HC Deb 03 May 1989 vol 152 cc291-332

Order for Second Reading read.

11.3 pm

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Tony Newton)

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

Mr. Speaker

I have selected the reasoned amendment in the name of the Leader of the Opposition.

Mr. Newton

I am sure that the House will understand if I speak crisply and do not say too much by way of history or generalisation. This is a significant Bill of 167 clauses, much of it the product of extensive public consultation and detailed discussion in many quarters. Its essential purpose is to bring company law up to date, to reflect changes or prospective changes in the business environment—for example, the development of the European single market; to implement changes in policy, for example, those directed to reduce unnecessary burdens on business and to deal with problems that experience has revealed in the existing provisions—for example, to make changes to the rules for disclosures of interest in shares and to refine and strengthen the powers to investigate companies.

In view of the terms of the Opposition's motion, it is most emphatically not the present Government's view that the law should contain blueprints for the internal management of companies in matters where the general public is not at risk. The Opposition's motion refers to participation by employees. Not only do we have nothing against worker involvement, but we have accepted into the Bill new provisions to make it easier to set up partnership companies and employee share schemes. However, I should make it clear that we are not inclined towards the imposition of particular models of employee participation or involvement by compulsion through the law.

The overall purpose of the Bill is to provide, in today's circumstances, a system of company law that meets the needs of enterprise, not least in ensuring open markets, while at the same time giving clear safeguards for those who invest in companies or do business with them.

I turn now in more detail to the individual parts of the Bill. Part I is concerned with the production of company accounts, obviously a pillar of company law. The Bill implements the seventh European directive, which deals with group accounts. It requires all groups in Europe above a certain size to prepare consolidated accounts on a defined basis.

The Bill will require better information to be given on the effect of acquisitions on the position of a group. While not specifically required by the directive, this is a feature that we have introduced in response to widespread concern at the confusing, and arguably misleading, ways in which some companies deal with acquisitions at present.

The Bill also gives effect to a decision announced last year to allow listed companies to provide their members with summary financial information rather than full accounts, unless the members indicate that they want to receive the full accounts. This is intended to help shareholders generally to have key information in an accessible form, but I emphasise that any member who wishes will still be able to receive the full accounts free of charge.

Clause 19 introduces a new definition of a subsidiary undertaking which is wider than the existing definition in the Companies Act 1985 and introduces tests based on control and dominant influence, to replace the existing test based simply on holding a majority of equity share capital. We are widening the definition in this way to bring many of the so-called "off-balance sheet vehicles" back within the consolidation. Off-balance sheet vehicles are an artificial device, typically controlled by the parent but kept outside the letter of the existing definition of a subsidiary. Their increasingly widespread use could undermine the value of consolidated accounts. We intend to curb their abuse.

Having made those points, I should emphasise that, as under the present law, the general requirement of accounts to give a true and fair view of a company's affairs will remain paramount. In any conflict with the detailed rules, that provision will override. It is important that that should be understood.

Before leaving part I, I remind the House of the announcement last week of the Government's decision to bring forward legislation relating to the Dearing report on setting and enforcing accounting standards. That will be done by introducing amendments part I in Committee.

I turn now to part II which deals with the regulation of auditors of company accounts—

Mr. David Winnick (Walsall, North)

To satisfy our curiosity, before the Minister goes any further will he tell us whether it is the intention of the Government to keep in the Bill the amendment that was passed in another place on political donations?

Mr. Newton

I shall comment on that later in my speech.

Mr. Winnick


Mr. Newton

I now turn briefly to part II which deals with the regulation of auditors of company accounts. It too derives from a European directive which requires us to give statutory force to rules which previously were set and administered by professional accounting bodies on their own behalf. We have sought to achieve this without erecting an unnecessarily burdensome or expensive regulatory system as it is right to acknowledge that we have no general sense of dissatisfaction with the quality or conduct of firms and individuals carrying out company audits or of the professional bodies which regulate them.

Part III of the Bill implements the measures my right hon. Friend the Secretary of State announced in May last year following a review of investigation powers and procedures. The measures amend and extend provisions relating to investigations under the Insurance Companies Act 1982, the Companies Act 1985, the Insolvency Act 1986 and the Financial Services Act 1986.

Two of the measures recommended following that review which did not require legislation have already been put into practice with good effect. The main investigation and enforcement activities of the Department have been brought together in a new investigations division. This, together with an increase in resources allocated to investigations, has already led to investigations being concluded in a much shorter time, despite an increase in the overall number of inquiries. Inquiries begun in 1984 took an average of three years five months to complete; inquiries begun in 1987 and completed have so far taken an average of 18 months.

Mr. Bob Cryer (Bradford, South)

I am sure that we are all pleased that inquiries are taking a shorter time to complete. Is the right hon. Gentleman concerned that it is necessary to introduce part III, which gives greater powers to investigate companies? Are those powers necessary because the enterprise culture, so much supported by the Government, is a corrupt culture?

Mr. Newton

No. The provisions in the Bill seek to support the changes that we have already introduced, to which I have just referred, in three main ways—by adjusting or extending the circumstances in which inspectors may be appointed and in which such appointments may be directed or terminated; by simplifying or enhancing powers to obtain and disclose information; and by enabling us to investigate on behalf of overseas regulators.

Clauses 76 and 77 would empower the Secretary of State to require the provision of information, the production of documents, or other assistance for the purpose of assisting an overseas regulatory authority in the exercise of its regulatory functions. Those powers are broadly similar in scope to domestic investigation powers and are subject to certain safeguards.

Part IV of the Bill concerns the registration of charges on companies—for example, in connection with loans. The overall aim is to provide a better register that will be of assistance to those offering advice to companies and it will reduce costs at Companies house, which will be to the benefit of those who pay for its services.

A second deregulatory element in part V of the Bill is the provision which permits the shareholders of private companies by unanimous vote to dispense with certain specific provisions of company law designed for their own —I emphasise "their own"—protection. Part V also implements some new proposals enabling a wider range of financial assistance to be given by companies to support employee share schemes and to facilitate the setting up of partnership companies. I mention those proposals as I know that they will be welcomed by the Opposition.

Among the other features of part V, I will confine myself to mention clause 108 only, which tightens the rules in the Companies Act 1985 for the disclosure of interests in shares. This clause implements proposals that were announced in 1987 following the review of takeovers. In our view, a greater degree of disclosure is needed to protect the interests of shareholders, especially in the run-up to a possible takeover bid. That brings me naturally to part VI of the Bill that concerns mergers and related matters. One provision I should mention is the new voluntary pre-notification system that will offer bidders a formal procedure for clearing merger proposals in advance, with a timetable for a decision. Provided that they give the Office of Fair Trading certain information, and meet the other conditions, they will receive automatic clearance within four weeks, unless they hear to the contrary.

That should cover the vast majority of simple cases which raise no competition or other concerns. Where cases raise problems or are more complex, there will be powers to seek further information and if necessary extend the period for consideration.

Even where mergers raise competition problems, they can sometimes be resolved quite easily by selling off part of the merged business. That occasionally happens now, when disposals form part of the proposed merger arrangements, but the present legislation is not well-adapted to that. In particular, there is only power to order a disposal following an adverse finding by the Monopolies and Mergers Commission; so if a disposal is not carried out, a reference to the MMC may have to be made.

What the Bill therefore provides is for undertakings which would deal with the possible adverse effects of the merger as identified by the Direcor General of Fair Trading, to be enforceable either directly through the courts, or by making an order, without the need for an MMC reference.

The Bill also contains provisions to restrict further acquisitions of each other's shares by the parties to a merger which is referred to the MMC; and to allow us to charge fees to cover the costs of merger control. It also makes a number of other minor changes to improve procedures and remedy deficiencies.

Mr. John Fraser (Norwood)

On what now becomes the 20-day rule for dealing with merger applications, what will happen if the Office of Fair Trading is overwhelmed by a number of major mergers—for example, if two banks, two brewers, BA and BCal all come along together? Will there not be occasions when the 20-day period, even with a 10-day extension, will not be sufficient, particularly if there is a multiple bid with two or three bids coming in against the same company over a period of two or three weeks, but not all on the same day? Is not the time scale too short for a mature and proper consideration of the bid application?

Mr. Newton

The fact that we acknowledge the hon. Gentleman's point in general terms is reflected, as he accepted, in the provisions for extension in certain circumstances. If the hon. Gentleman feels that further consideration needs to be given to it, that is very much the kind of point that can be considered further in Committee or by the House at a later stage.

I now turn to part VII, which concerns the way in which insolvency law applies to financial markets. It is a highly complex area. I will content myself by saying that our objective is primarily to remove uncertainties and to clarify the effect that most people believe the current law already has.

Part VIII makes a number of individual changes to the Financial Services Act 1986, the Insolvency Act 1985, the Policyholders Protection Act 1975 and the Building Societies Act 1986. Most of these changes are for clarification or tidying up purposes rather than being major policy departures. But I should refer briefly to clause 158 which removes the right of a professional investor to sue under section 62 of the Financial Services Act if he suffers loss as a result of a breach of the rules made under that Act. In considering experience of the working of the Act we have concluded that in respect of professionals—I emphasise professionals—the provision is inappropriate. I stress, however, that there is no change in the position for private investors, who will retain the additional safeguard provided by section 62.

We propose to bring forward in Committee amendments to achieve certain other changes to the Financial Services Act, following public consultation. The main effect of these amendments will be as follows. First, the Securities and Investments Board will have the ability to promulgate a set of general principles governing the conduct of investment business. A breach of such a principle will not give rise to civil liability under section 62 of the Act but may give rise to disciplinary consequences or the exercise of SIB's powers of intervention. The self-regulatory organisations will be required to adopt these same principles for similar purposes.

Secondly, the SIB will have the ability to require all the self-regulatory organisations to adopt so many of the board's rules as are designated for this purpose by the board. Those rules will have the same status as any other rules; in particular, a breach may give rise to liability under section 62 in appropriate circumstances.

Thirdly, both the SIB and the self-regulatory organisations will be able to supplement their rules with guidance as to the application of those rules in particular cases. A breach of that guidance would not of itself constitute breach of a rule, but could be used as evidence of such a breach.

We also propose to amend the test for recognition of a self-regulatory organisation. In future it will be possible for the SIB to recognise such an organisation if it is satisfied, having regard to the principles, the rules and the guidance, that the organisation provides an adequate level of investor protection, having regard to the type of investor with which its members deal. The board will also be able to take account of the costs of compliance with an organisation's rules. The new recognition test will replace an existing one after a transitional period.

The Government also intend to introduce provisions to increase the scope for the board and the organisations to rely on other financial services regulators, both in the United Kingdom and overseas. The Government believe that these amendments will assist the process, already under way, of simplifying the rules made under the Act without detracting from essential protections for investors.

In generally commending the measure to the House, I should make it plain that there is one aspect of the Bill as it presently stands that I cannot join to that general commendation. That is those parts of clauses I and 8, introduced by amendment in another place, which seek to provide for a form of specific shareholder approval of political donations. As my right hon. Friend made clear in another place, we regard that proposal as defective in that it leaves entirely unclear what the position would be if the shareholders declined to endorse donations already made. Leaving that aside, we see no good reason for going beyond the present position in respect of such donations —a policy that was introduced by a Labour Government in 1967. That legislation already provides that, if the donations exceed £200, they should be specifically disclosed in the annual report.

This provision, coupled with the existing ways in which shareholders, if they wish, can secure discussion of this or any other aspect of the report, seems to strike a sensible balance in ensuring proper openness, without unduly restricting the discretion of company boards acting in good faith, in what they judge to be the companies' interests, to disperse funds on political or charitable donations, or on the sponsorship of voluntary and sporting bodies, and the like.

Therefore, we shall not press for the retention of the provision as the Bill proceeds, but shall invite the Committee to remove it. With that reservation and also recognising that there will be many other aspects of this substantial, and often technical, Bill that the House will wish to discuss more fully at later stages, I ask the House to give the Bill a Second Reading.

Mr. Cryer

On a point of order, Mr. Deputy Speaker. We have heard the Minister make his comments about the House of Lords' changes to the Bill, which would introduce certain obligations in relation to the disbursement of company funds for political purposes. Will you examine the position of any hon. Member who votes on the Bill tonight who is in receipt of benefits from company disbursements to political parties? The Conservative party, for example, received £4 million in 1987. Would that constitute a direct pecuniary interest and so prevent from voting any Conservative Members who received any grant from central Conservative funds? Would you not agree that if this were the case in a local authority, there would be absolutely no doubt that it would do so? To allow Conservative Members to vote away the clauses because of their own financial involvement would be to draw ridicule and an accusation of corruption on the House.

