecution. But nothing much is happening. Given the Minister's attitude and complacency I suspect that even after today's debate nothing much will happen in future.
I shall give an undertaking from these Benches—I am sure that it has been given many times from the Front Bench—that, when the Labour Government come to power, the City will not get away with the rich pickings that it has been allowed to get away with under the present Government.
§ Mr. Anthony Nelson (Chichester)
The hon. Member for Warrington, North (Mr. Hoyle), who often speaks on these matters, may be no friend of the City, but he is consistent in his views about the iniquitous practices there, especially illegal ones such as we are discussing today. I have a good deal of sympathy with some of his sentiments, but not with all his solutions.
Insider dealing is undoubtedly rife and more lucrative than ever before. That is clear from the figures in recent years which show the considerable extent to which the price of stocks has risen in the short and medium term before bids have been formally launched. Insider dealing is more lucrative because the market, which trades at considerably higher levels than previously, involves much larger sums and the opportunities for misusing privileged information are much greater.
I disagree with the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) that the real problem is the fragility of Chinese walls. There will undoubtedly be great difficulty in ensuring confidentiality and arm's-length operations of subsidiary companies or divisions within financial concerns. The real problem is not that such information may be misused, as it undoubtedly is now, has been in the past and will be in future. The problem is to prevent its misuse, not only by legislation, but by ensuring that people cannot use it, however they obtain it.
804 It is impractical to suggest that there is a reasonable hope of preventing people from obtaining information, considering the size, flexibility and freedom of the new financial markets. Many people will obtain information about the contents of a prospectus and the terms of a bid. Everybody from the corporate finance executive to the printer responsible for publishing the information will be privy to the information. What is necessary is not to outlaw such practices and make them, rightly, criminal offences, but to prevent opportunities arising for people to misuse that knowledge. Many hon. Members on both sides of the House have directed their attention to that problem today.
I should like to add some comments and suggestions to those which have already been registered in relation to possible solutions. The hon. Member for Hackney, South and Shoreditch made two proposals which he thought would prevent some insider dealing offences. Indeed, his view is shared both inside and outside the House. His first proposal sought to prevent in-house dealing and to ensure that those who work for financial concerns and are privy to information are prevented from misusing that information by contract, presumably with the company that employs them.
That is a good idea, and some companies already impose that stricture on their employees, but it is unworkable because it is already a criminal offence to engage in insider dealing. If an employee abuses the law by engaging in insider dealing, why should he not also abuse the contractual restriction placed on him to use that information? That will not stop the type of person who is determined to break the law.
I have sympathy with the hon. Gentleman's second proposition in principle, but less sympathy with it in practice. It is to ensure by registration that all beneficial ownership of shares will be made more public and more accurate. In an intervention, I inquired how that would be possible for dealings on international markets, where orders are placed by companies abroad. Even if there were bilateral agreements with countries and banks about the disclosure of beneficial ownership, unfortunately there will always be trading opportunities with offshore concerns and locations, to which people will direct their money and through which they will establish nominee companies and make substantial criminal profits. One substantive move could be made through international co-operation significantly to improve the prevention and detection of this crime. I shall say something about that later. The extent to which full disclosure of beneficial ownership will deter people from engaging in that is limited.
I should like to make some proposals. My first is a reiteration of what I said in Standing Committee during the course of the Financial Services Bill. There is a case for the Securities and Investment Board having the ability to investigate suspected cases of insider dealing. The hon. Member for Livingston (Mr. Cook), in speaking about the powers of the SIB and its status as a private sector body rather than a statutory body, seemed to be under the misapprehension that in some way, even if it were given statutory identity, it would be able to resolve this problem. He may not be aware, but I am sure other hon. Members will be, that, even if the SIB were to be made a full statutory body, it has no powers. Indeed, it is expressly prohibited from having any powers to investigate insider dealing.
805 In Standing Committee I moved an amendment to give the SIB powers to investigate suspected cases of insider dealing. At that time, and largely at present, cases were initially investigated by the stock exchange. When it has a suspicion, it refers it to the Department of Trade and Industry, which decides whether or not to carry out further investigations or to bring a prosecution. The SIB is ostensibly responsible for the regulation and supervision of the investment markets but it has no legal right, in effect it is expressly forbidden, to investigate and prosecute in a case of insider dealing.
If there are more cases of this kind, my hon. and learned Friend the Minister will have to look at this matter again. It cannot be right to disallow the body responsible for overall regulation and supervision of the investment markets from investigating insider dealing. When I put that to my hon. and learned Friend during the course of the Bill, he said, with a large measure of justification, that the powers granted under the Companies Act 1980 and extended by this legislation have been substantially enhanced. In his words, their nature is draconian and there is no need to extend the right of investigation or prosecution to any body other than the Department of Trade and Industry.
Because these powers of investigation and the burden of proof and the other arguments to which my hon. and learned Friend addressed himself earlier are so draconian and distinct from prosecution and investigation in other criminal areas, he argues that it would be improper to extend those powers to a private sector body or, I suspect, to a public sector body if the SIB were to be made something akin to the Securities and Exchange Commission. I begged to differ with my hon. and learned Friend and that was why I pressed my amendment to a Division. It received a degree of support from all sides of the Committee. It is a legitimate matter to raise again if there is continuing dissatisfaction about the investigation and prosecution of people involved in insider dealing.
I sense that we all hope that the SIB will be responsible on a day-to-day basis for monitoring what the stock exchange council and lots of other self-regulatory organisations are doing. In turn, they will be in day-to-day touch with all the trading activities of the member firms. How can it he right to stop that supervisory body, when it gets a whiff of some criminal activity and suspects insider dealing or when its monitoring through the SROs of daily trade gives rise to suspicion, from either investigating or even drawing that matter to the attention of the Department of Trade and Industry? As a responsible body, it may well do the latter in any case, but we should look at the matter again.
Secondly, the hon. Member for Livingston said that there was a case for a bilateral agreement with the Swiss Government. He may have said the Swiss Government but he should have said the Swiss Federal Bankers Association. Such an agreement would allow disclosure of beneficial ownership or other details of account dealings. That agreement is similar to that which the Swiss have concluded with the SEC in the United States and it is a good idea. I supported that proposal during consideration of the Financial Services Bill.
Many hon. Members may know that the agreement which currently prevails between the SEC and the Swiss Federal Bankers Association provides that where investigations are being made into a suspected criminal offence in the United States, the assets of a person in a 806 Swiss bank can be frozen and information about the orders placed by a person, where they involve trading on American stock markets, can and will be disclosed—subject to certain safeguards—by the Swiss banks.
This is an important measure, because the agreement meant that, before anyone used a Swiss bank or a financial concern for nominee or trading accounts involving American stocks and shares, he had to sign a contractual form agreeing to the disclosure of such information as a condition of opening an account. It may be difficult and long-term to conclude such an agreement with the Swiss authorities, but it should be a starting point and a model for the sort of bilateral and international agreements which ought to prevail if we are to circumvent some of the offshore media being used by people to obtain rich pickings through insider dealing.
In the end, high standards of probity in this as in other matters will be observed only by the people concerned, but one hopes that, through a combination of legislation, supervision and penalties, one will see higher standards than have been prevalent in recent times. Undoubtedly, insider dealing is an insidious criminal offence because it takes money at the expense of the majority of shareholders. As many hon. Members have said, it brings the City into further disrepute of the kind created by certain other recent activities.
It is not in the interests of any of us to kill the goose that lays the golden eggs, not only for the many people who work in that sector but for British industry at large. The alacrity with which my hon. and learned Friend moved in the wake of recent events to change the law and the measures that he ably introduced during the passage of the Bill, and his response today, have demonstrated, if it was necessary, that the Government are determined to take action where necessary and are not prepared to lie back and oversee and suffer some of the bad practices that have been evident in recent months.
