§ Mr. Maxton
I beg to move amendment No. 9, in page 3, line 13, at end insert— 995'(4A) One third of all Securities issued under this section shall he designated "employee shares" and held in trust for employees in the form of an Employee Share Ownership Plan with power to appoint directors'.
§ Madam Deputy Speaker (Miss Betty Boothroyd)
With this we may take amendment No. 11, in page 3, line 13, at end insert—'(4B) One tenth of all securities issued under this section shall be designated "pension shares" and shall be made available to former employees of the British Steel Corporation.'
§ Mr. Maxton
The two amendments together deal with employee share ownership. It is nice to see the Secretary of State for Scotland here for this important debate, although if he is to be present, I hope that he will listen and not talk. He has not shown a great deal of interest in the Scottish steel industry so far—[Interruption.] He obviously does not intend to stay; I wonder whether he is going to Hampden.
In an earlier debate, we raised the question of the involvement of the work force in the new company. The amendment represents a different way of ensuring such involvement, and the Under-Secretary of State for Industry, who replied to the debate, suggested himself that share ownership was the best way of involving the work force.
I hope that we shall be able to debate a second matter. We shall, of course, be debating the amendment, but I hope that you, Madam Deputy Speaker, will give us some leeway and allow us some debate on the written answer yesterday in which the Government laid down their proposals for share ownership by employees. The House should know what the Government have in mind, and perhaps they will answer some questions—
§ Madam Deputy Speaker
Order. I am afraid that we can deal only with the amendments on the Order Paper. We cannot deal with answers to questions unless they relate directly to these amendments.
§ Mr. Maxton
I am sure that they do, Madam Deputy Speaker. The Government's proposals deal with employee share ownership, which is what this debate is about.
The Government's proposals and ours are very different. We propose that one third of the shares should be designated as employee shares and held in trust for the employees in the form of an employee share ownership plan with the right to appoint directors to the board. That seems to us to be the best way of ensuring that the employees have a stake in the company, without the risks of direct personal ownership. They would have the right to make decisions and have a say in the future of the company in which they have already invested their labour, time and effort, without the possibility of losing their hard-earned money by investing directly in shares.
I should have thought that that would allow exactly the sort of developments about which the Under-Secretary talked. That certainly cannot be called "tokenism"—the word used by Conservative Members to describe our plans for appointing two directors to the board. It cannot be called a "retreat"—the term used earlier by the hon. Member for Darlington (Mr. Fallon)—from our plans to involve workers directly in industry.
Incidentally, it is surprising—for once, the Chancellor of the Duchy of Lancaster may agree—that in both the earlier debate on union representation on the board and 996 again now, when debating share ownership, representatives of the Social and Liberal Democratic party, which has always been an exponent of worker participation and share ownership, have not bothered to be present and to participate in the debate.
We propose an innovative, imaginative and exciting way of ensuring the workers' involvement, even though that is not something the Government would like to see. We assume that those who will run the employees' share ownership plan will come, at least in part, from the trade union movement and will be nominated by employees through their trade unions. That would be the best way of involving the work force in share ownership and in directorships.
It is worth comparing the Government's scheme with our own. In a written answer, the Chancellor of the Duchy of Lancaster explained exactly what will happen:(i) employees will each be offered £70 worth of free shares plus a further £2 of shares for every year of service with the corporation. An employee with 15 years' service could therefore be eligible to receive, free of charge, £100 worth of shares;".One of the interesting points arising from the previous debate was that the Minister of State, Scottish Office said that the Government had no idea what would be the capital valuation of the new company. However, the Chancellor of the Duchy of Lancaster stated in his written answer:All these arrangements will be subject to an overall limit of 10 per cent. of the shares on offer in the flotation.There are 52,000 employees in British Steel. If one takes the minimum £70 giveaway, its value will total about £3.5 million. If that sum represents 10 per cent. of the shares on offer, the minimum flotation value will be £35 million. I hope that the Chancellor intends that the figure should be higher than that. [Interruption.] He is prepared to concede £35 million, but the overall picture adds more to that. It appears to give some idea that, when the right hon. and learned Gentleman did his sums in terms of employee share ownership, he had some idea of what the final flotation structure and value would be. How could he arrive at his 10 per cent. limit otherwise?
The Chancellor of the Duchy of Lancaster's written answer continued:(ii) employees will also be offered 2 free shares for each one bought at the full share price on a matching basis, up to a maximum value in free shares of £330. An employee buying £165 worth of shares would thus receive shares worth in total £495;(iii) employees will be able to buy shares, up to a maximum value of £2,200, at a discount of 10 per cent. on the full share price;(iv) employees and BSC pensioners applying for shares at the full share price, will be treated on a priority basis over the general public, up to a limit of £10,000 worth of shares"—presumably at the full share price—per individual."—[Official Report, 17 May 1988; Vol. 133, c. 383.]I do not believe that many employees at Ravenscraig will take up more than their £70-worth of free shares plus £2 of shares for each year of service.
