HC Deb 03 February 1987 vol 109 cc928-41

'(l) Subject to subsection (2) below, the Secretary of State shall by order made by statutory instrument make provision for prohibiting—

  1. (a) any person from holding the office, or exercising the functions of, Chairman, Deputy Chairman or Chief Executive of the Concessionaires or any of the Concessionaires; or— [Mr. Aitken.]

Brought up, and read the First time.

Mr. Aitken

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

The new clause seeks to safeguard the public interest against unwelcome and hostile changes to the financial and managerial control of the Channel tunnel. This is an important issue, which evidently worries the present so-called management of Eurotunnel because it suggests on page 9 of its prospectus the introduction of legislative changes that are similar to those proposed in the new clause. Unfortunately, however, the British Government, probably because of their ambivalent and doubtful ideology about the free-market purity of the Channel tunnel, have so far declined to tackle this issue. However, that must be tackled soon, because it is now public knowledge that Eurotunnel is already embroiled in what I suspect will be the first of several power struggles for the control of its management.

I shall refer in a moment to the devastating series of newspaper articles with headlines such as "Chunnel group in crisis", which was on the front page of today's Daily Telegraph, "Chunnel's new blow" on the front page of the business news section of The Sunday Times last week, and "Future of Channel Tunnel chief in doubt" from yesterday's Financial Times. The gist of those articles is that the chairman of Eurotunnel, Lord Pennock, apparently wants to go, his self-designated successor, Sir Nigel Broackes, is allegedly disenchanted and would like to resign from the board, and there is general turmoil, chaos and a crisis of leadership within the company. That is hardly the sort of boardroom harmony that one expects from a group which is passing the hat round to raise a mere £750 million from the market in a few months.

However, after all those surprises and even a number of threats, the two full pages of Eurotunnel advertisements that were scattered like expensive confetti through every national newspaper in the country, could not prevent the embarrassing revelations from appearing in print.

Whatever the boardroom row really means—I shall suggest later that it is immensely significant—one thing is crystal clear: far from being the solid, reliable blue-chip institution which it likes to portray itself as in its £10 million advertising campaign, in reality, Eurotunnel is a deeply divided organisation that is plagued by internal dissension, defections and public doubts. Those doubts centre on Eurotunnel's ability to manage the Channel tunnel and to ensure its future financial viability.

There are also grave doubts about the sources of finance for this gargantuan project. If those sources exist at all beyond the rather sorry-looking group of construction companies and other punters who, after a long struggle and severe flagellation from the Governor of the Bank of England, have literally scratched together the initial £206 million of equity for this £5 billion project, according to Eurotunnel's own prospectus most of the rest of the money will come from Japanese, far eastern, middle eastern, African and other Francophone sources.

Mr. Teddy Taylor

Is my hon. Friend suggesting that the Governor of the Bank of England who, of course, has enormous influence and pressure in financial markets, was actually putting pressure on, or twisting the arms of, organisations to get them to find money for the project against their commercial judgment? Surely my hon. Friend is not suggesting such a scandalous activity on the part of the Governor of the Bank of England?

Mr. Aitken

The Governor of the Bank of England is a very fine lord lieutenant of Kent, but I must say that his activities in regard to the funding of Eurotunnel are those of a hyperactive gentleman. Frankly, I have been amazed by his role so far. One of the purposes of my speech will be to suggest that no such role should be played by any official in high places, or by the Governor of the Bank of England in future.

Anyway, with the help of the Governor of the Bank of England, Eurotunnel scratched together the first £206 million, which leaves a mere 96 per cent. of the necessary funds still to be raised.

I shall turn later to the sources of funding for Eurotunnel, because at this stage I should like to make only one preliminary point. It is absolutely vital for the House to understand the importance of the little-noticed clause 32 of the concessional agreement which the Government signed with Eurotunnel on 1 March 1986—incidentally, without any debate in this House. Under that agreement, the Franco-Arabian-African multinational banks, who are putting up at least £4 billion of the money, are given the automatic right to take over the management of the Channel tunnel in what I regard as the highly predictable event of the much smaller sums of equity investment proving inadequate.