Mr. Winnick

Further to that point of order, Mr. Deputy Speaker. Yesterday—[Interruption.] Yesterday, a question was asked of the Prime Minister and it was later shown by my hon. Friend the Member for Bradford, West (Mr. Madden) that the Conservative Member who asked the question had a direct interest in asking it because of the way in which he was associated with a company—[HON. MEMBERS: "What about your financial support?"] The hooliganism from Conservative Members will not stop me saying that I hope that you, Mr. Deputy Speaker, will agree that the reputation of the House should remain clean and honourable. If hon. Members who have direct financial interests with companies vote on a motion such as this, it is essential for you to give us guidance.

Several Hon. Members


Mr. Deputy Speaker (Sir Paul Dean)

Order. I think that I can deal with this matter. As the House well knows, hon. Members declare their interests in the register, which is published. However, on a matter of public policy—the Bill deals with public policy—hon. Members are free to vote as they think appropriate.

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

On a point of order, Mr. Deputy Speaker. May I place on record the fact that some of us object most strongly to the fact that this important piece of legislation is being heard tonight at II o'clock and cannot be given the measure of debate that it deserves? I hope that the Government will take into account the objections of hon. Members from both sides of the House who will, I am sure, object to what is happening.

Mr. Deputy Speaker

We had better get on.

11.24 pm
Mr. Bryan Gould (Dagenham)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House declines to give a Second Reading to a Bill which is inadequately prepared and still contains major lacunae on important issues such as accounting standards and City regulation, which fails to provide for greater disclosure of a company's affairs, for greater participation by employees and for a more effective regulation of mergers, and which reflects a narrow and outdated view of the role of the limited liability company in a modern society. Let me begin with the strongest possible protest at the fact that a Second Reading debate on an important measure has begun at such a late hour. I do not believe that there is any precedent, at least in recent times, for a Second Reading debate to be entered upon so late. It makes proper debate of the Bill virtually impossible. [Interruption.] I see that the Conservative Front Bench is trying to shift responsibility to other hon. Members. I remind the Government that the responsibility for ordering their business is theirs, and that if they run into procedural problems they must make the necessary adjustments. I do not think that it shows sufficient concern and respect for the importance of the Bill to ask the House to debate it at this late hour, particularly when we know that tomorrow important county council elections are to be held, and many hon. Members will already have left for their constituencies.

At such an hour we have little chance of airing and elucidating some of the important matters that arise from the Bill. This should have been an opportunity for major debates on a range of questions relating to City regulation, mergers and the role of limited liability companies in our economy. That opportunity has been severely circumscribed by the Government's insistence on bringing the measure before us at this time.

Nevertheless, we want to make it clear that the Bill, although it may appear a technical and perhaps unimportant measure to the casual observer, is very important—important for what it contains, and perhaps even more for the opportunities that it misses. Although limited by the unsatisfactory nature of tonight's debate, we shall treat the Bill on its merits. We shall welcome those parts that we feel able to welcome, such as the provision of wider powers of investigation, but we shall pointedly express our regret—both this evening and in Committee —at the important opportunities that have been missed, and do our best to strengthen what I consider to be the Bill's deficiencies and weaknesses.

Inevitably—as is the nature of such measures—the Bill is something of a hotch-potch. No doubt it began with the perfectly acceptable necessity to act on EEC directives, with which parts I and II are concerned. The problem is that it has subsequently been seen as a repository for odd fragments of change to all sorts of existing provisions. It amends—in a spasmodic way—the Companies Act 1985, the Fair Trading Act 1973, the Financial Services Act 1986, the Insolvency Acts, the Policyholders Protection Act 1975, the Building Societies Act 1986, the Insurance Companies Act 1982, the Company Directors Disqualification Act 1986, and no doubt more.

The problem is that, in the Opposition's view, none of those changes has been thought through coherently. The Government are essentially legislating on the hoof. Moreover, changes that are made in this haphazard and spasmodic way are continually being supplemented as the Bill proceeds through both Houses. Already no fewer than 400 Government amendments have been made since it was published, and we know that we have yet to see the important provisions that the Government are to introduce on accounting standards and City regulation.

As a veteran of both the Insolvency and the Financial Services Acts—I see that some others in that category are present—I know how unsatisfactory that method of legislating can be. In both instances the Government tabled literally hundreds of amendments, in one case over 1,000. I hope that we shall not have a repeat performance. If the Government are not ready for their legislation, they have no right to introduce ill-thought-out proposals late in the day and to ask the House to deal with them, particularly at this time of night.

We have further objections to the form of the Bill. There are far too many clauses allowing the Secretary of State to remedy any omissions or correct any mistakes by changing the Act by statutory instrument at some later date. If the Government have so little confidence in the correctness of their current views, they should take more time before introducing legislative proposals. It is always dangerous and a legitimate cause for suspicion if the Government take powers to change primary legislation by statutory instrument.

Our major anxiety about the Bill lies not with its detailed preparation, but with the Government's general failure of imagination and purpose in respect of the true role of limited liability companies. We all know that the limited liability company is an institution of the greatest importance. The concept of limited liability was introduced to encourage people with money to invest in our industrial economy but to give them protection if they were to invest in enterprises over whose immediate management they had no direct control. I can understand that, and the concept has been immensely valuable. I do not contest the principle of limited liability. The limited liability company has become part of the furniture, and we are inclined to accept it as part of the natural order of things.

An immense range of privileges is provided by law for suppliers of capital, and in this case suppliers who may have very little connection, other than owning certain bits of paper, with the enterprise concerned. The privileges range from the powers of ownership and decisions over employment and deciding major issues of company policy to the power to take divdends from the investment. In addition to those immense powers, it is surprising that we should consider it necessary to include the privilege of limited liability. In effect, after receiving all the advantages that I have just referred to, the investor is permitted by law, if things go wrong, to walk away and leave his debts unpaid. That is how limited liability works. It is time that we had a good look at the conditions on which that privilege can be exercised.

The time has come for a major reappraisal of the operation of limited liability companies. Such companies should no longer be seen as operating exclusively in the interests of the shareholders who possess those privileges. We should be thinking in terms of a company which also has obligations to its employees, consumers, customers and trading partners. We should be concerned about the way in which the market for corporate control in this country often operates in such an exclusive and narrow interest.

We cannot afford to be insular about this. A similar line of thought is increasingly taking hold in Europe and the European company statute is likely to be suggested to us and thrust upon us before very long. The Bill ignores all that. Essentially it takes a narrow and technical view of any changes in company law which might be required. We contend that the Government have, in this Bill, adopted a narrow and outdated view of the role of the limited liability company.

We shall try to make good those deficiencies by tabling amendments in Committee. We shall try to illustrate our contention that limited liability is a privilege which must be earned by duties to the community, employees, consumers and shareholders. It must be earned by maximum disclosure of what the company is about. Company accounts should be as informative as possible on a whole range of issues which hitherto have not been thought to be of great interest to anyone else.

I had lunch in a hotel today in which I gather another celebration was taking place. At the table next to me a business man whom I did not know was describing to a colleague the operation of his company. He was asked about his turnover and what information he published. He said that he was a great believer in the principle of obfuscation. He did not believe in publishing any information. He believed that the only people who needed to have information were his auditors and Barclays bank.

That attitude characterises the general approach of people who enjoy the privilege of limited liability. We cannot afford to tolerate that attitude any longer. We must ensure that the recommendations of the Dearing committee are acted upon. We should like to see a general accounting committee, a statutory body set up to establish wide-ranging standards and with wide-ranging powers.

However, we want to go beyond that and make sure that company accounts are not just the glossy but uninformative bits of propaganda on bahalf of the company chairman which they often become. Why should company accounts not reveal, for example, the amount that the company spends on research and development, on training and on health and safety? Why should they not reveal the forms and quantities of central and local government assistance that the company receives? Why should they not give some indication of performance in respect of equal opportunities, imports and exports, the environment, pollution control and energy consumption? [Interruption.] The Minister thinks that companies would have little time to do anything else, but a well-run company would know about those things. If companies were compelled to operate monitoring systems for such matters, they would be able to produce information without any great effort.

Mr. Hugh Dykes (Harrow, East)

The hon. Gentleman spoke briefly about European aspects. I understand that he is now involved in organising the campaign for Labour's candidates in the European elections in June. In connection with the European company statute, he used the phrase "thrust upon us". Is he now in favour of that statute? Do I detect more enthusiasm from the hon. Gentleman for these European proposals than he has shown in the past?

Mr. Gould

As so often happens in interventions, the hon. Gentleman has intervened a little too soon. He should be patient. As soon as I have moved from my present point, I shall deal with the matter that concerns him.

There are further matters that company accounts should deal with. For instance, we regret that one of the minor consequences of the measure is that it does away with the obligation in the Companies Act 1985 to disclose the salaries of highly paid employees. Why is that? It is a retrograde step. We want to know what companies pay by way, for example, of transfer fees, golden hellos, to directors. We also want to know about donations to charities and political organisations. I listened carefully to what the Minister had to say about those matters.

The amendment passed by a substantial vote in the other place has a rightful place in the Bill. We were dismayed to hear what the Minister had to say. This is a simple issue about openness, fairness and shareholder democracy. We are after equality of sorts between trade unions and companies. The Government were keen to ensure that trade unions had to go through the hoops before they could make donations. We simply want equity of treatment for companies.

On those issues it is difficult at times to pin down the Government's argument. On occasion the Government have argued that the position of shareholders is quite different from that of trade union members because they can easily opt out of one shareholding and move to another company. I noticed that the Minister did not make that argument tonight. He was right not to do so because many shareholders are not direct investors but have their savings invested on their behalf by pension funds and insurance companies. In that respect, the Government's argument breaks down.

We want the inclusion of the simple principle that if a company wishes to make donations to a political party it must ask the shareholders for their approval. If that is not done, the whole range of Government propaganda about shareholder democracy is shown to to be the purest cant, nothing more than drivel, hypocrisy and propaganda. The true interest of the Conservative party is to ensure that companies continue unhindered to make political contributions. Consequently, many shareholders become involuntary contributors to Tory party funds. That is unacceptable.

There is another missed opportunity, and in dealing with it I take up the intervention of the hon. Member for Harrow, East (Mr. Dykes). One of the obligations which limited liability companies owe is to their employees. That is increasingly recognised, at times even by Conservative Members. Section 309 of the Companies Act 1985 was an attempt of sorts to recognise that responsibility. It so happens that that provision is unenforceable and almost completely useless.

The amendment of legislation that has been introduced to ease the path towards the establishment of employee share ownership plans is welcome, but it must be recognised that it is the product of the Government yielding to pressure put upon them by the Opposition in another place. We are not concerned to establish employee shareholdings of various sorts. We want to see democratic ESOPs that transfer control of the enterprise to the work force. We are still far short of that objective.

The Bill misses major opportunities in other matters affecting employees. The Minister mentioned the European company statute. That provides for employee participation in a range of possible ways, including two-tier boards, elected employee representatives and a fair amount of flexibility as to how those goals should be achieved. There are also the proposals—these originate from Commissioner Vredeling—for disclosure of inforrnation to employees. These are moves forward on a wide scale and are widely accepted by many other EEC countries. It remains a matter of surprise and regret to my right hon. and hon. Friends that the Government have not seen fit to legislate in that direction. We shall attempt in Committee to make good—here I answer directly the hon. Member for Harrow, East—these omissions. If the hon. Gentleman is a member of the Committee that considers the Bill, I hope that we can count on his support.

Mr. Dykes

Will the hon. Gentleman give way?

Mr. Gould

No, I shall not give way. The hour is late and I shall press on.

We shall pay especial attention to employees' rights to information in special circumstances such as takeovers and mergers bids.

There are other issues of disclosure, such as the important provision in clause 108 that extends the requirement to disclose an interest in shares to holdings as low as 3 per cent. It reduces the time allowed for notification from five to only two days. We believe, however, that that provision is disappointingly inadequate. The proposed changes are welcome so far as they go, but they do not deal effectively with the problems of nominee shareholdings. These are problems that we have seen all too clearly in recent instances, such as in the Guinness and Blue Arrow cases. We believe that the concept of corporate personality is acceptable only so long as those dealing with the company are entitled to know with whom they are dealing. That fundamental principle must surely override the advantage of privacy that is afforded by the use of nominee companies. That principle should apply at all times and not, as the Government's consultative document suggested, only at critical times.

We have similar misgivings about the recently introduced provisions that do away, in effect, with the ultra vires rule. One of the problems with limited liability is that those who claim the privilege are not to be regarded as in the same position as ordinary traders or business men. Under company law, those who deal with people who enjoy limited liability surely need to know what a company has been set up to do. I do not dispute that the ultra vires rule has, in effect, become unworkable in its present form and that something must be done. I put the Minister on notice, however, that we have misgivings about merely sweeping it away. It is not right to put the limited liability company in the same position as the person who enjoys no such privilege.

