BP Share Issue

HC Deb 29 October 1987 vol 121 cc540-53

10.5 pm

The Chancellor of the Exchequer (Mr. Nigel Lawson)

With permission, Mr. Speaker, I would like to make a statement about the BP share issue.

I told the House on Tuesday that the United Kingdom underwriters to the BP offer had invoked the contractual provision requiring the Treasury to consult on whether the offer should proceed, and I explained the legal procedures that flowed from this. These procedures have now been completed and I wish to announce my decision to the House. It is that the offer should proceed.

In reaching that decision I have taken full account of the views expressed by BP, by Rothschild's on the underwriters' behalf, and by the Bank of England in its assessment.

The Government's practice throughout the privatisation programme has been to have Government share sales underwritten. The BP offer was duly underwritten on 15 October. From that moment, the British taxpayer has been entitled to the proceeds of the issue at the offer price, just as the underwriters have been entitled to the fees which they receive under the agreement unless the agreement were terminated.

However, I recognise the concern that in current unsettled market conditions the sale could have an adverse effect on market sentiment, particularly in markets outside the United Kingdom where underwriting is concentrated in relatively few hands. And the prospect of an unsettled after-market is naturally of particular concern to BP itself.

I have therefore agreed with the Bank of England arrangements designed to prevent a disorderly market in part-paid BP shares—[Interruption.] I shall start the paragraph again. Right hon. and hon. Members should listen because it is of some significance.

I have therefore agreed with the Bank of England arrangements designed to prevent a disorderly market in part-paid BP shares developing when dealings in these commence tomorrow. The issue department of the Bank of England will be ready for the next month to purchase these partly-paid shares at a price of 70p, which is roughly equivalent to the price implied by the level at which the fully-paid shares closed in London tonight. These arrangements, which will be put in place as soon as practicable, and certainly by the end of next week, will last for at least one month and not more than two months. Partly-paid BP shares acquired by the issue department will not be resold within the next six months unless the price rises above 120p. These arrangements have been cleared by the regulatory authorities in the United Kingdom.

I would like the House to be quite clear about the objectives of my decision: first, and most important, to allow taxpayers to secure the full proceeds of the BP sale to which they are entitled; secondly, to ensure that there are orderly after-markets in BP shares; thirdly, to make quite sure that the sale does not add to present difficulties in world markets. It is not my objective in any way to bail out the underwriters, whether in this country or elsewhere. By proceeding as I have indicated, the City will uphold its reputation as the world's leading international financial centre.

Mr. John Smith (Monklands, East)

It is hardly satisfactory to be handed this statement as the Chancellor walks into the House of Commons. However, I can appreciate his difficulty after days of dither and confusion —[Interruption.]

Mr. Speaker

Order. These are very serious matters.

Mr. Smith

Is it not clear that this must be the first privatisation which has renationalisation built into it? That perhaps explains the difference between the tone which the Chancellor has adopted today and that which he adopted on Tuesday, when the clear implication was that N. M. Rothschild and others would get no sympathy whatsoever from the Iron Chancellor.

We have noticed, as we have noticed before, that this Government are prepared to intervene when financial interests are at stake but never when the interests of the country are at stake. The sad fact is that the Government, driven by dogma, are determined to drive through this sale and they are placing the Conservative party's interest before the true national and international interest. Is it not the case that the first victim will be BP, Britain's largest company? Has not BP made vigorous representations to the Government that the sale should not proceed? I invite the Chancellor to tell us what BP said to him. Is not BP appalled that over 30 per cent. of its shares will be held by the most unwilling shareholders in financial history? Is it not the case that BP—[Interruption.] I hope that Conservative Members will listen with a little care to the fate of British Petroleum. Is it not clear that BP will suffer from an inevitable over-hang in its shares which will greatly weaken the company's ability to finance its future operations? [Interruption.] I do not regard that, as do Conservative Members, as a matter for hilarity. I regard it as a matter of grave seriousness for BP and this country.