§ Mr. Charles Kennedy (Ross, Cromarty and Skye)
My contribution will be brief. I support many of the sentiments expressed by the hon. Member for Chichester (Mr. Nelson). He seemed to strike the right sort of balance in looking at this problem. As hon. Members said earlier, it is fitting that this debate should be held today, given the recent developments in Guinness and the decision by the Department of Trade and Industry to send in inspectors.
I should be grateful to the Minister if he could tell us when he responds to the debate what further thinking, if any, has taken place at the Department on what the Guinness bid revealed about the inadequacies of undertakings given at the time of big competitive bids in the past year or two. Those undertakings were subsequently broken or dropped in the aftermath of the successful bid.
I am thinking in particular of the fairly strong talking to by the Secretary of State for Scotland to Mr. Ernest Saunders concerning his commitments to maintain an important Scottish profile as part of a restructured Guinness and to move its headquarters to Edinburgh. The Government ought to investigate promises that are so lightly broken and that leave the Government, and political opinion, with egg on their face. We shall await with great interest the outcome of the investigation. Many people will be watching closely to see what the investigation uncovers.
807 Reference has been made to the City's image. I agree with the thrust of the argument of the hon. Member for Chichester (Mr. Nelson). It is important to draw attention to the massive resources that the City commands: to the number of people who are employed there and to the finance and capital that the City makes available for investment in British industry. I do not have a pathological mistrust of the City. However, because of its importance, the House is right to debate the issue and to try to stamp out some of the recent practices that have come to the fore in both New York and London.
As for the Boesky case, it is worth letting the man and what he represents speak for themselves. When he was addressing a group of business students in 1985 he said:Greed is all right, by the way. I want you to know that. You can be greedy and still feel good about yourself.That is a revealing insight into the type of mentality and into the type of morality that people of that kind have brought to international finance. Anybody like that who operates in the City of London should be weeded out in just as tough and hard a way as took place in the United States. Recently I was interested to read that the gentleman concerned, subsequent to his exposure, said:If my mistakes launch a process of re-examination of the rules and practices of our market place, then perhaps some good will result.That suggests a degree of humility which his 1985 statement lacked.
Insider dealings have again put self-regulation on trial. I sympathise with the point that was made by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) about the insufficient guarantees on regulatory controls that already exist. His point was well put in an article by Andrew Phillips, a City solicitor. The article, written a year ago, was entitled:Wanted: A sanitary squad for the Square Mile.Speaking about the reforms he said:In their place the Bank of England expects the new all-function colossi—increasingly foreign-owned—to erect invisible, or 'Chinese', walls of internal self-discipline. For a community which prides itself on hard-headed realism, such wishful thinking must be without precedent. Straight dealing is being sacrificed to competition; the national interest to capital gain.Much of the thrust of that article has been reinforced and strengthened by recent events.
What can now be done to try to clean up some of the practices that have been uncovered? As for tightening up the definitions, in a takeover the bidder defines his own insiders. If a leak then occurs and is not traced, all the insiders are collectively liable. However, the problems connected with this kind of scheme are quite immense. How could such a definition be put into practice? How wide would the net be cast? It may lead to over-reaction; it may provide far too big a solution to what is, nevertheless, a significant problem.
The suggestion has also been made recently that ill-gotten gains should be retrieved, as happens now to the ill-gotten gains of fraudsters and of those who traffic in drugs. It is an attractive option that the Government ought to examine.
Hon. Members on both sides of the House have said that insider dealing must be shown clearly to be fraud and that it should be treated as fraud. Parliament must make its contribution by making it absolutely clear that it 808 deplores insider dealing. As for treating it as straightforward theft, I agree that spectacular prosecutions and gaol sentences would have the effect of concentrating the minds of those who are involved in such practices, or who might feel tempted to become involved in such practices.
I welcome the recent developments and the efforts of the Government and the Department of Trade and Industry to introduce more draconian powers. Nevertheless, a considerable sense of unease is beginning to surface in Great Britain about what is being regarded more and more as the casino-like morality of the City of London, and it is being compared with other injustices elsewhere in the country. The Government ought to act by making it abundantly clear tonight that they intend to act decisively. If they act decisively, they will do not only themselves but all of us a favour, not least the City of London.
§ Mr. Dennis Skinner (Bolsover)
This debate is about capitalism. It is about the very nature of the beast—greed and materialism. We cannot avoid an examination of the cause of all these problems.
I do not believe for a moment that the Minister, who is connected with Lloyd's, will manage to avoid all the pitfalls into which previous Ministers have fallen. They tried to deal with the City by introducing banking Bills and companies Acts to get rid of the City crooks who are at work in their gambling dens trying to make as much money as they possibly can. Of course, they are carrying out the Prime Minister's principles, because she has called for an entrepreneurial society.
The Prime Minister says that she wants an entrepreneurial society in which everybody stands on their own two feet. That means, literally, standing on somebody else's neck. It also means that one has to get rich quick. That is one of the reasons why the Government are involved in a massive campaign to sell off British Gas. That is part of this Government's entrepreneurial ideas. The television advertisements about Sid, which cost £20 million, are really about insider dealing. They proclaim, "Where is Sid? Tell him." The Minister is trying to eradicate insider dealing, yet nearly every public hoarding in the country carries an advertisement about insider dealing that relates to Sid and British Gas.
§ Mr. Skinner
He could be, although many people might qualify to be Sid, in the avaricious, materialistic sense, in front of the hon. and learned Gentleman, because he is not a Cabinet Minister.
§ Mr. Skinner
Yes, he is.
Nine Cabinet Ministers deal in shares, according to the information, which is new since the war. It is well-known that the Prime Minister was dealing in shares during the pit strike, and made several thousand pounds profit in a company that had a coal mining subsidiary in Australia. Some insider dealing went on there. She was causing a coal strike and the subsidiary was making money by sending coal to Britain, which was short of coal. The Prime Minister was making money out of shares, and that was insider dealing on a grand scale.
§ Mr. William Cash (Stafford)
The hon. Gentleman made a number of serious accusations, one of which was directed to my hon. and learned Friend the Under-Secretary of State, with respect to his position on insider dealing. Will the hon. Gentleman accept that the moment the opportunity arose under the Financial Services Act—I had the good fortune to serve on the Committee on the Bill—my hon. and learned Friend immediately took action not only on the Collier case but on the most recent one, Guinness? The hon. Gentleman is known to be interested in cricket. I ask him to play fair.
§ Mr. Skinner
Before I come to that, I must deal with the Secretary of State for the Environment. When he was Secretary of State for Transport he had shares in Jaguar. The Government decided to privatise Jaguar. This is well known, as I have said outside, so it is not in dispute. As a Minister with shares in that company, he privatised it with the help of his Tory friends on the Back Benches, 200 of whom happen to be directors of companies and one in eight of whom is a member of Lloyd's—that gambling den in the city. He got them to walk through the Lobby to support the privatisation of Jaguar and made £4,000 profit. That is insider dealing.
In answer to the question put by the hon. Member for Stafford (Mr. Cash), I ask the Minister when he is going to feel the collar of the Secretary of State for the Environment and say to him, "What about that money you made? You had advance information that the Government were going to privatise Jaguar, but you got shares on the sly." That was revealed only after it was discovered that the Prime Minister had shares.
It is a scandal that a Tory Government with nine Cabinet Ministers making money out of shares should have the cheek to come along and say that they are doing a great job and are controlling insider dealing. I will never believe that, and I know that my hon. Friends will not either. Some 138,000 people have been done by the Government through the DHSS, but only five have been done in the City. There has been one famous case while the Government have been in power. Peter Cameron-Webb and Peter Dixon did the stock exchange for £39 million.
