HC Deb 12 February 1991 vol 185 cc735-89

Order for Second Reading read.

3.42 pm
The Minister for Corporate Affairs (Mr. John Redwood)

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

The Bill paves the way for the privatisation of the British Technology Group. BTG combined the National Research Development Corporation and the National Enterprise Board. Except for one remaining semi-dormant subsidiary, all the investments in the NEB portfolio have been sold, put into receivership or liquidated. Therefore, BTG's operations are now those of the NRDC, focusing on technology transfer.

BTG has 188 employees and a turnover of £30 million. It obtains new ideas and inventions from universities, Government research establishments, private companies and individuals. It funds their development to a stage where they can be globally patented. It licenses the resulting intellectual property rights to industry worldwide, gaining an income in the process. Its United Kingdom turnover is only £10 million, which puts its size into perspective in an economy of about £600,000 million. Its investments have included such international successes as cephalosporin antibiotics, pyrethrin insecticides and magnetic resonance imaging technology, used in hospital scanners.

Until 1985, BTG had the right of first refusal to exploit research in the public sector. Since 1985, universities and other public sector organisations have been able to exploit their own scientific advances, often through industrial companies. Despite that, the flow of inventions from universities to BTG has increased since 1985. Today, it is involved with 1,600 inventions, 8,500 patents and nearly 500 licences.

BTG's profits tend to depend on a few projects, making BTG's resulting profit trend uneven. But during the past five years, BTG's operating profits have averaged more than £4 million per year, rising to £6.8 million in 1989–90. BTG has been self-financing for almost 20 years. It has paid dividends to the Exchequer—a total of more than £18 million in the past six years. Transferring BTG to the private sector would rid it of restrictions on borrowing powers, obligations to submit investments for approval by the Department of Trade and Industry and remove the requirement that the salaries of its chairman and chief executive should be agreed with my Department and the Treasury.

BTG wants to develop its activities as an international organisation. It already derives 70 per cent. of its licensed income from outside the United Kingdom. Preliminary steps have been taken to expand overseas, with investments and agreements in the United States, India and several European universities. The original NRDC duties appear increasingly inappropriate for such international developments, and their removal would facilitate BTG's expansion.

Mr. Gordon Brown (Dunfermline, East)

The Minister of State mentioned that BTG supports the privatisation. Is he aware that the company has spent £75,000 on commissioning a public relations campaign to persuade Members of Parliament? Is he aware that page 4 of the document that I have been given, "Communication Programme for British Technology Group" states: BTG has the opportunity to have a parliamentary friend on the Standing Committee of the Bill. Will the Minister tell the House whether his Department has authorised the expenditure of £75,000 of our money to lobby Members of Parliament? Has any Minister, or anyone representing a Minister, informed BTG that it has an opportunity to have a parliamentary friend on the Committee discussing the Bill?

Mr. Redwood

BTG has many parliamentary friends, and I am sure that its case will be put strongly by those who support it and who think that the management's wish for privatisation is a good idea. I do not know whether any money has been spent in the way that the hon. Gentleman described. I shall look into that, and see whether it is true. I do not know where he has obtained that information.

Mr. Brown

Is the Minister telling the House that BTG has or has not been authorised to spend £75,000 to promote its activities in pursuit of privatisation among Members of Parliament? Does he deny that the Department of Trade and Industry or anyone representing it have given an assurance that BTG will have an opportunity to have a parliamentary friend on the … Committee"? We need direct answers to those direct questions.

Mr. Redwood

I have already said that I will let the hon. Gentleman know when I have researched the matter. There is no point in me giving him a categorical denial before I am sure. That is not a question that I have asked. I shall ask it for him and let him know. My hon. Friend the Under-Secretary of State for Industry and Consumer Affairs will give him the answer at the end of the debate, when we have had a chance to go into the matter.

Mr. Simon Hughes (Southwark and Bermondsey)

Having been a parliamentary candidate for Peckham in his earlier political existence, the Minister will know that BTG is based in Southwark. When he addresses the issue, will he recognise that there is no overwhelming view in favour of the privatisation of BTG, the majority of the staff are against it, its track record is good and, as far as I am aware, there has been no criticism of its activities in the past? Does he accept that it is perceived that the Government are adopting the view put forward by the management, which is a minority view in BTG, and that that is a dogmatic, not a sensible or rational, way forward for BTG? Has the Minister a closed mind, or does he still have an open mind for the best way forward for this well respected and reputable group?

Mr. Redwood

We have an open mind on the exact style and form of privatisation, and I and my hon. Friend the Under-Secretary of State wish to hear the views of the House on the subject. But we are strongly advised by the senior management of BTG that they believe that it would be in the best interests of the group to pass into the private sector, for the reasons that I have already set out. They are good reasons, which will be welcomed strongly by Conservative Members. The management of BTG are running a commercial enterprise. There are certain restrictions on the group's conduct by virtue of its public sector status which the management would rather be rid of, because they believe that that would add to their success. I am happy to back that judgment. The Government back the BTG board's view.

Mr. Brown

Will the Minister confirm that 75 per cent. of the staff have expressed opposition to the proposal to privatise the group, and that severe doubts have been expressed by the Committee of Vice-Chancellors and Principals, which says it has not even been consulted about the proposal? Will he publish the Coopers and Lybrand study commissioned by his Department some time ago, which he has never brought to the House or put into the Library but which I understand says that the difficulties of privatising the organisation are far greater than anticipated, and recommends that privatisation should not be proceeded with?

Mr. Redwood

I do not intend to reveal that study, because it has much interesting information that could only help those who might wish to negotiate the purchase of the group. It contains a lot of sensitive information about prospective values, which could only help those who would wish to get a finer deal as a result. But it is not right for the hon. Gentleman to assume something about the thrust of a report that he has not read. He expresses an extraordinary clairvoyance which is unwarranted in the light of the intricate details in the report. One thing that the report does draw attention to is the fact that it could damage top management morale if its clearly expressed view in favour of privatisation were ignored. The hon. Gentleman might like to think about that.

We have consulted the universities widely, and it is interesting to note that only 12 per cent. of those that have responded wish to keep BTG as it is. All the others think that there is a strong case for change. Some believe that a more commercial approach in the private sector would be exactly right for BTG.

My right hon. Friend the Secretary of State has said that he is interested in the views of employees; that is something which I am sure will emerge from the debate and will be carefully read by my right hon. Friend and by my hon. Friend the Under-Secretary of State.

Dr. Keith Hampson (Leeds, North-West)

My question relates to the point raised by the hon. Member for Dunfermline, East (Mr. Brown) about the universities. Because the vice-chancellors feel that they were not consulted in the early stages of this process, they are in some doubt about existing arrangements, and I hope that my hon. Friend can now reassure them. BTG holds a large number of university patents, so may we have an assurance that those are not at risk and that the privatised company will offer the same opportunities for technology transfer and the use of university research?

Mr. Redwood

This is one of the important points that we wish to draw out from the debate. It is one of the important details surrounding the sale that have not yet been determined. That is why the Government have come to the House with an enabling Bill, and why we wish to sound out the opinion of the House.

Mr. Alex Carlile (Montgomery)

So that we can understand the intellectual basis on which the Government are proceeding with privatisation, will the Minister answer this question? Did the Coopers and Lybrand study come to the conclusion that it was advisable that this proposed privatisation should not be proceeded with? Will the Minister answer that question with yes or no?

Mr. Redwood

I have already made my comments on this complex study, which provided a lot of background information on the sale. There is no way that I shall be drawn further when there is a lot of price-sensitive information in that report, which could only help those who wish to buy the group more cheaply than they should.

Mr. Michael Grylls (Surrey, North-West)

Is it not a fact that one constituent part of the BTG, the National Research Development Corporation, has to get ministerial approval to borrow more than £250,000, which is peanuts in developing a business? Such restrictions stop BTG moving forward. It is a successful group, making good profits, and it could expand much more. I am sure that, if it were explained to the staff—perhaps better than it has been in the past—that when these embargos have been removed, the group can raise all the money it needs, provided that it has viable projects, and that its future will be much better in the private sector, they would be more enthusiastic.

Mr. Redwood

My hon. Friend is right. There is an investment limit above which it needs to refer to the Government. It would expedite matters if the group did not have that limit. The Opposition say that we should change all these rules, but this is a public sector body. It has to be accountable through the normal public sector devices all the time that it remains in the public sector. One cannot make one rule for the BTG and other rules for other bodies.

The House would rightly say that every penny of money going through BTG is a matter for public accountability, and there have to be rules. We say that there should be only commercial rules, because BTG is trying to be a commercial operation and therefore fit better in the private sector, in the way that BTG's senior management are suggesting.

Mr. Merlyn Rees (Morley and Leeds, South)

The Minister referred to the support of top management for this scheme. I have a question about integrity, independence and impartiality. I am informed that, two years ago, the council of BTG declared itself in favour of privatisation, subject to those three Is being guaranteed. Are they guaranteed?

Mr. Redwood

This is another matter that will be reviewed under the enabling powers in the Bill. I am grateful to the right hon. Gentleman for making those points. We wish to go away and to draw up, with our advisers, the detailed proposals for sale documentation, for whatever form of sale may be appropriate.

That is exactly the kind of issue, along with that raised by my hon. Friend the Member for Leeds, North-West (Dr. Hampson), that we shall have to work through, and the debate will be useful. The Opposition now say that they want a blueprint for every issue, but if we had that, there would be no point in the House debating the matter. We are bringing it to the House at an early stage so that we can take enabling powers to privatise BTG. There is an overwhelming case for privatising the enterprise, and we need to discuss the best way forward.

Mr. Gordon Brown

Will the hon. Gentleman give way?

Mr. Redwood

I must make progress. The hon. Gentleman has already asked many questions.

Clause 1 vests all the property, rights and liabilities of the corporation and the board in a newly created company. Clause 2 extinguishes the corporation's capital reserve and the board's public dividend capital, as these will be replaced by the Government's shareholding. Clause 3 provides for the creation of the initial Government shareholding in the successor company. Clause 4 enables the Government to acquire additional shares or securities in the successor company. This, for example, would enable the Government to maintain the proportionate level of their shareholding, if they retain one, in the event of new issues and rights issues.

Clause 6 limits the Government's shareholding as a proportion of ordinary voting rights to the level at which it stands after privatisation. Clause 7 provides for the creation of a statutory reserve and for continuity in the accounts. Clause 8 provides that the Government may make loans to the successor company after vesting has taken place, but before privatisation. That would allow money to be lent if privatisation were delayed for any reason.

Clause 9 provides that any power entitling the Government to restrict the borrowing of the successor company shall be exercisable in the national interest. Clause 10 provides for the continuation of the corporation and the board after the establishment of the successor company to assist with completion of the transfer of assets. Clause 11 deals with the tax liability of the successor company, and clauses 12 to 17 contain various supplementary provisions.

Schedule 1 provides for the corporation and the board to do everything necessary to facilitate the vesting of their property in the successor company. Schedule 2 provides for the repeal of legislation which currently regulates or refers to the corporation and to the board. That is important, because it includes repeal of parts of the Development of Inventions Act 1967 and of part I and schedules 1 and 2 of the Industry Act 1975.

My Department has appointed Price Waterhouse to advise on the options for sale. The choice of option will be influenced by the interest shown by prospective purchasers during the coming months. The Government have made no decision yet about the method of sale and will listen carefully to the views expressed within the House by management, employees and other interested parties before deciding on the final option. I hope that Opposition Members will participate constructively in this debate, rather than giving endless press conferences attacking the whole idea.

The British Technology Group is making money. It has backed some good projects and it now needs the self-reliance of the private sector to go about its business. The Bill abolishes the National Enterprise Board and removes from the statute book the power for more such Government meddling in business.

The hon. Member for Dunfermline, East (Mr. Brown) will doubtless launch a tirade against these changes, as he did earlier this morning in a press conference. He will stand and fall as an advocate of "back to the 1960s and 1970s" failure. He may have cast off his 1960s drainpipe trousers and cut his 1960s student hair, but his ideas are still fixed in 1960s mode. He will conjure up images of the great days of the National Enterprise Board, to be transformed by 1990s high tech and training. We will hear the usual cascade of invective. He will say it, he will say it again and then he will bellow it. He will say it with repetition, with deviation—although not usually with hesitation.

I hear that the hon. Member for Dunfermline, East once wrote an original speech. Unfortunately, we have had to listen to dozens of versions of the same thing ever since.

I have three questions for the hon. Members opposite. Labour say that the Government need to intervene to increase investment in Britain. My first question to them is, how much taxpayers' money would they want to spend on such an enterprise? I shall happily give way to the hon. Member for Dunfermline, East if he wishes to give the House some real information for a change. But no—he does not seem to want to.

Are the Opposition aware that total investment in the United Kingdom now runs at £100,000 million each year, and that the BTG, by the way, invests just £11 million? Do they have a sense of the significance of those figures? To have any decent impact on the national total of investment, Labour must be planning for Government to spend at least an extra £10 billion, which the market does not provide—and that would still be less than 2 per cent. of GDP, although it is around 1,000 times the figure that the British Technology Group currently spends.