The Government will have considerable difficulty in floating the British Steel Corporation, anyway. It will not be attractive to many investors in the market place and there is no reason why employees should risk their money by investing in it. The advantage of our scheme is that it would not put employees' money at risk. They would enjoy a shareholding through the plan, but their personal savings would not be at risk.
997 I know some members of the senior management of Ravenscraig, and I do not imagine that any of them have £10,000, or the maximum of £12,200, to spare for an investment that is as risky as the British Steel Corporation, unless it is for a short-term return—buying shares at the time of the flotation in the hope that there will be an upward movement in their price, with a view to making a quick profit by selling them shortly thereafter. It is not likely that large numbers of employees will invest in the company in the way that the Minister suggests.
How many employees does the Minister expect will take up the various categories of share ownership? When he did his sums, he must have had some idea of the number of employees taking up even the £70 worth of free shares. Does the Minister expect them all to do so or only a certain percentage? How many employees does he expect will buy shares and then claim their entitlement to a further £2-worth of shares? How many employees does he expect will buy shares to the maximum value of £12,200 or £10,000?
When the Chancellor of the Duchy of Lancaster prepared his written answer, he must have had some idea of the numbers involved. Otherwise how did he arrive at those figures? What was the premise of his information?
§ Mr. Maxton
I thought that it was my hon. Friend the Member for Carrick, Cumnock and Doone Valley (Mr. Foulkes), and not my hon. Friend the Member for East Lothian (Mr. Robertson), who was into astrology. However, judging by some of the answers we have received, astrology appears to have been the way by which the Government arrived at them. Perhaps this is another example of it.
Having made all those calculations and arrived at an overall limit of 10 per cent. of the shares on offer, the Minister must have worked out what he considers should be the corporation's flotation value. If not, what will happen if, at the end of the year when he wishes to float the company, there is a slump in the share market? The share value may not be that which he anticipated but there may be the level of take-up which he expected from the employees. What will he do then? Will he downgrade the value of their shares? I am not sure whether the Chancellor of the Duchy of Lancaster nodded or whether it was only an involuntary movement of his head, but he appeared to nod, so it appears that, again, the offer he has made to the employees is not worth the paper it is written on. If there is a downward evaluation, the figures that he has produced will not materialise.
I am sure that the House is more interested to hear what the Chancellor of the Duchy of Lancaster has to say about his scheme than in listening to me talking about our own, which we know the Minister will not accept.
§ 7 pm
§ Mr. Fallon
Some pretty curious amendments have been tabled by the Opposition, but amendment No. 9 is the most extraordinary so far. It is probably symptomatic of the Opposition's confusion about the whole concept of share ownership. For some years now they have been telling us that there is no demand for share ownership, either in the wider population or among those who work 998 for nationalised companies that have been privatised. That is what the Labour party has been telling us, and some of its members are still doing so. That is what the trade union leaders have been telling us.
§ Mr. Maxton
As the hon. Gentleman accuses us of saying that there is no interest in share ownership, perhaps he would like to say who said it and when.
§ Mr. Fallon
I do not think that I need to detail exactly who said it. [Interruption.] Every time that my hon. Friends have come to the House and proposed a piece of privatisation legislation, it has been the Opposition's view that the privatisation should not proceed and, in particular, that shares in the previously nationalised industries should not be offered. Yet what happens? We have found time and again—with British Telecom, and with British Gas—that employees respond in overwhelming numbers.
§ Mr. Michael Brown (Brigg and Cleethorpes)
My hon. Friend is absolutely right. To illustrate the point that he has made about previous privatisation measures that have been brought before the House, the Opposition have reminded anyone who is thinking of becoming a shareholder that the shares would be confiscated, perhaps for very little value in return. Perhaps my hon. Friend would like to press the Opposition on what they will do to these shareholdings.
§ Mr. Fallon
My hon. Friend must not tempt me too far along that line. Suffice it to say that thousands of individual shareholders in every constituency in the country now hold popular shares in formerly nationalised companies that have been privatised. That is probably why there are slightly more representatives on the Tory side of the House than there are on the Opposition side.
The Opposition cannot have it both ways. They cannot say that there is no demand for share ownership, and then say that, if there is, the employees should have a third of the shares. That is nonsense. [Interruption.]
§ Mr. Fallon
This suggests to me that some Opposition Members have learnt from the success of our privatisation programme, having seen the huge take-up by British Telecom and British Gas employees of the shares made available to them. They have had to cobble together this policy so that they can go back and say to those who work for British Steel, "We would have allocated you even more shares than the Government are proposing."