The interests of BP have been cast aside in the interests of the Conservative party and the Chancellor's need to sell the silver for the political purposes of the Conservative party. Is it not clear that, at a time when the Chancellor has a special responsibility to encourage stability and order in troubled financial matters, he did not take the step which would have created the greatest confidence—to abandon the sale and to announce that it would be abandoned permanently? Instead, to save his political face, he has come up with this curious buy-back arrangement. What will it cost the taxpayer when the Bank of England has to buy the shares at 70p, however low they fall in the market? The right hon. Gentleman has created a floor for the very underwriters whom he told us had to hear the responsibility of their liability. Once again, a lifeboat is being organised to help out the underwriters with whom the Chancellor was going to be so stern a few days ago. Would it not help us all if the Chancellor announced that he was now abandoning not only BP but the foolish threat to privatise water and electricity? He knows that, unless he has some special arrangements such as that, he will find it difficult to underwrite them, and he may find it very difficult to sell them. To get some sanity back to these matters, should he not take the clear-cut decision, which should have been taken days ago, not to abandon BP but to put privatisation to rest and let us get on with some serious subjects?

Mr. Lawson

It is quite clear that the right hon. and learned Gentleman had written his little speech before he knew what I was going to say—I dare say he thought I was going to say exactly the opposite. I shall be brief.

On the first question, I should like to make it absolutely clear that there was no question of any dithering or confusion. The procedures had to be gone through. In fact, I did not receive the Bank's assessment until after 6 o'clock this evening.

Secondly, on the right hon. and learned Gentleman's remarks about either the privatisation or nationalisation of BP, he seems to have failed to notice that BP is in the private sector already. As for his concern for BP, my concern for BP was one of the main reasons I put in place the arrangements to have an orderly after-market in the company's shares. Finally, he has failed to understand the whole point of this operation. Under the operation which I have mentioned, the underwriters will bear the full loss of over £1 billion on the shares between the price at which they had to take them and the floor price that I have set. Under the right hon. and learned Gentleman's proposal of pulling the sale—[Interruption.] Oh yes, he said that we should not go ahead with the sale. He would have handed back the £1 billion to the underwriters. We know that the Labour party today is simply the friend of Goldman Sachs. [Interruption.]

Mr. Speaker

Order. I hope that the House will listen to those hon. Members whom the Chair calls and not ask questions from a sedentary position.

Mr. Terence Higgins (Worthing)

Is my right hon. Friend aware that he is to be congratulated on an extremely difficult decision? As the matter is rather complex, will he tell us whether he can estimate the likely effect on the public sector borrowing requirement?

Mr. Lawson

It is impossible to make any estimate of the effect on the public sector borrowing requirement because it is impossible to say how many underwriters, or indeed any other applicants, will be prepared to sell their partly-paid shares for the price of 70p against the 120p for the partly-paid shares which they had to pay. To the extent that they do, obviously that will be deducted from the £1 billion, which is the value to the Government of the first instalment.

Mr. Robert Maclennan (Caithness and Sutherland)

In the light of the buy-back arrangement, will the Chancellor, at least in future, spare us his cant on the virtues of the free market? Would it not have been more frank of him, having staked his all on this mega-flotation of BP, to have admitted that he has put his chips on black and the market has come up red? Far from having come before the House as a prudent Chancellor, is it not clear that he is in fact a reckless gambler who has been to the table once too often?

Mr. Lawson

I congratulate the hon. Gentleman on his percipience in noting that the market has fallen. However, far from being a gambler, I was extremely prudent. I took out an insurance policy with the underwriters.

Mr. Ray Whitney (Wycombe)

I congratulate my right hon. Friend on reaching a decision which, when it is carefully considered by the House and by the country, will be recognised for the value that it contributes in a difficult situation. Whatever may happen to the underwriters and whatever may happen at this juncture to the public sector borrowing requirement, what is important is the contribution that this decision makes to international economic and financial stability. The Chancellor and his right hon. Friends are to be congratulated on that judgment. Does my right hon. Friend agree that the right hon. and learned Member for Monklands, East (Mr. Smith) failed to read his script, to keep up with the play, or to understand what my right hon. Friend has just said?

Mr Lawson

My hon. Friend is right in what he says about the right hon. and learned Member for Monklands, East (Mr. Smith). He is right to point to the fact that, had there been this badly disorganised after-market in BP, this could have had—it may not have had a big effect, but it was a risk that I had to consider—an adverse effect on stock markets generally. That could have had an effect on the prosperity of the people of this country in these present circumstances. Therefore, I felt that it was right in these exceptional circumstances to put in place this support just below the current market price.