Will the hon. Member for Dunfermline, East confirm BTG would need at least as much as that in his scheme of things according to his analysis of the situation? Is he aware that many of his hon. Friends—I wish more of them were here today—believe that the last two Labour Governments' investment plans were ruined by a shortage of cash?

Ms. Marjorie Mowlam (Redcar)

Is this relevant?

Mr. Redwood

This is the key to the argument. The Bill will remove the damaging powers from the statute book which Labour used in the past and says that it would want to use again. The hon. Friends of the Member for Dunfermline, East feel that, if the Industrial Reorganisation Corporation and the NEB had had more money and made more investments, they would have done better. How does he answer them? Or is the shadow Treasury going to act as the bad nanny, by taking the Socialist toys away again?

My second question is this: why should we believe that the Opposition, with all the talents that are arrayed before us, will be able to spot investments that the private sector has missed? The hon. Member for Dunfermline, East is indeed a talented man—a temporary lecturer at Edinburgh university, a lecturer in politics at a college of technology and a journalist with Scottish Television—but he has never run a factory or made anything to sell in his entire life. And this is the hon. Gentleman who thinks that he could spot all the winners.

The hon. Member for Newcastle-upon-Tyne, North (Mr. Henderson) was a trade union official; the hon. Member for Gateshead, East (Ms. Quin) has lectured in French at two universities; the hon. Member for Kirkcaldy (Dr. Moonie) is a medic; and the hon. Member for Redcar (Ms. Mowlam) was an administrative officer at a college. Not one of them has ever managed a business or made a substantial investment, and none of them has had to rely on clients or customers to pay their wages. Where is the magic ingredient?

Mr. Alex Carlile

When has the Minister ever worked in a productive industry?

Mr. Redwood

For some time, I chaired an industrial company which was deeply involved in industrial life up and down the country. As a Minister behind a Government desk, I would not venture to spot winners, because I know from my business experience how difficult it is and how much it needs the commercial background of the private sector.

Mr. Carlile

Given all his experience as a banker, and his understanding of the City, can the Minister confirm that the most difficult thing for any entrepreneur or new business to obtain is free venture capital, and that the British Technology Group is one body from which it is possible to obtain such capital?

Mr. Redwood

I was trying to draw the House's attention to the sums involved. The hon. and learned Gentleman obviously was not watching last week, when the Department of Trade and Industry announced one part of a new programme of support for the type of investment that he is talking about. We shall be announcing expenditure of £30 million over three years for just such a purpose; that is more than the BTG is offering on its past annual figures. I agree that there is a need; the DTI is meeting it. Overall, the research and development allocation, and the other money available through the DTI, far exceeds what is available through the BTG.

My third question to the Opposition is this: why should the nation believe that the policies will be any different next time? It is not as though we were being offered anything new. The names may have changed, but the institutions proposed in Labour's documents look horribly familiar. Labour wants an NIB: that is one of the reasons for their opposition to the Bill. What does NIB stand for? "Normally Invested Badly"? "Nationalised Institution for Bankruptcy", perhaps? I think that those would be better characterisations than "National Investment Bank".

The National Enterprise Board, in its heyday, was a loss maker that hastened many of its investments to the liquidator. The House should remember the enthusiasm with which the NEB identified that "office of the future" market as one with boundless opportunities. It was right: many private-sector companies have done well by selling fax machines, xeroxes, electronic mail and the like. The final cost to the NEB and the taxpayer of those boundless opportunities in a high-growth, high-tech market were losses of £34 million.

The NEB also had to write off £6.8 million from its United States investment in software—a marketplace in which many others coined fortunes and supplied good products. So much for Labour's chant that next time it would be different, because it would concentrate on electronics and software. That was yesterday's story, and yesterday's disaster for the taxpayer.

Nor was the NEB much better in other sectors. Alfred Herbert, BTB (Engineering), Technalogics Computing Ltd., Microform Communications, Vicort, Mollart Engineering, Momex, QI (Europe), Gemspar, Sandiacre Electrics, Hilton Products, Preformed Road Markings, ASR Servotron and many others all went under. Holdings in Brown Boveri, Consine International, Negretti and Zambra and Energy Equipment, to name but a few, were sold at losses. The losses in tanning and clockmaking were as spectacular as they were predictable. The NIB, with branches in every major city, would be a sure-fire loser. There might be more noughts on the cheques, but they would go down the same old drain.

Labour also seeks a BTE. "Better Try Everything"? This morning, a sneak preview on the "Today" programme revealed a name change to BTC—"Britain Taking Chances", perhaps. In Labour's public bar all the investments would be on the rocks, and most of Labour's planned subsidies would be illegal under the treaty of Rome.

The British Technology Company could not do anything that the privatised British Technology Group cannot do. BTG has worked with companies pioneering new communications equipment, new farming systems, a more efficient combine harvester and a variable transmission system for cars. It is an important discipline that money should be committed only when there is a prospect of returns. That is the discipline which Labour still has not learnt, or cannot accept.

The hon. Member for Dunfermline, East is, I hear, having a few problems with his right hon. and learned Friend the Member for Monklands, East (Mr. Smith) and his hon. Friend the Member for Derby, South (Mrs. Beckett). Naturally, they do not like him always muscling in on the economy whenever there is a chance of media attention. He really should concentrate on the job he has now.

They are understandably even more worried about the hon. Gentleman's spending habits—thankfully, only shadow ones at the moment, and for a long time to come. There is his passion for regional investment—£10 billion?—and research and development—another £5 billion to make a splash? Perhaps the hon. Gentleman will tell the House how much money he wants to spend on regional investment and research and development. He tells us time and again in his speeches that the core of his proposals is that more money should be spent upon them, through the public sector. Why cannot he tell us how much he would spend and what he would spend it on?

Then there is training. That must be another £2 billion or £3 billion to have any impact. I hear that the shadow Treasury team has said that it would like the hon. Member for Dunfermline, East to be the Member for Duninvesting, Duntraining and Dunresearching as well, for the sums do not add up.

The British Technology Group needs a new future in the private sector. The United Kingdom taxpayer needs to be reassured that the power to back losers through the National Enterprise Board has been removed from the statute book. I commend the Bill to the House.

4.5 pm

Mr. Gordon Brown (Dunfermline, East)

I intend to deal with the substance and detail of the Bill. The Bill is ill-considered and irrelevant to the huge technology gap that Britain has to close with our competitors. It does nothing to achieve the Government's stated aims for privatization—to increase mass shareholdings, to create greater competition and to remove Government subsidies. The implications of the Bill are potentially destructive for the British Technology Group. The Bill provides no guarantee that BTG will remain British, at the forefront of technology, or even intact as a group. With no better explanation for it than that given today by the Minister, it is in the end, I am afraid to say, privatisation for privatisation's sake.

The first impression made on anyone listening to the debate and hearing the Minister's speech must be one of surprise—indeed, astonishment. Industry faces one of its worst recessions for years. Output has fallen faster than at any time, with the sole exception of 1980, during the past 60 years. There has been a record number of bankruptcies and closures, even of high technology companies. Nevertheless, the Department of Trade and Industry, with its wide responsibilities for both trade and industry, has introduced its second privatisation Bill in as many weeks. It has followed up its unwanted and unpopular privatisation of export credit insurance last month with this unnecessary proposal to privatise the British Technology Group.

Is it not the case that, as the public expenditure White Paper revealed on its publication only a few minutes ago, that the Government's withdrawal from the British Technology Group is the latest in a line of reductions in Government support for investment in technology? There has been a 25 per cent. underspend on regional innovation grants, a £42 million underspend on industrial research and development, a cut of 40 per cent. on research and development by 1991 and a cut of 34 per cent. on technology transfer by 1992.

Even with the addition of the SPUR scheme—support for products under research—which the Minister mentioned at the end of his speech, support for innovation will fall, in real terms, in the coming year, according to the White Paper. The total cuts in the DTI's budget over the next three years will be of the order of £370 million. I can think of no other Government in Europe who have simultaneously cut their training and industry budgets in the run-up to 1992 but have spent their time instead on privatising national assets that they can ill afford to put at risk.

Mr. Redwood

How can there have been a reduction in support for technology when the British Technology Group has been financing itself for 20 years and has paid dividends to the Government?

Mr. Brown

I am referring to the total technology budget the—budget for technology transfer and for research and development. I am also taking into account the much-publicised announcement—it has been announced five times during the last two months—of the SPUR scheme. At a time when recession faces industry, and when all our European competitors are preparing for 1992, this Government are cutting support for technology.

Let us be clear about the purpose of this Bill. Its main and most immediate effect is to wind up the National Research Development Corporation as a first step towards privatising the national technology organisation—a body that has enjoyed all-party support for four decades; was set up in 1949 to fill a gap in the market place; grew under the Conservative Government of the 1950s; expanded under the Development of Inventions Act 1967 in the 1960s and the 1970s; and developed yet again to suit the conditions of the 1980s. Now that body is to be abandoned to the vagaries of the marketplace, with—as the Minister confirmed today—not a single guarantee about who will run it or from where it will be run, or for the interests of whom and, as was confirmed in the Minister's answer earlier, not one guarantee about its integrity, about Its impartiality or even about its independence.

Mr. Patrick Nicholls (Teignbridge)

The hon. Gentleman speaks with great passion. Obviously he is totally against the principles of this Bill. Will he confirm that a Labour Government, should there ever be one, will renationalise BTG? If he is not prepared to give that commitment, there cannot be very much sincerity in what he is saying.

Mr. Brown

1 can give an assurance that we shall not spend public money renationalising the British Technology Group. I have made it clear—if the hon. Gentleman had followed events, he would know this very well—that we shall set up a British technology enterprise and shall work with the universities and other organisations, many of which are directly opposed to this measure.

Mr. Nicholls

The hon. Gentleman, on behalf of the Labour party, has just announced another initiative. Can he tell us exactly how much money will be invested in it, and whether this will be another priority area?

Mr. Brown

The hon. Gentleman cannot have been listening to remarks made earlier by his Minister for Corporate Affairs. The British Technology Group actually makes a profit. What is being privatised is a profitable group. I have no reason to believe that, operating in the public sector, and working with the patents of universities, our British technology enterprise will not itself make a profit. The purpose is to fill a gap in the marketplace that would not otherwise be filled and to take a long-term view that a private-sector company might not take. I have no reason to believe that the universities will not want to work with us in this enterprise.

Dr. Hampson

The hon. Gentleman has said that the universities are against privatisation. Perhaps he would care to correct that statement. The university vice-chancellors asked for the sort of reassurances that I requested of my hon. Friend the Minister earlier. Does the hon. Gentleman recognise that, since this sort of group was founded, universities have been provided with many new means of expanding their opportunities in the market? They have found private sector companies, and quite often they have set up their own companies, to exploit their research. The needs that led to the setting up of this group no longer exist in the same form.

Mr. Brown

The hon. Gentleman makes a fair point. Indeed, technology transfer organisations and organisations such as BTG have been springing up in universities. However, I must refer to a statement issued by the Committee of Vice-Chancellors and Principals in connection with the Second Reading of the Bill. The vice-chancellors and individual universities complain that, contrary to what the Minister has said, they have never been properly consulted officially about the Government's plans or options for the privatisation of BTG. I should be very happy to give way if the Minister were prepared to explain why he has said that the universities have been consulted. I have reason to believe that many of the vice-chancellors are very dissatisfied with the proposal.

Dr. Hampson

They are not against it.

Mr. Brown

As I think the hon. Gentleman will agree, what they want is a series of assurances that the Minister has been singularly unprepared to give.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh)

Perhaps I can help the hon. Gentleman. I am anxious to be of assistance to the House. A full survey of the universities was carried out in December 1988. I can give the exact results. The option of a sale to a commercial financial institution was favoured by 20 per cent.; 5 per cent. favoured a sale to BTG management; 50 per cent. wanted to establish BTG as a private foundation or trust, with objectives linked to university research; just on a quarter wanted to keep BTG as it is at present or wanted something akin to what the Labour party wants to set up.

Mr. Brown

What the Minister has just presented is evidence that I have certainly not had until now: that only 5 per cent. want the option that is favoured by management—a management buy-out—and only 20 per cent. want the trade sale, which is what is being pushed upon the Government. In other words, only 25 per cent. want the two main options that the Government are putting before us, and 75 per cent. are not in favour of those options.

Mr. Leigh


Mr. Brown

I shall give way if the Minister wants to contradict my figures.

Mr. Leigh

One can look at figures in any way one likes. Perhaps the hon. Gentleman will confirm that only 25 per cent. of university vice-chancellors, when surveyed, want to keep BTG in its present state or in the state that the Labour party would like to see.

Mr. Brown

The Minister is misinterpreting what I have said. The survey shows that only 20 per cent. want the trade sale that the Department is looking at, only 5 per cent. want it to go to the management, which is the favoured option of many people, and another 50 per cent. want it to be a trust and not to be privatised in the way that the Minister is proposing. If I have got that wrong, perhaps the Minister will correct me.

Mr. Leigh

That is interesting. Does the hon. Gentleman accept that, contrary to what he said earlier, the vice-chancellors were properly surveyed?