We are bound to ask where that leaves the Opposition's share ownership policy. Will they revise the arrangements for British Telecom and British Gas to ensure that the work forces in those industries now have a third of the shares, as those in British Steel would have if the amendment were accepted? Will they revise the arrangements that the House has already put through, take shares from the public—indeed, from other trade unionists—and cobble them together in this extraordinary share ownership portfolio?
The second reason I believe that Conservative Members should reject the amendment wholeheartedly is that the shares are not being offered to those who work for British Steel; they are being placed inside a trust. The employees will have no rights. They may in name have some claim to 999 a third of the share capital, but they will not have the right to buy more shares, to sell any of them, to hold them or to dispose of them as they wish. It is a very patronising approach to share ownership to say that the employees should have a third of the shares but that they should not he able to do anything with them—that the ownership and management of the shareholding should be confined to trustees.
Who will those trustees be? We heard that the trade union barons would be the trustees of the scheme. That is not real share ownership. It is treating shareholders like children with pocket money—saying that they can have a third of the shares, but cannot do anything with them, and cannot have any rights. These will not be free shares in any real sense. In fact, they will be fake shares.
§ Mr. Maxton
I wonder how the hon. Gentleman differentiates between that sort of share and unit trusts or investment accounts in banks? In those instances, people put in their money and then own shares as a result of investment made by the bank. But they have no direct say. The employees of British Steel will have considerably more say.
§ Mr. Fallon
A unit trust is not controlled by the trade union leaders involved in the industry. It is perfectly possible for any individual to acquire more units in the trust or to dispose of them, as the case may be. The individual has some rights. But under amendment No. 9 the British Steel employee would have no rights whatever.
This is a bogus amendment. It cannot be confused with any real extension of wider share ownership; nor can it he called "exciting", which was how the hon. Member for Glasgow, Cathcart (Mr. Maxton) described it. He said that the whole point of the share ownership proposal that he was advocating was to take out the risk so that not only would the shares not go down, but they would not go up. Those who work for British Steel would have no opportunity to benefit from their investment and their commitment to this new dynamic private company. They would have no real interest.
In relation to an earlier amendment, the hon. Gentleman specifically spoke about employee interests. The employees would have no interest in these paper shares. They would not be able to benefit from increased productivity or the better performance of the company as a whole, nor would they be able to sell their shares, or acquire more, if they wanted to do so.
This is a bogus share ownership proposal, and as such it should be treated with the contempt that it deserves.
§ Mr. Morley
The hon. Member for Darlington (Mr. Fallon) displays the Tory party's attitude to share ownership, and demonstrates the original idea of what share ownership was all about. The original idea was to invest capital in a firm to help that firm to prosper, and to take a return from the profits in the form of dividends. But what is happening now, in Mrs. Thatcher's Britain—
§ Mr. Morley
I apologise, Madam Deputy Speaker.
What is happening now is that shares are being used as some kind of casino economy. The City is becoming an up-market bookie: people are making money on the actual transaction of shares without having the slightest interest in the investment in the company or in the company itself.
1000 The amendment gives a direct interest to those who have earned their rights to share ownership by the efforts that they have put into the company over the years, and the help that they have given it.
We also feel that 10 per cent. should go to the pensioners who have worked all their lives in the industry. It is a shame that those who deal in shares are held. in higher esteem than, for instance, steel workers who have spent all their working lives in often appalling conditions and back-breaking work. They do not seem to receive the same esteem as people who sit in an office, press a button and transfer huge sums in shares in companies in which they have no interest and of which they have no knowledge. The amendment gives the people who have earned that stake some direct control of the company—a say in it, and a share and involvement in it. I am surprised that the Government should argue against that if they genuinely believe in any kind of shareholding democracy.
We talk about the desire of people to buy shares, and the so-called success of the Government's policy in selling them. If people are offered a deal whereby they give £5 and are given back £10, of course they will jump at the chance. But the number of small shareholders in British Telecom and British Gas is not increasing; it is decreasing rapidly, as people take their profits and get out.
Although many small investors had their fingers burnt in the October crash, it is worth remembering that the large institutions will still make money whether the stock market is booming or declining. Many of the small punters who were encouraged by the Government into the shareholding market have lost a great deal of money as a result. I do not see the Government shedding many tears about that. That is why it is right that the shares should be given to the steel workers. They have earned those shares through their labour, productivity and commitment to the industry.
§ Mr. Morgan
I am grateful for the opportunity to contribute my sixpen'orth to the debate because the amendments concern some important issues about which there are strong feelings among the steel workers as to who should own what share of the industry.
I listened aghast to the ignorance displayed by the hon. Member for Darlington (Mr. Fallon) about share ownership after privatisation. He appears to believe that the Government's privatisation programme completely excludes employee share ownership plans. He should be made aware that such plans have played a significant role over the past few years in privatisation involving parts of the bus and motor car industry.