Mr. John Morris (Aberavon)

Will there be any adjustment to the fees paid to the underwriters, and when will the right hon. Gentleman publish the total cost to the taxpayer?

Mr. Lawson

I will provide the total costs of the offer, including the costs of the fees to the underwriters, as soon as practicable. The taxpayer, however, has had an extraordinarily good deal out of this.

Sir Peter Emery (Honiton)

Does my right hon. Friend agree that what he has achieved is that the underwriters and the City, in their words, have been held to the contract that they entered into with the Government and that, at the same time, the Government have ensured that world markets will not be upset by this issue? It is quite brilliant.

Mr. Lawson

That was certainly the purpose of the conclusion that I reached. I take this opportunity to pay tribute to the City of London and in particular to the sub-underwriters. The Association of British Insurers said: ABI Members are quite prepared for the issue to go ahead and they will, of course, meet the obligations they have undertaken. There is no question of the ABI membership seeking to put pressure on the Government to have the BP issue postponed. Had this issue been postponed, halted altogether or abandoned, and the underwriters relieved of their obligations, as the right hon. and learned Member for Monklands, East sought, the reputation of the City of London would have been tarnished forever.

Mr. Michael Morris (Northampton, South)

Is my right hon. Friend aware that his measured response to these difficult trading conditions is greatly to be welcomed. Does he also agree that, whilst it is sad that United States brokers appear to be in difficulty and that the United States Treasury appears unable to help them, it is good that the Bank of England and the British financial sector are sufficiently strong to be able to provide a lifeboat for those in difficulty across the pond?

Mr. Lawson

I would not call this a lifeboat. I think that the House will find that the underwriters do not consider it a lifeboat. If it is a lifeboat, it is the most expensive lifeboat that they have ever seen—expensive for them. My hon. Friend made a good point. This has shown that the City of London, with its tradition and practice of sub-underwriting into sound hands, is a much better place to make share issues than any other financial centre of the world.

Mr. Merlyn Rees (Morley and Leeds, South)

Will the Chancellor confirm that one factor leading to his decision was direct representations from the American underwriting institutions? Will he tell the House whether any representations were made directly by the American Administration?

Mr. Lawson

What I will tell the right hon. Gentleman — [HON. MEMBERS: "Answer the question."]— is that there were very, very forceful representations from the United States, various quarters of the United States, all of them, or nearly all of them—there were exceptions and The Wall Street Journal today incidentally had a very good leading article urging us to go ahead — that I should follow the advice of the right hon. and learned Member for Monklands, East (Mr. Smith) and not go ahead with the offer. I declined to accept those representations.

Mr. Alex Salmond (Banff and Buchan)

Does the Chancellor accept that setting a floor price for the BP share issue is, in effect, a subsidy from the taxpayers to the underwriters and that following today's announcement the Iron Chancellor will be known as the Marshmallow Chancellor? Does he agree that while he is offering the underwriters a lifeboat the Labour Front Bench would have offered them the whole ship? Will he explain why he is so opposed to subsidies in every area of the economy except when they are subsidies to the City of London?

Mr. Lawson

It seems to me to be a very strange subsidy to the underwriters if they are obliged to pay 120p for the shares that they have underwritten and then, if they sell them back to the issue department of the Bank of England, they get only 70p. That seems a very strange idea of a subsidy.

Mr. Neil Hamilton (Tatton)

As the Opposition have criticised all previous privatisation measures, which have been oversubscribed, as selling shares at a discount, why are they not delighted that on this occasion we are selling shares at a premium?

Mr. Lawson

I remember being puzzled by this myself at the time of the Britoil sale, which was also underwritten. The plain fact is that shares sometimes open dealing at above the issue price and sometimes at below the issue price. The Opposition complain in every single case, whichever way it goes, from which one can draw only two conclusions. One is certainly that they disapprove of privatisation, with which indeed we shall be continuing, and which will go from strength to strength. The other is that they do not understand a thing that they are talking about.

Mr. Stuart Bell (Middlesbrough)

Is the Chancellor aware that it is his own reputation and that of the Government that will be tarnished in the eyes of the British people? His angry responses show his irritation at that fact. What is the subsidy, hidden or otherwise, to the American underwriters as well as to the English underwriters? If 70p is to be paid to those wishing to sell their shares, would that still be the case if the share price was 35p?

