HC Deb 16 April 1991 vol 189 cc206-11
Dr. Moonie

I beg to move amendment No. 3, in page 10, line 37, at end insert:— `(3A) On the appointed day the successor company shall provide for each of the employees of the Board or the Corporation and any body representing those employees a statement providing for the continuation of their employment and pension rights as previously enjoyed.'. Most of the debate, both in Committee and on the Floor of the House, has concentrated—rightly—on the principle of how the company will operate in the private sector and, indeed, on the principle of whether it should be privatised at all. We have touched briefly on the rights of employees in the company.

Although it is not a large company, BTG is a reasonably prosperous one. It has a substantial pension fund whose value is actuarily in excess of the pension requirements of its current employees. In view of the lack of safeguards from Ministers about the future, and the vagueness of the promises that have been made, we are not satisfied that employees' interests will be protected properly under the Bill in its present form. We know of instances in the private sector of pension funds being raided, by means of one subterfuge or another, to dilute their value and to use the surplus for other purposes, and we consider that unacceptable.

In Committee, the Minister said that he was not prepared to allow such raids in any form. He may now wish to say something about the company's articles of association, or to throw further light on the position to reassure us about the principle. In view of the relatively light discussion that took place in Committee, however, we thought that it would be worth while to table the amendment on Report, so that the Minister could confirm the impression that we had been given that employees' rights and guarantees would be enshrined in the Bill during the sale of the company.

Mr. Paul Flynn (Newport, West)

I support the amendment, but, like many hon. Members, I am disturbed by the actions of other privatised companies. Assurances were given during the passage of other Bills, but unfortunately the results often damaged the interests of pensioners and future pensioners of those privatised companies.

The pensions business has gone through a period of great turbulence. In the 1980s, pension funds in Britain rose in value from about £50 billion to £220 billion. During the first year of this decade they dropped in value by nearly 10 per cent.—a greater drop in value than occurred after the stock exchange crash of 1987.

What has happened to the vast surpluses that have been amassed by the pension companies? A survey by the National Association of Pension Funds showed that in 48 per cent. of schemes surpluses were applied to provide contribution holidays for the companies and that in only 22 per cent. of schemes did employees enjoy a reduction in their contributions. To a large extent, those surpluses have been used to help shareholders rather than pensioners.

In Committee the Minister gave a number of assurances that sounded very convincing. He referred to the fact that surplus pension scheme funds are now regulated by regulations made by the Secretary of State for Social Security under the Occupational Pension Schemes (Modification) Regulations 1990, which formed part of the Social Security Act 1990. He also said that under the 1988 Act a surplus was permitted to be dealt with in four ways: by making payments to the employer; by suspending or reducing for up to five years the contributions of the employer or employees; by improving existing benefits or providing new benefits; or in such other ways as prescribed by the Inland Revenue.

The legislation is in place. Sadly, however, the experience of similar privatised companies shows that a mockery has been made of the legal framework. The worst example is British Telecom. An early-day motion was tabled deploring what was said to be the unlawful action of British Telecom in reducing its contribution to the British Telecommunications staff superannuation scheme from the August 1989 payment without any actuarial certificate of disposable surplus. It had a contribution holiday without that certificate having been provided. A worse allegation is that British Telecom had no serious talks with its staff before that was done. The early-day motion asked for meaningful improvements to the benefits of members of the scheme, if any real surplus accrues.

A scandal involving a much larger group of people than those employed by BTG is the British Steel scheme, which covers 100,000 pensioners and deferred pensioners. It may be said that only 188 employees are involved in the BTG scheme. However, the actuarial surplus amounts to at least £3.8 million and may be as large as £13 million. I do not intend to repeat the Committee discussion. However, that is a very large sum when one takes into account the small number of BTG employees.

After the British Steel Bill was passed, the corporation discovered that it had a surplus of £600 million. British Steel disposed of that surplus in a way that greatly angered its 100,000 existing and deferred pensioners. British Steel has set aside half this surplus for the benefit of future pensioners—their present employees—and widows. As for the remainder, I have a letter from the director of British Steel who says that half of the original surplus has gone towards reducing the ongoing costs to the company. That money is not being applied for the benefit of future pensioners; instead, it is being used in the same way as British Telecom used its surplus—to reduce its part of the cost of the pension scheme. That is wholly against the spirit of the legislation that privatised those companies.