Mr. Brown

No. The vice-chancellors—[Interruption.] Conservative Members should take care to listen to the views of vice-chancellors in universities up and down the country. Many vice-chancellors will feel that the mocking from the Tory Benches when their case has been mentioned is unacceptable.

Mr. Nicholls


Mr. Brown

I do not intend to give way to the hon. Gentleman, since he is clearly not well versed in the issue.

Mr. Nicholls

Will the hon. Gentleman give way?

Mr. Brown

I have already said that I shall not give way.

The vice-chancellors make it clear that the Committee of Vice-Chancellors and Principals and individual universities have never been officially consulted about the Government's plans or options for privatisation of BTG. If the Minister wants to deny that, he should write immediately to every vice-chancellor in the country.

This is not an ordinary privatisation or, as the Minister tried to imply, the sale of a downstream company or the marketing of a run-of-the-mill business. It is the privatisation of 8,000 or more patents, involving 1,500 technologies. It includes patents such as those for anti-cancer and anti-depressant drugs and for inventions such as high-performance plastic fibres. Those ideas have been developed by BTG in the public sector; many of them came to BTG only because it was in the public sector, and some of them could be lost in their entirety if the company is transferred to the private sector as the Minister plans.

Our argument is clear. In Britain we need a body to facilitate and foster the development of inventions at the start of the technology chain. We need a body that is guaranteed its existence, which it could not be if it were a mere private sector company. We need a body with the flexibility to take a broader and more long-term view than the merely short-term interests of shareholders might allow. That requires a body run with the requirement to operate in the public interest. Our contention is that, for from public ownership being a hindrance to inventions being developed in Britain, BTG has offered the extra flexibility and scope without which long-term investments may not be given the consideration that they deserve.

Mr. Roger King (Birmingham, Northfield)

The Labour party is on record as saying that winners will be decided on commercial terms and that it will not just pick winners on the whim of somebody else's say-so. If that is so, why cannot it be done in a commercial way—or is it the Labour party's intention to go on stuffing dead ducks as it used to in the 1960s?

Mr. Brown

Is there any better example of a company that has operated commercially and successfully in the public sector than the British Technology Group? Because of its success and because it is next in line for privatisation, the Minister has brought forward today proposals to privatise it.

Let us look not at what Conservative Members say but at what has been said by some of the inventors who have benefited from BTG and believe that it benefits Britain. Magnetic resonance imaging is one of the major breakthroughs in medical diagnosis this century. The BTG said that it is comparable to the discovery of X-rays and is used routinely to generate detailed images of the tissue structure deep in the human body. In May 1990, the former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher) said that BTG had enjoyed outstanding success in managing the patent portfolio. She said: This invention will do much to generate further major British innovation and keep Britain at the forefront of rapidly advancing technology. She went on: This would not have been possible without the pioneering work of Professor Mansfield of Nottingham University". What does Professor Mansfield say in a letter that he sent to me in the past few days? He says: I am very much concerned about the proposed privatisation … I fear very much that were such a proposal to go forward the interests of research, research institutions in Britain and indeed, inventors would not be best served … BTG has in its present form served the scientific community very well over the years … had they been privatised I doubt very much whether the magnetic resonance imaging portfolio that they currently exploit would have earned very much at all". What is his recommendation? He says: I feel that the patents on which my name appear cannot and should not be part of any privatisation deal since they were offered to BTG originally on the understanding that BTG was a government department, and on this basis I do not feel that they are free to dispose of them in any way whatsoever without prior consultation with me". Here is a British inventor of international standing who is prepared to entrust his intellectual property to a body in the public domain and who states clearly that his invention would not have succeeded as well as it did without the activities of the public sector. He believes that the essential development of such inventions can and should be done in the public sector, and he feels so strongly about it that if the body ceases to exist in the public sector, he wants to have no dealings with it in the private sector.

It is no wonder that the Financial Times, one of many newspapers that have expressed doubts about the proposal since it was first mooted, said: instead of thinking about privatising the BTG the Department of Trade should be thinking how to improve it". Pyrethrine is the technology applied to some of the world's most widely used insecticides. Did the Government consult the inventor who had entrusted his patent to BTG before they decided on the privatisation measure? The answer is no. Under privatisation, the patent is to be moved from the public to the private sector. The inventor himself, Mr. Michael Elliot, wrote to me saying: finance from NRDC allowed research to be developed and applied that the private sector had judged to be too speculative or long term. Support such as this in the public sector can arise only if BTG is allowed to operate with its own structure and integrity. It is wrong to privatise BTG now without adequate guarantees to protect its role in supporting research in Britain.

Yet another scientist of international standing is opposed to the ill-considered privatisation proposal. Brian Oakley of Logica says: I can see no point in privatising it. A former director of BTG who has written to me privately says: I believe it would be a disaster if BTG is sold off to private interests. The vast majority of staff—three quarters of them—have come out today against the proposal. The Committee of Vice-Chancellors and Principals says, as I have reported, that it has not been properly consulted. The Coopers and Lybrand report, of which the Minister has refused to give details, expressed if not opposition, reservations about the proposals.

Who now supports the Bill? The only supporters of the Department of Trade and Industry are the Government's business machine and the senior management of the British Technology Group. However, I must tell the Minister that the document that I mentioned earlier reveals that he has problems with both those groups as well.

I have here the document that was commissioned by the British Technology Group at a cost of £75,000 for the media campaign and which was prepared by The Communication Group plc. It is now the subject of a communications campaign targeted on ourselves as the Bill goes through the House. A total of £75,000 of our money is to be used to persuade us to agree to the privatisation of BTG. Some £5,000 is to be used to cover press materials and the entertainment of journalists. Some £2,500 is to be used for a half-day session for the media training of Mr. Ian Hardy and two other senior executives to explore and develop the privatisation arguments". There is money to deal with "potentially hostile awkward questions".

What else is in the document for the £75,000? It proposes the "privatisation commemorative gift". The document recommends: Looking further ahead, some thought should be given to a commemorative gift for the principal commercial partners to mark the occasion. The gift in this privatisation is the 8,000 patents developed in the public sector which are now to be handed over to the private sector on a plate, commemorative or other.

Who supports the Bill? The document makes it absolutely clear that the Bill has engendered the hostility of the Government's business managers. It states clearly that the Bill is proceeding against the natural inclination of the party managers The document continues: Against this background, trenchant criticism"— [HON. MEMBERS: "Come on."] I am quoting from a document commissioned by the British Technology Group, which says: Against this background, trenchant criticism may weaken the business managers' resolve to press ahead with any great speed … the business managers' priorities in all this are a quiet time with no banana skins and a light programme to allow Tory MPs plenty of time in their constituencies. [Laughter.] Conservative Members have confirmed the problem that I have just identified. According to BTG's own document, there is no support for the measure from the Government's business managers.

What does the company itself want? Does it wholly support the Bill? The Minister said that it had given its assiduous—indeed, enthusiastic—support, although he had to recognise that three quarters of the staff were opposed to the Bill. The document says that BTG wants to make some major amendments to the Bill in Committee. The group will be seeking "firm commitments", which it wants to be "mostly extracted" during the Committee stage and possibly on Report. The document says: MPs may well be able to extract more from Ministers than the DTI would otherwise like to give. What is the attitude of the Bill's principal supporters? The Government Whips and business managers say that their natural instinct is against the Bill, and BTG—cited by the Minister as the main supporter of the Bill—proposes to seek to make major changes to it.

The BTG document is worrying in another respect. It suggests that the Government have given the group the opportunity to have a parliamentary friend on the Committee. The document continues: Much careful and extremely sensitive work must be done behind the scenes in the next few days. If that is what is happening, it is a misuse of parliamentary procedure and it should stop now.

Who is left supporting the Bill? It is none other than the Secretary of State himself. Two days ago there appeared in The Observer an article entitled: Why I am privatising British technology". Yet the Secretary of State cannot appear in the House to defend his own Bill. Perhaps he should have added to the title of his article, "Why I am insisting on the Bill being debated in the Commons when I cannot appear to defend the proposals." He is not so much a no-turning-back Minister as a no-turning-up Minister.

Mr. Redwood

That was most uncalled for. My right hon. Friend has been in India, working hard for Britain. He is travelling back today, as I think the hon. Gentleman knows. The Secretary of State is fully behind the Bill. He is allowing his fellow Ministers to see it through on this occasion because he is busy elsewhere. The hon. Gentleman should withdraw his slur.

Mr. Brown

As the Minister knows, we offered the Secretary of State plenty of opportunities to be here when we debated the Bill. We offered to change the Second Reading date so that he could be here to introduce it. We made the offer to the Department of Trade and Industry.

In the article in The Observer, the Secretary of State explained that he proposed to privatise BTG, first, because it was held back in many respects by its status as a public sector organisation; secondly, because bureaucratic restraints inevitably imposed themselves on statutory bodies; and, thirdly, because BTG will be able in the private sector to take up more opportunities and provide a comprehensive service.

Who is holding BTG back in the public sector? Who is imposing the bureaucratic constraints? Who is denying BTG the opportunity to provide a comprehensive service in the public sector? Who is to blame if BTG is suffering in those respects? If anyone is to blame, it is the Government, who have presided over BTG for the past 12 years. If anyone is holding BTG back it is the Secretary of State, and it is the right hon. Gentleman who imposes constraints. If there are problems—I do not believe that the problems are in any way serious—the Minister should set about solving them. Indeed, he should have solved them years ago. To let the problems persist and then to use them as a pretext for the simplistic measure that we have before us is doubly irresponsible.

The Minister was on the radio this morning and said of BTG's management that they did not think that the Department's involvement helped. I suppose that, if I were in BTG, I should be worried about the Ministers who came to see me.

Is the Minister really telling us that France, Germany and Japan, which have technology transfer organisations similar to BTG, can solve their problems within the public sector but that in Britain it is somehow beyond the imagination of the Department of Trade and Industry to do so? Let us consider what the Secretary of State had to admit in that article. He said: We must ensure that a framework exists for the dissemination of new technology … The benefit of the fine work that has been carried out in Britain and overseas research organisations will never be seen unless an effective network of technology transfer is in place. Is not that the argument for BTG to remain in the public sector?

What guarantee is contained in the Bill that the technology transfer network will continue to exist in the private sector? As BTG has said of itself: involvement in technology is a natural continuation of, and not a substitute for, research which may have been funded by research councils or other organisations. In Britain we need a body that bridges the gap between ideas and concepts and develops them to the point of commercial exploitation. The existence of such a body cannot be left to the vagaries of the marketplace, as the Bill seeks to do. Such a body must be sufficiently flexible and have enough scope to invest for the long term.

Mr. Redwood

Is the hon. Gentleman aware that the amount of research and development finaced by BTG is about 0.1 per cent. of total R and D? Does that mean that all the other R and D does not work or does not count because it is in the private sector? The hon. Gentleman has never answered that point.

Mr. Brown

The Minister has not answered the straight point that I put to him. BTG does a good job in the public sector. If it is thrown into the marketplace there will be no guarantee that it will continue to exist. It may not have the capacity or ability to take the long-term view that is necessary when supporting inventions. The weight of evidence is growing that other countries, such as France, which has ANVAR, Japan, which has its own research and development corporation, and Germany, where corporations and organisations work through the Lander, recognise the need for such a body. So why does the Minister persist in pursuing privatisation in Britain?

Mr. Philip Oppenheim (Amber Valley)

The hon. Gentleman referred to Japan as a country which has a state-run R and D body. Is he aware that the Japanese percentage of state support for civil R and D is one of the lowest in all the developed countries and has been consistently so for the past 20 or 30 years? Bearing in mind that Japan is indisputably the most successful economy in the world, does not that fact lead the hon. Gentleman to question some of the fundamental suggestions that underlie his beliefs?

Mr. Brown

The hon. Gentleman misunderstands the position. The issue is how the public and private sectors can work together to increase the amount of research and development and new technology that is stimulated in the economy. The hon. Gentleman would do better to consider some of the problems that have arisen in the British economy because of the lack of investment in technology, and to compare us with Japan, which has done far better. He might be more worried about the rise in unemployment in his constituency as a result of the Government's failures.

Why is the privatisation being imposed on us now? None of the traditional arguments for privatisation hold. The 1987 Conservative manifesto said that privatisation was about insisting that small investors and the employees of privatised companies should have a fair chance of buying shares. Yet the Bill contains no guarantee that any new shareholders will be individuals or employees. As the chairman of the company graphically put it: This will be no widows' and orphans' sale. The Minister cannot claim that the sale will inevitably be an extension of popular capitalism. Nor will it inevitably increase competition because the Bill opens the way to BTG being taken over and perhaps asset-stripped by a competitor. There may even be less competition as a result of the measure.

Nor will privatisation of BTG reduce the burden on the state—the other argument for privatisation. The 1983 Tory manifesto said: The burden of financing the state's industries has kept taxes and Government borrowing higher than they need be. But, of course, BTG gives money to the Government. The Government do not give money to it. There is no argument for privatising it if the argument for privatisation is a desire to reduce state subsidy. Nor will the Government obtain proper value for money if BTG is sold to the private sector.