§ Mr. Skinner
It was Lloyd's. The hon. Gentleman is right. I thought I would see whether he was awake. I caught him. He would not be much good at insider dealing, because he is too slow.
Peter Cameron-Webb and Peter Dixon got £39 million, and now they are in America. They have got big palatial places, and swimming pools to go with them, but nobody comes from the fraud squad and says, "Hello there, Mr. Peter Cameron-Webb, you have just done the City of London for £39 million. There are people in Britain called the electorate who are very concerned about double standards that operate when 138,000 people have been done by the DHSS for minor offences and little old women have been done for taking a tin of salmon out of Marks and Spencers." What kind of society is this? Nobody has been across to the United States to see these men.
Why is not somebody going from the fraud squad? The Government reckon that they have invested in the police. That is one of the mighty claims that they have made during the past seven years. They say that they have given the police more power and money and there are more of them, but one cannot be found to go across to the United 810 States to do his duty so that the British electorate know that the Government are prepared to deal with them as they deal with those who have to live below the poverty line.
The truth is that the Government have no intention of doing anything with those in the City because most of them come out of the same belly of the establishment as Conservative Members. More than 200 of them are directors in companies, many of them in insurance companies and banks. Where does one expect their allegiance to be? Of course they are in support of self-regulation. They do not want the Government to intervene and introduce laws that will make these people toe the line. They are in business to make money for those companies and to line their pockets and provide cash to the tune of £10 million or £20 million to finance the Tory party's election campaign. That is what they are in business for.
§ Mr. Skinner
Last week, in the debate about Hangers, the artificial limb factory where 300 people have been sacked by a Tory company, allied to a South African company that will be trying to take over Pilkingtons—the case to which my hon. Friend referred—I heard a Tory Member of Parliament declare his interest.
§ Mr. Skinner
Yes, I did. It is not a normal practice, although more than 200 have directorships or consultancy positions. This one declared an interest. When I asked how much he made out of it, he replied, "Only £5,000."
The right hon. Member for Hertsmere (Mr. Parkinson) has not been out of government for more than four years, yet he has 10 directorships already, and 4.5 million people do not have jobs at all. The right hon. Gentleman is moonlighting on a grand scale. That should tell the story. He has those jobs to act as an insider dealer. Any textbook on politics will justify the arguments about Tory Members needing business interests by saying that it is necessary so that they can pass on information about what is going on in the House of Commons and in Parliament generally to their businesses. That is insider dealing.
Despite all that, Conservative Members are talking as though they will eliminate such practices. They might be able to make some mild amelioration on the way. The hon. Member for Chichester (Mr. Nelson) more or less said that. He made a few offers, but he was not completely confident about it. Until one eliminates the beast itself—the gambling den, the stock exchange, and the rest of it—one cannot get rid of insider dealing. However, it is our job to expose it as often as we can and to show where it is possible to change it.
The hon. Member for Stafford (Mr. Cash), who was dropping asleep, has gone. He has probably got a headache because he has been thinking too fast. He asked, "Why will you not be fair to my right hon. and hon. Friends? They are having a debate about the issue; they have responded." Why have the Government done something about Guinness? The answer stares us in the face. It is because this debate is taking place. What is more, there is a little bit of a fracas in Australia. They want to get the headlines and eliminate the unseemly business that 811 is taking place in the law courts with Mr. Peter Wright. In fact, Peter Wright is an insider dealer. Several years ago he gave information to Chapman Pincher to write the book. The Government are now spending lots of money, twisting Robert Armstrong's arm and buffeting the Attorney-General from pillar to post because an insider dealer is now blurting out the truth that he blurted out several years ago when he made about £30,000. The whole thing is nonsense.
I am worried about insider dealing, the casino economy and double standards in Britain. Yesterday I met another of our casualties who has been savagely treated by the law courts acting on behalf of the Government. I refer to Fred Jones. He is not an insider dealer. He is an 84-year-old pensioner. He is on the other side of the tracks. He has probably never been to the City of London. All he wanted was a free television licence, such as those held by many pensioners in Britain who live in warden accommodation, homes for the disabled, and so on. He has launched a campaign for a free television licence. What happened? Under the so-called British law that is fair to all people in this land, Fred Jones did not have sanctuary. He did not have the opportunity to get away and ask a lawyer and a chartered accountant to talk it through for him. No, he finished up in gaol. The man is sound, he is still campaigning and the Government still have a problem with him.
When the Minister talks almost contemptibly about the way in which the law is fair, he should remember the Fred Joneses of this world. There is no self-regulation for Fred Jones. He was not able to say, "I have a group of people who will listen to my case and then perhaps make a recommendation to the Government that they should not take the matter to court." Oh, no, not for him. He has not got the ring fence of the Securities and Investment Board around him. Fred Jones bumps into the law head-on because he has not paid his £58. Today the Minister tried to apologise because the Government have managed to get only five people into the net from amongst all the crooks in the City.
A man in my constituency got notice to quit because he owed five weeks' rent. The estate agents, A. E. Holders of Mansfield, took him to court. I told the estate agents I was going to mention this. Mr. Bruin does not have a penny piece. There is no self-regulation for Mr. Bruin. He goes before the court on 16 December. The estate agents will try to take possesson of his home. Even if he gets away with it and his rent and arrears are paid, the law will almost certainly say, "We will not give you notice to quit, but we will put the court costs on your rent book." That could be about £100 or more. That is self-regulation, is it not?
It is interesting that during this Parliament and the one before there was no self-regulation for trade unions. We had Bill after Bill from Ministers, including the chairman of the Tory party. They said, "We have to stop this business of self-regulation for trade unions. We have to control them and make sure that they have a ballot for everything they do." That applies except when they want to stop them striking. They are not keen on ballots then, because they want them to get back to work as quickly as possible. They said there should be ballots for strikes, executives and general secretaries. Woe betide there being one little branch of the trade union which has not complied 812 with the law. All hell is let loose. There are questions in the House, and nine times out of ten they have to have another ballot. There is no self-regulation for trade unions.
The Government have the cheek to talk about no having double standards. Of course there are double standards. The reason why money has been made in the City in recent years to a greater extent than before is quite simple: the interest rates have been in double figures for every year that the Government have been in office. If one is in the City one cannot afford not to make money out of somebody else's money.
Why put money into a small engineering factory or into the Grantham cafe? The cafe has gone bankrupt. There are 150,000 bankruptcies in the industrial economy while the casino economy is blazing away in the City. We had an entrepreneur in Grantham who said, "I'll follow the Prime Minister. She has asked us to be entrepreneurs. I'll change the little shop where she used to live, where she used to put an extra penny on the bacon and butter when she served behind the counter." There used to be a post office inside. That was never talked about because it was part of the public sector. That was kept in the dark. That entrepreneur turned the shop into a cafe, in line with the entrepreneurial society. What happened? It is now one of the 150,000 bankruptcy casualties in Britain. I wonder whether that entrepreneur would have liked a bit of self-regulation before he went bankrupt. I wonder whether he yearned for the moment when he could have operated, as they do on the stock exchange, and gone to somebody and said, "Will you look into my case to see whether it is possible to stop it going to the Government and stop me having to file for company liquidation?" That is Thatcher's Britain. That is the society we are living in today.
Nobody should imagine that we have heard the last of the credit card and casino economy. In 1986, £27 billion is owed on credit cards. Seventy per cent. of the residual income of the average family in Britain, all of us, is owed in debts before the pay packet is opened. It was 45 per cent. in 1979. It has now gone up to 70 per cent. and over and it is still growing.
Tory Members talk about insider trading and self-regulation. There is a bigger problem around the corner. It has all come about because they have concentrated on allowing the City to make money out of the high interest rates, while the industrial economy has gone to the dogs. Have they cared as throughout the length and breadth of Britain engineering factories have closed down because of lack of investment and pits have been closed because of the Government's policies? Banks have been saved. They have saved banks, such as Johnson Matthey, which had no money and no reserves. I have to mention that because they want to hear it in the Galleries.