Mr. Lawson

At the moment 70p is just below the equivalent of the market price. That offer will remain open for not less than one month and not more than two months, and of course it is there, it is an undertaking whatever happens to the stock market.

Mr. Tony Banks (Newham, North-West)

What price the free market now?

Mr. Lawson

It is quite impossible to estimate the cost because one does not know how many people will avail themselves of this offer, or what the share price will be during the period, but what is quite clear is that the cost will be minuscule compared with what the Government are getting from the proceeds of this offer.

Mr. Robert Adley (Christchurch)

Will not the country treat with contempt a party such as the Labour party which jeers at the ingenious solution that my right hon. Friend has found but fails to recall that the whole process of selling BP shares was begun under a Labour Government by the right hon. Member for Chesterfield (Mr. Benn)? Should we not pay tribute to the British people for having the good sense to put the economy and the fortunes of this country in the hands of the Conservative party and not in the hands of the rabble on the Benches opposite?

Mr. Lawson

That has been increasingly apparent as the exchanges on this issue have developed. When my hon. Friend referred to the first sale of BP shares by the Labour Government 10 years ago, he might also have reminded the House that it was the equivalent, in today's prices, of a fully-paid share of under 100p.

Mr. Terry Davis (Birmingham, Hodge Hill)

What will be the cost if everyone goes to the buy-back arrangement?

Mr. Lawson

That is not going to happen.

Mr. Teddy Taylor (Southend, East)

In order to ensure that this brilliant solution—to a problem that simpler minds like mine had thought insoluble — works effectively, will the Chancellor use his influence through the Bank of England to ensure that, in areas in which the Government have influence, there will be no other substantial public flotations during the next two months?

Mr. Lawson

I am not quite sure what particular issue my hon. Friend can possibly be thinking about. If it is the Channel tunnel, by any outside chance, I have to tell him that the decision on whether and when to go ahead—I am sure that it will go ahead at the appropriate time—will be taken by the company itself. The Government will not have any influence over that.

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

What sort of commentary is it on the Chancellor's theory of market economics if the Government cannot float one of the richest, most powerful and profitable companies that the world has ever known without intervention because markets cannot cope? Will the right hon. Gentleman confirm that he will be announcing a cut in interest rates tomorrow morning to soothe the markets?

Mr. Lawson

Interest rates will be kept at whatever level is appropriate in the circumstances, keeping in mind the need to bear down on inflation. I shall adjust interest rates as and when I think it is right to do so.

Mr. Ian Bruce (Dorset, South)

I thank my right hon. Friend the Chancellor for preserving the jobs and integrity of my BP workers at Wytch Farm in Dorset. Will he comment on a strange change that has taken place? Conservative Members have been rather unfair to the right hon. Member for Chesterfield (Mr. Benn). I have done a little research and can tell the Chancellor that when the right hon. Member was Secretary of State for Energy he consistently maintained that the investment of the British Government in BP shares was a Treasury matter, and not a nationalisation.

Mr. Lawson

I recall that, but as the right hon. Member for Chesterfield (Mr. Benn) is, unaccountably, not in his place, I do not think we need to dwell on it.

Mr. Gavin Strang (Edinburgh, East)

In the aftermath of this debacle, will the Chancellor now accept that a distinction needs to be drawn between a person who invests in a company with a view to obtaining some benefit over a period from increased output and profits, and a person who buys a state asset at a knock-down price to make a fast buck? Do not the Government realise that by encouraging the latter at the expense of the former they are giving private share ownership a bad name?

Mr. Lawson

I am surprised that the hon. Gentleman should be so concerned about the good name of share ownership. I am not only surprised, I am delighted that enlightenment is dawning even in the strangest places. As for the suggestion that the BP share issue was sold at a knock-down price, I do not know where the hon. Gentleman has been.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Does my right hon. Friend agree that, when the Opposition have got over the disappointment of his doing precisely the right thing, they will realise that the City of London's word will have been shown to be its bond—it should be remembered that it earns £10 billion a year for the country—and that the problem arose on Wall street? The Chancellor has done exactly the right thing by keeping our name and our nerve. The weak sisters in America have shown the strength of London and how right it is that we are the centre of the financial world.