Against that background it is not necessary to be labelled a little Englander to have some doubts about whether it is wise to allow a strategic artery of our national communications with Europe—that is how the optimists see it—to be financed in the way that I have described without any safeguards by the potential owners' consortium of 40 multinational banks and investment houses, only two of which are British.

If, instead of the Anglo-French Channel tunnel that we were promised, we end up with what I think will he a Franco-Arabian-African-Japanese tunnel, with, for all we know, the future financial equivalents of Ivan Boesky or Adnan Khashoggi in control of it, let us write into the Bill safeguards that will protect the management and the corporate structure of the company for the benefit of the public interest.

The Channel tunnel has so far proved to be an unloved project, both politically and financially. Politically, even the most ardent tunneller would have to admit that the public reaction to the Chunnel has been at best lukewarm and at worst downright hostile. Yet despite this widespread public and political scepticism, a French President and a British Prime Minister who are sadly infected with the statesman's disease of monumentitis, and a Government majority of 140 in the House, mean that the reality is that the Bill will receive its Third Reading tonight. But it will not be all over bar the shouting. Leaving aside the near certainty of a sticky passage in another place, the real battlefield on which the future of the Channel tunnel will be decided will be in the financial arena and not at Westminster.

In financial terms, Eurotunnel is entering a different and much more desperate ball game. Everyone knows that the Chunnel's fate will be decided by international financiers and not by domestic politicians. Before we consider what safeguards should be written into the Bill it is important to glance at the history and the prospects of the money and management of the Channel tunnel.

The founding shareholders of Eurotunnel, who put up about £43 million, were a group of Anglo-French joint venturers, or joint adventurers, the founders being dominated by construction companies, especially French companies. It is unusual for construction companies to be the founding and dominant shareholders in a project in which they hope to obtain large contracts to be paid for by other shareholders.

The flavour of the construction companies' intentions were rather well summarised by Mr. Francis Bouyges of the Bouyges Construction Company. Mr. James Sherwood, who was then in dialogue with Mr. Bouyges about a rival consortium, wrote a letter on 2 June 1986 which read: Shortly before the concession was granted, Mr. Francis Bouyges, the spokesman for the French contractors, said to me 'Mr. Sherwood, you have no idea what enormous profits exist in this project for the construction companies'. The ambiguous and somewhat avaricious role of the construction companies as founding shareholders was one reason why Eurotunnel found the next and rather small tranche of equity fund-raising so difficult. Equity 1 was the petty cash for the project and equity 2 was the seed money for it. Those efforts have so far raised £206 million of equity, and although that sounds a large sum it is a mere 4 per cent. of the £5,000 billion of equity and loans that the Channel tunnel project needs.

Equity 2 was a public relations disaster for Eurotunnel. The financial press used words such as "fiasco", "desperate scramble", "a rescue from the brink of collapse" and "a shambles" to describe the extraordinary story of missed deadlines, postponements, emergency flights to Paris by bankers and the involvement of Downing street and the Bank of England.

To summarise the position of equity 2, I can do no better than to read from an article about which my hon. Friend the Minister of State is sensitive. In fact, it is rather favourable to the Channel tunnel. I refer to the article which appeared in the remarkably well informed Contract Journal on 20 November 1986 under the headline "Treading water in the City". The relevant extract reads as follows: When the curtain sticks and the leading actor forgets his lines at the dress rehearsal, it does not necessarily mean that the first night is going to be a disaster. But backers get the jitters and start examining contracts for escape clauses. Something of the sort has happened to Eurotunnel, whose efforts to raise £70 million in the City last month very nearly ended in embarrassing failure. Raising £70 million in the UK towards the £206 million second tranche resulted in public humiliation for the financial team which apportioned how much cash Eurotunnel should try to raise in the UK and how much in other leading international markets. On reflection, the United Kingdom application was overoptimistic. For, while France romped home with its £70 million of shares, and Japan and America stumped up, the UK operation was whipped to the finishing post by the Bank of England, reportedly at the behest of Mrs. Thatcher, who cracked the whip in the City for the last £10 million.

Mr. Rowe

I realise that I know a great deal less about the Arab financial world than my hon. Friend, but does it not strike him as ironic that he should quote the private notes of an American president of the company that runs a large slice of what he would undoubtedly describe as a national asset in order to rubbish a scheme that is at present trying to raise money on the international markets?