In the interests of brevity, and in recognition of the lateness of the hour, I shall pass directly to the vexed question of mergers. Part VI deals with mergers, an area in which we believe that the Government have placed themselves in a mess. The current law proceeds on the assumption that mergers and takeovers are likely to be beneficial unless it is shown otherwise. The Government, and especially the Secretary of State for Trade and Industry, have made it clear that in principle at least they will intervene only on competition grounds. That takes no account of the wealth of academic evidence to the effect that mergers are likely to be detrimental both to the parties and the national interest. Even the Department of Trade and Industry, in its 1988 blue paper, recognises that evidence on post-merger performance that has emerged since the 1978 Green Paper supports the earlier findings of disappointing or inconclusive performance.

Furthermore, the emphasis on competition as the sole criterion takes no account of the fact that by comparison with other European Community countries the United Kingdom has a uniquely open market for corporate control. Therefore, our companies need more legislative protection against hostile bids than do their French or German counterparts.

Not surprisingly, the Secretary of State, despite his constant pronouncement, has in practice operated on rather different criteria. Sometimes he thinks that the "foreignness" of a bidder is objectionable; sometimes he does not. Sometimes he takes account of regional, employment or strategic considerations; sometimes he does not. Sometimes he objects to highly leveraged bids; sometimes he does not. It is now impossible to tell in any given case the way that the Secretary of State is likely to jump. The Bill is inadequate for clearing up that confusion.

We gladly support clause 118, which allows for what is called plea bargaining. We believe that the pre-notification procedure is useful—so useful that it ought to be made mandatory. If that requirement were to act as a small disincentive to takeover activity, so much the better. We want those reforms to go further. We want the burden of proof reversed so that mergers or takeovers can proceed only if they are shown to be in the general interest. We should like the public interest criteria in section 84 of the Fair Trading Act 1973, already governing the Monopolies and Mergers Commission, expanded to align it with article 85 of the treaty of Rome and made applicable to the Director of Fair Trading's recommendations and to the Secretary of State's decisions.

We should like new statutory obligations to consult and inform employees about the implications of bids, and particular attention should be paid to the importance of ensuring that conditions laid down by the MMC, and promises made by bidders, are observed.

As to the Financial Services Act 1986, part VII of the Bill attempts to deal with some outstanding issues but falls far short of what is required. It is what is not in the Bill that is of particular concern to us, especially when the overall state of City regulation is in such an unsatisfactory condition. All the evidence is that current attempts at regulation are not effective enough and are not taken seriously enough—which makes it all the more surprising that the Bill does not address that issue.

The Department of Trade and Industry is so slack and inefficient in that respect that Cameron-Webb and Dixon —the villains of the PCW scandal at Lloyd's—escaped criminal charges because of lapse of time. The average amount of time taken for inquiries under the Companies Act 1985 is two years and three months—notwithstanding the points that the Minister made earlier. Nineteen such inquiries remain uncompleted, some dating back to 1982. The DTI has been notoriously incompetent in carrying out its supervisory functions in cases such as Barlow Clowes. When it has discovered something wrong, it has been slow to act, as in the case of Blue Arrow—although I believe that there the fault lay with the Bank of England.

The Secretary of State cannot make up his mind whether serious offences such as insider dealing should be treated seriously. He is happy to allow the MMC to wave through the Minorco bid for ConsGold, notwithstanding substantial evidence of insider dealing. In the case of the House of Fraser, matters serious enough to be referred to the Serious Fraud Office were apparently not regarded as warranting a re-reference of that bid to the MMC.

There lies the mystery of the whole Al-Fayed business. The answer to that mystery can be found in the Secretary of State's determination to prevent publication of the report until any possibility of a re-reference is past. That possibility will lapse when the House of Lords judgment is delivered—if publication is not enjoined by their Lordships. After then, and however strong may be the case for a re-reference, the Secretary of State will have no legal power to make that decision.

I believe that the Secretary of State well understands that publication of the House of Fraser report now would constitute such an overwhelming case for a re-reference that he would be unable to resist it. That is why he is delaying the matter until he no longer has the power to do anything about it. That is the only sanction that really matters. The prospect of a criminal prosecution in three or four years' time is hardly likely to worry the Al-Fayed brothers. But if the bid could he reopened and they were divested of Harrods, that sanction is one that they would not like.

That raises the question why the Secretary of State is going to such lengths to prevent that possibility from being kept open. The answer must lie either in the source of the Al-Fayeds' money or in the fact that the A1-Fayeds have a relationship with the Government or with the Conservative party which the Conservative party would prefer not to bring to light.

A further problem arises out of the Secretary of State's refusal to publish the report in the even more serious case of Blue Arrow. If he applies the same reasoning, he will be constrained to refuse to publish the Blue Arrow report. Most people who have been following the issue expect that report to disclose serious criminal offences which should certainly be referred to the Serious Fraud Office. If that reasoning is applied, the report will not be published until prosecutions can be brought and therefore there will remain a major cloud hanging over one of our most important financial institutions. The Government will have to face that dilemma and resolve it. I believe that it should be resolved by publication, which is the right answer in the Minorco hid and the Al-Fayed bid.

The Government not only have difficulty in deciding how to apply and enforce the rules, but in this Bill they are deciding to reduce the impact of the rules by amending section 62 of the Financial Services Act 1986. I understand and sympathise with the arguments, but I give the Minister notice that we shall examine that provision with great caution and scepticism. We believe that the threat of civil action for substantial damages is by far the most effective sanction, and the best way to ensure that the rules are observed.

We also find it difficult to understand how the dividing line is to be drawn between the professional investor and the private investor. We have not yet been given the definition. We shall watch that dividing line and definition very closely, bearing in mind that it will vary from time to time and from case to case. But ultimately we are left with the following question: why should the direct investor be allowed such a remedy, while the investor whose savings are invested through a pension fund or through a professional investment manager is denied any such remedy?

We were interested in what the Minister said about the proposition that the Securities and Investments Board should draw up a list of principles. We are not opposed to a simpler and more acceptable rule book, but I find what the Minister had to say about those principles unacceptable. If the proposition is that those principles are not to have the full force of law and are not to be enforceable in the courts by those aggrieved by their breach, I do not believe that. the House should accept it. We shall certainly resist it.

The problems of City regulation arise from one single factor—the belief still current in the City and, it seems, in the DTI that rules which should normally be enforced with full rigour in other walks of life have less force when they apply to the City and financial markets, and that criminal offences committed in the City are not serious. That view was reinforced by the Government's reluctance to provide clear statutory rules and proper enforcement mechanisms. The City will not get the right message until the SIB and the takeover panel are made statutory bodies with full enforcement powers so that no one is in any doubt that they mean business and that the law will be applied.

The Bill is an important provision and a missed opportunity. It demonstrates by virtue of the fact that we are debating it at this time of night, the cavalier attitude with which the Government have approached so many important matters. We shall try to remedy their deficiencies. We shall try to help the Government to produce a Bill which deals effectively and constructively with the pressing problems of City regulation, the regulation of mergers and the true role of the limited liability company. At present the Bill fails to meet those responsibilities. We shall do our best to make sure that it does so.

11.54 pm
Mr. Nicholas Baker (Dorset, North)

I share the regret that we should be discussing such an important measure so late at night. I shall keep my remarks extremely brief as a result, and it is good to have the support of my hon. Friends behind me for that.

I believe that the Chingford guidelines on mergers are correct, and I am glad that they retain support in the provisions of the Bill. I notice with approval that measures are being taken to speed up references to and investigations by the Monopolies and Mergers Commission. I hope that my right hon. Friend the Minister will not regard speed as an absolute essential in dealing with changes in capital structures and capital ownership of companies. It is useful, but it must not be the overriding factor.

I hope that my right hon. Friend will consider further and tell us a little more about the definition of public interest, especially in relation to highly geared acquirers, whether they be from the Antipodes or Britain, whose acquisitions may be against the public interest.

The 13th directive of the EEC threatens to make statutory the provisions of the takeover code. I hope that my right hon. Friend will consider carefully before advancing statutory regulation in that way. The self-regulatory justice provided in the takeover code is efficient, sometimes rough but generally effective, much cheaper and quicker, and preferable to a court of law. It is a good deterrent for the sort of wrongdoing that it is designed to prevent.

I hope that my right hon. Friend will not agree to exactly the same regulatory machinery for takeovers throughout the EEC. Surely the test should be that the rules, as they are applied in each EEC country, should have the same practical effect. We should not observe tidiness as a virtue, because it certainly is not.

Takeovers are a part of our system and have improved the performance and competitiveness of our companies, but I wonder whether we rely on them for our competitiveness too much. As a result of takeovers, too many companies have lost their regional and local control and have become too centralised in London. It is argued that company law may have helped a little in this process. There can be no doubt that taxation, especially capital and inheritance tax provision, has accelerated centralisation in London, as have centralisation of Government Departments and civil servants in London. I want more companies to remain locally controlled and to grow and mature where they are born and bred.

Political contributions have been mentioned. There is no direct parallel between trade union political funds and company political contributions—partly, but not only, because the money belongs not to shareholders but to companies. Subject to the general rule for any expenditure, any payment by a company must be made for the benefit of the company, and the ultra vires rules, albeit varied by the Bill, and directors' ultra vires rules, govern the payment of these sums. The closest parallel is between payments made to political parties and other payments made by companies, such as to local charities or communities.

The change that their noble Lordships have suggested is a fundamental change of principle that all payments by companies should be voted on. That would lead to chaos in companies' accounting affairs if every payment—and this would be a precedent for many more—has to be voted on by shareholders. It is not clear what happens if the payment is voted down. The directors are responsible for their activities to their shareholders and are answerable to them. It is right that those payments should be disclosed.

How do we deal with the great problem behind this matter—the Labour party's concern that companies may give donations to the Conservative party, the Liberal party and SDP and possibly, in the future, the Labour party? That is why the Labour party wants the Bill not to be amended, but it has a remedy at its beck and call, which the hon. Member for Dagenham (Mr. Gould) has mentioned. If it is shown that at last the Labour party has become interested in business and is prepared to acknowledge the important part that limited companies play in our society and economy and the fact is acknowledged that we all depend on their profitability and the jobs that they provide, its worries will disappear.

The hon. Member for Dagenham has told us that he spent some time today twinkling in and out between lunch tables in the City. That is good news for the Labour party. It may remove its worries about political contributions. I welcome the Bill.

12.1 am

Mr. Charles Kennedy (Ross, Cromarty and Skye)

I echo the disappointment and criticism over the manner in which the Government have commenced their dealings on the Bill in this House. On this occasion, I do not blame the Department of Trade and Industry. If a criticism is to be made, it is of the Government Whips Office. However, the DTI is culpable in that it would have preferred a fuller and more sensible hour of debate—perhaps next week—but I suspect that it was overruled by the Government's business managers.

The Minister delivered a thumbnail sketch—it could be no more than that—on this wide-ranging, technical and, in parts, deeply political legislation in only 16 minutes at the Dispatch Box. To be fair, the right hon. Gentleman gave way on the few occasions when there were interventions, but I think that he will agree that that was hardly satisfactory for a Second Reading speech. I do not think that he would be happy with it. Many matters, including those on which the right hon. Gentleman touched, will be raised in Committee.

I shall confine my remarks to three aspects of the legislation—mergers policy, company accounts and political donations, and employee share ownership. I echo the remarks of the hon. Member for Dagenham (Mr. Gould), on the continuing unsuitability of the strict definition of competition as the only ground on which the Government will take a view on proposed mergers. The MMC's wider remit in considering the public interest covers competition, consumers, costs and product development, distribution of industry and employment and competitive activity overseas. That remit underscores the deficiency of the existing guidelines as laid down by a former Secretary of State—the Chingford rules—and referred to more recently in a speech by the present Secretary of State for Trade and Industry to the stock exchange on 27 October last year.

The Government are acquiescing—I was going to say "pursuing", but that suggests a degree of activity that does not exist—through a free market mentality, in the concentration of greater economic power in ever fewer hands, which is relevant in terms of large institutional shareholdings, such as pension funds. Many takeovers are purely acquisitive. Predators are looking to boost short-term funds by acquiring companies with existing assets which, all too often, are undervalued. There is a legitimate role, therefore, for far greater Government intervention—if they do not like the word "intervention", we could substitute the concept of healthy political or governmental interest—in some of the merger dealings that take place at the moment. A wider public interest basis for merger policy at the Department of Trade and Industry is long overdue.