Does the Minister agree that BTG has £20 million or more in liquid assets, as stated in its accounts, that it has offices worth more than £10 million, investments that are worth nearly £30 million and other assets that could be liquidated for more than £50 million? The price of the sale, however, which has been quoted in the newspapers at the moment is little more than £35 million. When the Under-Secretary replies perhaps he will tell us what is being paid out to sell the company. What is the cost of the Coopers and Lybrand report? What is the cost of the Lazard's report? What is the cost of the Price Waterhouse appointment? What will be the cost of the time taken to change the patents? I understand that just to change the name on patents abroad will cost in excess of £1 million of taxpayers' money.

Far from costing the country money in the public sector, where it is required to break even, the company has made profits in successive years of £13 million, £11 million, £8 million, £10 million, £2 million, £5 million, £7 million, £7 million, £3 million, £6 million, £7 million and £9.5 million. In each year, that company has made profits for this country and paid dividends to the Government, and sometimes it has been required to give extra cash to the Government.

The taxpayer would be far better off with BTG making money for the country in the public sector than gaining limited proceeds from selling it at an undervalued price to the private sector.

Mr. James Paice (Cambridgeshire, South-East)

We now come to the nub of the hon. Gentleman's argument; it is his view that BTG would be better off in the public sector. Can we take it from that that a Labour Government would, as a priority, renationalise the BTG?

Mr. Brown

I sometimes wonder why I should give way to Conservative Members, because the hon. Gentleman was clearly not in the Chamber when I answered that very same question from one of his hon. Friends. No doubt the hon. Gentleman has had circulated to him a list of questions that he should put to me during the debate. I repeat that we have made it clear that we shall set up a new organisation, British Technology Enterprise, and we hope to be able to work with the universities to develop—

Mr. Paice


Mr. Brown

I shall not give way again. We shall work with the universities to develop a technology transfer organisation for Britain.

Mr. Paice


Mr. Brown

It would be an abuse of the House's time were I to give way to the hon. Gentleman again.

Once one strips away the old arguments for privatisation, which have no relevance to the sale, and realises that this could be a trade sale—not so much a case of tell Sid, as tell Lord Hanson and ICI—it is clear that this is privatisation for privatisation's sake. I have come to the conclusion that the only reason for privatising this company now is that it has not been privatised already.

The company is not going because it is losing money, is a drain on public finances, is a big sale that could change the face of public finance, is a sprawling bureaucracy that needs private sector efficiency, or is a sale that will create millions of shareholders—it will not. It is simply going because it is next on the list of private sector enterprises that the Government feel, as a matter of ideology, that they must sell.

Worse than that, however, the same organisation will not just be denied a place in the public sector, but will be transferred to the private sector with no guarantee that it will ever again work in the public interest. The Bill makes that clear. Let us consider the public interest considerations that were part of the Development of Inventions Act 1967 and which will be waived aside as a result of the Bill. Under the 1967 Act, the NRDC had the job of acquiring, holding, disposing of and granting rights … where the public interests so requires". In each section of the Act the public interest was mentioned as a reason why the company had to act. Now the Government are telling us that BTG should act purely as a commercial organisation. Viscount Ullswater, speaking for the Government, said that the Government considered that its activities were now of a commercial and training—I think that he meant trading—nature and that was not appropriate for the public sector.

To relegate BTG to the status of just another company surely mistakes its role. Do the Government agree that BTG fills a role that, if it did not exist in its present form, would be unfulfilled in the marketplace? Do the Government accept that, while the company is commercial, and should be as far as it can be, its purpose is not wholly commercial? Does the Minister accept that the public interest demands that an organisation exists for developing inventions and that it should work to a remit broader than merely the interests of shareholders? The public interest is served by having guaranteed the means of facilitating the progression from invention to production in circumstances where, because of the nature of investment, there is a danger that that might not happen.

The Secretary of State has not made up his mind whether any guarantees or other conditions should be written into the Bill. He should not be bringing forward a measure that he has not yet thought through. He is in the absurd position of having made up his mind to privatise even before he has considered the practical implications. The Bill is here because, regardless of other considerations, the Minister believes in privatisation at all costs.

What guarantee should have been written into the Bill? There should be a guarantee that the company will not be asset-stripped and split up. There is no guarantee that it will remain in British hands—not one guarantee that it might not be owned in Tokyo, Taiwan, Korea or Brazil. In past privatisations, a golden share has been invoked, even in the privatisation of ordinary companies like Britoil. Indeed, a limit has been set on foreign shareholdings in the past, but in this case there is nothing in the proposals to suggest that the company may not fall into foreign hands.

There is no guarantee either that the company will remain independent or able to act impartially. Are not the work force right to argue that BTG should not be in hock to another firm and that it should not run the risk of its principal assets—its patents—being auctioned off, frittered away or simply handed over to competitors? Is not it also right to argue that it must be able to give objective opinions, to be trusted by inventors as impartial, and to be free of influence from a large conglomerate?

There should not be a conflict of interest with shareholders. For example, BTG holds the patent for the next generation of anti-depressant drugs, a patent with a development licence with one company, which might lead in theory to that company capitalised in billions buying over the smaller BTG capitalised in millions. It might lead to another drugs company trying to buy BTG to eliminate that venture. Clearly, the Government measure the risk to the independence, the impartiality and the integrity of the company. If the company becomes a vested interest of one private sector or of one or two private sector organisations, it cannot work in the public interest to secure the independence of the inventor or the best benefit for the country as a whole.

Let us remember that BTG took on the Pentagon only recently over the hovercraft design. At a cost to itself it won the action in the American courts. Does the Minister seriously believe that a private technology company would take on the Pentagon in the interests of British science and technology and would be able to do so from the same vantage point that public status gives to BTG?

When we say that the British Technology Group should be independent, we mean that it should be free from the control of any one vested interest in the private sector. When we say that it should retain its integrity, we believe that it should not be dependent on calculations made purely on behalf of shareholders and purely about profits and dividends, but that the public interest should allow a wider set of considerations to be introduced. That requires a balance to be struck between the need to invest long term in further scientific advance and the need to weigh the commercial cost of doing so.

Mr. Leigh

I thought that the hon. Gentleman might be coming to the end of his speech. I hope that he will tell the House his attitude towards the abolition of the National Enterprise Board.

Mr. Brown

I have made it clear from the beginning that we oppose the Bill. We will oppose it root and branch in Committee, as has been made clear from the beginning of the debate. We have argued that the Bill is doctrinaire and likely to be self-defeating in its ultimate effects on British science, technology and industry.

The Bill has been pursued not because the Government believe in British science, technology or industry but because they believe in privatisation. It is the ultimate in short-term measures from a Government dominated by a short-term approach. To privatise the one Government agency with a key role in the early development of technology, and to abandon it to the short-term pursuits of the marketplace with no guarantee that it will work for the long-term, is short-termism in its worst aspect. When faced with a simple opportunity to show that they are more interested in the long term than the short term, the Government have decided to choose the short term.

BTG is a unique and special company with a distinct purpose. For 40 years, under successive Governments, it has worked to ensure that British ideas benefit British industry in Britain. The company has worked in the public interest for the long term. Now the Government have decided that it will work in the private interest, probably for the short term. They are not privatising it to create a market discipline, because there is a competitive environment already. They are not privatising it to issue shares, because it is doubtful whether many people will get shares as a result of the privatisation. They are not privatising it principally to raise more money, because they would be better off keeping it in the public sector, with the dividends that come from its work.

The main argument is that none of the arguments about privatisation applies. The privatisation is based on dogma and on nothing else. If anything, it indicates that, despite a change of leadership, the Government have not changed in fundamentals. They are exercising a dogmatic insistence on privatising a successful public enterprise, which is working successfully in the long-term interests of British industry. They would appease the vested interests of their friends in the private sector before advancing the public interest which it is their duty to uphold. Our argument is that we need in Britain a body to facilitate the development of inventions. We will ensure that the public interest is upheld.

4.45 pm
Mr. Michael Grylls (Surrey, North-West)

The synthetic nonsense and selective quotations from internal documents from the British Technology Group which the hon. Member for Dunfermline, East (Mr. Brown) produced are a smokescreen to cover the real thing that worries the Labour party about the Bill. The Labour party is not worried about the merits of what goes on in the British Technology Group; its only worry is that its chief toy is being taken away from it. The Labour party invented the toy in the 1970s; that was before the hon. Gentleman was here, but I am sure that he will have read about the disasters of the National Enterprise Board in the 1970s. That toy is being taken away from the Labour party in the Bill and will not be available to an incoming Labour Government, however unlikely that event may be; I think most people would consider it most unlikely. The hon. Gentleman is angry because the Labour party has lost that toy. That is why he quoted tittle-tattle from alleged statements by people within the BTG.

It is probably extremely boring to quote what happened many years ago, but there are still hon. Members here who can remember what went on when the National Enterprise Board was in being, and how it went round punting wiith taxpayers' money, trying to pick winners. My hon. Friend the Minister for Corporate Affairs made a good point about the doubt that ,most people would have as to whether the hon. Member for Dunfermline, East has the necessary experience in industry to ensure success in picking winners, whether it is done by himself or by civil servants.

Civil servants have an important role, but it is not to choose where investment should go. If the hon. Member for Dunfermline, East thinks that that is a doctrinaire statement, the fact is that we do not need to guess what might happen in the future because we can look back to what happened in the past. My hon. Friend the Minister quoted company after company that went bust under the auspices of the National Enterprise Board because it picked companies and put money into them for all the wrong reasons. Most of the companies ended in disaster.

I have told the House why the Labour party is wound up about the Bill. It is not concerned about the merits of the British Technology Group, because, as both sides of the House agree, BTG is trading profitably and is a successful business. Actually, it is a small business. This is the first case that I can remember of a small business being privatised, but I welcome all forms of privatisation. Before the hon. Gentleman tells me that that is doctrinaire, let me explain why I welcome privatisation. Again, we do not need to look into a crystal ball because we can read the book.

I do not know whether I can get the hon. Gentleman to agree with me, but I am about to make a non-partisan point; Governments of all complexions have been bad owners of businesses, because they have a different perspective from business men. Business men make judgments on the return from investment. Politicians—the hon. Gentleman and myself—are different animals. We are looking for votes. When elections come, we have to collect votes; the hon. Gentleman has to do that and so do we. Therefore, what happens? When the Treasury has to decide between one investment and another, does it decide to put money into Amersham International—when that company was nationalised it was relatively unknown—or the British Technology Group? Naturally it does not, but it puts money into schools and hospitals, about which people feel passionately, and, collects votes at elections. It does not put money into the businesses that are worthy of investments on their own merits.

We have learnt during the 40 years since the second world war that all Governments have been bad owners and we do not want to return to that. The hon. Member for Dunfermline, East should consider the amazing transformation in the fortunes and fame of such companies—[Interruption.] I wish that the hon. Gentleman would listen for a moment, but perhaps he thinks that he knows it all. Will he raise his head and lend me an ear? Will he try to remember the success of Cable and Wireless, which was a disastrous nationalised industry? It could not even afford to pay enough to recruit a top-class financial director because the salaries of the board were controlled by the Department of Trade and Industry. It is now free to recruit the best brains, and the result is that Cable and Wireless is one of the finest businesses and is spread throughout the world. I could list many other successful privatised companies, such as British Airways, British Telecom and Amersham International which, although relatively unknown when it was nationalised, is now a world winner.

Ms. Hilary Armstrong (Durham, North-West)

I am trying hard to follow the hon. Gentleman's argument but am finding it a little difficult. Is the hon. Gentleman saying that he is content with the amount of investment in, and commitment to, research and development in those areas where we can prosper in the manufacturing industry? Does he believe that we need no commitment from central Government to ensure that it is improved?

Mr. Grylls

The worst possibility would be if politicians were to try to judge the gross amount of investment that there should be in industry. That is a matter for businesses to decide.

Ms. Armstrong

Is the hon. Gentleman content with that?

Mr. Grylls

The hon. Lady asked a question and I shall do my best to answer it, unlike some Opposition Members. She may not like my answer, but I shall at least try to answer it. It is not good for politicians to make such a judgment. We are not very good at it and we embrace all people in the political process, in Whitehall and in Westminster. Our experience shows that such decisions are best left to the people who run the businesses, understand the ins and outs of business, and decide how much to allocate to research and development. It would be wrong for us to interfere. The hon. Lady and I must part company, because we do not agree.

The British Technology Group will have great opportunities in the future. Once it is out of the nest of state control and away from the heavy hand of state interference, it can spread around the world. It is already an international business so, once privatised, it can spread its wings and build its confidence in the knowledge that, if it has a good project, it will be able to raise money automatically through the City or in foreign financial markets. It does not matter where it raises the money. But, left in the public sector, it will be for ever constrained because it will always have to request Ministers' approval before making an investment. Even the salaries of its directors are controlled by Ministers because that is the way in which nationalised industries work. One reason why they have been such a disaster is that they have been unable to recruit the highest level of management.