If the amendment is not accepted, a similar mistake will be made. This surplus of £3.8 million, or possibly £13 million, may be regarded as an inducement to a future owner to take over BTG and use it in a way that damages the financial interests of the employees.

6.45 pm
Mr. Leigh

Although I understand and share the Opposition's concern for BTG's employees, I assure them that amendment No. 3 is unnecessary, as these matters are already provided for by the Bill as drafted. Paragraphs 2 and 4 of schedule 1 to the Bill, notably paragraph 4(1)(b), make it palpably clear that vesting under clause 1 will not affect any of the corporation's or the board's existing agreements, transactions or anything else, and this includes employment contracts, pensions and redundancy arrangements, whether or not they are in writing. The only effect of the Bill in this respect will be to substitute the successor company as the employer.

Dr. Moonie

In view of the Minister's clarification of the point, for which I am grateful, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Order for Third Reading read.

Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Leigh.]

6.46 pm
Dr. Moonie

We have had several long and interesting debates on the Bill, starting with Second Reading, then in Committee and earlier today. I pay tribute to all right hon. and hon. Members on both sides of the House who have expressed their concern about the future security of the British Technology Group in the marketplace and its future independence, integrity and impartiality.

In an intervention during the speech of the hon. Member for Leeds, North-West (Dr. Hampson) I referred to the attitude of the BTG management to privatisation and their support for it. Having considered what I said then, I should not like it to be thought for a moment that I intended to impugn the integrity of the BTG management, or its chief executive. I was attempting to demonstrate that no one who is involved in an organisation can be completely impartial when a decision is being taken over its future.

When we wound up the debate on the new clauses the Under-Secretary of State appeared to shift his ground. He said that he was not prepared to give the best assurances over BTG's future, but initially he was prepared to give very good assurances. I was a little concerned when the very good assurances became only good assurances later in his speech. I listened with growing apprehension in case the good assurances became only reasonable assurances and then, perhaps, fair assurances, since he gradually wriggled out of his original fairly generous commitment. I am sure that that was just the form of words that the Minister was using and that he is genuinely concerned about the future of BTG after privatisation.

In Committee we made much play of the length of time it took for messages to get from the Government's brain to any of their effector organs. Clearly, the long Easter recess has allowed that message slowly to percolate through and now we have at least some assurance from the Minister that the Government will be looking carefully at the articles of association.

I must look back at our debates in Committee as I am sure that at one stage the Under-Secretary of State was scathing about writing safeguards into the articles of association for the company since future managements could change those articles of association without our having any say. Therefore, I shall look with interest at the proposals that the Minister brings forward after vesting date to see what safeguards he intends to institute to ensure that the articles of association are so constructed as to give BTG maximum protection, consistent with operating in the climate that the Government intend for it, particularly when that climate involves the British market which is dogged by short-term concerns about profit instead of being strengthened by long-term visions of growth.

Our fears about the future of the privatised BTG are shared by many individuals outside the House. The chief executive of BTG, Ian Harvey, in an article in the Observer on 10 March 1991 on the future of the British Technology Group, argued—1 respect his view, although I disagree with it—that the privatisation of BTG is welcome, but a trade sale could destroy the business". He wrote: We, the council and management of BTG, welcome privatisation. But that support is contingent upon preserving the independence and critical mass on which our business depends, and on preventing 'asset-stripping' by a future owner. BTG's business is finding global markets for clever ideas and protecting researchers when the rights to their inventions are infringed. We do that through patenting and licensing. Of course that is well known. He mentioned that eight years ago BTG had been criticised by the Government and universities for being a slow and bureaucratic organisation. There is no doubt that the organisation now operates much more effectively under its present management. That is not necessarily due to any action or inaction by the Government. I suspect that it has happened quite independently. If any Conservative Member wishes to challenge what I am saying he is welcome to do so, but he might be unpopular with his colleagues in the Whips' Office.