JMB was an uneconomic unit of production, but the Government saved it. In fact, the Chancellor of the Exchequer rang the Prime Minister on 30 September 1984 and said, "JMB has got no reserves." The Prime Minister said, "You know what to do when it has no reserves; you shut it." The Chancellor said, "It is not a pit; it's a bank." The Prime Minister then said, "Save it." Of course, it is part of the casino economy. The Chancellor said, "What shall I save it with?" The Prime Minister said, "Save it with £100 million of taxpayers' money." Just think what we could have done with that money in the shipyards on the Tyne and elsewhere, in the coalfields and in the engineering and steel industries.
813 It is all double standards. Here we are today talking about self-regulation. We are talking about self-regulation for Tory Members and people in the City. Imagine what would happen if a bloke in a betting shop got done for insider trading. A betting shop is much the same as the stock exchange—that posh gambling den. Just imagine somebody coming along and saying, "Well, I do not think you should prosecute old Jack. He only backed five winners after they had all come in." Insider dealing. I rest my case.
§ Sir Brandon Rhys Williams (Kensington)
I would not attempt to speak with the brilliance and grasp demonstrated by the hon. Member for Bolsover (Mr. Skinner), partly because I have never worked in the City and I have not had sufficient opportunity to observe what goes on there. The hon. Gentleman evidently has had that Opportunity, and it has inspired his speech.
May I first declare my interests. I own no shares in any public company, I am not a director of any public company, I am not a member of Lloyds, I take no retainers, I am not a paid consultant, I am not a member of a trade union and I am not seeking office in the Government.
Many of my constituents in Kensington earn their livings in occupations which, directly or indirectly, contribute to the success of the City. The vast majority of them do not earn six-figure incomes or, many of them, even five-figure incomes. I am speaking of men as well as women, who go into the City each day to make their contributions. They are certainly not gamblers. They pay their taxes like everyone else. We need to bear in mind the fact that the City is a large institution in this country and an enormous contributor to the success of the British economy.
My voters do not welcome the suggestion that the City is a crookedly operated casino or a haven for corner cutters and irresponsible adventurers. No doubt some such people exist in the City, just as they exist in political circles—it is unavoidable. We have to bear in mind that all types of people are attracted to the work of the City, and sometimes things will go wrong.
The British economy needs the City to be successful, just as the City needs a flourishing British economy if it is to continue as one of the world's greatest financial centres. The City has not abandoned the traditions which made it a world financial centre, but shadows are over it at the present time. That is a matter of concern to all hon. Members. The City has the appearance of Versailles some 200 years ago, when it still had time to avert a disastrous clash with public opinion. It was a brilliant, powerful and glittering centre—like the City is now—a centre of ideas and influence. The leaders in Versailles did not recognise the danger they were in. If they did, they did not exert themselves to correct the drift from responsible public opinion while they still had time.
There is a danger that not enough people in the city today are prepared to speak out plainly for the old standards. I hope that the leaders of the City's institutions will recognise the urgent need to insist on the highest standards of conduct in small and large transactions. The principal responsibility for maintaining standards lies within the square mile, not in Whitehall or Westminster.
Politicians are unlikely to have the relevant experience to justify taking power to interfere in the management of 814 markets or the control of investment policy. The same is likely to apply to their permanent officials as well. The Government should not rely only on the Financial Services Act 1986. The Financial Services Act represented a tremendous endeavour by the Department to put a new structure of conduct into place in statutory form. We all have to pay tribute to the Minister, in particular, for his hard work in bringing that Act to its successful conclusion. But there are measures now which the Government, and only the Government, can take, to produce a more responsible and more fruitful climate in the disposal and control of capital assets.
I shall briefly list a series of points and make some recommendations for the Ministers to consider. Over 100 cases of suspected insider trading have been referred to the Department, only a handful of which have resulted in prosecutions since the 1980 Act came into force. When the stock exchange was solely responsible for its own discipline, a number of cases of insider trading that were detected probably never came to light before the general public. The stock exchange had a more successful record in maintaining the highest standards than the Department has so far achieved since it was granted power to intervene.
The recent tremendous pressure towards the corporate restructuring of British industry has provided spectacular opportunities for quick capital gains. Perhaps that was inevitable. It does not mean that the reorganisation of industry, which has taken place in recent years and is still continuing, is necessarily wrong.
For some 14 years, I served in ICI. Everybody in that company—certainly when I served in it—knew the importance of the measure which took place in 1926, when a great capitalist and adventurer, Harry McGowan, had the foresight to realise that the British chemical industry had to be totally restructured if it was to survive. Had it not been for Harry McGowan's foresight in creating the merger of the major British chemical companies in 1926, we would not have an industry today with anything like the importance it has.
There is a serious need for much closer liaison and better understanding between large investors and the senior management of British industry. The CBI is perfectly right to call for it. The Government should look for measures that would encourage closer liaison and understanding between the DTI in particular, the City and the senior management of British industry. Such liaison and understanding are possible without partial disclosure of confidential information.
There is also an urgent need to lengthen the time span of investment discretion. The Government must accept some responsibility in this matter. It is not outside the Government's ability to influence the events that investors have to take into account when they make long-term decisions about the disposal and organisation of capital assets. Changes in taxation policy could be made which would encourage the revival of fixed interest and preference shares as a source of corporate finance. For too long we have been living in the age of the equity. It has brought an element of doubt, just as it has brought an element of discretion, into the way that dividend policies are likely to operate. Now that conditions for the long-term expectations of the value of the currency have been restored, we should try to revive the fixed interest and preference share sectors of the market which played an important part in the financing of British industry before the war.
815 I have spoken about this matter before, but I do not seem to have made any progress with Treasury officials. They consider suggestions about reform of company taxation, and matters such as that, simply from the viewpoint of protecting the revenue. They do not realise that revenue would increase enormously if the health of the British economy could be improved. It is vital that we seek to lengthen the time span of investment discretion and create a climate in which there is less doubt about company policy in the payment of dividends from year to year. It is unhealthy speculation and pressure on boards to change their dividend policies in response to very short-term market forces which cause a great deal of the anxiety and uncertainty in boardrooms, and resultant timidity in splashing out and making big investment decisions.
I have referred before to something that I regard as the historic compromise. It is happening on its own and is beginning to take shape. This is the historic compromise under which, increasingly, shareholders will give up their right to an equity dividend and workers will give up the right to strike. This is a coming together of the two sides of industry. It is inevitable, and it is happening, whether or not the Government encourage it.
There is a need for much greater transparency and predictability in financial decision-making; this is also a matter for Treasury policy.
We shall have to move quickly towards establishing a more stable relationship between exchange rates, especially those of sterling and other Common Market currencies. As I have said before, I entirely support my right hon. Friend the Prime Minister in her resistance to announcing that we have joined the exchange rate mechanism of the European monetary system. However, we should make our target—and we should be taking positive steps now to achieve it—the creation of a currency union within the Common Market. There is no reason why that should be regarded as a long-term objective. There are measures which we could take at once that would encourage the markets in the expectation that the major currencies of the Common Market will be brought closer together and will stay closely together in future years. There is nothing that would help British industry more in planning long-term investment decisions and the responsible structure of corporate finance than the feeling that this country's future in the Common Market can be placed on a long-term and predictable basis.
The Department of Trade and Industry should be less preoccupied with immediate instances of crime and fraud, however scandalous they are and however high the headlines in the daily press. The Department should consider the way in which company law operates in regard to the responsibility of the supervisory elements in our financial, industrial and business institutions. It should consider the conditions in which management is able to become slack without even being aware of its shortcomings, in which shareholders are powerless to intervene when they begin to feel anxious about management's efficiency and in which auditors are uncertain of their duties and loyalties. The tone of business may become so slack and lacking in supervisory discretion that opportunities arise for people to begin with small frauds or minor cheating decisions and go on to major frauds, many of which are not discovered.