Dr. Hampson

I agree with all of my hon. Friend's powerful arguments. Another aspect that needs further consideration is that, once the British Technology Group is in the private sector, there is a genuine risk that such a relatively small group could be swallowed up by a major industrial corporation. Although it could, conceivably, make a great deal of money, that could be to the detriment of the company's long-term interests and some of the projects being undertaken. For example, it could be disadvantageous if a major pharmaceutical company took it over as it is involved in so many aspects of the pharmaceutical world. Will my hon. Friend consider that argument and contemplate a golden share being held by the Government to prevent that from happening, at least in the short term?

Mr. Grylls

I do not agree totally with my hon. Friend. If we are to privatise a company, we should let it be free and keep a minimum of ties with it. Whether the Government should hold a golden share is for the Committee to decide. I am sure that those hon. Members fortunate enough to be on the Committee will enjoy doing that work. I hope that I shall not be one of them. It would not be my first contribution to the National Enterprise Board, but it would be my last, to the great relief of the House.

The House should welcome this privatisation, which follows a long path of successful privatisations. The Opposition have produced no arguments today to cause anyone, either inside or outside the House, to be concerned that we are not doing the right thing in freeing the British Technology Group from the dead hand of state interference, control and restrictions. I shall watch, with the greatest of interest, to see what happens to the British Technology Group. As my hon. Friend the Member for Leeds, North-West (Dr. Hampson) said, the group may change and some parts of it may be put into different hands, but they will not disappear. I wish the group well and support the Bill with great enthusiasm.

4.55 pm
Mr. Alex Carlile (Montgomery)

There can be two reasons for privatising a company—on its merits, or on account of prejudice. The hon. Member for Surrey, North-West (Mr. Grylls) said, frankly, that he favours all privatisations, which is a straightforward way of expressing a prejudice—I use the word in a literal and not a pejorative sense—in favour of privatisation. The Government have had the opportunity to consider the proposed privatisation and to assess its merits for several years.

As the Minister for Corporate Affairs confirmed when he opened the debate—I am glad to see that he is still in the Chamber, albeit on the periphery—the Government have the advantage of a Coopers and Lybrand study commissioned in early 1988 and available since July 1988, which was just such a study of the merits of the proposed privatisation. We can be sure that that report has not been gathering dust for the past two and a half years, and that the Minister for Corporate Affairs—who has the reputation, justifiably or not, of being one of the cleverest people in the House—will have considered that report with great care.

The Minister will have considered not only the report's conclusions, but the wisdom of revealing those conclusions to the House. His study seems to come to one of two conclusions: either the rest of us are simply not fit to understand the conclusions reached by Coopers and Lybrand or the conclusions are so embarrassing that they should not be revealed to us because the embarrassment would be on the Government.

I asked the hon. Member for Surrey, North-West a straightforward question when he kindly allowed me to intervene in his speech. My question called for a yes or no answer: did Coopers and Lybrand express misgivings about the proposed privatisation and advise that, on balance, it should not proceed or did they not? Will the Parliamentary Under-Secretary of State for Industry and Consumer Affairs, when he responds to the debate—I am sure that he will do so in his customary robust and frank way—answer that question? His hon. Friend the Minister for Corporate Affairs inevitably raised suspicion, because he was fudging the issue and seemed incapable of answering any question with a direct yes or no answer.

Therefore, one is driven to the conclusion that the reason for the report's supression is that it advises against the privatisation. That leads us to the verdict that the privatisation is founded on prejudice. "Let us privatise what we can," says the Minister to himself, whether the merits favour it or not.

As a committed free marketeer, I am all in favour of privatising state-owned businesses when the merits are in favour; but equally, it does not serve the interests of the free market, and it certainly does not serve the interests of the privatised company, if the decision is based upon prejudice.

Mr. Andrew Hargreaves (Birmingham, Hall Green)

Will the hon. and learned Gentleman develop his argument to the point where he explains why most of the board and the council of BTG appear to be in favour of such a move and the press have frequently offered BTG as a possible candidate for privatisation in order to allow it the international expansion which its natural role suggests?

Mr. Carlile

Unlike the Minister, I will answer the hon. Gentleman's question head on. There is a simple reason why the press has spoken of BTG as a candidate for privatisation. Any boring day of the news week when the press are looking around for something on which to comment, one of the first things that comes to mind is what the Government will think of privatising next. They look at the list of Government-owned businesses and, as BTG makes a profit and so, presumably, can be sold for a reasonable price, the press say that perhaps the Government will privatise BTG. The Government themselves have taken the same somewhat simplistic approach to the privatisation of BTG: because it makes a profit—because it moves, as it were—let us privatise it.

I shall answer the hon. Gentleman's first question as I proceed because, on the merits, there is no good case for privatising BTG. BTG has amassed quite a reputation for itself. It is a successful public sector company, albeit a small one. The Minister has asked rhetorically more than once today whether it matters if BTG is privatised, since the Government are increasing the amount of money that is being put into what he broadly describes as "this area", by which I presume he means the research and development of ideas. That is a fair point to make, but there is research and research, development and development, technology and technology.

As one university vice-chancellor has said, there is an acute gap in the market for relatively small, highly speculative investments. That is the type of highly speculative investment which almost every private finance house and private venture capital organisation would not consider. Yet that is precisely the type of project, and the small scale of funding involved is precisely the scale of funding, most often needed to take innovation from the experimental stage to a point at which its commercial potential can be seriously evaluated.

BTG has been almost alone in filling that gap. It is the only organisation which has made it its stock in trade, day by day, to be prepared to fill that gap. A reasonable concern is that a privatised BTG would be driven by short-term fimnancial objectives to withdraw from that area of the market. If it does so, it will be an entirely hit-or-miss operation for the inventor or entrepreneur as to whether he can develop and proceed with his invention.

Many entrepreneurs in the global village in which we live, certainly in the European village in which we live, would go elsewhere with their inventions because they might feel, with reasonable justification, that they were more likely to obtain the sort of venture capital and development support that they needed outside the United Kingdom than within the United Kingdom.

BTG has a valuable asset, but not in bricks and mortar; it is a portfolio which contains promising technologies, varying from voice recognition devices to combine harvesters. But many of them are still at the patenting stage, the early development stage, and are the intellectual property of their inventors, who have only laid the basic bricks of that property and still have a great deal more work to do.

The Minister tells us that the Government have decided to proceed with the privatisation at a stage when they do not know what form it will take, have no idea to whom the company will be sold, and have not decided what safeguards should be put in place to ensure that investment continues. He says that they are open-minded, which means that they have not made up their mind about a golden share, guarantees or foreign involvement. All those matters are up in the air. It will not be possible for the House to amend the Bill to deal with such issues in Committee because of its nature and shape.

We may find that BTG is privatised successfully in a financial sense, with plenty of other companies prepared to pay large sums of money for it, but they will be paying for the portfolio, a list of tradeable assets—patents which can be sold off, and technologies which can be dispersed undeveloped. There is no guarantee from the Government at this stage that anything will be done to preserve the value of that portfolio.

I venture to suggest that little can be done to preserve the value of the portfolio once it is dispersed. If it were to be done, the Government would have to develop a new body of law to protect certain aspects of intellectual property which would be inconsistent with the thoroughgoing and needed review of intellectual property law which the Government have already carried through Parliament.

Mr. Simon Hughes

As my hon. and learned Friend knows, I represent the constituency with the largest part of the British Technology Group. It is feared—I say this seriously to the Minister—that the collective expertise of the people working as a team is at risk. The management may consider that the group could do well in the private sector, but that does not explain why there cannot be complementary activity, some in the private sector, as happens now, which is perfectly justifiable, and some in the public sector, to do what the private sector either is not doing or will not do, or what it can do best. It is the Government's failure to address that aspect which has caused most of the employees to have no confidence in the Government's proposal.

Mr. Carlile

I am grateful to my hon. Friend; he has taken a great interest in BTG, which is in his constituency. A great and broad body of expertise has been built up within the group. As my hon. Friend will confirm, we are talking not merely about a group of technologists but about scientists, patent agents, lawyers and other experts in intellectual property, and financiers, people who understand venture capital, that most difficult thing to obtain at reasonable rates of interest in what is essentially a fee-generating City of London. As the Minister well knows, there is no interest in the City of London in developing new ventures; the interest at the moment is in churning out fees.

BTG is a multi-disciplinary body which has been working for Britain, trying to secure a real place in the world for Britain's young and vital technology. It has been fighting to ensure that we do not have the fiasco that occurred after the last war, when the patents that could have been obtained for the British discovery of antibiotics were not taken out and all corners were able to move in and make trillions of dollars out of British invention.

The BTG should stand independent of Government, although publicly funded. It is open to that body to sell parts of its portfolio or to license others to manufacture products that are part of its expertise. That must be right. In the end, however, there must be a Government-funded agency. There has to be an agency that is able to pick up those inventions which have the imagination that floors the City of London, but which the Government, with their necessarily patriotic view, will be prepared to back a little way, and then perhaps a little way more and so on, until one turns into the successor to the light bulb or the antibiotic. This will not happen if the BTG is taken into the private sector and nothing remains in the public sector to act as a longstop for the great inventiveness of British scientists, technologists and engineers.

Perhaps, if the Government had come to the House with much clearer proposals, and had been able to say that, while they were privatising the BTG, they were also establishing a structure to pick up the residue that needs to be dealt with in the public sector, we might have been able to support the Bill. As it stands, its proposals are too diffuse, because they have been motivated by the Government's prejudice in favour of privatisation rather than by an argument on the merits.

5.11 pm
Sir Trevor Skeet (Bedfordshire, North)

The hon. and learned Member for Montgomery (Mr. Carlile) raised an interesting point about the Coopers and Lybrand report. If he were a Minister, would he be prepared to release confidential information that could be of use to the pharmaceutical industry, especially if, by doing so, he would destroy the independence of the organisation?

Mr. Alex Carlile

I did not argue that all the confidential information about pharmaceuticals should be released. I asked a specific question: did Coopers and Lybrand come down in favour of privatisation or against it? The House would find that answer to theat question instructive.

Sir Trevor Skeet

The hon. Gentleman is asking for a little part of the report without the entire report. One may need to read the entire report before finding precisely the case that it makes.

The hon. and learned Gentleman also said that there was no case for privatisation. Let me give him some ideas. It is no longer appropriate for an international, commercially viable operation to be answerable to Ministers, civil servants and the Treasury. I agree that BTG grew up under an umbrella, that it was safeguarded and out of international competition. Now, we are moving into an era in which, if it is to expand, BTG will have to be privatised.

I have a second, compelling argument in favour of privatisation. Certain overseas Governments find the idea of a state-sponsored agency or company unacceptable. For example, when the French Government wanted some research to be handled by a United Kingdom agency, it refused to allow a Government-owned agency to carry it out. BTG did not get the contract. Is that of no significance? BTG proposed a joint venture with a Spanish firm. That required the approval of the Spanish Cabinet solely because the BTG had public sector status. Questions were not answered, and the whole project was abandoned. When BP was substantially nationalised, it tried to get certain licences in Turkey, but could not do so because it was a state enterprise with a large state investment. It will be hard for Opposition Members to deal with that point.

Mr. Simon Hughes

While there may be political reasons why another country does not wish to deal with a state-owned enterprise, no Opposition Member has argued that there should not be private sector activities developing British technology. There should be as much as there is now and more. We are arguing that there should also be a subsidiary state sector. Just as there is accountability for science and the arts, through funding from the Government, so such technology should have some Government link and direction.

Sir Trevor Skeet

I do not accept that. This is a viable company which has reached a point of maturity at which it should be put in the private sector because it is commercially oriented. If there were any other competitors, that would be the luck of the draw, but no specific provision should be made for that. We are told that the Labour party has its own ideas, but, like many of its other schemes, they will not work.

My third example concerns Government restraints. The size of group investments has to be scrutinised first by the Department of Trade and Industry, not by the board. Such matters should be decided at company level by BTG. Appointment to the top posts is settled by the Secretary of State for Trade and Industry. The Department monitors all BTG activities, as does the Treasury, and if the Treasury is short of cash, it can prune the group spending. BTG is required to pay a fixed percentage of profit to the Government. Operating profits after tax were £6.8 million and tax and dividends paid to the Government were £6.1 million. That is too heavy a burden for a new company, so it should be pared down in such a way as to leave sufficient resources for expansion. I should have thought that those points made it clear that it is essential that the company moves into the private sector.

I agree with the hon. and learned Member for Montgomery that the group has a valuable combination of professionals. No more than he does do I wish to see it broken up. I regard it as a centre of commercial excellence. I should not like to see it dismembered. There is a staff of 188, including six solicitors, two barristers, 18 patent agents plus two trainees, 15 financial managers, six of whom are on the venture capital side, and 60 specialists in technology transfer in the operating division, whether that is pharmaceuticals, engineering or anything else.

We must recognise that most large companies, such as ICI, Unilever, the Royal Dutch Petroleum and the Shell group, have a department through which they do their own patent and licensing business in-house. The big difference between BTG and these companies is that it specialises in dealing with all this expertise and sorts out patent and licence problems. I should not like to see it disintegrate, because it has an assembly of professionals. However, steps should be taken to release the enterprise from the restraints created by a too-close association with the state. I believe that many people will appreciate that point.