11.45 pm
Mr. Aitken

I do not know what my hon. Friend is talking about. I cannot quite follow his point. I was making my own speech and quoting from the Contract Journal, which is actually a quite well-known public magazine.

Mr. Rowe

Perhaps my hon. Friend will allow me to explain. My hon. Friend earlier quoted from what must have been the notes belonging to Mr. James Sherwood, an American citizen running a British ferry company, which is surely a national asset.

Mr. Aitken

My hon. Friend seems a little sensitive about this. Mr. Bouyges and Mr. Sherwood are well-known public figures who were at one stage nearly partners together. Correspondence was exchanged between them. Mr. Sherwood wrote a letter which has been circulating around dozens of people and that is the letter from which I have quoted. I do not regard that letter as private notes, as it has been in circulation for some time.

Whatever went on between the various tycoons, the House should focus on the really bizarre nature of this fund raising in the United Kingdom for equity 2. After all—

Mr. Ian Gow (Eastbourne)

Would my hon. Friend remind the House that the baronet, my hon. Friend the Member for Ealing, Acton (Sir G. Young) writes for the very journal to which my hon. Friend has referred? Is it true that my hon. Friend the Member for Ealing, Acton wrote the article from which my hon. Friend the Member for Thanet, South (Mr. Aitken) has quoted? Or did Dr. Johannes Witteveen write the article?

Mr. Aitken

I hesitate to invoke the name of the good doctor, who I think is innocent in this matter. The truth is that, apart from having a vast team of research assistants at my disposal, the devastating quotation came from the magazine Contract Journal. My hon. Friend the Member for Ealing, Acton (Sir G. Young) passed me a copy of that magazine when he was trying to draw my attention to an article on pedal cycles. He was not the author of the article, but he was the source of the copy. He was as innocent as that. He simply passed me the copy of the magazine as he wanted to draw my attention to an article on pedal cycles.

However, I seized on that quotation which summarises the bizarre nature of the fund raising in equity 2. It really does sound very strange. It was the greatest project of all time, according to its backers. Britain was trying to raise a mere £70 million, yet even that limited target could be raised only after whips had been cracked and arms twisted, No. 10 Downing street had been brought into the fray and that great and good man the Governor of the Bank of England had been required to stop regulating the City and chasing the members of Guinness in order to pass around the hat on Eurotunnel's behalf.

Sir Nigel Broackes was the arch-enemy of Eurotunnel in the past, but he was brought on to the board—again, apparently, on the instruction of the Governor of the Bank of England. The only person who was left out of this frantic whip round was the Secretary of State for Transport. I suspect that he and his Ministers of State were omitted so that they could pop up and deny any suggestion that the Department had ever been involved in any of these activities. That is why they come to the Dispatch Box Question Time after Question Time saying that they cannot possibly answer any questions about Eurotunnel because that has nothing to do with them even though it has a lot to do with the Bank of England and everyone else.

Mr. Raynsford

At least they did not send in the Special Branch.

Mr. Aitken

They did not send in the Special Branch. We were spared that.

The odd thing is that we have been continually told that the project has nothing to do with the Government. We have been told that it is a free market project which will be decided by market forces and that the Government will stay at arm's length. The reality has been completely different. I believe that the Governor of the Bank of England will have cause to regret his direct involvement when the full facts come out or if the rest of the money is not raised and those who put in the £206 million lose their shirts.

Some of the truth is dribbling out. On 8 December 1986, the back page of the Financial Times carried a well-informed story by Andrew Taylor under the heading: Founding shareholders help Eurotunnel to meet funding target. The article said: 'Eurotunnel did not expect the founding shareholders to participate in the October issue. In other words, the construction companies were anxious not to have to put their hands into their own pockets. The article revealed: the struggle that, the Anglo-French Channel tunnel consortium had in raising £206 million in an international share placing at the end of October is underlined by a full list of subscribers to the issue. It shows that Eurotunnel would have fallen short of its target by at least £12 million if the founding banking and construction shareholders had not decided to increase their stake in the venture. Total purchases either directly or indirectly by the founding shareholders totalled more than £20 million.