816 I learned when talking informally some time ago to officers of the fraud squad that in all too many cases, when fraud is suspected or even proved, the auditors are already aware of what is happening but do not think that it is their responsibility or that it is in the interest of their firm to do anything about it. The auditing profession is not certain to whom it is responsible. Are auditors responsible to the shareholders, as was originally conceived, over the directors' heads or are they responsible to the directors, so that they are obliged to connive with the directors in policies that are dubious or even contrary to law? Auditing firms face a difficult decision. Junior officials in those firms may notice highly dubious activities which, for personal or policy reasons, they think it would be better to say nothing about; so instead they simply close the lines of investigation which would bring discipline to bear on those who are breaking the rules.
Top management should not conduct its business without accurate, up-to-date information provided on a professional basis. When I was involved in consultancy, I knew of all too many companies in which some senior people were aware of critical information about the company's future, marketing prospects, and so on but others, who should have had that information, were not. All too often, non-executive directors would go to the board to express their anxieties but would find themselves floored by the arguments of the full-time directors simply because they had not been provided with the data to enable them to press their point. A small change in the rules governing the circulation of data in companies is needed to ensure that confidential data go to those who should have it but not to those who can use it wrongly, have no need of it and may be offered temptation by it.
One cannot tell British management in the City, in industry or in business that it must be honest and that laws will be passed to force people to be honest. Human nature is such that some people will always be willing to break the rules. We cannot pass laws that tell people that they must be efficient. To do so would be futile. But I implore my right hon. and hon. Friends to realise that we can create statutory routines that make it normal practice in the vast majority of companies for all concerned to act in such a way that opportunities to commit fraud do not arise.
Of course mistakes will be made; but British company law used to be held up as an example to the world of the way in which private enterprise should be regulated. I do not think now that anyone would look to British company law, in its present state—even if he had the patience to read our vast and wordy statutes—for a model of how private enterprise should conduct itself. The original model, which I suppose was a Gladstonian one, was an exceedingly well-conceived balance between the powers of shareholders, the responsibilities of the auditors—when the audit was made statutory near the end of the 19th century—the duties of management and the rights of workers and others.
Those aspects can be put right, but the flood of company legislation in recent years has not brought into focus the necessity for simple statutory routines that strengthen the hands of the non-executive directors and especially the supervisory role of the auditors. That aim does not require a tremendous upheaval in procedure. It is simply a matter of bringing up to date procedures which were put in place in our company law 50 or 100 years ago and which are now falling into disuse or are simply neglected.
817 I shall cite one example which gives us an insight into the way in which the Securities and Exchange Commission works in the United States. Because there is a separate company law in every state, it is not possible for the SEC to introduce changes in the law that will result in changes in the way in which companies manage their affairs. In recent years, the practice has been for the SEC to bring pressure to bear on the stock exchanges in the United States to alter their listing agreements so that companies could not have their shares quoted unless they operated certain routines which the SEC thought necessary for the good conduct of business. The New York stock exchange in particular was, I believe, the first to introduce the rule that the shares of a company could not be quoted unless the company established an audit committee. Of course, that was a controversial development, but it was not all that difficult to introduce it in the context of American company practice. In the United States, the majority of companies are primarily run by non-executive directors, and the executive heads on the boards tend not to be in an overwhelming position, unlike their counterparts in the majority of British companies.
The liaison which that rule brings about between the auditors and the company directors has been put on a formal basis. In Britain, almost invariably, experts on company practice—and on the future of the auditing profession in particular—will say that it would be an excellent idea if the practice of appointing audit committees were adopted in this country. Some limited steps have been taken in that direction but, unless there is a statutory push to bring it about, or unless the stock exchange in London decides to make it one of its listing conditions, another 10 years will go by and the auditors will still not be in a position to exercise the appropriate degree of supervision over company management.
I have introduced a companies Bill in every Session since 1969. In recent years, I have regularly made recommendations as to the way in which we could strengthen the hands of the auditors and of the non-executive directors, improve the circulation of data, and so on. Since 1974, because of the intervention of the Department of Trade and Industry, I have not been able even to get my Bill considered by a Standing Committee. The Department's policy of blocking discussion in Parliament of my proposals can now be seen to have been a mistake. I hope that this year, when I again introduce such a Bill, the Department will not intervene to prevent the House from taking by Bill into Committee.
§ Mr. Alan Williams (Swansea, West)
There should have been a Division when my hon. Friend the Member for Bolsover (Mr. Skinner) finished his speech, since after that, all that was left to those of us who remained was to contribute to a state of creative anti-climax. I congratulate my hon. Friend on a speech of, if I may say so, unusual comprehensiveness. It should be the answer to anyone who doubts the elasticity of the rules of procedure of the House.
The Minister sceptically asked why we wanted this debate now. Since he does not seem to trust our motives, I shall refer to the Financial Times. It said:There have never been so many opportunities to make illegal profits in the United Kingdom stock market by using inside information about a company's financial performance or its takeover strategy.818And it has never been easier for the directors of a company, its merchant bankers, lawyers or accountants, to get away with it.That is why we are having this debate. We are talking about crime on a massive and unprecedented scale in this country; crime on such a scale that it makes the great train robbers look like back-street pickpockets. We are dealing with greed and avarice on an unprecedented scale, far beyond the comprehension of most of us.
We are also talking about sums of money that are beyond the comprehension of most of us. Yet in a way, that gives the lie to the pretensions of so much of the Conservative party's strategy. The Conservative party said that tax cuts motivated people. We are talking about the people who have been the beneficiaries of £3 billion a year of tax cuts. The Government gave those tax cuts to people on top incomes. We are talking about a group of people who, in many cases, have seen more than a doubling of their salaries within the past 12 months. To them, everything has come. Despite all of that, they still cannot keep snouts out of troughs. That is the shabby truth of the position that we are investigating.
There is nothing glittering about that aspect of the City. I am sure, as hon. Members on both sides have said, that the City feels no pride in those activities. We are talking about the quick buck morality. Let there be no doubt that this Government have contributed to that philosophy. It is innate in their thinking, in their concept of privatisation and in their concept of pop capitalism.
On the one hand the Prime Minister stands at the Dispatch Box and berates workers for a 5 per cent. a year pay rise, and on the other hand she eulogises about the success of the launch of British Telecom with a 100 per cent. capital gain for those who happened to win a place in the lottery. That is the sort of ambiguity and ambivalence, the undermining of social and moral values, to which the basic political tenets of the Conservative party have contributed. The lesson that is getting through to many young people who cannot even find a job—the lesson of the British Gas launch, the British Telecom launch, the TSB launch—is that it is easier to work the system than to work a machine. In their motion the Government eulogise the actions of the City; a City which has exported about as much capital from Britain as the Government have received in revenue from the North sea during the entire time that they have been in office.
The Government praise the City for its work in support of industry. The Minister got into some slight difficulty earlier because of a basic conflict between the aspirations of the City and the needs of industry. The Minister shakes his head, but he must be about the only person in Britain who does not understand that conflict. The City is motivated by a quick rate of return. Industry desperately needs long-term investment in plant and machinery, and in research and development. Yet firm after firm says that it must be careful about its investment and research and development programmes, because if it puts too much into those areas and too much into the seed corn of their industries, they line themselves up for takeover by the City. The Minister got into a slight predicament over investment made in industry during his time in office, which has been a time of unprecedented boom in the City's activities. He wanted to dismiss the protestation that investment had fallen during the last quarter. The Minister said, "Oh no, you must not take just a quarter into account. You must look at progress in the City and 819 industry over a much longer time scale." But when we tried to examine progress over the entire lifespan of the Government, the Minister did not want that examined either. He is a singularly difficult man to please, much as we try.