I have another reason for admiring the enterprise. It has an aggressive enforcement attitude to rights arising out of patents, particularly during the 1980s. Over the hovercraft, BTG filed an action in the United States and claimed compensation from the United States Government—the Pentagon—for infringement of the United States hovercraft patents. There was an out-of-court settlement, thanks to the persistence of the enterprise, of $6 million from the United States Government. That was an outstanding achievement, and I commend it.

Another case was nuclear magnetic resonance imaging. There was an out-of-court settlement by the United States health care group Johnson and Johnson for patent infringement. By taking aggressive action—as such a small company can—the group has built up its commercial reputation for independence and impartiality, and I should not like to see that destroyed. It has also used discretion in inter-corporation licensing.

The BTG has a broad network with universities—it has technical transfer agreements with 50 universities, plus one abroad, with 17 polytechnics, and with eight medical schools. The hon. Member for Dunfermline, East (Mr. Brown) said that there were no consultations, but that is extraordinary coming from him, because none of the nationalisation proposals put forward by the Labour party have included consultation with the industries involved. Surely it is up to the Government to decide whether this industry continues to identify commercially useful ideas and to search out solutions with academic institutions and private and public sector research establishments. In 1990, its new business was made up of 46 per cent. from academic institutions, 12 per cent. from Government research bodies and 42 per cent. from the private sector. The group is increasing its work in the private sector and should therefore be considered a private sector enterprise.

The group also has a broad network of contact with research councils, for example with the Science and Engineering Research Council, which carries out much of its own work, but I daresay that that collaboration could be extended in future, and with the Medical Research Council, which largely deals with its own work but perhaps should delegate it to a private enterprise like BTG. The group also does most of the work of the Agricultural and Food Research Council. When its monopoly of work from Government-funded research was terminated in 1985 it was probably a good thing, and BTG has now recognised that fact.

I have been singing the praises of the enterprise and have given a pretty clear indication of why it should be commercialised in the true sense of the word. It is a unique institution, with few competitors. One competitor is the American Research Corporation in the United States, but that is much smaller and BTG has an affiliate there, which makes sense because in 1990 40 per cent. of its income came from the United States, 20 per cent. from Japan and 10 per cent. elsewhere abroad, with the balance of 30 per cent. in the United Kingdom.

There are few competitors in the United Kingdom. Oxford university carries out its own work. Impel Ltd. carries out work for Imperial college and 3i. Those are the only competitors in the United Kingdom, except for a large amount of in-house work carried out by some of our larger enterprises. France and Germany are untapped fields for the company. It is associated with Eurotech and with the European institute of technology and, because it is well dug in there, I envisage there will be every opportunity for moving ahead.

I have mentioned several ideas for how privatisation should be effected, but impartiality and independence are paramount and should be protected. Without them, the company would not be able to do work in the United Kingdom and abroad. There is no reason why that work should not be continued if a suitable privatisation is carried out, which is what the Minister intends.

There must he some protection against asset stripping. Any industrialist would look at the group and think it was a good company to acquire. For example, it does a lot of work in pharmaceuticals and, if it were taken over, the company acquiring it would know all about its competitors and would have a long list of perhaps 8,000 patents, either in existence or being applied for. I suggest the following possible solutions. There could be a flotation through the stock exchange with the retention of a golden share, which would always be retained. There could be an allocation of shares to the staff and, as they would have an interest in the enterprise they would be loth to concede it to any foreign enterprise or to another company in the United Kingdom. The flotation could provide that no foreign company could take over a key industry to the United Kingdom. The allocation of shares could be limited to one shareholder, which would prevent sector domination, and I hope that the Minister will consider that. Also, the establishment of a trust has been mentioned and it is interesting to observe the analysis made in December 1988 that 50 per cent. of people interviewed were in favour of that. It would be for the Government to work out the type of trust.

The Government are wise to introduce the Bill in the way that they have done. They have set up a limited liability company, into which all the shares will go, and at a later date they will decide on one of the ideas that I have mentioned, or will perhaps select another. Then the company will be in the correct shape for privatisation.

Mr. Mike Watson (Glasgow, Central)

The hon. Gentleman was talking about the safeguards which he felt should be introduced. I hope that he will press them strongly on the Minister. However, he did not mention the patents held by BTG that have resulted from research in universities. Universities and individual academic inventors stand to receive royalties for many years to come. How does he propose to protect them?

Sir Trevor Skeet

They would be protected because they are subject to agreements at present. If inventions have been patented by BTG on behalf of universities or by the universities themselves the inventors will be safeguarded. I cannot see any great difficulty. The agreement could be transferred to another body that takes over the group.

There could be a case for an institutional purchase by a major finance house, which would maintain impartiality and the independence of its commercial operations. I suggest that the Minister might study that idea. Obviously there will have to be an independent show, which is not interested in any sector in particular. One could probably find the right solution along those lines.

Price Waterhouse is making a report on privatisation, which is probably the most advantageous way to proceed, and I shall be interested to read it.

Mr. Simon Hughes

The hon. Gentleman might not be allowed to read it if the precedent of the Coopers and Lybrand report is followed and it produces a conclusion but we never know what it is. Perhaps we shall all remain in the dark with the next report.

Sir Trevor Skeet

I think that the Government will release whatever information that they receive, provided that it is not confidential—[HON. MEMBERS: "Oh."] If the report is confidential the information cannot be released —it would injure not the Government but the companies concerned, and they have clients who may be involved. It would be a good idea if Members of Parliament could read at length a report on methods of privatisation and study the recommendations made, so that they could make an accurate assessment. I believe that that is precisely what the Government will ensure.

The group has been working for some years, is viable and has been paying a lot of tax to the Treasury. It has international credit not merely in the United States but in Japan, India, the United Kingdom and many other counties. We wish it to continue. Now that it has reached the end of the springboard, it must go for further competition, and the only way in which it can do that is to become part of the private sector. The public sector contains too many restrictions and limitations, and foreign Governments may refuse to deal with bodies simply because they are state agencies.

I wish that Opposition Members would recognise the merits of the Government's proposal. That applies to the Liberals as well as Labour, but it is Labour that is thinking back 20 years. If it continues to think in that way, we shall never get ahead. I welcome the Bill and hope that it will have a very successful Committee stage.

5.30 pm
Mr. Mike Watson (Glasgow, Central)

It is evident, especially from what the Minister and his colleagues have said, that there is no clear demand for the Bill. We have been told that the council of BTG supports it, but that is not entirely surprising: for reasons that I do not fully understand, the council feels constrained by the Department of Trade and Industry. BTG seems to me to be operating perfectly well now, and it is certainly profitable. Where, then, is the demand for the Bill?

I shall not rehearse the arguments, but I believe that dogma is at the root of the legislation. It is likely to produce a much less effective private-sector successor, with consequent damage to technology transfer procedures and, equally important, a reduction in the protection available to patent holders.

In the past, the Government have cited as part of the rationale for their privatisations the need to reduce the drain on public resources when nationalised industries are inefficient and unprofitable. We have already heard that BTG in its present form is not only highly efficient but extremely profitable. Last year, it managed a profit of some £7 million on a turnover of £30 million—a good performance by any standards, and in itself an increase of some 24 per cent. on the previous year.

Nor can it be said that a sale would raise much for the Government coffers: being undervalued, it is likely to realise only £35 million to £45 million. We have often been told in the past that one of the Government's aims is the pursuit of a wider share-owning democracy. That aim will not be served by the Bill, which will not extend share ownership among the general public.

BTG makes no demands on the public purse; quite the opposite. It is accountable to the Secretary of State, but is entirely self-financing—which, I believe, is testament to its success. It continues to benefit from the fruits of its expert judgment, and that of its predecessor bodies, over the past 40 years.

If the public or the national interest is to be served, BTG should remain in the public sector. When plans to privatise it in 1988 were announced, they provoked an outcry in the scientific and research establishment. Not only is there no demand for the privatisation; there has been an outcry in the world of academia and research. There are two main reasons for that. First, the bulk of BTG's income is derived from technology transfer, largely as a result of its having the flexibility to adopt a longer-term view based on technological as well as commercial judgments. By contrast, traditional venture capitalists seek shorter-term returns from equity investments.

BTG's profits are reinvested through research and investment—the seedcorn of the country's future. They are not paid out in dividends, apart from the amount that BTG is obliged to give the Government. That amount is, in any case, modest. BTG is not driven by the same considerations to which a private company is obliged to give precedence. For that reason, private-sector organisations are inhibited from underwriting the long lead-in times that are often necessary to allow a new product to develop and realise its commercial potential. The Minister ascribed no importance to that aspect, although I am sure that he is aware of it. Venture capitalists typically allow a lead-in time of five to seven years, although many inventions may require 10 to 15, especially in the pharmaceutical sector.

I have mentioned the importance of seedcorn capital. Writing in the Financial Times, David Sawers, an economic consultant, said: Most venture capital funds are looking for projects which involve limited technical risk, and can be evaluated primarily on commerical criteria…Fund managers accept that a gap exists in the supply of funds". BTG has not filled that gap entirely, but it has gone much of the way towards filling it. If it ceases to exist—which is the aim of the Bill—the gap will widen, and many young researchers with good ideas capable of development may well be denied the opportunity to develop them.

The lead-in times that are often required are unlikely to attract shareholders; there must be more attractive options for those involved with venture capital. No less important, however, is the question of patent infringement. Scientific and academic opinion are united in the view that BTG will constitute a more formidable deterrent to patent infringement as a public-sector body than as a private company. As a private company, it would have little clout, and doubtless even less enthusiasm for protracted and inevitably costly legal action. My hon. Friend the Member for Dunfermline, East (Mr. Brown) mentioned BTG's pursuit of the Pentagon in a case not so long ago. It is surely inconceivable that a private company would be prepared to invest the money that it takes to pursue such actions.

Overseas predators, paying lip service to patented products, are likely to see the United Kingdom as a soft touch in future. That would leave our universities cruelly, indeed dangerously, exposed. What price multinational companies riding roughshod over academic and research institutions—particularly given the weak financial position in which many universities and research establishments now find themselves as a result of the Government's consistent underfunding over the past 10 years? They are simply not in a position to defend themselves if multinational companies choose to brush them aside and carry on regardless. That, too, represents a gap in the Bill, with which I hope the Secretary of State will deal.

Sir Trevor Skeet

The hon. Gentleman is talking about the inability of a private enterprise to proceed with infringement actions. Why should he come to such a conclusion, given that most of the litigation is now private in any event? When the political machine is behind something, it will impose all the inhibitions of politics. It is only because we have a good team here, working together, that this course is being taken. That team will be preserved in the new enterprise, and surely it will proceed with its litigation as it would be expected to do.

Mr. Watson

I did not say that companies were unable to proceed; I said that they would be very reluctant, because of the cost. A company taking over the complete portfolio of BTG might regard, for instance, magnetic resonance imaging as one of the lucrative aspects, and in that event it would clearly be worthwhile to pursue legal action. But, in many other instances, a Japanese or European company might choose to steal an invention, and the company that had bought BTG might decide that it was not worth its while to take legal action.

Over the years, BTG has forged a relationship with the academic establishment as well as with leading companies, which has ensured that the best of British research can be developed into marketable products. At a time when manufacturing industry is on its uppers, we need alternative sources for the future regeneration of British industry. It would be a tragedy if we closed any doors, because people with useful ideas could not see those ideas developed. I fear that that relationship between BTG and the academic and industrial establishments is likely to be destroyed if the privatisation goes ahead.

My hon. Friend the Member for Dunfermline, East referred to the opposition of eminent researchers and industrialists. The New Scientist, a publication respected by many who are concerned with and for the British Technology Group, says: If the British Technology Group does go private, the Government will one day have to invent an organisation staffed by people with time to spare to wander through academic research laboratories—an organisation that can act at the cutting edge of innovation to promote ideas that are too tentative to attract hard-nosed investors. That underscores my previous point regarding legal action.

The British Technology Group does an excellent job, as evidenced by its performance over many years. It makes profits. Far from using up public money, it contributes to public funds, albeit modestly. For the reasons that I have outlined, it should be allowed to continue to do its job. One should bear in mind the old maxim, "If it ain't broke, don't fix it."

5.40 pm
Mr. Phillip Oppenheim (Amber Valley)

The Opposition's attitude to the privatisation of the British Technology Group is based in part on the hope that BTG in the state sector could become the centrepiece of some type of interventionist industrial strategy. Opposition spokesmen often refer to the need for an industrial strategy, by which I assume that they mean more state intervention—which of course means politicians and civil servants making the decisions about the British economy. It is too often forgotten that we have tried such industrial strategies before.

Industrial strategies such as those advocated by the Opposition were tried for about 35 years after the second world war. What did we get out of it? It led to a sorry array of industries—steel, coal, nuclear power, shipbuilding, cars and motor bikes—none of which was a paragon of industrial or economic success. When the previous Labour Government tried to create a rival for IBM through the vehicle of the National Enterprise Board, they sponsored an organisation called Nexos; that, too, was an abject failure. Before Nexos went bust, it had lost more than £30 million. Its main achievement was to import a large quantity of Japanese-made facsimile machines which, after Nexos went out of business, it sold for the sum of £1.