The two largest employee share ownership schemes in Britain have both followed privatisation. The first is operated by the Portsmouth bus company, which, I understand, has about 4,000 employees and was privatised through a management and worker buy-out with the workers' part of that buy-out being operated through a employee share ownership scheme. The second scheme is operated by Llanelli Radiators, which employs about 1,500 workers and was privatised as part of the sell-off of the fringe parts of the British Leyland and, later, Austin Rover empire. Those workers found themselves faced with the choice of closure or having to assist in funding a buy-out and chose to opt for an employee share ownership scheme.
That was an extremely large company in manufacturing terms, certainly in Wales, and was privatised with no more 1001 than one quarter of the employees taking part. Nevertheless, it is still a new concept that has not been immediately embraced by everyone. An employee share ownership plan, such as we are proposing here, was adopted and helped to save 1,500 jobs, which are like gold in the Llanelli area as they are elsewhere in south Wales.
If the hon. Member for Darlington wants to exclude employee share ownership plans from privatisations, he has a considerable amount of retrospective work to do as a result of the Government's policy over the past four years. If he wants to defend the exclusion of the steel industry from such a scheme, he must explain why it is acceptable for the motor car components manufacturing industry and the bus industry to have such a scheme. Some extremely substantial privatisations have taken place in those industries with the assistance of employee buy-outs through employee share ownership plans.
Our proposals are no different, although they are on a larger scale. Although it is true to say that scale can sometimes be a killer argument, as it is not always easy to scale up to a firm with 52,000 employees, the position with British Steel does not differ greatly from that of the National Freight Consortium management and worker buy-out. The employees were very much in the driving seat in that company, with about two thirds of the shares owned by one third of the employees. That firm is halfway between the Portsmouth bus company or Llanelli Radiators and the British Steel Corporation and has well over 20,000 employees, of whom one third participate in share ownership. That buy-out took place through a scheme similar to an employee share ownership plan.
The Government must explain their reasons for rejecting the amendment, if they decide to do so, in spite of our best efforts to persuade them to support us. Why cannot such a scheme be set up in the steel industry when similar schemes have been set up in industries that are almost as large?
§ Mr. Fallon
The hon. Gentleman referred to the example of the National Freight Consortium. The key difference between that share ownership scheme and the proposal that we are discussing is that the employees of the National Freight Consortium were free to buy as many shares as they wanted. As I understand the wording of amendment No. 9, the employees of British Steel will not have the freedom to buy as many or as few shares as they wish.
§ Mr. Morgan
The hon. Gentleman introduces the philosophical and dogmatic flavour that characterises his contributions to our debates. He is in favour of a proposal, if someone is economically free to implement it, but, if there is an element of planning, he is against it, regardless of whether it helps to achieve wider share ownership and greater employee involvement.
The hon. Gentleman is right to say that we accept that the Government have gone too far down the road towards the flotation of the successor company to involve the employees in majority share ownership in National Freight style. When the company had a low value, about a third of the employees would have come into the scheme and seen the value of their shares appreciate twentyfold, as has happened in the five-year period since the National 1002 Freight Consortium was bought out by management and workers. That is not possible as the BSC is now a profitable company. The NFC was a highly unprofitable company when the arrangement was made and the shares bought by workers were therefore extremely cheap. Only they and the management had the faith, with a small number of venture capitalists backing them, to buy in cheap and watch the company appreciate. As the BSC has now returned to profit, that option is no longer available and an employee share ownership plan is more logical.
It is a minor objection to claim that the Government could reject the proposal because it involves only one third of the shares or because it is compulsory to specify a figure of one third. If the Government wish to incorporate a flexible element in the scheme, we would be willing to discuss it with them. We want to ensure that, as far as possible, the firm's employees, including senior and middle management was well as shop-floor employees, should be in the driving seat.
One of the primary reasons why the employees of the BSC and of Allied Steel and Wire are extremely interested in acquiring shares in the industry is the fear of being ripped off by speculators. They see employee share ownership as one way of warding off control by speculators and the financial community. They want to ensure that they have the maximum amount of elbow in the industry after privatisation to ensure that the industry is not taken over by speculators, companies which are primarily interested in shrinkage and sell-off of spare assets or foreign companies interested in further rationalisation.
Some of those fears may be dealt with by the Government's announcement regarding a golden share. Following the experience with Britoil, the Government must accept that many employees of industries that were protected by golden shares do not have the same confidence in the golden share as a method of warding off takeovers as they did before the curious handling of the BP-Britoil takeover saga, in which the golden share was finally negotiated away by the Treasury.
Obviously, there will be the attractions of a dividend. It is difficult for Opposition Members to recommend the prospect of capital growth, because it is greatly influenced by currency patterns. Within the past month the senior management of the next largest steel company to the BSC, United Engineering Steels, warned that the rising pound was already hitting its profits and performance. One imagines that, if the flotation were not in the offing, the management of BSC and Allied Steel and Wire would have said exactly the same. The steel industry by its nature is highly sensitive to the changing relationship between the pound, the deutschmark and the dollar.