During the past few years, especially the last two years, the City's role has been predominantly predatory and parasitic. It has incited, with the support of the Government, the merger mania that has led to the enormous, illicit profitability of insider dealing. The figure of £30,000 million has been given for this year alone, which is five times higher than last year. That is why we are having this debate now. Opportunities to make killings exist on an unprecedented scale. It is clear that there is little or no industrial logic in so many of the mergers that are taking place. They are related far more to a quick financial kill than to any industrial logic or any attempt to structure our manufacturing industry more efficiently. The Government, with their friends in the City, have created a paradise for insiders. That is why it is interesting to note the statistical evidence that between 75 and 80 per cent. of all suspected insider deals have occurred in the context of takeover bids. They have all occurred during the build-up to the takeover.
My hon. Friend the Member for Livingston (Mr. Cook) referred to Acquisitions Monthly and the evidence that it gave of a 25 per cent. average share rise in the three months prior to the takeover of a company. As my hon. Friend said, the figure is as high as 80 per cent. That is why the opportunity is so massive for those who have inside information. The editor of that magazine—
§ Mr. Williams
I shall not give way, as I am limited on time.
The editor of the monthly magazine is quoted in The Guardian as saying that financial deals are now worth hundreds of millions of pounds. We are not talking about small sums of money. The sums about which we have been hearing recently in one or two cases are derisory by comparion with what has really been going on.
We have heard about the virtues of self-regulation. If it is so virtuous, one is bound to wonder whey we are having any investigation so late into the activities of Guinness in relation to Bells or Distillers. The ultimate in complacency is a statement made to The Guardian in June last year:We all work in a price-sensitive world and are well trained to keep our traps shut.That was a quotation from a City spokesman who works in Morgan Grenfell, the company whose activities are attracting attention at present.
The Minister cannot pretend that those are occasional lapses or occasional indiscretions. The structures that exist to conceal and support those activities, such as the offshore companies, are evidence of the way in which the position has been conspired at over the years. It is only the minnows who are caught. We have heard that 110 cases have been referred by the Stock Exchange Council to the Department of Trade and Industry. Of those, nine led to prosecutions and six to convictions.
820 As the stock exchange said, five of them were "small fry". The big men in those deals are already well protected and covered. It is the naive and the novices who tend to be caught.
The Government have contributed to the peculiar new morality of people's capitalism by the way in which they have dealt with privatisation. As has been pointed out, thousands of multiple applications were made during the BT launch. Shortly after that launch, Kleinwort Benson warned that action for fraud would be taken against those making multiple applications. Where are those prosecutions? There are 7,000 multiple applications on record, not counting those that were not found. Where are those threatened prosecutions, and who has been prosecuted over the 6,000 such deals in relation to the Trustee Savings Bank?
The Minister said that the Government regarded insider dealing as being pernicious to markets. He then described it as a pernicious offence. No hon. Member would deny that it damages the City's standing; nor would the City deny it. But having passed a law in June 1980 for which the Minister claims credit, the Government sat back for the next six years and ignored their own law. They then feign surprise when others follow their example. Small wonder that the financial page of The Guardian said that the Department of Trade and Industry wasa bit like a black hole when it comes to dealing with insider trading cases. Dozen of cases go in, but nothing comes out.Our indictment of the Government is that the present situation is clearly the direct consequence of years of their own indolence and indifference.
§ Mr. Howard
The right hon. Member for Swansea, West (Mr. Williams) and several other hon. Members suggested that certain developments in the City might increase the incidence of insider dealing. That may be so, but two factors may work substantially to decrease the incidence of insider dealing.
The first is the amount of information that is becoming available, along with the new technology in the market place, which will shed even more light on suspicious movements in share prices and suspicious patterns in share dealings and make it easier for the regulatory authorities to identify and detect insider dealing.
The second is that powers have now been in effect for two weeks or so which, it was admitted during the passage of the Financial Services Bill, are draconian and sweeping. They should enable us, as never before, to detect, investigate and punish instances of that offence when and where they occur.
One remarkable feature of the debate is that neither of the Opposition Front Bench spokesmen suggested an additional power that should be added to the battery of powers available to us in order to deal with this mischief. However, Back Benchers have made suggestions, and I shall use the few remaining minutes to deal with some of them.
The first hon. Member to make any constructive suggestion was the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). He made two suggestions. I pay tribute to him, incidentally, because he recognised the difficulties involved in pinning down, with sufficient evidence, what is needed to establish the criminal burden of proof in such matters. That is a difficulty, and that is why we have taken these additional powers.
821 The first suggestion of the hon. Member for Hackney, South and Shoreditch was that own-account dealing should be banned by those involved in the City. The second suggestion was that further steps should be taken to try to identify the beneficial ownership of certain shares and investment companies.
The first suggestion deserves to be treated seriously. However, I agree with my hon. Friend the Member for Chichester (Mr. Nelson) that it would not work. We do not need more rules, because we have the criminal law and the power to bring people to book. If people are prepared to break the criminal law, nothing would be achieved by introducing more rules that would not have the force of the criminal law in an attempt to bring them to book.
The hon. Member for Hackney, South and Shoreditch referred to identifying the beneficial ownership of certain shares and investment companies. A good deal can be done, and we have already taken additional powers in response to the amendment moved in Committee by my hon. Friend the Member for Suffolk, South (Mr. Yeo). They will go a long way towards enabling us to track down those who have the beneficial ownership of shares and are responsible for dealings.
My hon. Friend the Member for Beaconsfield (Mr. Smith) asked a question about resources. They should not be a constraint in the investigation of such cases. On 10 January 1986 the then Secretary of State announced a substantial increase in the amount of resources devoted by the Department to countering fraud. Indeed, 195 new posts are being created over a two-year period in those parts of the Department dealing with investigation and prosecution work. The extra staff will be available, if required, to assist with insider dealing investigations under the Financial Services Act 1986. In addition, we now have the power, recently used, to appoint external inspectors with wide-ranging powers to investigate insider dealings.
My right hon. Friend the Member for Beaconsfield also mooted the possibility of introducing a civil offence of insider dealing. I doubt whether that would substantially increase the efficacy of the powers available to us. I believe that the criminal nature of the offence now on the statute book and the possibility of imprisonment as a punishment for it represents the greatest possible deterrent. I do not believe that anyone would want to contemplate imprisonment without the satisfaction of the criminal burden of proof.
As I have said, we have gone a long way towards modifying the normal standards of the criminal law and substantially eliminating the right of silence in order to do all that we can to increase the prospect of effective enforcement of the criminal law.
My hon. Friend the Member for Chichester made two points. The first point was argued at considerable length in Committee on the Financial Services Bill. He asked for the powers to be capable of transfer to the SIB. He did not persuade me of the importance of necessity of that step during the passage of that Bill, and I fear that he has not persuaded me tonight. These draconian powers need to be exercised by an authority that is directly accountable to the House. That is why it is important that they should be retained by the Secretary of State.
However, I agree with my hon. Friend the Member for Chichester about the importance of international co-operation. This is a most important matter. Although we have made a useful start, I freely recognise that more needs to be done. Information is the key to progress. That is why 822 the sharing of information is at the heart of the memorandum of understanding that my right hon. Friend the Secretary of State recently signed with the SEC and the Commodities Futures Trading Commission in the United States. We hope to build on that start in international co-operation.
To that end, we shall hold a conference next week in this country which will be attended by the regulators of most of the important countries in the world which have big financial centres. We shall be seeking to make substantial progress with them in extending international co-operation. Insider dealing will be high on the agenda at that conference. I am delighted to say that the Swiss have accepted an invitation to attend the conference. We shall be putting our concerns to them and seeking to obtain their co-operation in dealing with abuses and taking effective action.