We have tried all that before and it has failed dismally, disastrously and abjectly. It is interesting to note that one of our most successful industries since the war has been chemicals and pharmaceuticals. That is one of the least subsidised industries.

Mr. Gordon Brown

They are two industries.

Mr. Oppenheim

The hon. Gentleman says that they are two industries. Perhaps he is splitting hairs. For his information, chemicals and pharmaceuticals are closely linked. Some of our main chemical companies are also our main pharmaceutical companies. I refer to companies such as ICI.

Our chemical and pharmaceutical industries have been the least meddled with and the least subsidised since the war, yet they remain among our most successful. Two of the industries that have been most interfered with by politicians since the war are steel and aerospace. They lost their share of the international market until the beginning of the 1980s, but they regained a great deal of their market share during the 1980s. To a large extent, they were liberated from Government control, since when they have performed strongly.

The iron and steel industries, which had chronic trade deficits in 1980 after 30 years of meddling and interference by politicians, have made substantial surpluses since then. Last year, the British iron and steel industries registered a net surplus of £1 billion. British Steel is now recognised as one of the most efficient steel producers in the world.

Under the previous Labour Government, manufacturing output fell in the 1970s. When Labour's industrial planners were in charge of the economy—supposedly wedded to the great idea of a strong manufacturing industry—manufacturing output fell. Under a more free market economic regime in the 1980s, British manufacturing output increased faster than that of any other European country.

Mr. Rees

Is the hon. Gentleman saying that manufacturing investment did not fall greatly during the early years of this Government? If he says that manufacturing investment has increased, he must, according to the figures, have chosen a different base.

Mr. Oppenheim

I was referring to manufacturing output, not to investment. Manufacturing output in the 1980s—I accept that that is not the whole of the Government's period in office—rose faster than in any other European country. If we include 1979, manufacturing output increased by about 12 per cent., which was faster than the increase achieved by most other European countries. It was certainly faster than that achieved by the previous Labour Government, when manufacturing output fell.

If we consider the raw investment figures, it does not look as though it has increased very much in real terms. However, the quality of the current investment is much better. During the 1960s and 1970s, much of that investment was directed by civil servants and politicians and was wasted; money was invested in unwise projects. A great deal of the investment in the 1980s was of a far higher quality. Investments were made as a result of a myriad of market decisions. They tended, therefore, to yield better results. I suspect that the hon. Member for Dunfermline, East (Mr. Brown) would question that assertion.

Labour's magic solution for our industrial strategy is just as much a red herring now as it ever was. They want a return to the bad old days when politicians made decisions for business men, while preaching that profits are bad and have to be equated with greed or crude materialism. That is hardly likely to help British industry. Simplistic solutions, such as a Government-directed industrial strategy, have been tried before and have failed.

The extent to which such a solution persists in Opposition circles is based on a misreading of Japan's success. Many people hold the mistaken belief that Japan's industrial success is founded on a successful state-industry partnership, as embodied in Japan's Ministry of International Trade and Industry. MITI is not nearly so powerful as is made out by those who use the MITI myth as an excuse for their own failure, or to lobby for more subsidies or more protection at home. Many of Japan's most successful industries have completely shunned MITI interference. In the 1950s, for example, MITI tried to consolidate the Japanese car industry and to produce a people's car on the lines of the Volkswagen Beetle. That was a complete failure. None of the Japanese car companies agreed to co-operate with MITI. The record of the Japanese car industry since then speaks for itself.

Many of Japan's most successful industries have received little help or guidance from MITI. I could quote many examples, but three will be sufficient—photocopiers, excavators and motor bikes. All three have had little involvement with MITI. However, many of Japan's least successful industries have been the recipients of large amounts of MITI aid. A MITI-sponsored restructuring of the aluminium industry left it very weak internationally. Many point to the Japanese steel and shipbuilding industries as the supposed paragons of MITI's interventionist approach. However, when a team of economists visited Japan in 1968, at a time when its steel and shipbuilding industries were rapidly overhauling those of Western countries, they found that MITI's aid to the steel and shipbuilding industries was almost insignificant and that other factors, such as Japan's underlying structural competitiveness, accounted for their success.

Other industries where MITI supposedly had a large hand in Japan's success were computers and electronics, semiconductors and components. However, MITI's subsidies to those industries were minuscule compared with the overall research and development requirement of the companies involved. All the OECD, GATT and World bank reports show that Japanese subsidies to the electronics industry were lower than those for the electronics industries in Europe and the United States, where such subsidies have often been disguised in Pentagon or NASA budgets.

There are many reasons for the failure of interventionist policies. Far too often, decisions on whether to invest money are made for political rather than for commercial reasons. A classic example is the British steel industry since the war. In the early 1960s, a private sector steel company was told that it would be given a licence to build a plant in Wales only if it built part of the plant at Ravenscraig in Scotland.

Too often, when Government subsidies are about, it is the most powerful lobbyist—not the industries that really need the money—who gets the largest slice of the cake. Too often, the industries that are promoted by politicians are simply unsustainable for the underlying fundamentals of the economy. Quite often, they are simply too advanced.

I am thinking, for instance, of the attempt by the European Community to foster a semiconductor industry. So far, it has been an abject failure. It has swallowed vast sums of money, yet the European semiconductor industry, in international terms, is something of a joke. Too often, interventionism leads to the creation of national champions. They often have semi-monopolistic positions in their home markets, and the result is to divide up the overall market, leading to a plethora of national companies, very few of which are strong global competitors.

This, surely, is the story of intervention in Europe as a whole. Consider the electronics sector or even the car industry in Europe. Over the years, almost every European Government have played the game of subsidising, aiding and protecting their national car industries. National car industries, national steel industries and national electronics industries in Europe have fairly strong positions in their home markets, yet Europe as a whole has very few international players.

Above all, intervention and subsidies almost always lead to misallocated investment and wasted resources—resources that could better be employed elsewhere in the economy. Consider, for example, the huge sums of money and the huge amounts of skilled manpower that were invested in Britain's nuclear power programme in the 1950s and 1960s in an attempt to build an indigenous nuclear power capacity to rival that of the Americans. At the time, everyone knew that it would be cheaper to buy American technology. One must ask how much more good the vast resources and the investment in highly skilled manpower that went into that project could have done if market forces had directed them elsewhere in the economy.

Those are the reasons for the failure of interventionist policies. I urge hon. Members who may be inclined to point mistakenly to the supposed successes of interventionist policies in Japan to point, instead, to the failures of interventionism elsewhere. When I say that, I am not referring just to the eastern bloc. A sorry array of developing countries thought that the way to industrial and economic success was to have a centrally planned and controlled economy, with politicians, rather than business men, making the decisions. All those countries are now paying the price.

Consider the disastrous state of the Brazilian and Indian economies. Consider the way in which Brazil and India have tried to build indigenous computer companies, to develop space programmes and to engage in other types of nonsense. In those cases, the failure of interventionism is very stark. Having politicians make decisions that business men should be making leads to complete misallocation of resources, and that harms the overall economy.

Mr. Keith Mans (Wyre)

Does my hon. Friend agree that Brazil is now taking our route—reducing interventionism and encouraging foreign investment with no strings attached?

Mr. Oppenheim

My hon. Friend is right. I am full of admiration for President Collor and what he is trying to do in terms of liberalising the Brazilian economy, tearing down trade barriers—Brazil was one of the most protectionist countries in the world—encouraging foreign investment and the internal economy and privatisation. I am also full of admiration for the way in which he is combining that with a strong environmental policy aimed at maintaining the Amazon rain forest and looking after the rights of the Indians. Truly, President Collor is a great man, but he is struggling with all the vested interests and all the heavy baggage of Brazil's industrial and economic history. Looking at Brazil's present position, I fear that his plan may fail, simply because the burden of the past is far too great. I wish him the best of luck, and I certainly hope that he will succeed.

My hon. Friend's intervention came at an opportune time. I was just about to say that, bearing in mind the almost indecent haste with which central planning is being abandoned all over the world—not just in the eastern bloc, but in countries such as Brazil and even, to an extent, India —the Opposition might finally have got the message and might have dropped their predilection for interventionist policies and industrial strategies. That is not to say that there are not lessons to be learnt from countries like Japan and Germany, which are sometimes wrongly held up as being interventionist paradises. There are lessons to be drawn from Japan and Germany. However, the contention that those countries have succeeded as a result of interventionist policies is simply wrong.

Certainly there is plenty that Governments can do to help their economies. For one thing, both Japan and Germany have excellent, although not expensive, education systems. Clearly, in this country we have much to do to gear our education system more closely to the needs of industry. That is something that the Government can do. On the surface, it appears that Labour have grasped how crucial to the economy is a successful edcucation system. However, their answer is simply to throw more money at education. That ignores the fact that the Japanese spend less per pupil than we do, yet their results are far better.

Mr. Robert B. Jones (Hertfordshire, West)

Does my hon. Friend agree that the education system in Germany reflects what we started to have—technical schools, grammar schools, and so on—and that that is precisely what Labour, when in power, have tried by every means to eradicate?

Mr. Oppenheim

My hon. Friend makes a very good point. Indeed, the parallel could be extended to Japan. Germany and Japan both have two-tier education systems and there is no in-built bias against vocational education such as one so often encounters in this country. In academic circles there is no snobbery regarding vocational education. There are, of course, other reasons for the success of German and Japanese education. One is the concentration on literacy in science and maths, and another is that children there work 42 to 50 per cent. longer hours than do children here. We can learn many lessons from their highly successful education systems.

The point that I was making is that throwing more money at education, in an attempt to gear it better to our economic system, is unlikely to succeed. That ignores the fact that the least successful education authorities—least successful in terms of results—are those that spend the most money. Incidentally, all those are Labour-controlled. I do not see how appointing peace studies inspectors, or keeping one quarter of total funds back for central administration, or packing school governing bodies with political supporters of the local council, all of whom have an innate hostility to industry, or having economics teachers who preach the supremacy of socialism, is the way to gear our education system to the needs of industry.

Another lesson that we can learn from the Japanese and the Germans is that public spending must rise in line with what the nation can afford, and that encouraging savings is a good way to bear down on over-consumption and inflation and, at the same time, help to provide a pool of capital for industry. Unfortunately, everything in Labour's policies—from the investment income surcharge to the encouragement of high-spending, low-performance, left-wing education authorities—demonstrates that they have not yet grasped this fundamental truth.

The Opposition spokesman claimed that his opposition to the privatisation of BTG was to a large extent based on the need to retain a Government-run research base in Britain. I contend—although I accept that this is not a very fashionable view—that lack of research is not our problem. It is worth remembering that Britain is still a net exporter of industrial technology licences. Japan and Germany, on the other hand, are still net importers of industrial technology licences. We need not so much to improve our research and development as to improve our production and marketing capabilities. The best research and development in the world does not do much good if one cannot produce the goods properly and get them to the market effectively.

Here again, we can learn lessons from the Japanese experience. It is worth remembering that in the early years of Japan's industrial development, the Japanese were major purchasers of industrial licences. That was often sneered at as being simply copying, but it helped the Japanese to develop extremely fast. It also allowed them to concentrate more of their resources on production and marketing. Of course, as Japan became more powerful as an economy in the 1960s and 1970s, it moved on from simply copying or reproducing western products to improving those products, and in the 1980s, as it became the leading economy, it started to innovate far more and to conduct far more of its own research.

The same happened in the United States. In the early phase of industrial development in the 19th century, it was sneered at by the British as being a mere copier, but the Americans, in turn, moved from being mere copiers to being improvers, and eventually became great innovators —and now, in their turn, they sneer at the Japanese as copiers.

The cycle of economic development for nations in terms of technology and research goes from copying to improving and then to innovating. It is natural for an economy at the top of the scale to innovate. For an economy such as Britain's, which is trying to grope its way back to some sort of industrial respectability after many decades of abject decline, it is important to spend more of its resources on improving manufacturing and marketing rather than on basic research, much of which, historically, has been exploited by other countries because our manufacturing production and marketing capabilities have not been as strong as they should have been, despite some major improvements in the past decade.

Far more important than a state-sponsored research body is to encourage industry to look further afield and be more prepared to buy in licences from abroad and be more open-minded about buying in technology from overseas. The "not made here" attitude that has characterised much of British industry since the war and led industry to be less than open-minded about foreign technology has done our industry a great deal of damage and shows that the need for a state-run research body is extremely dubious.

The Opposition spokesman said that he would not renationalise BTG if Labour came into office. If that is the case, why do the Opposition oppose its privatisation? I believe that this is part of a sorry charade of inconsistency by the Opposition. They have opposed every privatisation programme put before the House by the Government. Yet companies such as Amersham International, Rolls-Royce and British Airways have proved that they can be far more effective international competitors in the private sector.

Mr. Robert G. Hughes (Harrow, West)

Surely there is no mystery about why the Labour party is opposing this measure, as it has opposed every other privatisation measure. The reason was made clear in a statement by the hon. Member for Dagenham (Mr. Gould). On BBC's "On the Record" on 17 September 1989, he said that the Labour party is against all privatisations because they provide for the element of private profit-making. That has always been the basis of its position. Presumably the Labour party is against anyone making any profits out of anything.