Mr. Lawson

My hon. Friend is right. The City of London comes out of this very well compared with other financial centres. For future privatisations, of which there will be many, I shall certainly need to reconsider the practice of having overseas underwriters.

Mr. James Wallace (Orkney and Shetland)

The Chancellor's comments about the small investor came almost as an afterthought in his reply to the right hon. and learned Member for Monklands, East (Mr. Smith). In view of all the money that was spent on advertising to encourage the small investor, even this minimal relief will represent a great loss for small, inexperienced investors. Is this not a kick in the teeth for people whom the Government have been trying to encourage?

Mr. Lawson

Obviously I am concerned about the small investor. That is why, as soon as the stock market fell, I withdrew all the advertising. I thought that it was right to do that. Of those small investors who have subscribed, I believe that the overwhelming majority subscribed as long-term investors, not as short-term holders. I believe that we shall find that this is a good long-term investment in Britain's largest company.

Mr. John Browne (Winchester)

Will my right hon. Friend accept my congratulations on a courageous and historic decision which has shown sensitivity to the market place, firmness and, most important of all, confidence in the market, the financial system in the City and the issuing company? Will he confirm that the precedent for maintaining orderly markets after a new issue exists and that that is greatly in the interests of the issuing company and its shareholders and, therefore, of the taxpayer?

Mr. Lawson

That is right. The real issue that I had to decide was the choice between going ahead with the sale and then, obviously, as any responsible Government would do in the present circumstances, doing something to produce an orderly after-market, and aborting the sale altogether. I decided that it was right to go ahead.

Mr. Greville Janner (Leicester, West)

What advice does the Chancellor give to the small investor whom he conned into buying shares at great cost and who is suffering, and will continue to suffer, as a direct and immediate result of this so-called historic decision?

Mr. Lawson

As I said, small shareholders who have put their money into BP have overwhelmingly done so as a long-term investment. We have encouraged them to do that by having a loyalty bonus for them if they hold shares for a certain length of time, during which time they will enjoy the success of the company as measured in the dividends that they receive. The small investor, I am sure, will be glad to have had a holding in BP, even though all investors have clearly not been unaffected by the fall in the stock market.

Mr. Tim Yeo (Suffolk, South)

Will my right hon. Friend confirm that, so far from bailing out underwriters with taxpayers' money, even if every underwriter took advantage of the offer to repurchase shares at 70p, they would collectively suffer a loss of more than £1 billion and that, if that were to be the case, the Government would own exactly the same number of shares in BP as they did three months ago, but would have received more than £1 billion and thereby would have effected the greatest short sale in history?

Mr. Lawson

My hon. Friend has understood the position entirely accurately. That was certainly not our intention when we made the offer, but it is the position today.

Mr. Allan Roberts (Bootle)

Is that the position? The Government could have bought the shares back freely on the open market at less than 70p, if the market fell below that, and made more than £1 billion. Has not a deal been done between the Government and the underwriters? The flotation had to go ahead to save the Government's face, but some subsidy had to be arranged for the underwriters, or they would not have underwritten the flotations of water and electricity. That is the deal that has been done: a direct subsidy for the underwriters, and an intervention in the market by the Government to prevent the shares from falling below 70p.

Mr. Lawson

Had I sought to help the underwriters, I should have taken the advice of the right hon. and learned Member for Monklands, East (Mr. Smith) and cancelled the offer. Instead, I did what was right in the circumstances — right for the City, and right for the Government's privatisation programme.

Mr. Michael Fallon (Darlington)

Did not this technically brilliant solution secure some £7,000 million for the public purse and in the interests of the taxpayer? Can my right hon. Friend tell us how much was raised by the first sale of BP?

Mr. Lawson

I do not recall the sums, but it was certainly considerably less. The price per share was under 100p in today's equivalent, compared with the 330p for which we have sold our 31 per cent. stake in BP today.

Mr. Harry Ewing (Falkirk, East)

Will the Chancellor answer the question asked by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith)? What did BP say to the Chancellor when it had discussions with him yesterday and again today? Is the right hon. Gentleman aware that, to save the face of the Tory party, he has put at risk the future of a great company which employs many thousands of people in constituencies throughout the country? Any other Chancellor who had made such a mess of such a serious and important financial matter would have resigned. Why does not the right hon. Gentleman give his resignation to the Prime Minister?