As I have said, both sides of the House agree that insider dealing is harmful and unfair and ought to be stamped out. The Opposition have been careful not to claim that they could eradicate it completely. No system of regulation could prevent fraud completely, but there can be no doubt whatever that the Government have acted to take the powers which are necessary to deal effectively with this mischief. Those powers have been put into effect. It is on that basis that I ask the House to support the amendment and to reject the Opposition motion.
§ Question put, That the original words stand part of the Question:—
§ The House divided: Ayes 177, Noes 261.825
|Division No. 15]||[7 pm|
|Abse, Leo||Crowther, Stan|
|Adams, Allen (Paisley N)||Cunliffe, Lawrence|
|Alton, David||Cunningham, Dr John|
|Anderson, Donald||Davies, Rt Hon Denzil (L'lli)|
|Ashley, Rt Hon Jack||Davies, Ronald (Caerphilly)|
|Atkinson, N. (Tottenham)||Davis, Terry (B'ham, H'ge H'l)|
|Banks, Tony (Newham NW)||Deakins, Eric|
|Barnett, Guy||Dewar, Donald|
|Barron, Kevin||Dixon, Donald|
|Beckett, Mrs Margaret||Dobson, Frank|
|Bennett, A. (Dent'n & Red'sh)||Dormand, Jack|
|Bermingham, Gerald||Duffy, A. E. P.|
|Bidwell, Sydney||Dunwoody, Hon Mrs G.|
|Blair, Anthony||Eadie, Alex|
|Boothroyd, Miss Betty||Eastham, Ken|
|Boyes, Roland||Evans, John (St. Helens N)|
|Bray, Dr Jeremy||Faulds, Andrew|
|Brown, Gordon (D'f'mline E)||Field, Frank (Birkenhead)|
|Brown, Hugh D. (Provan)||Fields, T. (L'pool Broad Gn)|
|Brown, N. (N'c'tle-u-Tyne E)||Flannery, Martin|
|Brown, Ron (E'burgh, Leith)||Foot, Rt Hon Michael|
|Buchan, Norman||Forrester, John|
|Caborn, Richard||Foster, Derek|
|Callaghan, Jim (Heyw'd & M)||Foulkes, George|
|Campbell, Ian||Fraser, J. (Norwood)|
|Carlile, Alexander (Montg'y)||Freud, Clement|
|Carter-Jones, Lewis||Godman, Dr Norman|
|Cartwright, John||Golding, Mrs Llin|
|Clark, Dr David (S Shields)||Gould, Bryan|
|Clarke, Thomas||Gourlay, Harry|
|Clay, Robert||Hamilton, James (M'well N)|
|Clwyd, Mrs Ann||Hamilton, W. W. (Fife Central)|
|Cocks, Rt Hon M. (Bristol S)||Harrison, Rt Hon Walter|
|Cohen, Harry||Hattersley, Rt Hon Roy|
|Conlan, Bernard||Healey, Rt Hon Denis|
|Cook, Frank (Stockton North)||Heffer, Eric S.|
|Cook, Robin F. (Livingston)||Hogg, N. (C'nauld & Kilsyth)|
|Corbett, Robin||Home Robertson, John|
|Corbyn, Jeremy||Howarth, George (Knowsley, N)|
|Craigen, J. M.||Howells, Geraint|
|Hoyle, Douglas||Pike, Peter|
|Hughes, Dr Mark (Durham)||Powell, Raymond (Ogmore)|
|Hughes, Roy (Newport East)||Prescott, John|
|Hughes, Sean (Knowsley S)||Radice, Giles|
|Janner, Hon Greville||Randall, Stuart|
|Jenkins, Rt Hon Roy (Hillh'd)||Raynsford, Nick|
|John, Brynmor||Redmond, Martin|
|Jones, Barry (Alyn & Deeside)||Rees, Rt Hon M. (Leeds S)|
|Kaufman, Rt Hon Gerald||Richardson, Ms Jo|
|Kennedy, Charles||Roberts, Allan (Bootle)|
|Kirkwood, Archy||Robertson, George|
|Lambie, David||Rogers, Allan|
|Lamond, James||Rooker, J. W.|
|Leighton, Ronald||Ross, Ernest (Dundee W)|
|Lewis, Ron (Carlisle)||Rowlands, Ted|
|Lewis, Terence (Worsley)||Sedgemore, Brian|
|Litherland, Robert||Sheerman, Barry|
|Livsey, Richard||Sheldon, Rt Hon R.|
|Lofthouse, Geoffrey||Shore, Rt Hon Peter|
|Loyden, Edward||Short, Ms Clare (Ladywood)|
|McCartney, Hugh||Short, Mrs R.(W'hampt'n NE)|
|McDonald, Dr Oonagh||Silkin, Rt Hon J.|
|McKay, Allen (Penistone)||Skinner, Dennis|
|McKelvey, William||Smith, C.(Isl'ton S & F'bury)|
|MacKenzie, Rt Hon Gregor||Smith, Cyril (Rochdale)|
|McNamara, Kevin||Smith, Rt Hon J. (M'ds E)|
|McTaggart, Robert||Spearing, Nigel|
|Madden, Max||Stott, Roger|
|Mallon, Seamus||Strang, Gavin|
|Marek, Dr John||Straw, Jack|
|Marshall, David (Shettleston)||Thomas, Dafydd (Merioneth)|
|Martin, Michael||Thomas, Dr R. (Carmarthen)|
|Maxton, John||Thompson, J. (Wansbeck)|
|Maynard, Miss Joan||Thorne, Stan (Preston)|
|Meacher, Michael||Tinn, James|
|Michie, William||Torney, Tom|
|Mikardo, Ian||Wainwright, R.|
|Millan, Rt Hon Bruce||Wardell, Gareth (Gower)|
|Mitchell, Austin (G't Grimsby)||Wareing, Robert|
|Morris, Rt Hon A. (W'shawe)||Weetch, Ken|
|Morris, Rt Hon J. (Aberavon)||White, James|
|Nellist, David||Wigley, Dafydd|
|Oakes, Rt Hon Gordon||Williams, Rt Hon A.|
|O'Brien, William||Winnick, David|
|O'Neill, Martin||Wrigglesworth, Ian|
|Orme, Rt Hon Stanley||Young, David (Bolton SE)|
|Patchett, Terry||Tellers for the Ayes:|
|Pavitt, Laurie||Mr. Mark Fisher and|
|Pendry, Tom||Mr. Derek Fatchett.|
|Adley, Robert||Bright, Graham|
|Aitken, Jonathan||Brinton, Tim|
|Alexander, Richard||Brittan, Rt Hon Leon|
|Alison, Rt Hon Michael||Brown, M. (Brigg & Cl'thpes)|
|Ancram, Michael||Browne, John|
|Ashby, David||Bruinvels, Peter|
|Aspinwall, Jack||Buchanan-Smith, Rt Hon A.|
|Atkins, Robert (South Ribble)||Budgen, Nick|
|Atkinson, David (B'm'th E)||Bulmer, Esmond|
|Baker, Nicholas (Dorset N)||Butler, Rt Hon Sir Adam|
|Baldry, Tony||Butterfill, John|
|Banks, Robert (Harrogate)||Carlisle, John (Luton N)|
|Batiste, Spencer||Carlisle, Kenneth (Lincoln)|
|Beaumont-Dark, Anthony||Carttiss, Michael|
|Bendall, Vivian||Cash, William|
|Benyon, William||Chalker, Mrs Lynda|
|Best, Keith||Chapman, Sydney|
|Bevan, David Gilroy||Chope, Christopher|
|Biffen, Rt Hon John||Clark, Hon A. (Plym'th S'n)|
|Biggs-Davison, Sir John||Clark, Sir W. (Croydon S)|
|Bonsor, Sir Nicholas||Clarke, Rt Hon K. (Rushcliffe)|