Those are all reasons why an employee share ownership plan is of great importance and why its structure is convenient to the industry, suspended as it is in a state of profitability, but with that profitability likely to be severely affected by currency changes, which are already upon us, and possibly by the changes which could occur on 30 June if quotas are not renewed and if dumping steel in the back gardens of other steel producers in Europe sets in as a way of removing surplus capacity, since that does not seem to be possible by negotiation.
Employee share ownership plans have the great advantage that they achieve a greater measure of control. I hope that the hon. Member for Darlington agrees that a curious feature of share ownership is that, despite the 1003 massive number of share owners in British Telecom, for example—I understand that the employees own no more than 1 per cent.—they have no control over the company. They have the ability to buy or sell, but that is not a measure of control, nor is it what we are seeking for BSC employees. We are seeking a measure of control and I implore the hon. Gentleman to understand that that is what BSC' employees are looking for. We intend to help them to achieve that.
The Government have offered conventional share ownership on slightly preferential terms in this absolutely repellent form of tokenism, which might result in as many as 3 or 4 per cent. of the shares landing up in the hands of employees. That is three times what BT employees have, but it is still nowhere near what we are trying to achieve. That does not achieve control. If British Steel has 52,000 employees, of whom 10,000 buy shares because they can afford to, and if they are backed up by a certain number of steel industry pensioners—the BSC is one of those curious industries which we now have in Britain in which there are twice as many pensioners as workers—how do they get together to exert any influence over the broad strategy that management is pursuing? They cannot.
An employee share ownership plan with the shareholders' power being exercised through proxy votes vested in trustees, who could be from trade unions—obviously those chosen to exercise proxy votes could be changed—means that a considerable amount of power is hands of employee or pensioner shareholders. That is the advantage.
Shareholders in British industry simply act as sleeping shareholders and in the end their only power is to sell shares and move on. That is not an option which employees would ever want. They invest their careers in the industry and their families depend on it. There is no way that they can share that in-out attitude towards the industry in which they work. They want to exercise some sort of control and influence over the management, and they can do that only through and ESOP-type structure.
That is how they will get together. Some will live in Scunthorpe and some on Teesside. The steel industry operates in the outer circle of the United Kingdom—in Wales, Scotland, the north-east and the east midlands. It is not all grouped together in one convenient region, so it is difficult for 10,000 shareholder employees to influence management's strategic decisions or to change the management if they think that its policy has deteriorated severely. Under the amendment, that can be done through proxy voting through the structure of an ESOP. That is why we commend it strongly as the best available option for maximising, not just share ownership but property control.
How does the provision of an ESOP relate to the golden share aspects that the Government announced in their proposals for preferential access to share purchase and to the temporary five-year anti-takeover provision? A company with an anti-takeover clause is attractive to its employees. They would be worried about buying shares in a company which might be taken over. Therefore, an employee share option plan goes along with an anti-takeover provision.
The Government have offered us temporarily a golden share of the classic kind. We are asking them also to consider the advantages of an ESOP proposal, such as we have here, which can incorporate not just the golden share for a temporary period, but a poison pill mechanism 1004 against the devices which in recent years the shadier end of the finance capital industry has developed in both Wall street and the City of London. A poison pill defends, not so much against takeover as against the dawn raids which are of doubful virtue, but which have not yet been made illegal.
Under the poison pill mechanism, additional shares will immediately be created if a dawn raid is carried out. If a dawn raid or concert party results in 15 per cent. of shares landing up in one pair of hands, it would be possible instantaneously, by articles of association and the relationship between the ESOP and the overall share of the company, to create an additional number of shares equal to that which landed up in the hands of the predator.
I understand that the alternative to the poison pill defence against dawn raids is called the Pac-Man alternative. In that, additional voting rights can be conferred on the shares in the proposed ESOP. In the event of any owner acting on his own or through a concert party and landing up with 15 per cent. or more of the shares, instantly additional voting rights are temporarily conferred until the takeover bid is warded off. They last simply while the crisis lasts. That is made much easier by the ESOP proposal. I hope that the Government will realise how much more attractive employee share ownership is to the employees of an industry such as British Steel if it can incorporate one of those two variants.
In that way, when the Government's golden share proposal expires, the ESOP can be used to achieve anti-takeover protection or semi-legal anti-takeover protection, against the dawn raid or concert party which we have seen so much of engendered by the wilder fringes of the financial community. That is simply not the kind of world in which potential employee share owners want to become involved. The ESOP proposal can be used constructively to maximise, not just employee share ownership, but long-term employee share ownership and an appropriate degree of control, so that if employees finish up with one third of the shares, they can wield one third of the power in the corporation. That is how it should be.