As I have said before, that desperate operation reminded me of an old French proverb: It is a sad woman who has to buy her own perfume. It is a sad and sorry company which, having touted itself all over the world to find new shareholders, cannot find them and has to go back to an unwilling group of founding shareholders and persuade them to pony up for the shares that no-one else would buy.

Mr. David Mitchell

Just so that I understand the position, is my hon. Friend quoting from his speech in Committee? Is he reading Hansard or is he reading a newspaper?

Mr. Aitken

I am reading some of the same quotations, but that was a quotation from theFinancial Times. I am reading it for the benefit of the whole House.

While the traumatic difficulties were going on, the noble Lord Pennock was exuding confidence and optimism about financing the Channel tunnel. There was a quotation from Sir Robin Day's programme "The World at One", when all hon. Members were ticked off by Lord Pennock. He wished that Members of Parliament would stop mucking around with the Bill because he had got banks from all over the world ready to finance the project. That remark was justified. On page 63 of the rivetingly interesting prospectus put out by Eurotunnel, one finds the list of 40 international banks.

My hon. Friend the Minister was working from some other list, because he was able to reveal at an earlier stage in the proceedings that he knew something about a draft list of other bankers, including the European Investment Bank. I am basing my remarks on the printed prospectus which seems the most reliable source of information, since that is what has gone to shareholders. It lists the 40 international banks that have said that they are apparently willing to lend the £4 billion to Eurotunnel. The willingness to lend is subject to a mass of small print conditions that can be extremely easy to wriggle out of. Let us not cavil; the list of potential lenders is there.

The list of lenders is worrying, because the majority of the 40 banks are from outside the EEC. There are 14 Japanese banks that dominate the field, there are several Arab banks and, apparently, even some African banks are willing to support the project. There are plenty of French banks, some of them are even state-owned banks or financial institutions. Those organisations know a good benefit match for the French state when they see one. The British banks are conspicuous by their absence. Of a total of 40 banks, only two are British. Only the National Westminster bank and the Midland bank are brave enough to join in the £4 billion financing project. A tiny slice of the action is going to Britain.

The British institutions, with the direct encouragement and advice of the Governor of the Bank of England, have been told that they should put their money into the equity of the Channel tunnel. That is why a rather artificially high figure of 43 per cent. of British construction companies at this moment own a very small amount of equity. But that situation could not possibly last. Therefore, as many institutions in the City of London were quick to spot, that advice to go into the equity of the Channel tunnel is likely to prove disastrously wrong. As I see it, the equity investors in the Channel tunnel are the equivalent of the first waves of infantrymen at the battle of the Somme. They will be wiped out. The reason they will be wiped out is that not to be wiped out requires, as the red Queen said in Alice in Wonderland, a belief in six impossible things before breakfast.

To give three of the impossible things that one has to believe before breakfast in order to believe that the equity investors will not be wiped out, one has first to believe that this project will be built on time and on budget, which is a triumph of hope over experience for any construction project of such size and scope and underwater difficulty that the world has ever seen.

Secondly, one has to believe that the figures in the Eurotunnel prospectus and its forecasts are going to come true. If I had to pick out just one statistic which makes me certain that the clock has struck 13, it is the figure which says that the Eurotunnel will capture 67 per cent. of the total car traffic market crossing the channel. That figure can only have been plucked out of the air by someone who has no understanding of the psychology of the English motorist—as indeed Eurotunnel shows by its remarkable advertisements placed at such great expense in the national papers. It pictures the Channel in the middle of a hurricane or a force 9 gale, with foaming billows, an albatross diving into the waves, thunder and lightning overhead. The inviting slogan is: You will travel better when you are under the weather". I am sure that is true in January and February, but the bulk, something like 80 per cent., of the cross-Channel holiday motoring market travels in June, July, August and September. The psychology of the British motorist is that he enjoys a touch of the briny and a bit of ozone to cross the Channel, especially if he can do it at a lower price.