Over the past decade, the Government have done much in legislation to encourage an increase in the percentage of the population who fall into the small shareholding category. They trumpet their achievements in that regard, and much of what they have done is to be welcomed. In addition to that, however, we must consider the more significant increase in institutional shareholders. Institutional shareholders do not necessarily have an interest in the fortunes of employees or the local economy. They often switch their money about to a great extent; consequently, they will not necessarily have a great commitment to the long-term prospects of a company. That is not always the case but it can be, and in being unwilling fully to address those aspects in the Bill, the Government are missing an opportunity.

Let me deal with company accounts and political donations. The Minister made a short speech—commendably so, given the lateness of the hour. He therefore did not enter into a detailed defence of the Government's thinking. In a sense, that in itself was rather revealing. In my view, the Government's position on political donations is utterly indefensible, and it is indefensible no matter which political party is involved.

It is extremely arrogant of the Government not to have made any concession to the House of Lords. They propose simply to try to delete the change made to the Bill in the other place. They do not propose even to try to meet the spirit of that proposal halfway. That arises from the arrogance of the Secretary of State, who, in our experience, has very little time for or courtesy towards others views—even where his own party is concerned, if we are to believe the criticisms that have been levelled against him. A few weeks ago, the Minister of Trade and Industry had to defend the Government's position on Harrods and looked rather shamefaced about it. He had to do that as a result of the lack of action by the Secretary of State.

The Secretary of State should have been willing to meet the spirit, if not the substance, of the amendment passed in another place, yet the Government have announced in a cavalier fashion in this truncated Second Reading debate that they intend to knock out the amendment and go no way towards the principle of equity in company donations —particularly, although by no means exclusively, in political donations. That is indefensible.

I cannot see how the Government can deny the obvious parallel with the trade union political levy ballots. My hon. Friends and I supported that proposal at the time, but we did so on the basis that such an approach should be even-handed. Any chairman of a sizeable company will confirm that, come an annual general meeting—a great opportunity, we are told, for shareholders to ask to what uses the company's resources have been put—any company chairman worth his salt and his telephone-digit salary can have the meeting in his pocket on such questions. Therefore, the Government are on thin ice in trying to defend their position on political donations.

To end on a happier note, there are some good aspects to the Government's policy on share ownership. Most notably, they have made a major concession in agreeing to introduce an employee share ownership scheme. At the moment, companies are prohibited from giving financial assistance to buying shares. That will be amended so that companies can help their employees to buy shares. That is to be welcomed. If we are to encourage share ownership, as the Government want, it is also extremely important to encourage greater shareowner democracy. It was unfortunate that, in the other place, Lord Monson's amendment was defeated. It read: In the case of a company having an issued and fully paid share capital of £2.5 million, every notice calling a meeting of the company issued to those of its members entitled to attend a vote at the meeting whose registered addresses are in the UK shall he accompanied by a reply-paid form of proxy. That is a sensible suggestion which can be easily tacked on to the Bill. I do not see it resulting in undue bureaucracy or difficulty for the company concerned. It would therefore enhance the concept of share ownership democracy. Of course, some but not all companies already follow such a practice. Surely it is important to make it as easy as possible for small shareholders. Most often, they will be new to the game of having a say in the company that they partly own.

I agree with much of the sense of the arguments put forward by the hon. Member for Dagenham that this is a comprehensive, or at least fairly straddled piece of legislation. It touches both technically and politically on a wide range of matters. In this case, the Government have an opportunity to improve matters. However, on the issue on which they were defeated in the other place and in relation to other potential aspects of the Bill, they are certainly not displaying a constructive attitude towards the Committee's proceedings. They certainly have not endgendered a good spirit in choosing to move the Second Reading of the Bill in its present form and at this hour.

12.12 am
Mr. Ian Taylor (Esher)

I welcome this constructive Bill. I will confine my remarks to one subject, the last matter raised by the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy)—employee share ownership. I welcome Government amendments Nos. 105 and 107, moved in the other place, both of which refer to facilitating wider employee share ownership. This forms part of the overall Government strategy to encourage worker participation, as we have already seen in the Finance Bill and the Budget.

In effect, clause 105 facilitates the formation of partnership companies, by enabling the Secretary of State to prescribe regulations under statutory instrument for table G—a model set of articles of association. That is important because, in some circumstances, a decision which is marginal can be influenced by financial considerations, and the availability of those various tables —and this one in particular—will enable much hard legal work to be overcome since the model articles are openly available.

Much of the work behind this amendment was done by Lord Onslow in another place, and the Government are to be congratulated on bringing forward their own amendment. Clause 107 also has a major impact on employee share ownership by enabling companies to give financial assistance for the acquisition of their own shares in circumstances related to the formation of an employee benefit trust.

I raised an eyebrow at the remark of the hon. Member for Dagenham (Mr. Gould) that much of the progress made on employee share ownership was the result of Opposition pressure. That is simply untrue. Many of my colleagues and I have been waging a campaign since the last Finance Bill for this initiative, and I know only too well the confusion on this matter, since the Finance Bill debate, amongst Labour Members.

Mr. Gould

Is the hon. Gentleman trying to make the point that this provision was all part of the Government's plan? If that is so, why was no such provision included in the Bill when it was originally published?

Mr. Taylor

That is precisely the point. Several of us, with the co-operation, for example, of Lord Onslow, persuaded the Government of the rectitude of this proposal. The hon. Gentleman should also be aware that it is important to see this measure in tandem with the Finance Bill because the two interrelate closely. For the hon. Gentleman to claim credit for this proposal when he has been forced to admit, in an issue of Marxism Today, that when one mentions the word "shares" in the Labour party one is regarded as a raging capitalist, is intriguing indeed. It is also revealing that he only identifies the possibility of having a benefit for workers if they also have control. That means that in nine cases out of 10 he will deny the workers the benefits they might receive from some equity holding in a company simply because of some dogmatic structure that requires that they should have over 51 per cent.

Mr. Gould

The hon. Gentleman has totally misinterpreted and misquoted me and misrepresented my position. We have no view on whether there should be employee share ownership schemes. If people want them, that is fine. However, without taking any view against such schemes that do not bring control, our objective is to have schemes that do bring control. I am sure that the hon. Gentleman will see that, logically, it does not follow from that that we are in any sense opposed to other forms of scheme.

Mr. Taylor

The continued emphasis on the fact of control is important and gives a clue to the Opposition's principal interest in employee share ownership schemes. The reality is that workers, through employee ownership, can get the fruits of capital from their own labour. The percentage of control is a totally misleading guideline.

Small companies can often benefit from very small amounts of capital put into the hands of their workers, and that gives them a commitment to the future success of the company. That is the way in which the Government want to see the scheme work. It is also significant that there is a criticism inherent in the amendment in the name of the Leader of the Opposition and others that calls for greater participation by employees. Greater participation by employees is already enshrined in this Bill in clauses 105 and 107. Therefore, the true meaning is that the hon. Member for Dagenham and his colleagues want to see worker participation in the form of mitbestimmung and other such measures to which many Conservative Members are rigorously opposed.

12.18 am
Mr. David Winnick (Walsall, North)

I agree with the many valid points made by my hon. Friend the Member for Dagenham (Mr. Gould). I view, as he and my other hon. Friends do, with considerable concern the vast concentration of economic power in giant private monopolies and multinationals, and this Bill will do little or nothing to change that.

The only aspect of the Bill I will deal with at this late hour is political donations. It comes as no surprise that the Minister announced that the amendment passed in another place would not be accepted by the Government. I refer to the provision in the Bill as it stands that requires specific approval of shareholders for political donations. I have raised several times the matter of company donations for political purposes, mainly on ten-minute Bills.

When I asked, on a point of order, for some guidance from you, Mr. Deputy Speaker, a number of Conservative Members shouted, "What about your financial support?", so I had better declare an interest now. Although I have not heard many declarations of interest from Conservative Members, I shall declare my interest. I receive directly no money whatsoever from my union, which is APEX—the Association of Professional, Executive, Clerical and Computer Staff, which is now part of GMB.

As I have explained—we all fill in our own register—I am not sponsored by my union, although if I was I would make no apology, but over a period my union has made contributions to my election campaign. It pays £100 per year to the constituency party, and £50 for secretarial expenses, which is sent to me and which I pass on to the constituency party. I hope that that explains my position.

I shall come in a moment to the way in which trade unions make political donations—[Interruption.] No, there is no doubt in my mind that the provision now in the Bill should remain as it is.

Some of the ways in which company donations are made to the Tory party are undesirable. They may be within the law, but they are only just within it. They are underhand, secretive and murky. Sometimes it reminds one of how the Mafia organisation launders money to be used for legitimate purposes.

More light has been thrown on this murky subject by some excellent material that has appeared recently in The Independent. The articles in question brought to light what are known as the river companies. I must confess that I did not know about the river companies on the occasions when I raised these issues in ten-minute Bills and the like, and I doubt whether any other Opposition Member was aware that the river companies existed. The river companies were set up to get round certain legal technicalities that prevented gifts being made to the Conservative party which, not being a commercial company, had certain problems in receiving those gifts. After the war it was decided to set up the river companies. Most of the money received by the river companies was received from large companies and was used by the Conservative party.

Substantial donations were sent to a front organisation that I had certainly heard of and the existence of which I had been aware of for many years—British United Industrialists. The money was first given by companies to British United Industrialists and was passed to the river companies and finally reached Tory Central Office. That is what I mean when I talk about "laundered" money. It is underhand and murky. Why could not the donation be made directly by the companies to the Conservative party?

Mr. Tim Smith (Beaconsfield)

I am surprised that the hon. Gentleman did not know about that because it was the Labour Government's Companies Act 1967 that required companies to disclose such contributions in their accounts. If the hon. Gentleman had taken the trouble to look at the accounts of individual companies, he would have seen contributions to British United Industrialists, among others.

Mr. Winnick

I am aware of what has passed in 1967 because I was here and supported that Act at the time. Up to that time there was no way in which companies could be shown to have donated money, and even with the introduction of that provision in 1967 the fact remains that many of the contributions made by companies are underhand.

I have already made it clear that I was aware of the existence of British United Industrialists. Today that organisation passes its donations to another organisation, Drummond bank, free enterprise account. However, that Conservative party account is not mentioned in the figures that are published by Conservative Central Office. The hon. Member for Beaconsfield (Mr. Smith) may wish to tell us about that organisation.

It seems that literally millions of pounds have been channelled to the Tory party from British United Industrialists. That organisation also supports actively and fnancially the Economic League. It could be argued that we are talking about relatively small sums that do not really make much difference because they amount to only £100 or £200, but that is not so. The figures published show that some £4.5 million was donated by large companies to the Conservative party just for the 1987 election campaign. Hartley Investment Trust gave the Tories £167,000, George Weston Holdings gave £150,000, British and Commonwealth Holdings gave £137,000, Hanson gave £102,000, Taylor Woodrow gave £78,000, United Biscuits, one of the firmest commercial supporters of the Conservative party, gave £100,000, P and 0 gave £100,000 and Allied Lyons gave £97,000. That money was given for just one general election campaign.

Surely it is not too much to ask that, before such large donations are made by companies, the approval of shareholders should be acquired. Before the law was changed a few years ago by this same Government, my union had a political fund, which, I admit, had been established many years previously. That fund could always have been modified or ended at the annual conference of my union, which would have been perfectly democratic. Anyone could opt out and many did because they did not want to pay into the political fund. Along came this Government, however, and said that that was not good enough. They said that all trade unions had to have a political fund ballot every 10 years.

In 1985 I took part in the political fund ballot of my union, then APEX. I tried to persuade members that they should continue to have a political fund. I must confess that during that campaign I spoke about the money that was donated to the Tory party by big business. I am glad that, at the end of the campaign, all the unions with political funds succeeded in their ballots—we had a majority of more than 70 per cent. The irony was that a couple of trade unions that had never had political funds had a ballot and decided to establish them. I was pleased about that.

The unions' behaviour is in stark contrast to that of the Government. The Government told the trade unions that they had to have political fund ballots every 10 years before such funds could be maintained to make contributions to, as we all know, the Labour party. A modest proposal passed in the other place would simply mean that shareholders would be able to decide whether contributions of a political nature should be made. That would affect the Conservative party, and the Minister has said that such a proposal is out of the question and that it will be changed in Committee. That is the height of hypocrisy. Surely no one can deny the contrast in behaviour.

I accept, of course, that I am politically biased—as is everyone in this House. We want to ensure that our argument is the best, but surely we should be concerned about standards in political and public life. If a trade union acts corruptly, that is indefensible. I would not wish to argue in favour of such a union, which would bring discredit to the trade union movement. I have no wish to defend indefensible practices. Conservative Members seem to be unanimous, however, that the present practice whereby companies donate large sums of money to their organisation is all right. They believe that the law should not be changed and that everything is in order, however murky, underhand and secretive it is, as shown by the articles in The Independent on the river companies, British United Industrialists and all the rest. Undoubtedly the time will come when another Government will be in office and they will make changes which are perhaps more substantial than the modest proposals carried in the other place.