It is no good simply saying, "If you wish to dispose of your shares you should be free to do so." That is not what employee share ownership is. about. It is an expression of the fact that employees have given their life's blood to the industry and wish to remain committed to it so long as they are employed there.
Yesterday we made an unsuccessful attempt to encourage employee share ownership in Allied Steel and Wire. We asked that an employee trust fund, similar to an employee share ownership proposal, should be set up. According to my information, the Minister, no doubt inadvertently, misled the House. I am sure that he would like to take this opportunity to correct what he said yesterday in reference to my speech:I am attracted by the idea that the employees of Allied Steel and Wire Ltd. should have a stake in the company. Once again, the hon. Gentleman's chosen method, contained in amendment No. 32 … is generous but it goes over the top somewhat. Most of the employees already have a stake in the company".—[Official Report, 17 May 1988; Vol. 133, c. 834.]My information, from the trade union representing the employees, is that they do not have a stake in the company. What they took out last October was a £1 option which 1005 could be converted into shares when the flotation was announced. That option cost them a nominal amount. The workers may or may not exercise the option.
I offer amendments Nos. 9 and 11 to the House in the same spirit as I proposed the amendment yesterday. I am sure the Minister will take the opportunity later to correct the misinformation he gave the House yesterday, according to what I have heard from Cardiff, where Allied Steel and Wire has its headquarters. We are keen to encourage employee share ownership which does not exist yet in Allied Steel and Wire, although the Minister said yesterday that it did. We believe that employees require further encouragement towards share ownership. Amendment Nos. 9 and 11 would achieve that.
§ Mr. Kenneth Clarke
I accept that the hon. Gentleman may be more up to date and more closely informed about Allied Steel and Wire than I was yesterday. I will check what he has said. The workers' shareholding in the company may take the form of options to be exercised in the flotation. I am grateful to the hon. Gentleman for pointing that out to the House.
The amendments ought not to lead to too great a divide between us. It appears that we start roughly at the same place. We are now all in favour of the employees of companies that are being privatised having shares in those companies. Certainly the Government have never had any doubts about the desirability of encouraging employee share ownership in major companies. We have demonstrated that over and over again, because employee share ownership schemes have been a standard feature of almost every privatisation that the Government have carried out, although the exact terms have varied from case to case.
We are also clear about why we put forward these offers to employees. We think that it is important that people should be rewarded for the contribution that they have made, in the case of British Steel by turning the corporation around from being a chronic loss maker to a profitable company that is ready for the market place again.
It is right that, as far as possible, people's rewards in industry should be linked to the performance of the industry. Therefore, we are impressed when people take a stake in the industry and are prepared to look forward to gaining personally out of whatever improvement in performance they can contribute to. Obviously, it tends to reduce the divisions in industry if employees feel that they have a direct financial stake in the company for which they work.
Over the last seven or eight years of our economic revival, we have seen a change of opinion. Most people realise that their interest as employees is identical with the interest of the company for which they work and that anything that underlines that is to be welcomed. For that reason, we have always made it clear that we proposed to make special arrangements for employees of the British Steel Corporation and its subsidiaries to take shares in the flotation that we are planning.
Yesterday, in response to a parliamentary question from my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), I gave details of what we propose. Employees will each be offered £70-worth of free shares, plus a further £2 of shares for every year of service with the corporation. That means that an employee with 15 years' 1006 service could be eligible to receive free of charge £100-worth of shares. Employees will also be offered two free shares for each one that they buy at the full share price on a matching basis, up to a maximum value in free shares of £330. So an employee buying £165 worth of shares would receive shares worth in total £495.
Employees will also be able to buy shares up to a maximum value of £2,200 at a discount of 10 per cent. of the full share price. Finally, employees and British Steel Corporation pensioners applying for shares at the full share price will be treated on a priority basis over the general public up to a limit of £10,000-worth of shares per individual. That is one of the most generous arrangements that we have proposed in a privatisation flotation. I hope that many employees will take advantage of it.
So far, so good. While I am grateful to receive the support of the Opposition for the principle of share ownership, I find, as my hon. Friend the Member for Darlington (Mr. Fallon) said, that they still have not sorted out exactly what form of share ownership they favour. The bland assertion of the Labour party that it has always been in favour of workers' shares is an assertion which I greet with the same incredulity as my hon. Friend the Member for Darlington.
I think I remember correctly—but I have not checked it—that the hon. Member for Dagenham (Mr. Gould) went to the last Labour party conference in a spirit of revisionism to lead the party back from the abyss into which it had fallen in June. He made a speech in which he was unwise enough to point out to fellow members of his party that he had found that many workers in industry were attracted by the idea of workers' shares. He was repulsed; he was rebuffed.
It is all very well for Labour spokesmen to say how much they favour employee shares, but the attendance of Opposition Members is not much better than the attendance on the Government side for the debate. If some of the hon. Member for Dagenham's hon. Friends from below the Gangway were to hear these ringing remarks about the desirability of encouraging workers to take shares, I think that the hon. Gentleman would be in trouble again. I think he would find that his party has a long way to be led on the issue.