That brings me to the third point. Another impossible thing one has to believe is that the Eurotunnel consortium will not be badly hurt by the inevitable price war. As soon as the tunnel opens, it is certain that the ferries, in a desperate effort to fight it off, will dip their prices sharply, which they are able to do, and which Eurotunnel is unable to do because it has to carry the heavy capital cost. In the short to medium term, we will see a price war on the Channel and enormous competition, which will result in the ferries doing quite well.

I am sure, unless I am very wrong, that we will see higher than expected construction costs. The possibility, if not the probability, of the equity investors' funds proving inadequate, I suggest, is very high. What will happen when those equity investors' funds run out? Here we have to turn to clause 32 of the concession agreement, headed "Provisions relating to lenders". It goes on at some length and begins: The parties to this agreement agree that the new Concessionaires shall be substituted for the initial Concessionaires in the following circumstances". These new concessionaires are known as "substituted entities".

The substituted entities are, in a phrase, the lenders. This extraordinary concessional agreement gives virtually an automatic right for the banks to take over and run the whole project as the new management. There are grave dangers in this, because when the consortium just changes its whole nature then comprises not the original equity shareholders but the bankers, only two out of 40 of whom are British, Britain and even the EEC will end up having very small shares in this project, which will lead to managerial changes.

Managerial changes seem to be happening somewhat unwillingly in Eurotunnel at the present time. We have already seen a flood of the sort of "Broackes knifes Pennock" headlines—or is it vice versa—but this is going to be nothing to the shock-horror equivalent of the headline "Boesky and Khashoggi unite to double prices on the Chunnel", which we will see if the substitute entities, who will then be the owners, get together. Although some parts of my speech may seem like scaremongering talk, what I envisage is perfectly possible, given the strange financial structure and the concession agreement.

12 midnight

We have here a swaying house of cards over which Parliament and the Government have abandoned all control. The only people who recognise the real danger are the people in Eurotunnel who, in a whiff of panic, decided that they had better write something into the prospectus to cover them for this kind of eventuality. On page 9 of the prospectus there is a note which says: Consideration is being given by the Governments to the introduction of powers which would be in addition to the existing powers under United Kingdom and French Law which could be embodied in a protocol to the treaty and empower the Governments, following ratification, to prevent any person holding the office or exercising the function of chairman, deputy chairman or chief executive who is not a national of a member state of the European Community and to prevent any person from acquiring by transfer or otherwise a beneficial interest of 20 per cent. or more of the voting capital of Eurotunnel. Eurotunnel thought this thing through. It wants the safeguards. When I raised this matter in Committee the Minister of State at first denied that anyone had ever dreamed of such a scheme. After tremendous correction from the civil servants, he came back and said that they were thinking about it. I am pressing to have these thoughts clarified.

There is a genuine danger that the control of Eurotunnel, both managerial and financial, could shift dramatically away from anything envisaged at present. The Eurotunnel project is of strategic importance to Britain. Certain strategic industries, such as the television industry about which I know something, cannot change managements control or shareholdings without the consent of the governing body—in that case the IBA. In the same way, some safeguards should be written into the Bill to prevent an effective financial or managerial takeover of the Channel tunnel.

Although I do not suppose that Eurotunnel will welcome every word that I have said in moving this new clause, it will see the wording of the clause as the first recorded example of co-operation between the Member for Thanet, South and Eurotunnel. That is because I am trying to write into the Bill exactly what sagacious businessmen who look ahead can see as a danger which needs to be headed off. I hope that the Government will accept the clause now or in the other place, because something like it has to be written into the Bill.

Mr. Robert Hughes

I listened with a great deal of interest and delight to the hon. Member for Thanet, South (Mr. Aitken), who moved the new clause. I am certain that many of his remarks about greedy, predatory construction companies and the disgraceful way in which private capital behaves will be abstracted, not from Hansard, because that would not be allowed, but elsewhere, and will appear in close terms from the election manifesto that I expect to produce in the near future. I have rarely heard in the House such a damning indictment of the way in which private companies operate, and to have it from the horse's mouth is absolutely delightful.