I know that there are people inside the Conservative party, if not inside the House, who share our views. They are, of course, as anti-Labour as Conservative Members; otherwise they would not be active members of the Conservative party. I know of the Charter movement and of Mr. Eric Chalker and others who are looked upon almost in the same way as dissidents in the Soviet Union. They take a different view from the Minister and Conservative Members. The Charter movement inside the Conservative party argues that the Tory party should be far more open about its finances and that Conservative Central Office should publish full, audited accounts. It is remarkable in this day and age that anyone should have to campaign for what should be taken for granted in a political organisation. The Labour party has always published full, audited accounts. It would be odd if it did not do so.

I have no wish to personally attack or smear any Conservative Member—I am concerned with the politics of the matter—but when I look at the Register of Members' Interests I see that in some cases Conservative Members have several directorships. For instance, the hon. Member for Dover (Mr. Shaw) has 12 directorships. Other hon. Members, present or absent, have a substantial number of directorships. A number of the companies mentioned donate large sums of money to the Conservative party. Those hon. Members are firmly opposed to any change of the law, yet four years ago they were only too keen to change the law regarding the political funds of trade unions. Those individuals, like the Government, are acting in a hypocritical manner. I beg Conservative Members to understand that there is a need to retain the amendment carried in another place. If there is a change, as undoubtedly there will be arising from what the Minister has said, when another Government come to office there will be substantial changes in party finances.

12.31 am
Mr. Anthony Nelson (Chichester)

The hon. Member for Walsall, North (Mr. Winnick) spoke principally on one issue. I make no complaint about it, but the Bill affects thousands of companies, hundreds of thousands of shareholders, investors, creditors and debtors, and millions of employees and customers. Perhaps they were entitled in the breadth of the debate to a little more comment on the issues than the navel-studying issue of political contributions, although I do not under-estimate the depth of feeling of hon. Members in both Houses, and on both sides, about the matter.

In observance of the conventions of the House, I wish to declare my personal interests as a director of, and a consultant to, a number of companies—one plc, two private companies and two charitable companies. The plc is the General Electric Company, which is relevant in that it has recently been involved in a takeover bid, although that is not relevant to what I wish to say now.

I also want to take the opportunity to register a protest. The Government do the House no service in bringing forward such legislation late at night. First, we should blame the hon. Member for Glasgow, Govan (Mr. Sillars). I understand the Government's point of view, that they should not have to alter the legislative programme for major Bills because of the irresponsibility and the publicity stunt of the hon. Member for Govan. I think that he will get his come-uppance in due course. That example shows yet again that we as a House should exercise more of a self-denying ordinance about messing up the business of the House and of the Government of the day. The first responsibility lies with the House. As an ordinary Back-Bench Member I say that we should exercise more responsibility.

Secondly, Mr. Deputy Speaker, you and Mr. Speaker speak for the House. You are our representatives to the outside world. We respect you. In you is the repository of the heritage, the good order, the respect and the procedure of the House. While it is not for me to put words in your mouth or to raise a point of order, I believe that the House should be concerned—with the concern reflected through the Chair—about such procedures and the fact that Ministers are detained here late at night. I have just met the Minister for Roads and Traffic, who may be making important decisions about roads in our constituencies tomorrow. What nonsense it is that he should have to be here at this time of night because of the irresponsibility of the hon. Member for Govan. Finally, there is the responsibility of business managers and the Ministers because it is their Bill and it is within their bailiwick to decide whether to bring forward the Bill.

The House knows, and it should be said in the House, that this business could, and should, have taken place tomorrow. Why was it not conducted tomorrow? We should not continue to put up with cursorily discussing so late at night important Bills that affect so many people and lay down legislation for a decade ahead. I have said my piece at too great a length on that matter.

The first two parts of this important Bill implement two European Community directives, both of which are necessary and overdue. The Bill is an important step towards improving the standards of auditing and accountancy in this country, and the education, supervision and control of the accounting profession. As the Opposition motion—subsequent to Second Reading —suggests, the proceedings of the Bill would be more adequately dealt with by a special Standing Committee. The Bill is ideally suited to that procedure.

The special Standing Committee procedure allows for only four mornings on which the Committee sits, with the Chairman of the relevant Select Committee, to take evidence from relevant organisations. When discussing a Bill of this magnitude, technicality and importance, in which legislation is framed that will affect major professions in this country, we should want to hear what those professions have to say. We, as a House and as a Committee, should take evidence from them.

I am told that the problem is time, and that if those extra days were allocated, it would not necessarily reduce the amount of time that the Bill was in Standing Committee. However, parliamentary procedures should be pursued not for the convenience of the Government, but for the good government of the country. They should be enshrined in good, entrenched and workable law. The special Standing Committee procedure would allow that to happen and would be well suited to do so.

When implementing the European standards of accountancy in this country, the European countries will have a great deal to learn from us, and we shall have little to learn from them. I would like Ministers to assure me that just as we will implement—no doubt to the letter—the requirements of the directives in this country, we shall press hard for those directives to be fully implemented in other European countries. The single Europe, the degree of competition, the prosperity and prospects of British companies, will rely as much on the comparable standards of accountancy and disclosure—which certainly do not exist at the moment—in the European Community, as they will on the implementation of the high standards of probity in this country.

I welcome the moves that the Government are making in relation to part VI and the competition policy, as elsewhere in the Bill, to streamline and speed up the process of supervision and decision-making on takeovers and mergers. Increasingly in recent years, successive Ministers of Governments of different political colours have been placed in an increasingly difficult position. Not only have their utterances and decisions been increasingly subject to litigation and legal challenge, but they have to withdraw and be much more circumspect about what they can say, in the House and elsewhere, about important matters of public policy, industries and competition because of pending Monopolies and Mergers Commission inquiries and litigation. That is not necessarily good.

Part of the answer to this problem might be to shift out of the Department the process of supervision, as I and others have sought to do with regard to the supervision of the investment and financial markets. In this case it would involve moving the supervision towards some of the accountancy and other professions and, particularly, to give powers to those other than the Secretary of State for the supervision of monopolies and mergers. In my view, however, that would not be desirable. Every merger is individual, and inevitably—certainly in the case of major mergers—contains a range of political and regional factors that should be taken into account. Ultimately, the need for a political decision cannot be ignored or circumvented, although it is right for us to construct procedures to ensure that the Secretary of State receives the best possible objective—informed advice.

In deciding to speed up the process the Government have chosen a course that has been welcomed on both sides of the House, and I look forward to discussion in Committee. It is, effectively, plea bargaining. I should like an assurance, however, that it is not a charter for leveraged buy-outs, for I fear that speeding up or making easier the process whereby applicants to the Department of Trade and Industry can be told, "Yes, you will be given permission for a takeover without a reference if you agree beforehand to undertake to divest yourself of certain subsidiaries afterwards" will lead to many companies trying it on. They will try various formulae for the hiving off of various subsidiaries. The leveraged buy-out phenomenon has not yet swept this country, but it has swept the United States.

Moreover, I do not consider the process itself helpful or beneficial to the development of British industry or to the confidence of other investors who are by no means in such a powerful position as major shareholders, and certainly the institutions. I am a little concerned about the restraints, controls and conditions that will be attached to such procedures to ensure that this is not a charter for takeovers which will result in virtualy no references being made to the Monopolies and Mergers Commission. I believe that there is a role for the commission, which has done outstanding work and which, under Mr. Sydney Lipworth has not only proved very good value for money in public expenditure but, over the past year, has considered an increasing number of cases with great diligence and impartiality.

While I welcome much that is in the Bill, I believe that we should consider other measures that are increasingly necessary in company law. Let me mention, in general terms—I think that this relates partly to the initial dissertation by the hon. Member for Dagenham (Mr. Gould) about the changing roles and obligations of limited companies—my increasing concern about the way in which public limited companies are using shareholders' funds for some rather questionable purposes. The House should be very concerned about the personal vendettas, highly questionable loans and activities apparently wholly unconnected with companies' articles of association that we have seen in recent years.

My own view, as I think is well known, is broadly in line with that of the late Sir Brandon Rhys Williams. I believe that there is a pressing need for us to consider ways of supporting and empowering non-executive directors—or at least some elements on the board—to require, through separate responsibilities and abilities, certain financial information. I am not yet persuaded of the need to adopt the supervisory board system employed elsewhere in the European Community; I believe that we can accommodate such arrangements within our unitary board tradition. Nevertheless, in many companies it simply is not working out.

It is not good enough that companies are making substantial loans, grants and disbursements for people and activities wholly unassociated with what shareholders believe to be taking place. That is not good for investment, for the City, for probity or for the recognition of company law in this country. If it is getting out of hand, as I believe it is, we should strengthen and bolster the role of non-executive directors. We have done that in banking. Partly by coercion and partly voluntarily, new standards of probity have been established in the banking community. It is difficult to achieve unanimity and a perfect performance elsewhere, and much remains to be done. I predict that the problems will get worse unless the House does something about the problem.

In many of its measures, particularly the disclosure measures in part I and II, the Bill does much to rectify the problems. I hope that in the later stages Ministers will be able to reassure us that the comprehensive nature of the proposals answers many of the fears that I have expressed and which I know are abroad elsewhere in the House.

12.45 am
Mr. Bob Cryer (Bradford, South)

I shall be relatively brief because of the late hour at which we are debating this Bill. We have been forced to debate it because the Government insisted that it should be debated at this late hour. The Bill is long, complicated and technical. It is wrong that we should be debating it now. I do not know why the Government have insisted on this, unless they want to diminish the long, boring intervention made earlier by the hon. Member for Glasgow, Govan (Mr. Sillars). I must point out that he is no longer in the Chamber. He spoke at length and pushed our proceedings into the early hours, but he has now disappeared. None of the SNP Members is interested in this legislation, which will affect Scotland and will have equally grave importance for Scottish Members. [HON. MEMBERS: "Hear, hear."] Having received that support, I suspect that my next remarks will not receive such universal commendation.

The Minister referred to clause 19, which tightens the definitions of parent undertaking and subsidiary undertaking. That is pleasing. A lot of siphoning off of companies has occurred to defeat legitimate industrial disputes involving the trade union movement. If clause 19 stops that abuse—I suspect that that is not the reason why the Minister included it in the Bill—it will help to encourage decent industrial relations. However, the Minister has included the clause to stop abuse and, as he said, to make consolidated accounts more meaningful and to avoid evasions caused by the siphoning off of companies. Evasions also occur in the responsibilities of allowing trade unionists the proper rights to undertake legitimate industrial action against companies.

Part III is entitled: Investigations and powers to obtain information. That section of the Bill refers to stronger investigative powers. That is good, but those powers do not go far enough. They do not go as far as the comprehensive investigative powers of the Department of Social Security. I cannot find any clause in the Bill which allows inspectors to stand outside a company office to spy on the activities of people inside. Inspectors in the Department of Social Security have such powers in respect of disputes about relatively paltry sums.

While I welcome the increased powers to obtain information and the investigations, I would argue, as my hon. Friend the Member for Dagenham (Mr. Gould) argued, that they do not go far enough. The Government have a great deal of experience of pursuing recipients of relatively tiny sums in the form of social security benefits. I should have thought that they could invoke some of that experience against the massive sums which are being defrauded in the City.

I have a few comments to make about the provision from the other place to give some meaning to shareholder democracy. I do not have much sympathy for that concept, because there is not much of it about. The Government are not prepared to extend it, because the House of Lords is not a very radical place. It moves very mild amendments, and that is what it has done in this case. It is not all that radical to permit shareholders who provide the money to make the decision about political donations. The Government are denying shareholders that opportunity. They are giving a kick in the teeth to the people they are supposed to be encouraging.

What are the Government afraid of? Are they afraid that shareholders might say, "We don't want to give money to the Conservative party that produced this wretched Government"? The Government should put the matter to the test. They have insisted on ballots for trade unionists and trade unions. Clearly, they have double standards, because they will not give shareholders the sort of rights that they claim have spread democracy in the trade unions. That is an appalling example of Government hyprocrisy.

There is some interesting information about why the Government are hesitant to do that. They are hesitant because they might lose a great deal of money. "Labour Research" for December 1988 conducted a survey to determine political donations. It revealed that 1987, election year, saw the highest amount of money being given to the Conservative party. There was a total direct donation to the Conservative party of £4,528,533, from 333 companies. That is not the total of political donations, but I shall come to that in a moment.