§ Mr. Maxton
If my hon. Friend the Member for Dagenham (Mr. Gould) was repulsed, as the right hon. and learned Gentleman suggests, how was it that the constituency section of the Labour party elected my hon. Friend to the national executive of the Labour party so overwhelmingly?
§ Mr. Clarke
I note that the constituency section also elected the hon. Member for Bolsover (Mr. Skinner) to the national executive. It seems that he does not intend to give us the benefit of his views on workers' shares this evening, but I suspect that they are dramatically different.
Given that I am addressing the revisionists in the Labour party, having heard their amendment and the case which they put for it, I fear that they have not yet got the point of workers' shares. I have explained why we favour employee shares; we want to give employees a share of the reward that arises from the improved performance of the company and to lessen the divisions within industry.
The Opposition have suddenly thought that workers' shares give the opportunity of worker control; at least, that is what I thought they were in favour of. The hon.
1007 Member for Glasgow, Cathcart (Mr. Maxton) said that they would not give the workers influence over the company, but that the trade unions would act as the workers' trustees and would ensure that the workers' interests were looked after by the route of worker share ownership. That explains the generosity of their amendment.
So enthusiastic are the Opposition about workers' shares that when we come forward with our reasonable proposals they outbid us; they try to steal our clothing. They say that we should give a third of the entire equity to the workers. That is curious coming from hon. Members who have complained about that hard deal which the taxpayer is getting. Now they say that the taxpayer should see a third of the equity given to the workers. However, it would not actually be given to the workers because they would not be allowed to sell their shares. They would not be allowed to behave as shareholders because the shares would be held in trust by the trade union, which would make sure on their behalf that suitable influence was exercised over the management of the company to put the new democracy in place.
§ Mr. Gould
I find that passage of the Minister's speech encouraging. After a long journey of incomprehension, he has at last grasped the point. Even he has been able to put in his own words, not quite accurately but just about right, the essential distinction which I and my hon. Friends have always maintained between the tokenism which he is offering to individual share owners and the rather doubtful investment which he is encouraging British Steel employees to make. There is a difference between that proposition and the idea, which has a long Socialist history, that worker share ownership held collectively is a means by which workers can exercise some control over their own destiny as workers in that enterprise. I am delighted that at long last the Minister has grasped that point.
§ Mr. Clarke
I think that I have always grasped the point. We are both defining carefully the distinction that still lies between us. The Government favour wider share ownership among the general public and employees. We see it as a way of distributing wealth and rewarding performance in industry. We believe in a property-owning democracy and that employees who have shares should be entitled to get the same benefit and have the same influence over them as any other investor and use them as they wish.
The Labour party, having discovered that it has been defeated in the general public argument of privatisation, employee shares and wider share ownership, has decided to return to all the old nostrums of worker control. I thought that workers' control was a very Left-wing part of the Labour party, but it seems to be winning new recruits tonight. The Labour party is not interested in every man being a capitalist and employees entering the property-owning democracy. If the Labour party cannot have state-owned nationalised industries, it is interested in having trade union-dominated industries by "giving" a third of the equity to the work force so that the trade unions can exercise control over it.
It may be that it is not in the amendment and this is not the occasion to go into further detail but, if that is the Labour party's intention, I am not completely against the idea of ESOPs and workers' co-operatives even, if they operate in the market economy and on a sensible basis. I 1008 do not think that using them as a cloak for trade unionism control or as an anti-takeover device is one of their attractions. I am familiar with ESOPs. Russell Long was the chap who started ESOPs in the United States. I have corresponded with and met Russell Long. We have looked at the possibilities of extending ESOPs in this country.
I agree with the hon. Member for Cardiff, West (Mr. Morgan) that the Portsmouth bus company is a good example of an experiment with an ESOP. As a Minister, I was involved in the privatisation of the National Freight Corporation, which was a successful example of employees taking shares. As my hon. Friend the Member for Darlington said, that privatisation led to an extremely successful company being formed. I might say that it was formed in the teeth of the opposition of the Labour party which, I recall, fought it night after night in Committee, because it did not want the employees to have shares. It wanted the company to be nationalised and loss-making and to stay as it was. Nevertheless, there is not need for us to have a deep divide over all these areas—increased worker involvement in industry, workers' ownership of shares and so on.
There is a fundamental difference between us. We believe that our proposal is an attractive offer to the employees of British Steel to participate as shareholders in the future success of the company. What is being offered by the Opposition is an apparently generous offer of trade union control.