The chief executive of BTG makes much of the fact that the Government have had a negative effect. We should not forget that we are talking about an organisation which everyone in the world recognises as the best in its field. What would it be like if it were not restrained by the dead hand of the Government, be it through a dismal succession of Secretaries of State at the Department of Trade and Industry or through an even more dismal procession of Chancellors and the malign effect on a successful organisation of the attitude taken by the Treasury? What could BTG have managed in the public sector over the past 10 years had it not suffered under those constraints? It is small wonder that the BTG management now feels that it is better to risk the most short-term and blinkered market in the western world rather than to continue to operate under the guiding hand of such as the Secretary of State for Trade and Industry and his colleagues in the Bruges group—the last bastion of Brugesism in the Government, fighting a desperate rearguard action to preserve the true faith and keep the candle burning for the leader over the water.

I hope that you will agree that this is germane to the Third Reading, Madam Deputy Speaker, as we are discussing the principles dividing the views of the Opposition from those of the Government and the reasons why we shall divide the House on Third Reading.

Let me continue outlining our objections. Ian Harvey wrote that his position is clear—the private sector offers BTG the best chance for future expansion and success, and the best opportunity for Britain to retain its leadership position in world-wide technology flow. I take issue with him on that, because we believe passionately that BTG's mission is to promote technology transfer from the universities and institutions in Britain and that that role is paramount and much more important than a successful role in trading worldwide. I would not attempt for a moment to say that its successful role in trading worldwide is not essential, but it must be subservient to BTG's other role in promoting research and development from British organisations. Anyone entering the debate with an open mind would agree with that.

Concerns have also been voiced by other external observers. I would not say that they were dispassionate observers because, like most of us, they have an interest in the Government's proposals. The Committee of Vice-Chancellors and Principals has made its position clear. The Minister made much of the fact that it appeared to support privatisation. That is not necessarily the case. He has inferred that from the questions that the Committee of Vice-Chancellors and Principals was asked, and he is entitled to do so. Anyone listening to his first speech this afternoon would be clear that, when quoting, he stressed those syllables that he wished to emphasise and destressed those to which he wished to pay less attention. That is a natural thing for a Minister to do. He is seeking any port in a storm and welcomes any support for the privatisation of BTG outside the dwindling ranks of his own right-wing colleagues in the Conservative party. If he can suggest to gullible minds that the Committee of Vice-Chancellors and Principals supports him, so much the better for him.

In the briefing dated today, Tuesday 16 April 1991, the Committee of Vice-Chancellors and Principals said that it continues to be concerned about the form which the privatisation of BTG might take and how the intellectual property entrusted to the new company will be safeguarded and effectively exploited to the continuing benefit of the originators of the intellectual property. It continues: The universities are by far the biggest single source of BTG's intellectual property—well over 50 per cent. if the contribution from teaching hospitals is included. Another 25 per cent. comes from Research Council Institutes and Research Associations. The rest comes largely from Government Laboratories. In other words, the biggest source of BTG's intellectual property—almost the only source—is provided from public money. The briefing continues: The total income from the academic sector from the BTG for development projects and from sharing of royalties from licensing of patents is at present some £30 million per annum. That is a very welcome income which is much larger than that which accrues to American universities from the organisations acting on their behalf, and demonstrates just how successful BTG has been while acting in the public sector in comparison with similar organisations in the private sector. Such organisations are united merely in their lack of success in the commercial markets.

The vice-chancellors and principals go on to say: Universities are being exhorted by the Government to maximise the commercial exploitation of their inventions, discoveries and other intellectual property and to raise more money from sources other than Government. They are also meeting demand from increasing numbers of students at lower cost. The vice-chancellors and principals make the point that the £13 million that the universities make from BTG is very worth while and should not be put at risk.

It being Seven o'clock, and there being private business set down by direction of The CHAIRMAN OF WAYS AND MEANS, under Standing Order No. 16 (Time for taking private business), further proceedings stood postponed.