Metal goods, engineering and vehicle companies gave the Tories £657,533. Energy and water supplies contributed the comparatively trivial amount of £14,333. The extraction of minerals and ores, and the manufacture of metals, mineral products and pharmaceuticals handed over £449,250 and general manufacturing handed over £943,810. Distribution, hotels and catering produced £229,552. Construction and other such companies, including Taylor Woodrow, which is an avid supporter of the Conservative party and which one recalls built Ronan Point, produced £461,925. Transport and communications produced £188,950.

However, it is when one comes to banking, finance and insurance that one sees where the real pearls were handed to the swine, if I may use that phrase. Banking, finance and insurance produced £1,451,550. No wonder that powers of investigation are not to be applied to such enthusiastic supporters of the Government. After all, they contributed almost £1.5 million directly to the Tory party.

As I said earlier, that was not the total amount given to the Tory party and front organisations. Total donations were £5,023,243. The paltry amount of £42,250 went to the SDP-Liberal alliance and no doubt the money came from Tories eager to split the Opposition vote. The Labour party received £1,000, and £4.5 million went to the Conservative party. British United Industrialists, which is a hiving-off operation to give money to the Tory party, received £214,750 and the Economic League, which exists to spy on workers and hand over the information in a most disgusting manner to employers, received £52,592. The Tory Centre for Policy Studies, which has several graduates in this place producing their noxious nostrums, received £81,500. Aims of Industry received £22,110 and so on.

All the money—well, 99.9 per cent. of it—went to the Tory party or its front organisations. It is pretty timid, to say the least, of the Government not to be able to say—this is what they say to trade unionists—"We have given you an element of democracy." The Government have insisted —

Mr. Charles Wardle (Bexhill and Battle)

Will the hon. Gentleman give way?

Mr. Cryer

I shall not give way. The hour is too late, and it is the Government who—

Mr. Wardle


Mr. Cryer

I will not give way. The Government have insisted on introducing the Bill at this late hour and they must accept any difficulties that occur.

The Government have insisted that trade unionists should have ballots before they take strike action. Similarly, they have insisted that trade unionists should use ballots to elect officials, although the democracy of trade unions has developed over the years and the Government's intervention was really an attempt to diminish democracy. In the Government's terms, however, they claim that they have extended democracy for trade unions.

Mr. Wardle


Mr. Cryer

Unfortunately, the Government will not apply the same principle to shareholders. Surely shareholders are those whom the Government claim to cosset. When the Government steal public assets from the citizenry at large and hand them over to a relatively few shareholders, they claim that they are spreading shareholder involvement and a participating democracy. It is described by some as people's capitalism. It should be noted that those who have capital are not allowed to decide which organisations should receive political donations. They are not allowed to decide the amount of such donations.

Mr. Wardle

Will the hon. Gentleman give way on that point?

Mr. Cryer

The fact that they are not allowed to do so is an outrage. I hope that it is another nail in the Government's coffin. It may not be an especially large nail, but many others are being hammered in, as the Vale of Glamorgan by-election and the local authority elections tomorrow will demonstrate.

12.58 am
Mr. Jeremy Hanley (Richmond and Barnes)

I welcome the Bill, which is a long-awaited measure, and the majority of its provisions. I regret only that earlier parliamentary antics have curtailed the debate on a most important Bill. The more substantial contributions to it must await the Bill's consideration in Committee. I shall reduce my speech to three main areas, but I am grateful that there has been no undue pressure from the Government to shorten the debate on Second Reading. I understand that consideration must be given to all hon. Members, but the House must understand that certain matters must be raised on Second Reading if we are to have an effect on the consideration of the Bill in Committee. It is difficult for those who wish to raise technical matters at this time of night, and perhaps unfair on them, if they are obliged to do so only briefly.

Primarily, the Bill implements the seventh and eighth company law directives that regulate consolidated accounts and the regulation of auditors. The opportunity has been taken, however, to improve and strengthen company law while at the same time removing many unnecessary burdens and elements of bureaucracy.

I am mindful of the great effect that the Bill will have on the regulation and practice of auditors. I wish to declare an interest as a chartered accountant and the parliamentary adviser to the Institute of Chartered Accountants in England and Wales.

The Bill, as with every recent companies Bill, has received exhaustive examination during its passage through the other place. These are important technical and largely non-political Bills and they are often the subject of many amendments and new clauses. I remind my right hon. and hon. Friends on the Government Front Bench that the Insolvency Bill, as it then was, to which the hon. Member for Dagenham (Mr. Gould) referred, contained 200 clauses. It was the subject of 1,400 amendments, of which 1,250 were tabled by the Government. That must prove that the Department, or its draftsmen, did not have everything right initially and that proper discussion improved an imperfect Bill. In the end, that discussion produced reasonable, although imperfect, legislation. In the main, the Bill that is before us has fewer defects.

Part I deals with company accounts. Accounting standards will soon be brought into our consideration of the Bill, and the issue is so important that I feel that is should be raised this evening. There may be many hon. Members on both sides of the House who feel that accounting standards constitute an unimportant and esoteric matter, but every set of accounts and every bid, be it an attack or a defence, relies on a set of standards that must be observed in the creation of figures that can mean millions or billions of pounds for shareholders, employees and, increasingly, for those who are both shareholders and employees. In other words, accounting standards are vital to achieving a level playing field.

In 1969, to reduce the variety of accounting practice and to make accounts more consistent for the reader, certain standards were formulated. That programme was financed and developed by accountants through an extra levy on their subscriptions. Therefore, that work was completely paid for by the practitioners—although it was respected enough for many of its basic concepts to be incorporated in later company law statute.

That programme expanded over the past 20 years, but the preparation and enforcement remain with the accountancy profession alone. The system has very largely been a great success, as the improved economy, as measured by the values and numbers of shareholdings, shows. After all, any lack of confidence in the integrity of published accounts would have led to a severe reluctance of invest in United Kingdom companies, with highly damaging consequences for Britain as an international financial centre.

We need enforceable accounting standards, but the accountancy profession can discipline only its own members. Only the Government can establish a system effectively to regulate the corporate sector when it breaches standards. Eighteen months ago the Combined Consultative Accountancy Body—the six accountancy bodies recognised by statute—established the Dearing committee to suggest the way forward in creating an independent body to devise and enforce standards. The result is the Financial Reporting Council which, it is suggested, should comprise 25 representatives of preparers, users and auditors of accounts, supervising and guiding the work of the nine-person accounting standards board. Also proposed is a review panel to review and enforce compliance with the standards.

The accountancy profession welcomes the Dearing report and is pleased that the Government agreed to implement its proposals. However, the ICAEW has strong reservations about the way in which the Government intend implementing them. As to the membership of the FRC, the Government suggest that its chairman should be appointed by the Secretary of State, possibly with the advice of the Governor of the Bank of England, but that its other members should be representatives of accountancy firms, large and small companies, banks, perhaps the Confederation of British Industry, and the stock exchange.

It is suggested that anyone wanting to join could pay a contribution of £25,000, say, and share the costs of that important body. That must be wrong. Some important groups, such as academics, would not have £25,000. They may not have a bean, but their advice, and the contribution they can make, would be vital. It is surely in the public interest that the FRC should remain independent and that not just its chairman but all its members should be appointed by the Secretary of State and the Governor of the Bank of England. Payment should take the form of a levy on all limited companies of only £6 for every firm registered at Companies House. That would not be taxpayers' money but a small extra cost imposed on those who enjoy the very great privilege of limited liability, as was mentioned by the hon. Member for Dagenham.

It is also suggested that either the DTI, the review panel or the stock exchange should bring actions against directors—and perhaps their auditors—in cases of departure from the agreed standards. The ICAEW believes that only the Secretary of State should have the duty, on the advice of the review panel, to order corrected accounts. If that is left to any one of three bodies standing in a circle waiting fo the others to move because the first one to pick up the glowing coal will have to pay the bill, one can be sure that there will be another two or three years of inaccuracy and delay before corrected accounts are ordered.

The cost could be immense. If a company with the determination of Lonrho, for example, decided to pursue an order for corrected accounts all the way to the House of Lords, there is no doubt that the stock exchange would not touch it, and that the review panel would not have the depth of purse or the staff to pursue such an action. As to staffing, the review panel could not deal with more than four or five large cases a year. If it became caught up in a major court action, it could hardly deal with more than one correct account case. It must be the Secretary of State who not only orders those actions but guarantees payment.

Part II of the Bill introduces a new regime for the regulation of auditors. It implements the EC eighth directive on the approval of auditors, but goes well beyond the directive's requirements. The United Kingdom Government do not often go way beyond European Community directive requirements, but in schedule 8, for example, the requirements on monitoring, on maintaining competence and on technical standards are not contained in the directive. Therefore, the Government have chosen a significantly heavier regulatory regime than we believe is needed. The costs of the new regime will be increased further by the Government's decision to retain the small company audit requirement.

We in the Institute of Chartered Accountants accept the monitoring of auditors, but we do not believe that the public interest is served by monitoring all auditors of all companies as is proposed. Why should one monitor the activities of a small audit firm that audits the local newsagent? It cannot be in the public interest. The accounts are not in the public interest, the company is not in the public interest. Therefore, the nettle of removing the statutory duty of small companies to have an audit should have been grasped. Not only would accounting standards and the monitoring of auditors be applied solely to firms that had a public interest, but the costs would be greatly reduced for all concerned. Only about 1,000 firms would have to be monitored if only major companies had to be audited rather than the estimated 11,000 firms at the moment. Those costs will be passed on to the smaller companies being audited, and that cannot be in the national interest.

Accountants are members of the one profession that is happy to lose an apparent vested interest by removing the statutory requirement for audits of all companies, no matter how small. We should rather do work that clients want than the work that the state demands. There would be no loss of security on income tax. After all, large partnerships do not have audits unless they want them, and it is pointless to say that banks will insist on an audit. Banks do not need last year's audited profit and loss account; they need next year's projected cash flow.

The Government are considering a number of detailed points that the institute has raised on part II of the Bill, and have already brought forward a number of amendments in response to our comments. We are grateful for those changes, and particularly for the introduction of immunity against litigation for recognised supervisory bodies. I must pay tribute to my hon. Friend the Under-Secretary of State for Corporate Affairs for listening to our arguments and to Lord Strathclyde, and particularly to Lord Benson who worked so hard to achieve that immunity. Without that protection, recognised supervisory bodies and their officers and employees would have been vulnerable to litigation for huge sums—amounting to hundreds of millions of pounds in some cases—and the new regime would have been unworkable.

I regret having to leave out four other substantive issues which must be left for consideration in Committee, but my final point is equally important. The Institute of Chartered Accountants in England and Wales has been concerned for many years about the complexity and uncertainty surrounding the Companies Act provisions relating to the disclosure of directors' transactions. My hon. Friend the Minister will remember that clauses were introduced in part IV of the Companies Act 1980 to try to stop various abuses by which directors used company funds for their own benefit. Very few would deny that the combination of straight prohibition and heightened disclosure has worked to some extent, but those 1980 rules, which were consolidated into the Companies Act 1985, are famous by their obscurity of language and complexity in practice. The main object of the regulations seems to be to embarrass directors who use loans, quasi-loans, expenses or other transactions with their companies, into giving up their erstwhile practices because of the publicity given to them in the company's accounts which would be checked by the auditors.

The state relies on company auditors to make sure that proper disclosure is achieved, and that directors do not wriggle out of their legal obligations. The only problem is that auditors, solicitors and the barristers to whom they refer from time to time are frequently unable to give companies positive advice on the law as it applies in particular circumstances. The law, on one hand, is too complex and, on the other, is not comprehensive enough. It cannot be in the interests of any of us who want to see properly agreed legislation fully carried out if the auditors, on whom the directors, the DTI and shareholders rely, are seen to be muddled and uncertain about those interpretations. The most significant problems were communicated to my hon. Friend the Minister in a memorandum from the ICAEW dated December 1988 in an endeavour to have the matter considered under the Bill. Regrettably, the Department said that the Bill was too complex without the introduction of further material.

The existing law must be simplified and improved in the interests of all by starting again from first principles, offering greater simplification and clarity and, at the same time, removing unnecessary burdens and plugging loopholes. The longer the law continues unchanged, the longer the defects and ambiguities will be allowed to continue. The current muddle on loans, quasi-loans and credit transactions will, for yet another two or three accounting years, be a drain and burden on those who exercise their obligations properly and a muddy pond in which the ignorant or, at worst, the fraudulent will continue to wallow. For instance, transactions by non-relevant companies can be easily structured to avoid the prohibition on loans to directors, allowing a director, in certain circumstances, to borrow from his company without financial limit.

Extended credit terms can be used to drive a coach and horses through intended legislation. Too many subjective judgments must be made, all of which are unfair on an auditor trying to do an accurate job, and these lead to poor relationships with a director, who for the life of him cannot understand why he should be exposed to such publicity, about which there is no clear legal interpretation.