|Boscawen, Hon Robert||Cockeram, Eric|
|Bottomley, Peter||Colvin, Michael|
|Bottomley, Mrs Virginia||Conway, Derek|
|Bowden, A. (Brighton K'to'n)||Coombs, Simon|
|Boyson, Dr Rhodes||Cope, John|
|Brandon-Bravo, Martin||Cormack, Patrick|
|Couchman, James||McCurley, Mrs Anna|
|Cranborne, Viscount||Macfarlane, Neil|
|Critchley, Julian||MacGregor, Rt Hon John|
|Crouch, David||MacKay, Andrew (Berkshire)|
|Currie, Mrs Edwina||MacKay, John (Argyll & Bute)|
|Dickens, Geoffrey||Maclean, David John|
|Dicks, Terry||McLoughlin, Patrick|
|Dorrell, Stephen||McNair-Wilson, M. (N'bury)|
|Douglas-Hamilton, Lord J.||McNair-Wilson, P. (New F'st)|
|Dover, Den||McQuarrie, Albert|
|du Cann, Rt Hon Sir Edward||Madel, David|
|Durant, Tony||Major, John|
|Dykes, Hugh||Malins, Humfrey|
|Edwards, Rt Hon N. (P'broke)||Malone, Gerald|
|Eggar, Tim||Maples, John|
|Emery, Sir Peter||Mather, Carol|
|Evennett, David||Maude, Hon Francis|
|Farr, Sir John||Mawhinney, Dr Brian|
|Favell, Anthony||Maxwell-Hyslop, Robin|
|Fletcher, Alexander||Mayhew, Sir Patrick|
|Fookes, Miss Janet||Meyer, Sir Anthony|
|Forman, Nigel||Miller, Hal (B'grove)|
|Forsyth, Michael (Stirling)||Mills, Sir Peter (West Devon)|
|Forth, Eric||Miscampbell, Norman|
|Fowler, Rt Hon Norman||Mitchell, David (Hants NW)|
|Fox, Sir Marcus||Montgomery, Sir Fergus|
|Franks, Cecil||Morrison, Hon C. (Devizes)|
|Fraser, Peter (Angus East)||Morrison, Hon P. (Chester)|
|Gale, Roger||Moynihan, Hon C.|
|Garel-Jones, Tristan||Mudd, David|
|Glyn, Dr Alan||Neale, Gerrard|
|Goodhart, Sir Philip||Nelson, Anthony|
|Goodlad, Alastair||Neubert, Michael|
|Gow, Ian||Nicholls, Patrick|
|Gower, Sir Raymond||Onslow, Cranley|
|Greenway, Harry||Oppenheim, Phillip|
|Gregory, Conal||Oppenheim, Rt Hon Mrs S.|
|Grylls, Michael||Ottaway, Richard|
|Gummer, Rt Hon John S||Page, Richard (Herts SW)|
|Hamilton, Neil (Tatton)||Parkinson, Rt Hon Cecil|
|Harris, David||Patten, Christopher (Bath)|
|Haselhurst, Alan||Patten, J. (Oxf W & Abgdn)|
|Hawksley, Warren||Pawsey, James|
|Hayhoe, Rt Hon Barney||Peacock, Mrs Elizabeth|
|Hayward, Robert||Percival, Rt Hon Sir Ian|
|Heath, Rt Hon Edward||Pollock, Alexander|
|Heathcoat-Amory, David||Porter, Barry|
|Heddle, John||Portillo, Michael|
|Henderson, Barry||Powell, William (Corby)|
|Heseltine, Rt Hon Michael||Powley, John|
|Hickmet, Richard||Price, Sir David|
|Hicks, Robert||Proctor, K. Harvey|
|Higgins, Rt Hon Terence L.||Raffan, Keith|
|Hind, Kenneth||Raison, Rt Hon Timothy|
|Hirst, Michael||Rathbone, Tim|
|Holland, Sir Philip (Gedling)||Renton, Tim|
|Hordern, Sir Peter||Rhodes James, Robert|
|Howard, Michael||Rhys Williams, Sir Brandon|
|Howarth, Alan (Stratf'd-on-A)||Ridley, Rt Hon Nicholas|
|Howell, Rt Hon D. (G'ldford)||Ridsdale, Sir Julian|
|Hunt, David (Wirral W)||Rifkind, Rt Hon Malcolm|
|Hunter, Andrew||Rippon, Rt Hon Geoffrey|
|Irving, Charles||Roberts, Wyn (Conwy)|
|Jenkin, Rt Hon Patrick||Robinson, Mark (N'port W)|
|Johnson Smith, Sir Geoffrey||Roe, Mrs Marion|
|Knight, Greg (Derby N)||Rossi, Sir Hugh|
|Knowles, Michael||Rost, Peter|
|Lang, Ian||Rowe, Andrew|
|Latham, Michael||Sackville, Hon Thomas|
|Lawler, Geoffrey||Sainsbury, Hon Timothy|
|Lawrence, Ivan||St. John-Stevas, Rt Hon N.|
|Lee, John (Pendle)||Sayeed, Jonathan|
|Lennox-Boyd, Hon Mark||Shaw, Giles (Pudsey)|
|Lewis, Sir Kenneth (Stamf'd)||Shaw, Sir Michael (Scarb')|
|Lilley, Peter||Shelton, William (Streatham)|
|Lloyd, Sir Ian (Havant)||Shepherd, Colin (Hereford)|
|Lord, Michael||Shepherd, Richard (Aldridge)|
|Luce, Rt Hon Richard||Shersby, Michael|
|Lyell, Nicholas||Silvester, Fred|
|McCrindle, Robert||Sims, Roger|
|Skeet, Sir Trevor||van Straubenzee, Sir W.|
|Smith, Tim (Beaconsfield)||Vaughan, Sir Gerard|
|Soames, Hon Nicholas||Waddington, David|
|Speller, Tony||Wakeham, Rt Hon John|
|Squire, Robin||Walden, George|
|Stanbrook, Ivor||Wall, Sir Patrick|
|Stanley, Rt Hon John||Waller, Gary|
|Stern, Michael||Wardle, C. (Bexhill)|
|Stevens, Lewis (Nuneaton)||Warren, Kenneth|
|Stewart, Allan (Eastwood)||Watson, John|
|Stewart, Andrew (Sherwood)||Watts, John|
|Stewart, Ian (Hertf'dshire N)||Wells, Bowen (Hertford)|
|Stradling Thomas, Sir John||Wells, Sir John (Maidstone)|
|Sumberg, David||Wheeler, John|
|Tapsell, Sir Peter||Whitfield, John|
|Taylor, John (Solihull)||Whitney, Raymond|
|Taylor, Teddy (S'end E)||Wiggin, Jerry|
|Temple-Morris, Peter||Winterton, Mrs Ann|
|Thompson, Donald (Calder V)||Wood, Timothy|
|Thornton, Malcolm||Young, Sir George (Acton)|
|Thurnham, Peter||Younger, Rt Hon George|
|Townend, John (Bridlington)|
|Townsend, Cyril D. (B'heath)||Tellers for the Noes:|
|Tracey, Richard||Mr. Peter Lloyd and|
|Trippier, David||Mr. David Lightbown.|
§ Question accordingly negatived.
§ Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Question on amendments) and agreed to.
§ MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
That this House congratulates the financial services sector on its contribution to invisible earnings, to growth in employment and on the efficient and effective way it raised £6 billion for industry and commerce in 1985; congratulates Her Majesty's Government and the financial services sector on their prompt and effective action against insider dealing; and reaffirms its support for self-regulation within the statutory framework of the Financial Services Act as the most effective system of regulating the City.