Much of what the hon. Gentleman said, especially his quotations from various newspapers, reminded me of quotations from the seedy saga of TV-am, of which I think the hon. Gentleman has some experience. We have to take it that he is speaking with some experience and some credibility. I quarrel with him on one point. He quoted Mr. Sherwood in aid. I know that what I am about to say may not be appreciated in all parts of the Committee, but Mr. Sherwood is not to be trusted as far as he can be thrown—which is not very far. He constantly parades himself as a defender of the ferry industry and many people are naive enough to believe him. He has damaged the ferries that he operates and his predatory activities have sacked more seamen than are likely to lose their jobs if and when the Channel tunnel goes ahead. Some care should be exercised about the sources of evidence.

The hon. Member, who moved the new clause, said very little about it. He constantly repeated—I shall not attempt to emulate his stage accent—various people and he constantly referred to African banks. What a terrible thing that African banks may have money which they wish to invest in Britain. He constantly mentioned Mr. Khashoggi and the fellow who has been suspended from the New York stock exchange as being people that we should be aware of. I am afraid that the hon. Gentleman let himself down tonight. Although he said that he did not want to be described as a little Englander, the whole of his speech was chauvinistic and disparaging of foreigners in a manner that I regret.

I do not understand what the hon. Gentleman is saying about lenders taking over the tunnel. Once the initial capital is raised the tunnel will be built. The company will not go bankrupt in the process of building the tunnel. It may run into difficulties once it is up and running. If the traffic forecasts are not up scratch it will lose money. Presuming the tunnel is built, if, as the hon. Gentleman suggests, the ferry companies sharply reduce their prices to keep their trade, it is possible that Eurotunnel will go bankrupt. What will then happen if these mysterious and sinister foreign bankers take over? What will they do to affect our strategic link with Europe? Is it as the hon. Gentleman suggests? Will they shut it down? If they take it over they will try to make a success of it. The hon. Gentleman says that they will double the prices. They will not double the prices if, because the company has not previously collected enough revenue it has gone bankrupt. They may—I accept that this is a danger—try to use predatory pricing to drive the ferries out of business.

The logic does not stand up. Eurotunnel will go bankrupt only if the ferries are still thriving. It cannot go bankrupt if the ferries go out of business because it will have a monopoly of the trade. The logic in the hon. Gentleman's scenario does not add up.

The hon. Gentleman suggests that there is the possibility of a price war. We have suggested on many occasions that there ought to be a mechanism to act swiftly to prevent a price war, which would have disastrous effects on the ferries, or indeed on the tunnel if it is built and operating. We should set up an office of Channel fair trading which would be specifically charged with acting speedily and directly on prices and competition. We believe that the existing mechanisms for dealing with unfair competition take too long to deal with the problem. Therefore, there should be one specific body to deal directly with it. That would be a better way to go about it.

On the face of it, new clause 8 has some attractions in that only a national of a member state of the European Community can be chairman of the company. The hon. Gentleman made disparaging remarks about the French, so I do not think that he would welcome a French chairman. I do not think that this new clause provides the sort of security for 10 years ahead—which is about the time that we are speaking of—if the hon. Gentleman accepts my logic, which I do not think he does. It does not provide the sort of protection that is desirable to make sure that there is proper competition, that the ferries are not driven out of business, and that we renew our flexibility with regard to our communications with Europe.

In the face of what I have heard so far, I am not persuaded by any manner of means by the speech made by the hon. Gentleman.

Mr. Teddy Taylor

For the first time in these proceedings I am not entirely at one with my hon. Friend the Member for Thanet, South (Mr. Aitken), because it would be unfortunate for the operation of the tunnel, if it proceeded, if someone was barred from the job of chief executive simply because he was a Swiss, an Australian or an American. It would be unfortunate if we were to deny someone a job on merit because of his nationality.

My hon. Friend has given us some horrifying information about the present financial position and prospects of the tunnel. I want to ask my hon. Friend the Minister one basic question. There has been a major change from the situation when we were told that investors were queueing up to invest in the tunnel to the present situation, particularly after equity 2, when it seems we came close to total financial disaster. The £206 million was not raised easily. The investors were not queueing up and the Minister must be aware that there were postponements on what is a relatively minor sum in comparison with the whole operation.

That should not surprise us. Many documents have been referred to, but the most interesting and authoritative was the five banks' review, in which two of our joint stock banks participated and in which it was made abundantly clear that they thought that it was virtually impossible for the project to proceed unless some guarantee was given by the Government or some public authority for the borrowings, and that is what the Government have, rightly, set themselves against.