§ Mr. Peter Hardy (Wentworth)
The Minister is obviously enjoying himself, but he should realise that we are entitled to ask the Government to be consistent. Some of the shares that have accrued to workers in past privatisations have been given without voting rights. That does not tally with the suggestion that the Government are being generous to the steelworkers. When British Gas was privatised, the value of the free shares given to the employees was less than the cost incurred by the Government in promoting llts privatisation in the United States of America. We are perhaps seeing inconsistency in the Government's approach tonight.
§ Mr. Clarke
The precise offers that we have made have varied from case to case. 1 am not sure, but I think the proposal that we announced yesterday for employees of British Steel is the most generous offer of shares that we have made so far. It is certainly one of the most generous and there is no question of non-voting shares or anything of that kind.
We have made offers to the workers in every privatisation that the Opposition have fought. These offers have become increasingly popular with the employees. That is why Labour Members no longer get up during these discussions and flatly attack the idea of employees owning shares. Instead, they come up with alternatives of their own which are not quite the gift-wrapped presents that they seem to be.
A third of the equity to be given to the workers is not an option which I or my hon. Friend the Member for Darlington find acceptable. The Government have met the underlying desire—apparently of both sides of the House—to give the employees a stake in this company. I ask the House to accept our proposals and to reject the amendments.
§ Mr. Stan Crowther (Rotherham)
I had no intention of intervening, but as the Minister is not prepared to give way, I must put this important point quickly. As far as I know, the Chancellor of the Duchy has no objection to institutional ownership of shares. I do not think that he will say that he objects to pension funds and insurance companies buying shares in the BSC. If that is the case, why cannot he be consistent enough to accept that an institution which represents the employees should also be entitled to hold shares? It is a simple point which I would like the Minister to answer.
§ Mr. Kenneth Clarke
I have no objection to trade unions owning shares; many of them do. I expect that trade union pension funds will take a substantial stake in this privatisation, as they have in others. That will be after the Opposition, to which many unions are affiliated, have fought the privatisation tooth and nail. I do not mind the trade union institutions holding shares as investors, but I dislike the idea that the workers will be given a large number of shares and that the power over the management—which is what interests the Opposition—will be exercised by the trade unions on their behalf.
§ Mr. Maxton
The hon. Member for South Ribble (Mr. Atkins)—in whose constituency is that famous bus company—attacked the Opposition earlier for tokenism. I have heard of tokenism, but, by God, the Chancellor of the Duchy's speech was the best piece of tokenism that I have heard from any Minister. [HON. MEMBERS: "It was robust tokenism."] I accept that it was robust tokenism, but it was still tokenism.
The way that the Minister made his scheme out to be the most generous ever is quite remarkable. He did not answer any of my questions about what percentage of the total share ownership he expects to be owned by employees or how many employees he expects to take up the various aspects of the scheme. Perhaps my hon. Friend the Member for East Lothian (Mr. Home Robertson) was right when he said that all these figures were down to astrology and have little to do with realism.
It is a generous offer of share ownership for employees, because the Chancellor of the Duchy knows that nobody else will take the shares. Of course he will try to get rid of as many of them as possible to the employees. That will get the shares on the market and enable him to say that the Government are getting rid of some of the shares. That is why, on the surface, the offer is so generous. However, many employees will not take up the share offer. He knows that the steel industry employees, like ordinary people and institutions buying shares, will not consider it to be a particularly worthwhile investment.
One reason why our scheme is designed to give power and responsibility to workers in the industry, as opposed to giving individual workers a small stake in the industry, is that people—especially those who live and work at Ravenscraig—know that privatisation puts their jobs at risk. However, if they own one third of the company, they will have a say in whether Ravenscraig should close. Under the Government's proposals they will have no say in the matter even if they buy the shares.
In fact, far from having a say, an employee at Ravenscraig who takes up his allotted number, or perhaps buys more than his allotted number, of shares under the Minister's scheme will be declared redundant, either because of a partial rundown at Ravenscraig or its closure.
1010 Then the DHSS will expect him to make a profit of 20 per cent. on each of those shares and will take that profit into consideration before it pays the redundant worker any income support that he may be entitled to. I do not know whether the Minister expects British Steel to pay a dividend of 20 per cent. on its shares. I think that that is rather unlikely, but perhaps he will tell us whether that is the case.
People will not buy the shares, because they will not give them any protection against the threat of unemployment. Therefore, there is a major difference between the Opposition and the Government. The individual share ownership tokenism in which the Minister is indulging does not give the workers any directors, or any power, and gives them only a small bonus. The Minister has said that workers are entitled to some return for the hard work that they have put in to help turn the British Steel Corporation round. However, if a man has worked for 30 years in that company, his bonus for doing all that work to turn it round and make it a profitable organisation is the princely sum of £130. What a bonus to offer the employees.
As there are other debates to come and although the Government are indulging in tokenism, as we accept that they will not take on board our genuine and imaginative approach to share ownership in the company, and as there comes a point at which it ceases to be enjoyable to bang one's head against a brick wall, I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.