I ask my hon. Friend the Minister, in all sincerity: if a Companies Bill is not the proper medium to amend this important legislation, what on earth is? If the Bill is too complex and long, when can we expect another to deal with these important matters?

I am aware of an exchange of letters between my hon. Friend and the Institute of Chartered Accountants and of the fact that there will be a further meeting later today. Progress cannot be delayed much further.

I am sad that we have not had longer to debate the Bill. There will be many chances to debate it in Committee, but I ask my hon. Friend the Minister, please, not to consider that the shortness of the debate has reduced the sincerity with which hon. Members have discussed the issues that are involved and the importance of the task still facing him in producing a Bill that will be regarded as competent and workable legislation.

1.11 am
Mr. John Garrett (Norwich, South)

The debate has given us an opportunity to examine some important issues in relation to the regulation and governance of companies. I join hon. Members in saying how ridiculous it is that such an important Bill is being considered at this hour. Although it is true that the delay was caused by the now absent hon. Member for Glasgow, Govan (Mr. Sillars), we are discussing the Bill at this hour to satisfy the amour propre of the Government. It could easily have been dealt with tomorrow, or later.

That is not the only example of unsatisfactory conduct on the Bill by the Government. In another place, the Bill was presented incomplete and poorly drafted. The ultra vires provisions were inserted as Government amendments in the Committee stage and we still await amendments based on Department of Trade and Industry consultations on the Dearing report on the making of accounting standards and on proposed amendments to the Financial Services Act 1986. Those consultations were carried out late in the progress of the Bill.

Ministers have continually referred to seeking consultations on the detailed provisions of the Bill, yet part VII—"Financial Markets and Insolvency"—introduced its measures without consulting the major relevant body—the Insolvency Practitioners Joint Liaison Committee. In a complex subject, this failing resulted in proposed legislation that was less than comprehensible and the Government had to introduce 110 amendments to this part on Report.

As my hon. Friend the Member for Dagenham said, in 50 hours of discussion on the Bill in another place, the Government introduced 400 amendments. In his final speech, the Secretary of State, in one of his most welcome appearances during discussion of the Bill, told the other place that there were still many matters on which the Government were in the process of coming to a view, which may lead to changes in this House.

I hope that the Minister will undertake that in Committee we shall have adequate notice of proposed amendments, some of which raise the most important issues in the Bill. The Government should make up their mind what they want and put forward legislation designed to achieve their objective. We should not have to debate what are merely suggestions in the Department's consultative documents.

We are critical of the Bill in three main areas. It gives inadequate recognition to the fact that limited liability is a privilege that carries with it obligations to shareholders, creditors, employees, the local community and the public interest; its failure to address the all too prevalent problem of managerial and financial market short-termism, manifested by our present outbreak of merger mania; and the reliance on self-regulation, which has not worked when high financial stakes are involved. I shall refer briefly to some of the consequent issues to enable the Minister to reply.

Given the privilege of limited liability, it follows that company accounts should reflect the consequent obligations to provide full and meaningful disclosure. We want a regime of disclosure as a result of which the company is made more accountable to its shareholders, customers, employees, the local community and the national interest.

We welcome the Government's apparent commitment to give the degree of statutory backing to the statements of standard accounting practice recommended in the Dearing report. This, however, puts the cart before the horse and we await the Government's comments on the Dearing report's recommendations for a new structure for accounting standards. We are not impressed by the present self-regulatory approach with the major accountancy firms dominating the body responsible for drafting accounting standards—and a particularly secretive body it is, too.

Part II deals with the regulation of the auditing profession and seeks to implement the EEC eighth company directive. In 1986, the then Secretary of State for Trade and Industry said that the implementation process provided the opportunity to take "a long, hard look" at the structure and organisation of the profession. In the light of that long, hard look, we regret that the Government appear to have in mind measures which essentially leave intact the present hands-off regulatory approach to auditing.

We regret that the Government have not chosen to implement any of the suggestions in the DTI consultative document "Regulation of Auditors" regarding article 24 of the eighth directive which requires member states to ensure that statutory auditors must be independent. We welcome the announcement by the Secretary of State on Second Reading in another place that the Government amendments would require the fees paid to auditors, or their associates, for services other than auditing to their clients, to be disclosed in company accounts, as audit fees are now. Clearly, there are potential conflicts of interest, and we shall seek the Government's views in Committee.

I was involved in the campaign that led up to the National Audit Act 1983. We are concerned that the Bill in at least one respect is narrower than the EEC eighth directive on which part II is based. The restrictions in schedule 9 on the type of audit work and the bodies to be audited may have a substantial impact on the work of the National Audit Office, the Audit Commission for England and Wales and the Accounts Commission for Scotland—for example, in the establishment of agencies which may become corporate bodies but are still largely funded by public expenditure which the National Audit Office would no longer be empowered to examine. Those of us who were in the campaign that led up to the National Audit Act 1983 would be sorry to see its provisions weakened.

We welcome the wider investigation powers conferred in the Bill in part III. The Minister referred to speeding up investigations, but 19 inquiries are still uncompleted, some dating back to 1982. Slackness and inefficiency by the DTI is the clearest possible signal to miscreants in the City that they have nothing to fear from the present regulation arrangements.

Part V, on other amendments to the Companies Act 1985, is disappointingly short. The Government could have updated the purpose and concept of company law, so that it was concerned not only with protecting the shareholders but with recognising the great social and economic importance of the limited liability company and ensuring that it served the wider interests of the community. The interests of the company are defined by the courts to be those of its shareholders. Section 309 of the 1985 Act which enables and requires directors to take account of the interests of employees is ineffective.

I am glad that the hon. Member for Chichester (M r. Nelson) referred to non-executive, audit committees and compensation committees. The desire to see them introduced is held by hon. Members on both sides of the House, and I hope that we can form an alliance in Committee to ensure that progress is made. That would ensure public accountability of a company in a simple way—which has been advocated by hon. Members for a long time.

In Committee we shall also discuss European initiatives in providing new statutory rights to employees—rights of representation on the board and rights to information and consultation. Such changes would bring us into line with the EC Vredeling directive arid the draft fifth directive on the structure and management of public companies.

We look forward to discussing in Committee the Government's position on takeovers, as embodied in part VI. The hon. Member for Esher (Mr. Taylor) referred to the greater efficiency, effectiveness or both that can arise from takeovers. In fact, however, the DTI's research shows that more than half of takeovers lead to a decline in company performance or at best have a neutral effect on it. The threat of takeover leads to preoccupation with short-term survival. We shall try to establish what Government policy is on that, given that there is widespread confusion at present.

We welcome the increased shareholder interest disclosure provisions in the Bill as a step towards greater transparency, to bring the behind-the-scenes activities of predators out into the open. As my hon. Friend the Member for Dagenham (Mr. Gould) said, however, we do not think that it goes anything like far enough. At present the law proceeds on the assumption that takeovers and mergers are beneficial in principle. We should like the burden of proof to be reversed so that mergers or takeovers could proceed only if they were shown to be in the public interest. The Director General of Fair Trading aired that possibility some time ago. Overall then, this is a Bill of missed opportunities, which we shall do our best to amend in Committee.

I should like to refer to the Special Standing Committee procedure and the motion on it. I am glad that the hon. Member for Chichester referred to it. Our objective view is that this Bill is particularly well suited to examination in a special Standing Committee. The 1987 Procedure Committee, which proposed the procedure and of which I was a member, thought that it was well suited to a technical Bill affecting the interests of particular groups. Those groups could be summoned—for no more than three opening sittings in Select Committee form—to give evidence to show to what extent their interests were enhanced or prejudiced by the proposals.

It would save time if we could examine the Minister rather than having to table probing amendments leading to long and often fruitless debates, and the two Procedure Committees that have considered the procedure since 1987–88 have concluded that it should be used more widely. The Procedure Committee that sat in 1984–85 observed that all the evidence that it had received on the operation of Special Standing Committees "was enthusiastic" and the Committee that sat in 1987 said that it should be more widely used.

Given the number of technical, largely non-controversial Bills that come before us, it is a great pity that the Leader of the House has seen fit to accede to a request for its use on only five occasions, although we have examined 440 Bills under this Government. In our objective and non-partisan view, the Companies Bill is just the kind of Bill that would benefit from examination. In view of the lateness of the hour and the known opposition of the present Leader of the House—who, I am afraid compares most unfavourably with one of his predecessors, Lord St. John of Fawley—I shall not press the motion to a Division.

1.23 am
The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude)

A number of hon. Members have commented on the time at which this debate is taking place, and I am sure that all of us on the Conservative Benches share the disquiet that has been expressed. It is a matter of regret, however, that the culprit who held up our proceedings for so long with his outrageous display of egotism and publicity-seeking has not sought to avail himself of the opportunity to take part in this debate on what everyone has agreed is an extremely important Bill. Moreover, the Bill directly affects Scotland, so it is a matter of regret that the hon. Member for Glasgow, Govan (Mr. Sillars) and all his colleagues in the Scottish National party should have taken themselves away as soon as their publicity stunt was over.

The hon. Member for Dagenham (Mr. Gould) referred to the motion to refer the Bill to a Special Standing Committee. I understand his arguments. He took part in the setting up of that procedure, which is particularly dear to his heart. This is not the right sort of Bill for that approach. He said, as the Select Committee on Procedure said, that that was appropriate for Bills which affect particular groups. This Bill has wide application. It affects every company in the business sector. It is of universal application. It does not fall into the category of Bills which affect certain groups in the way that the Select Committee had in mind.

Several hon. Members have taken the trouble to express thoughtful and serious views about this important Bill. Several points have been agreed to be desirable, and I welcome the support that has been expressed. So much agreement was expressed about the Government's views on employee share ownership schemes that I am inclined to think that it may arouse some suspicion. None the less, we are glad to have the universal approbation that the provisions have aroused.

I shall deal briefly with some of the points that have been raised in, I regret, no particular order and not, I regret, comprehensively. My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) referred to the Dearing committee on accounting standards. I am aware of the Institute of Chartered Accountants' concern about financial arrangements. I stress that the financial arrangements will not be comprehensively dealt with. I have no doubt that, if the new system is to work, it must attract funding from a wide variety of sources—practitioners, users of accounts, and a wide variety of participants.

Regarding the regulation of auditors in part II of the Bill, the hon. Member for Dagenham asked whether there was a need for monitoring arrangements to be included in the Bill and whether the eighth directive requires that. That is not done in specific terms, but we have no doubt that the requirement that companies set up effective supervision implicitly requires that there should be some monitoring. We do not believe that the monitoring to be carried out by professional bodies need be excessively burdensome. The hon. Gentleman will know that detailed arrangements have not been submitted to my Department by professional bodies.

The hon. Gentleman asked whether progress can be made in resolving the incredibly difficult issues on directors' transactions. All of us agree that the present state of the law is by no means ideal. Nevertheless, no one can agree on how the law can be improved. I am aware of the concern of the institute on this matter, too, and further discussions are taking place.

Several hon. Members referred to political donations. The hon. Member for Dagenham went to some pains to knock down, so he thought, my right hon. Friend's arguments—arguments that my right hon. Friend had not in fact deployed. It was rather foolish of the hon. Gentleman to raise that matter, because what he said was wholly spurious. He argued that it was not possible for indirect investors, through insurance schemes or unit trusts, to opt out of paying political contributions by selling their shares. He said that we should therefore embrace the amendment made in another place. Unhappily for him, that amendment provides no remedies at all in the case of such indirect investors. The hon. Gentleman would have been wise to leave that argument alone.

The hon. Member for Walsall, North (Mr. Winnick) spoke about river companies. Any such companies are subject to the proper requirements of company law that political donations of more than £200 must be disclosed. That provision was introduced by the Labour Government about 22 years ago and has operated effectively since then. We see no reason to change it.

Several hon. Members have referred to the disclosure of interest in shares. The hon. Member for Dagenham regretted that we have not gone further in requiring nominee share owners to disclose their interest. He does not recognise that such disclosure requirements affect nominee share ownership. The beneficial interest in shares must be disclosed, not the nominal ownership of the shares. The impact is considerable, bringing the time period for disclosure down from five days to two days and reducing the threshold from 5 to 3 per cent. The hon. Gentleman was ungracious not to recognise the significance of that change. He also failed to recognise the changes made by the stock exchange in enabling companies, by their own articles of association, to provide a remedy against nominee share owners who fail to disclose, when properly required to disclose by companies.