My basic question, which is relevant to the new clause, is: could the Minister tell us, and particularly the investing public, what happens if, as seems likely, the £750 million, which I believe is the sum involved in equity 3, does not come forward within the required time scale? The Minister will be well aware that institutions have shied away from equity investment in the project. Quite apart from all the arguments across the Floor, my hon. Friend the Minister will be aware that it was a difficult job to get that. Some of us will have been horrified to have heard the suggestion that the Governor of the Bank of England had to twist arms. I know nothing about that, but I think that my hon. Friend the Minister will be well aware that it was difficult to get the investors in the institutional network to give a relatively small sum which, in Britain's case, was about £70 million. That is peanuts for our institutions. In insurance companies, unit trusts and other such organisations huge sums are available and they obviously did not like the idea of an equity stake in this operation.

Now we are going to the general public who are not, as some people think, silly people. They know a good investment when they see one and they know a rotten investment when they see one. They put their money into offers such as TSB and British Gas because they considered, rightly, that those were good sensible investments for their savings.

The Minister will be well aware that bearing in mind that investors could lose all I heir money that they would certainly not get any return for at least seven years and that the whole project is not regarded as sound by the institutional investors, it is pretty clear that the investing public, the kind of people who invest £500 or £1,000 in a project, will not look eagerly at this despite the flood of advertising.

Will the Minister tell us, and thereby tell the investing public, what will happen if the £750 million is not raised? Will the project come to a complete end so that everything stops, and, sadly, the institutions will lose the £206 million that they have already invested in equity? Or will some other device be found within the framework of the legislation to carry it forward?

Frankly, I was horrified when it was explained earlier by my hon. Friend the Minister that public funds would be used for the project through the European Investment Bank in which the Government have no direct responsibility. They certainly are because, as my hon. Friend the Minister will be well aware, the autumn statement made it abundantly clear that this year the British Treasury is giving £48 million to the European Investment Bank from taxpayers' funds. He also knows that the bank has a board of management consisting only of the finance Ministers of member states. He knows that this is a European institution which is designed. as its prospectus says, to give loans at attractive rates of interest guaranteed by the funds of member states and the sums are borrowed on the basis of the security of member states.

If the £750 million is not raised, will money be provided by organisations such as the EIB, or will money be provided from foreign banks or foreign investors? The investing public, to whom the Government have been fair in their privatisation project, are entitled to know simply what the score is. In other words, if they put in the £750 million they know that the project will go ahead so long as the loan can be secured. That is clear.

What we are entitled to know is what happens if the £750 million is not raised. Does that mean that the project stops or is some other device found to put the cash in? Our understanding in the past was always that a crucial element to progress was the raising of £750 million from the general public.

Therefore, I hope that the Minister will answer what I think is a simple question in a complicated financial situation. The investing public is entitled to an answer because I have a genuine fear that many investors, people with limited savings, are in danger of losing a lot of their money or of putting their money at unreasonable risk. They are entitled to simple information on what the procedure will be if they do not put their money into this project.

12.15 am

Mr. David Mitchell

Those who served on the Standing Committee will have been familiar with the rather tired record that my hon. Friend the Member for Thanet, South (Mr. Aitken) played about the Franco, Arabian, Japanese tunnel. We heard it to the point of tedious repetition. He also made references to the difficulties of Eurotunnel in raising equity. It was a remarkable performance for Eurotunnel to raise that money against a background of no measure on the statute book, the concession agreement not in operation and a unique and expensive knocking campaign mounted by competitors and their mouthpieces.

I wonder how my hon. Friend the Member for Thanet, South would like it if TV-am were raising extra capital on the stock exchange or from its bankers and the BBC ran a knocking campaign of his company designed to undermine the creditworthiness of his operation and to destroy his ability to compete in the market. In short, I wonder whether he would ponder on the business ethics of Flexilink and its spokesmen in using the passage of legislation through this House to try to undermine a new competitor at its birth.