Mr. Lawson

The hon. Gentleman must recognise that there have been difficult market conditions. As for what BP said, the company informed me that it was very concerned that there should be an orderly after-market in its shares.

Sir Peter Tapsell (East Lindsey)

Does my right hon. Friend agree that, while the BP issue naturally assumes very great importance to us here tonight—and my right hon. Friend seems to have dealt with it very skilfully—we must bear in mind that we are talking about a little over £1 billion, after a fortnight in which the stock markets of the world have fallen in value by $1,000 billion. The wider problem remains. Will my right hon. Friend be continuing the energetic search for international co-operation to deal with it?

Mr. Lawson

My hon. Friend is right. Of course I shall be doing that. It is very important that we move swiftly to international agreement on measures to deal with the current financial problem. At the heart of that must be effective action by the United States to reduce the federal deficit significantly, by more than the $23 billion suggested in the Gramm-Rudman II Bill, and to do it in ways that will be credible in the markets. With that as the centrepiece, I believe that it is possible for other countries to contribute their part. Certainly we in the United Kingdom are fully prepared to contribute ours.

Mr. D. N. Campbell-Savours (Workington)

Have the underwriters, either here or in America, considered—or threatened—legal action against the Government on the basis of a different interpretation of the underwriting contracts from that which the Chancellor would accept?

Mr. Lawson

I have heard one or two rumours of that, but an awful lot of rumours fly around. I have no evidence of that whatsoever.

Mr. Peter Thurnham (Bolton, North-East)

Following his wise decision, will my right hon. Friend say how much of the £1 billion underwriting loss will be borne by overseas underwriters, to the very clear benefit of this country?

Mr. Lawson

I do not think that we are particularly in business in order to extract money from other countries by these means, but it is certainly true that the biggest single losses will be borne by United States underwriters.

Mr. Doug Hoyle (Warrington, North)

Will the Chancellor say what has happened to popular capitalism, or people's capitalism? Has it been temporarily abandoned, or has it been permanently abandoned? What has happened to the free market? Has the free market been temporarily abandoned, or has it been permanently abandoned? How many more Conservative principles are to be abandoned under the right hon. Gentleman's Chancellorship before he resigns?

Mr. Lawson

That was a rather tired question. Popular capitalism is alive and well. One in five adults in this country now owns shares, and that number will steadily increase.

Mr. Kenneth Hind (Lancashire, West)

I congratulate my right hon. Friend on the very sensible and quite brilliant method of dealing with this matter. One factor that the Opposition fail to realise is that by taking the action that he has taken my right hon. Friend will shore up the market in BP shares, that he will safeguard the future of that company and that he will also give confidence tomorrow to the markets in London and throughout the world, which can only be good for future world stability?

Mr. Lawson

I am grateful to my hon. Friend. Confidence throughout the world is affected primarily by many other factors, to some of which I referred when I replied to the question of my hon. Friend the Member for East Lindsey (Sir P. Tapsell). However, in so far as the outcome of the BP controversy is a factor, the decision that I have taken will clearly be a stabilising element in the question.

Mr. Dick Douglas (Dunfermline, West)

While most hon. Members have on occasion had great sympathy for the Chancellor, tonight he is dangerously looking rather like the Joe Bugner of the financial markets. He fights a good fight with the underwriters, but is it not a fact that he has placed the Bank of England as underwriters of last resort, not just to United Kingdom financial institutions but particularly to American financial institutions, a role in which the Federal Reserve and the banking institutions of the United States might have refused to involve themselves?

The Chancellor has refused to say what was the exact position of Sir Peter Walters and the board of BP in relation to the Chancellor's actions this evening. Will the right hon. Gentleman confirm or deny that BP's view was that this sale should have been aborted?

Mr. Lawson

No, I shall not reply in those simple terms, because the discussions with BP were confidential. However, I can assure the hon. Gentleman that what took place does not correspond with the account that he has just given to the House.

Mr. Nicholas Winterton (Macclesfield)

Does my right hon. Friend accept that, whatever be the market price of BP shares at the moment, their asset value is tremendous and holds superb potential for the future, that many of the small shareholders, about whom hon. Members on both sides of the House are concerned, will wish to hold these shares, and that they will look not only to their asset value for the future but to the dividend income that they will obtain from them?