My hon. Friend the Member for Chichester (Mr. Nelson) asked that we ensure that other member states in Europe implement the requirements as rigorously as we will do. I have discovered that there is a tendency in the European Community to believe that each country is the only one implementing rules properly and that all other 11 countries are breaking the rules. We must be alert to ensure that the rules are properly implemented.

My hon. Friend also referred to non-executive directors' audit committees and so on. With his experience, he will know that the law makes no distinction between non-executive directors and executive directors. All directors are under a fiduciary duty to act in the interests of the company. That obligation rests on all directors, irrespective of their role in the company.

Opposition Members, particularly the hon. Member for Dagenham, made some snide allusions to the House of Fraser case. His allegations were extremely offensive and unfounded. When he reads them in the cool light of dawn, he will regret the tone he used. In the case of the publication of reports, each instance must be considered on its merits to decide how the public interest is best served. The hon. Gentleman does himself no credit if he suggests that anything other than the public interest has motivated the Government.

Several hon. Members referred to the provisions on mergers. The hon. Members for Ross, Cromarty and Skye (Mr. Kennedy) and for Dagenham suggested that we should reverse the presumption that a merger is in the public interest, and cast the burden on companies to prove that their proposed mergers meet that requirement. A takeover bid, a public offer for shares, is an invitation to shareholders to sell their shares. They need do so only if they decide that it is in their interests. Companies are owned by their shareholders. Are the hon. Gentlemen saying that the Government should exercise more powers strenuously to prevent mergers from taking place? Are they saying that we should forbid shareholders from selling their shares to a willing buyer? If they are trying to make themselves out to be respectively representing the parties of the shareholder, they have some more thinking to do.

The hon. Member for Ross, Cromarty and Skye said that we must be more alert to prevent concentrations of shares. It is true that in the early 1970s concentrations did increase, but the hon. Gentleman will be relieved to know that, since then, they have decreased, if only slightly.

My hon. Friend the Member for Dorset, North (Mr. Baker) said that speed must not be an overriding master. However, it is in the interests of commercial efficiency that matters are resolved speedily. My hon. Friend complimented the takeover panel on the effective way in which it operates, and I endorse what he said. We are anxious that the very effective procedures that exist as a method of self-regulation should be allowed to continue. No one disputes the voluntary nature of the arrangement. We are simply trying to find a way in which that non-statutory form can be used to implement the takeover directive.

Several hon. Members referred to the United Kingdom market's relative openness to takeovers. That is correct and it is a problem that needs to be resolved. However, the way to resolve it is not by making our markets less open; it is to take steps to make other markets more open. At our specific request, the European Commission is undertaking studies, assisted in many ways, into what barriers exist and whether they can be removed by legislative means. I have no doubt that some can, but many are cultural and attitudinal barriers and they will take time to remove—but being removed they are, and that will continue.

My hon. Friend the Member for Chichester referred to the Monopolies and Mergers Commission and hoped that it would continue to have a role. I assure him that it will, and I endorse his tribute to the work of the MMC, which has had an exceptionally heavy work load in the past 12 months, which it has discharged efficiently, thoroughly and effectively. I am grateful to my hon. Friend for his remarks.

The hon. Member for Dagenham referred to the modest changes that we are proposing to the Financial Services Act 1986 and said that he sympathised with our argument on section 62. I assure him that we shall consult before we make regulations that define who the private investor is. It is important that we should maintain adequate, proper and full protections for private investors, but we feel that it is reasonable to take the view that professional investors can look after themselves to a large extent. Therefore, the argument for removing section 62 protection from such investors is incontestable.

The principles that the Securities and Investment Board will be able to promulgate do not replace the rules which have a legally binding effect; they merely form a backdrop to those rules so that a firm that manages to avoid the letter of the rules does not avoid the consequences of that altogether.

Mr. Gould

Is the Minister saying that the rulebook, as it existed in all its volume and complexity, will remain and that the principles will be additional, or can we expect that the principless will displace a good proportion of those pre-existing rules?

Mr. Maude

The hon. Gentleman will be aware that, within the existing framework of the law, some simplification of the rulebook has already taken place. I regard that as wholly desirable because the rulebook had become over-complex, which was helpful neither to investors nor to firms. Although we can expect further simplifications of the rulebook, that does not mean that the effect of those rules will be less. I believe that their effectiveness will tend to be greater because the more detailed rules are, the easier it is for clever lawyers to find a way through them. Adding the principles to those rules with legal effect will provide a more effective backstop because it will enable the regulatory bodies to take disciplinary and regulatory action against those firms that try to avoid the letter of the rules but breach the principle. I hope that that satisfies the hon. Gentleman.

Mr. Gould

No, I am sorry, but it certainly does not. The Minister has confirmed that the principles will replace the rules at least in some respects. I agree that the rules are too detailed, but at least they have the merit of being legally enforceable at the suit of those who suffer from any breach of those rules. We are unhappy that, if the rules are to be replaced by principles that are not so legally enforceable, we have lost an important element of the regulatory framework. As that is exactly what the Minister and what his right hon. Friend said earlier, it is on that basis that we shall object to the proposals.

Mr. Maude

The hon. Gentleman's fears are unfounded. There is no question of the principles replacing the rules—they are an addition to the rules, which will continue to have legal effect. However, I look forward to discussing this in detail with the hon. Gentleman in Committee.

The hon. Member for Dagenham concluded his remarks by listing a string of examples, all of which he adduced in order, he hoped, to show that the Financial Services Act 1986 has not been effective. Those examples had one common thread running through them: they were all utterly irrelevant to the case that the hon. Gentleman was seeking to support. Either they related to events that happened before the 1986 Act came into effect or they related to breaches of laws that have nothing to do with that Act.

We take extremely tough action against any wrongdoing. Given the sort of cases currently before the courts, anyone who suggests that the Government are anything but robust in pursuing wrongdoing and bringing it to justice has not been reading the newspapers carefully.

Mr. Gould

Will the Minister give way?

Mr. Maude

No. I have given way on several occasions to the hon. Gentleman, and I believe that the House is anxious that this matter be brought to a conclusion.

This has been a useful debate. It is a prelude to more detailed discussions in Committee. The Bill is a useful measure that will improve the teamwork within which free enterprise can operate. I urge the House to support the Second Reading.

Mr. Nigel Spearing (Newham, South)

On a point of order, Mr. Deputy Speaker. Can you confirm that there is no constraint on time and that it is the courtesy and practice of the House for Front-Bench speakers, particularly on important Bills, to give way on explanations?

Mr. Deputy Speaker (Sir Paul Dean)

It is a matter for the Minister to decide.

Question put, That the amendment be made:—

The House divided: Ayes 18, Noes 91.

Division No. 186] [1.41 am
Barnes, Harry (Derbyshire NE) Morgan, Rhodri
Cousins, Jim Nellist, Dave
Cryer, Bob Quin, Ms Joyce
Cunliffe, Lawrence Skinner, Dennis
Dixon, Don Spearing, Nigel
Garrett, John (Norwich South) Wall, Pat
Gould, Bryan Winnick, David
Henderson, Doug
Hughes, John (Coventry NE) Tellers for the Ayes:
Jones, Martyn (Clwyd S W) Mr. Frank Haynes and
McAvoy, Thomas Mr. Allen McKay.
Alison, Rt Hon Michael Irvine, Michael
Baker, Nicholas (Dorset N) Jack, Michael
Beaumont-Dark, Anthony Janman, Tim
Beggs, Roy Jessel, Toby
Bottomley, Peter Kennedy, Charles
Brooke, Rt Hon Peter King, Roger (B'ham N'thfield)
Brown, Michael (Brigg & Cl't's) Knapman, Roger
Burns, Simon Knowles, Michael
Burt, Alistair Lightbown, David
Butterfill, John Lilley, Peter
Carrington, Matthew Lord, Michael
Cash, William Maclean, David
Chapman, Sydney Mans, Keith
Chope, Christopher Martin, David (Portsmouth S)
Conway, Derek Maude, Hon Francis
Coombs, Anthony (Wyre F'rest) Maxwell-Hyslop, Robin
Coombs, Simon (Swindon) Mills, Iain
Couchman, James Morrison, Sir Charles
Cran, James Moynihan, Hon Colin
Currie, Mrs Edwina Nelson, Anthony
Davis, David (Boothferry) Newton, Rt Hon Tony
Day, Stephen Nicholls, Patrick
Douglas-Hamilton, Lord James Paice, James
Durant, Tony Porter, David (Waveney)
Fallon, Michael Raffan, Keith
Forman, Nigel Rathbone, Tim
Forsyth, Michael (Stirling) Sackville, Hon Tom
Forth, Eric Shaw, David (Dover)
Freeman, Roger Smith, Tim (Beaconsfield)
Garel-Jones, Tristan Stern, Michael
Gill, Christopher Stevens, Lewis
Gow, Ian Stewart, Allan (Eastwood)
Greenway, John (Ryedale) Stradling Thomas, Sir John
Griffiths, Peter (Portsmouth N) Summerson, Hugo
Grist, Ian Taylor, Ian (Esher)
Hague, William Thompson, Patrick (Norwich N)
Hanley, Jeremy Thumham, Peter
Hargreaves, Ken (Hyndburn) Trotter, Neville
Heathcoat-Amory, David Twinn, Dr Ian
Howarth, Alan (Strat'd-on-A) Waddington, Rt Hon David
Howarth, G. (Cannock & B'wd) Wallace, James
Hughes, Robert G. (Harrow W) Waller, Gary
Hughes, Simon (Southwark) Wardle, Charles (Bexhill)
Hunt, David (Wirral W) Wells, Bowen
Widdecombe, Ann Tellers for the Noes:
Winterton, Mrs Ann Mr. Kenneth Carlisle and
Wood, Timothy Mr. Stephen Dorrell.

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 60 (Amendment on Second or Third Reading):

The House divided: Ayes 89, Noes 10.

Division No. 187] [1.52 am
Alison, Rt Hon Michael Heathcoat-Amory, David
Baker, Nicholas (Dorset N) Howarth, Alan (Strat'd-on-A)
Beaumont-Dark, Anthony Howarth, G. (Cannock & B'wd)
Beggs, Roy Hughes, Robert G. (Harrow W)
Bottomley, Peter Hughes, Simon (Southwark)
Brooke, Rt Hon Peter Hunt, David (Wirral W)
Brown, Michael (Brigg & Cl't's) Irvine, Michael
Burns, Simon Jack, Michael
Burt, Alistair Janman, Tim
Butterfill, John Jessel, Toby
Carrington, Matthew Kennedy, Charles
Cash, William King, Roger (B'ham N'thfield)
Chapman, Sydney Knapman, Roger
Chope, Christopher Knowles, Michael
Conway, Derek Lightbown, David
Coombs, Anthony (Wyre F'rest) Lilley, Peter
Coombs, Simon (Swindon) Lord, Michael
Couchman, James Maclean, David
Cran, James Mans, Keith
Currie, Mrs Edwina Martin, David (Portsmouth S)
Davis, David (Boothferry) Maude, Hon Francis
Day, Stephen Maxwell-Hyslop, Robin
Douglas-Hamilton, Lord James Mills, Iain
Durant, Tony Morrison, Sir Charles
Fallon, Michael Moynihan, Hon Colin
Forman, Nigel Nelson, Anthony
Forsyth, Michael (Stirling) Newton, Rt Hon Tony
Forth, Eric Nicholls, Patrick
Freeman, Roger Paice, James
Garel-Jones, Tristan Porter, David (Waveney)
Gill, Christopher Raffan, Keith
Gow, Ian Rathbone, Tim
Greenway, John (Ryedale) Sackville, Hon Tom
Griffiths, Peter (Portsmouth N) Shaw, David (Dover)
Grist, Ian Smith, Tim (Beaconsfield)
Hague, William Stern, Michael
Hanley, Jeremy Stevens, Lewis
Hargreaves, Ken (Hyndburn) Stewart, Allan (Eastwood)
Stradling Thomas, Sir John Wardle, Charles (Bexhill)
Summerson, Hugo Widdecombe, Ann
Taylor, Ian (Esher) Winterton, Mrs Ann
Thompson, Patrick (Norwich N) Wood, Timothy
Trotter, Neville
Twinn, Dr Ian Tellers for the Ayes:
Waddington, Rt Hon David Mr. Kenneth Carlisle and
Wallace, James Mr. Stephen Dorrell.
Waller, Gary
Barnes, Harry (Derbyshire NE) Spearing, Nigel
Cousins, Jim Wall, Pat
Cunliffe, Lawrence Winnick, David
Hughes, John (Coventry NE)
McAvoy, Thomas Tellers for the Noes:
Nellist, Dave Mr. Bob Cryer and
Snape, Peter Mr. Dennis Skinner.

Bill accordingly read a Second time, and committed to a Standing committee pursuant to Standing Order No. 61 (Committal of Bills).