Mr. Aitken

I deprecate the references to Flexilink's ethics which have been totally above board, but if I was by any chance raising a capital sum on the stock market for any business of mine I would certainly welcome the support of the Government and the Bank of England and I would welcome my hon. Friend the Minister as spokesman as I am sure that he would do a good job and would completely destroy any enemy propaganda which all businessmen are used to anyway.

Mr. Mitchell

Business men are not used to the sort of wholesale advertising on the scale which has been indulged in by opponents of this legislation.

My hon. Friend the Member for Southend, East (Mr. Taylor) should not be frightened by my hon. Friend the Member for Thanet, South. I warn him of the dangers of listening too carefully to the flights of fantasy of my hon. Friend the Member for Thanet, South which tend to divorce themselves from reality. The matter for the House is to pass legislation to facilitate the tunnel. The matter of raising finance is for Eurotunnel and not for the Committee. The amendment sets out to control the nationality of senior officers of the concessionaires.

Mr. Teddy Taylor

Surely this project has a structure set out under which we understood that £750 million equity was an integral part. That, I understood, was a requirement of the Government. Surely the Minster can say what would happen if the money was not raised from the general public. Is not that a simple request to make?

Mr. Mitchell

We have made it clear on numerous occasions that it is up to the promoters to raise the money and to set out their stall to do so. If they do not succeed in raising it, the Government will not put money into the project. That is the position as stated repeatedly on previous occasions. It is no different now. This amendment sets out to control—

Mr. Robert Hughes

The hon. Member for Southend, East (Mr. Taylor) is entitled to a straight answer. He wants to know whether, if Eurotunnel does not raise the money, the project stops until presumably some new consortium has to negotiate a new concession agreement. In other words, if the money is not raised, the tunnel will not be built.

Mr. Mitchell

Within the confines of the paramaters that the hon. Gentleman has drawn, he is correct. Of course, there may be other sources, but I am not in a position to comment on that. It is entirely a matter for the promoters. It would be wrong for the Government to give what would be, in effect, a letter of comfort. We have said all along that this is a private sector operation, and the matter of raising money is for the promoters, not for the Government.

Mr. Hughes

Am I right in my contention that, if Eurotunnel cannot raise the money, that is the end of the matter? However, if a new consortium put up a new proposition and could raise the money, would a new concession have to be signed?

Mr. Mitchell

I hesitate to give an answer at 12.20 am on a matter that needs careful thought. I think that the hon. Gentleman is right, but I shall write to him and put the matter beyond a peradventure.

The new clause sets out to control the nationality of senior officers of the concessionaires and to limit the acquisition of large shareholdings by individuals who were not nationals of the European Community. It has a number of technical deficiencies—for example, the term "person" in a statute includes legal person, unless otherwise stated, and would catch companies, including the concessionairies' holding companies Eurotunnel plc and Eurotunnel SA. The implication of persons and nationals seems to conflict with that. There is a whole series of other technical defects in the new clause.

The hon. Member for Aberdeen, North (Mr. Hughes) rightly drew attention to the non-logic of the case of my hon. Friend the Member for Thanet, South. The Arabs and the Japanese investors are hardly going to dig up the tunnel and take it to the middle or far east. I am not sure that my hon. Friend has been able to define the alleged damage that such investors might do.

In Committee I said that we were considering with the French Government and the concessionaires whether there should be additional safeguards to ensure that the management of the concessionaires did not fall into undesirable hands. If this consideration shows that some restriction is necessary, and that an amendment to the Bill is required to implement it, the Government will introduce such an amendment in another place.

On that basis, I invite the House to reject the amendment should my hon. Friend not feel able to withdraw it.

Mr. Aitken

My hon. Friend's closing words were a gracious sign that the points that I have sought to make were, at least to some extent, valid, even though he quarrelled with certain issues. Indeed, I was convinced by the valid point made by my hon. Friend the Member for Southend, East (Mr. Taylor) that it would be wrong to exclude for all time, under all circumstances, someone such as a Canadian managing director—

Mr. Teddy Taylor

He might be a French-Canadian.

Mr. Aitken

Indeed, and then we could compromise.

It has been a useful exercise for the House to understand some of the financial problems inherent in this basically unsatisfactory financial structure. I have made my speech and I will not elaborate on the points further.

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn

Forward to