Mr. Lawson

My hon. Friend is right. That is the second time today that I have agreed with him in the House. It must be a record.

Mr. Dennis Skinner (Bolsover)

Following the remarks of the hon. Member for East Lindsey (Sir P. Tapsell) in respect of the continuing crisis which sparked off the problems with the BP sale, and taking into account what the Chancellor said tonight, is the right hon. Gentleman aware that he is not likely to get much assistance from West Germany and Japan in solving the crisis, because they have won the economic war? With a trade surplus between them of $120 billion, why should those two nations care tuppence about bailing out the Chancellor or even the Americans?

As for the sorry saga with BP, history will record the fact that another Tory, Winston Churchill, bought the shares for £2 million, while in 1987 the Chancellor of the Exchequer tried to sell the first tranche at 120p and then had to fix another market price at 70p, with consequential costs to the taxpayer, at a time when child benefit has been frozen and the pensioners and disabled are being hammered.

Mr. Lawson

The hon. Gentleman fails to grasp the fact that there can be only substantial benefit to the taxpayer from this. If the taxpayer sells the shares at 120p and then buys some of them back at 70p, he will have made a profit.[Interruption.]

Mr. Speaker

Order. The hon. Gentleman asked a long question and he got his answer.

Dr. John G. Blackburn (Dudley, West)

Will my right hon. Friend accept the congratulations of the House and the nation on his courage and skill in making this statement tonight? Does he agree that the brightness of the reputation and honour of the City of London remain untarnished, and that that of the company is reflected by its ability to produce profits? The statement will certainly enhance the reputation of BP.

Mr. Lawson

A main reason, which weighed very heavily with me, why I decided that it was right, having heard representations, many of which were in the contrary direction — as the House knows, the majority of the underwriters asked for the issue to be called off—to go ahead, was my profound concern that the reputation of the City of London should remain untarnished. It was important that, whatever the pressures may have been in other financial centres, that reputation should continue to ride high. During this experience, we have seen the much greater soundness of the City of London compared with other financial cities.

Mr. Dave Nellist (Coventry, South-East)

If the Chancellor's announcements this evening, especially the buy-back procedures, were necessary to avoid instability after flotation, because of the effect that that could have on the prosperity of the country, what effect will the 25 per cent. fall in share values in the past 14 or 15 days have on the prosperity of the country?

Mr. Lawson

As I said on Tuesday, the fall in share prices worldwide will have a dampening effect on economic activity, and that will affect the prosperity of the British people as well as people thoughout the world. At this stage, it is impossible to put a figure on the extent of that damage. I am striving, in my actions in this country and in collaboration with my opposite numbers overseas, to take action which will minimise the effects on the world economy of the sharp fall in stock markets.

Mr. David Shaw (Dover)

Will my right hon. Friend confirm that the principal concern of financial markets is confidence and that, as a result of his actions today, the City of London has increased the confidence of people in various markets and the Government and their financial strategy have retained the confidence of people around the world? Does he agree that the only loss of confidence is that in the Opposition?

Mr. Lawson

Of course, the electorate delivered a very substantial vote of no confidence in June of this year and subsequent events have vindicated that.

Mr. Nellist

How about an election next week?

Mr. Lawson

As to the suggestion from a sedentary position by the hon. Member that we should have an election next week, I feel that that would put the people of this country to unnecessary inconvenience, given that our position in the polls is even higher now than it was in June.

Several Hon. Members

rose —

Mr. Speaker

Order. I shall call hon. Members who have been regularly trying to catch my eye, but I ask them not to repeat questions that have already been asked.

Mr. Rhodri Morgan (Cardiff, West)

When proceeding with the BP share sale — after a fashion — will the Chancellor of the Exchequer be having discussions with the right hon. Member for Chingford (Mr. Tebbit), the chairman of the Tory party, to see whether he intends to continue with his normal practice after a privatisation of writing to the lucky shareholders offering them, as an additional blessing, membership of the Tory party and cut-price crates of Christmas claret—Chateau Rothschild usually, I believe. Perhaps the right hon. Gentleman considers that unnecessary because in this case it will be the 100,000 disgruntled shareholders who will be writing to the chairman of the Conservative party.

Mr. Lawson

I cannot answer for my right hon. Friend the Member for Chingford (Mr. Tebbit), although I am very happy to discuss this matter with him, as I am to discuss any matter with him; he is very good value. As for the hon. Gentleman's observations, I congratulate him on his perspicuity in noticing that shares can go down as well as up.

Mr. Ian Taylor (Esher)

Will my right hon. Friend confirm that the parallel transaction in the BP placing—the rights issue — has also been enabled to go ahead because of his action this evening? Can he therefore refute the Opposition's claim that BP is in a worse position as a result of his shrewd action today?

Mr. Lawson

My hon. Friend is right. BP was anxious to raise £1½ billion to repay borrowings which it had incurred as a result of the Sohio acquisition. This means that it will be able to repay its borrowings and be in a stronger position as a result.

Mr. Ron Brown (Edinburgh, Leith)

Is it not clear that the crisis of the capitalist system will continue and that jobs will be put in jeopardy, particularly at BP? Will the Chancellor say something about that—or do jobs not matter to this Government?

Mr. Lawson

There is no danger to any jobs in BP. As for jobs generally, I am sure that the hon. Gentleman will welcome the fact that unemployment in this country has fallen more rapidly in the last year than it has in any other country.

Mr. Nigel Griffiths (Edinburgh, South)

Is it not demeaning for the Chancellor of the Exchequer of this Government in crisis to be dragged reluctantly to the House of Commons earlier this week and again this evening, to the considerable embarrassment of the Leader of the House? No wonder the Prime Minister is looking sheepish. Why will not the Chancellor tell us the cost to the Bank of England of underwriting this issue? Is it not BP on HP?

Mr. Lawson

Any marginal reluctance that I may have in coming to the House is because I know that I will have questions like that from the hon. Gentleman.

Mr. Tony Banks

On Monday I compared the Chancellor to Nero. Someone suggested that the right hon. Gentleman would be better compared to Caligula. But Caligula's horse was alive. The Chancellor has been flogging a dead horse, and he has managed to flog it to 250,000 applicants for shares. If the Chancellor believes that they will be happy with that deal, he is deceiving himself if not the House. Will the Chancellor tell the House what action his Department will take with regard to applicants who cancel their cheques?

Mr. Lawson

If that were to happen, that is a matter that obviously I would have to consider, but I believe that those shareholders put their money into BP as a long-term investment, not to make a short-term profit. I do not believe that very many of them will cancel their cheques.

Mr. Pat Wall (Bradford, North)

I am glad to see that the Chancellor has caught up with his reading of The Wall Street Journal and note that his reading is about as selective as mine. I should like to know how he can claim as a triumph a three-week period in which he has grossly overvalued the shares of the BP offer. As a believer in the free market, he has been forced to build a raft to save the financial institutions — a piece of anti-Tory legislation, much like the nationalisation of Rolls-Royce, which was carried out by a previous Tory Government—

Mr. Speaker

Order. This is not a debate. The hon. Gentleman must ask a question.

Mr. Wall

I am asking how the Chancellor can claim all of these tragedies as a triumph. He said that 300,000 would make money and they have lost it. What he has achieved is not people's capitalism, but, for those 280,000 investors, people's decapitation.

Mr. Lawson

What I am claiming is that the taxpayer is getting the money to which he is entitled and that the reputation of the City of London remains untarnished. Orderly markets in BP shares will have been secured-something that is not only important to BP but, in these difficult financial times, is perhaps important rather more widely.

Mr. Chris Mullin (Sunderland, South)

Has the Chancellor learnt any lessons from the events of the past few days? If so, will he share those lessons with the House, or does he intend blithely to carry on looting public assets in the same way as he has proceeded so far in his term of office?

Mr. Lawson

If the hon. Gentleman is asking whether we shall continue with our privatisation programme—this question was asked from the Opposition Front Bench —the simple answer is yes we shall.

Mr. Nicholas Bennett (Pembroke)

Will my right hon. Friend confirm that throughout the past two weeks of turbulence on the stock exchange the one group of investors who have refused to be panicked and who have looked to the long term and seen the underlying strength of the British economy has been the small investors?

Mr. Lawson

All the evidence shows that the small investors are more likely to be long-term holders than many of the City institutions.