Mr. Oppenheim

There seems to be a dichotomy in the Opposition's attitude. They are always telling us that our industry must do better and that they believe in manufacturing, but there is still an inbuilt bias in the attitude of many Opposition spokesmen—not all, since some of them have come on recently—against profit, which they equate with greed and crude materialism. It emanates from their view that human nature is perfectible and that anyone who moves away from their idea of the perfect society should be discouraged and kept down. They seem to believe that politicians and civil servants should make all the decisions.

The Labour party should look at successful economies such as Germany and Japan where there is no inbuilt hostility to money-making, business, commerce and profit. They do not have the outdated 19th-century attitudes that still permeate the British Labour party.

As I said, the Opposition have opposed every privatisation measure, but companies such as Amersham International, Ross-Royce and British Airways have proved that they can be more effective in the international marketplace when freed from the control of politicians and civil servants. None of those companies has asked to go back into state ownership. All over the world, countries are not nationalising their industries but privatising them. They are not increasing state intervention in industry, but reducing it. It is sad that the Opposition spokesman and Opposition Members in general have not yet learnt that fundamental lesson.

6.4 pm

Mr. Simon Hughes (Southwark and Bermondsey)

If I were an employee, perhaps an engineer, of the British Technology Group listening to the debate, I would think that there was a great philosophical political debate going on above the head of my organisation. The hon. Member for Amber Valley (Mr. Oppenheim) made some perfectly valid and pertinent points about comparison between us and Japan and Germany, and so on. However, we are not talking about just another public sector industry. We are not talking about the steel industry, the coal industry or a company such as Cable and Wireless which, as part of the manufacturing sector, happened to be in public ownership. We are talking about a unique institution which, to use the words available to every hon. Member in the first sentence of the note provided by the House of Commons research staff, is the world's leading technology transfer organisation.

BTG is one of the bodies created intentionally by the Government as an amalgamation of organisations in the public sector to do a specific job. BTG's job is to be a bridge between science, learning and invention and manufacturing, production and economic success. The argument about whether it should be in the public or private sector does no justice to the correct analysis of the role and function of BTG which is that it is there to provide a particular form of assistance so that the private sector can do its job properly. It is there so that science and invention can pass on, through a group of people with expertise, the ability to make us successful, whether we sell our licences to this country or abroad. Therefore, the great polemical debate is out of place.

I hold no brief for a general renationalisation or public ownership programme that may or may not be advanced by the Labour party at the next election. My hon. and learned Friend the Member for Montgomery (Mr. Carlile) and I, together with all our other colleagues, do not have a partisan public/private sector view. We do not have a dogmatic view about whether things are better in the public or private sector since this depends on all sorts of circumstances. We are not against the idea that the market place is usually the best way for corporate enterprise to succeed. However, we are talking today about a different and unique body. If we focus our attention on the nature of BTG, we can begin to address its concerns and the concerns of many others about its future if it takes the path that the Government have charted for it in the Bill.

The Minister prayed in aid the support for privatisation of the senior management of BTG against the wishes of the majority of its work force. The parallel that suggested itself to me was the recent example of the popularity among a small minority of people in certain sections of the health service for self-government of hospitals within the national health service, against the view of the majority of the work force who would rather the hospitals remained integrated as part of the local district health authority.

I understand that there may be a view within the management of BTG which says, "We think that we can go out into the big wide world and, because we are already profitable and successful, we can go on being more profitable and successful." However, there are other considerations which I hope that the Ministers will address. To be honest, I have not heard them adequately addressed yet. I was sad about the Minister for Corporate Affairs' speech. He is capable of making an intelligent and cerebral speech, but he made a party political knockabout speech, which belittled his intelligence and the importance of the issue.

The first matter—I shall be brief because this was dealt with by my hon. and learned Friend the Member for Montgomery and in exchanges across the Floor—is that the Government have not come clean about the advice that they have been given. It appears that the advice that they have been given internally is in favour of keeping BTG in the public sector.

It also appears from the partial consultative exercise with the universities, that they also do not want a privatised BTG in the form envisaged by the Government. The Under-Secretary quoted the majority view of the universities and the Committee of Vice-Chancellors and Principals. A majority of them wanted BTG to continue as a private foundation or trust—as a special body in which they conjointly had an interest and which would act as the technology arm to which their research activities could be linked. The universities did not argue for the wholesale divorce of BTG by letting it go off into the private sector sea to be bounced around and bought and sold by whoever came along under whatever conditions were imposed, let alone while we have not heard of those conditions because the Government have no idea about them.

Next, the hon. Member for Amber Valley considered whether we should tie up significant public funds in an organisation that could function equally well in the private sector. He knows—as does anybody else who has considered the issue—that we are not talking about large amounts of public sector funding or about the Government pouring enormous sums into this particular pit, let alone into a bottomless, non-profit-making pit which is a drain on the economy.

It is exactly the reverse. BTG's total income last year was £29.5 million. The operating profit after tax was just short of £7 million. Of course there is a drain if it must pay off a certain amount to the Government. It has to pay a significant amount and that may be an argument for changing that relationship. The £6 million which is siphoned off may be able to be put to better use, but that is not an argument for saying that it is a big drain when looked at as a whole or that it is a loss-making enterprise. It is not. It is successful and we are talking about relatively small amounts of money if we consider the public exchequer expenditure overall.

If we bear that in mind, the argument should not be whether to cast off BTG and let it go unprotected into the private sector or whether it stays where it is. We could properly debate alternative models for BTG. Certainly, my colleagues and I would not argue against that approach, although there are certain criteria that must be fulfilled before we would be happy about any new model.

The Government have commissioned a study, the conclusions of which they have not shared with us, so this is a debate in the dark. We conclude, therefore, that the reason that BTG is on the agenda is that it has been spotted as a remaining public sector enterprise about which the Government have a straightforward and dogmatic view. That is the only justification.

The right hon. Member for Morley and Leeds, South (Mr. Rees) is, coincidentally, a constituent of mine and a near neighbour of the BTG's headquarters at the Elephant. He has an interest in this debate and I shall be brief in order to allow him to catch your eye, Mr. Deputy Speaker. He asked one of the most pertinent questions: how do we know that the new regime will guarantee the three Is that he identified, of which I shall mention just two —the integrity, and independence of the enterprise that the BTG has been? We are worried that Britain will lose a resource which is currently so successful because it has the confidence of scientists and of inventors. Those people can go in confidence to BTG knowing that their ideas will be respected and not be at risk of being exploited or put into the private sector without the protection that they seek.

The danger of the loss of independence is that the supply of ideas and inventions will cease. That is obvious. If the new regime does not have the same integrity and if scientists and inventors do not believe in it as a body in the scientific and research technology world, they will not use it. They will not supply the ideas and inventions as they have in the past.

The BTG is trusted not to disclose ideas to other people. It is trusted not to pinch ideas and to pretend that they belong to someone else or to sell them at a profit. It is trusted to give a good technical assessment of an idea. It is trusted to ensure that the procedure for licensing the technology will work and will be carried out effectively.

As BTG is in the public sector, there can be no conflict of interest. In the private sector, there is bound to be such a conflict. Yesterday for the first time I visited, relatively privately, one of the private hospitals that have sprung up in my constituency. It is opposite Guy's hospital. It is important to see what is happening. The private sector must have a conflict of interest about where it takes its patients from or what it does to maximise its profits, because it is a profit-making enterprise. If a body is in the private sector and has a profit-making motive, there will be conflicts of interest—whether to maximise profits or to maximise investment and research, and we risk losing the technological advantages that BTG has had.

Will people have the same confidence in a profit-orientated private sector company that they currently have in a commercial but non-profit orientated company which is in the public sector and seen to be accountable to Parliament? Clearly one must at least be sceptical, and the probable answer is no.

Another concern is that there is a special relationship between BTG and the science funding organisations, as mentioned by the hon. Member for Bedfordshire, North (Sir T. Skeet). The logic of his intervention would be to privatise the research councils. There would be no merit in keeping any agency close to Government to ensure that activities of scientific research and of technological importance were carried out. I heard the rather unusual view of the hon. Member for Amber Valley that Britain should reduce the amount of its research, not increase it.

Mr. Oppenheim


Mr. Hughes

I listened carefully. He argued that we should concentrate on manufacturing and production rather than on funding research which is then used abroad. I am not against concentrating on manufacturing and production, in which we have been weak, but I dissent strongly from the view that we can afford to reduce the amount of research carried out in Britain, let alone non-private-sector-led research.

One of the greatest problems that the scientific research community continually bemoans is the fact that scientific research in Britain is too demand led by the private sector and that there is too little blue sky research. Pure research is now at a premium in terms of funding. We risk creating the same problem in the context of technology that we already have in purely scientific research. This is a problem which we should address now rather than bemoan later.

Another of the merits of an organisation such as BTG has been that it has been a long-term institution. It has supported people for two, four, six, eight, or 10 years to develop their ideas to fruition. Sometimes a good idea can take eight or 10 years before it generates profits and may need experts working together to support it from its original concept to exploitation. In the private sector, the danger would be that long-term, difficult ventures would not be supported. The private sector would go for short-term profits. There would be no guarantee of long-termism. Additionally, all the factors that have been built up as a support—the additional education given to researchers in BTG, the benefit of a cross-relationship between people from different disciplines working together in a sort of technological hothouse—are at risk of being lost.

The real threat to BTG is that the Government would take a dogmatic view if the Bill were passed. Parliament would enable it to be sold. We would have no guarantee that we should retain close to the Government or to the public sector anybody at all to be accountable to Parliament and to carry on the work which, according to any record or assessment, has been extraordinarily successful. Why on earth are we running the risk of throwing away what has proved itself an eminently successful, complementary part of Britain's industrial, technological and scientific activity in the past 20 or 30 years?

There have been many failures in industrial terms, but BTG has not been one of them. It has been one of our successes and it has brought about many of our successes. It seems folly to throw away a proven success for a future that is, at best, extremely uncertain.

6.19 pm
Dr. Keith Hampson (Leeds, North-West)

I am in something of a dilemma. I appreciate the arguments put so effectively by many of my hon. Friends, and I apologise to a couple of them whose contributions I missed—especially my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), whose approach, I suspect, is similar to mine.

On the one hand, it seems to me to be eminent good sense to privatise BTG. We have heard from a number of hon. Members just how unnecessary many of the bureaucratic regulations are. It seems quite unnecessary, for example, that BTG should have to go to Ministers in respect of certain levels of investment and to have its appointments approved. Also unnecessary is the general involvement of Government officials in scrutinising BTG and so on. BTG should simply be getting on with making sound academic and commercial judgments.

On the other hand, Opposition Members—and, I suspect, my hon. Friend the Member for Bedfordshire, North—have made valid points about the national interest. Collectively, Britain has been under-investing in research—I stress the word "research". I fully accept the central point of my hon. Friend the Member for Amber Valley (Mr. Oppenheim) that, in many respects, there is no point in researching unless one can develop products from one's research. Nevertheless, the research itself is fundamental.

As the hon. Member for Southwark and Bermondsey (Mr. Hughes) pointed out, one must strike a balance between blue sky research and research that is directly industry-driven. That balance was skewed the wrong way, and the Government have rightly tried to swing it back to ensure that there is more industry-related research. There is a huge investment at stake, and in the past we were simply not using our talents as well as we should have been in the generation of products. We have an unrivalled Nobel-prize-winning record, yet many of the breakthroughs that we were achieving were being developed elsewhere—notably in Japan.

The Government have established various means of getting the higher education institutions and research establishments to relate more closely to industry and to discover what industry wants. The LINK initiative immediately springs to mind. We have also encouraged universities to develop science parks. Moreover, as I said in an earlier intervention, most universities now have their own company structure through which to try to exploit their research efforts and patents and that has been very valuable. But we cannot swing the balance wholly in favour of near-market research. There is still a vital need for blue sky research—research driven by the exigencies of the research programme and the ideas of those pursuing it which, throughout our history, has thrown up breakthroughs that are directly relevant to product development that no one initially foresaw.

We have under-invested in relation to our major competitors—notably the Japanese and Americans. A high percentage of our research investment is geared to the military—a consideration that the Japanese do not have. In large measure because of the short-termism of the City's outlook, British industry has shown an unwillingness to invest in its own plant and research facilities, just as it under-invests in training. Since the war, we have had a history of economic cycles and, in periods of downturn, when management rightly have to cut their overheads, the two first victims tend to be training and research.

As a result, whereas we have remained fairly static in terms of civil research investment, our competitors have steadily moved ahead. One can look for figures that approximate our research effort to those of our competitors and compare percentages of GDP, but even in those terms the gap is widening. Our economy has not done terribly well; percentages of GDP hide the real truth —that, in absolute terms, the amount of cash that we invest is much smaller than that invested by Japan, the United States and even Germany.

That problem must somehow be addressed. The Japanese and the Americans are trying to establish increased collaboration between the academic, higher education and research worlds and companies. The promotion of such collaboration was precisely the role conceived for BTG—or its predecessor body—which was to act as a sort of academic broker. When the group was first launched—at a time when there was a shortage of all the other initiatives to which I have referred—it was the only body that was pretty close to industry and knew some of the directions in which industrialists wished to develop products. The group could scour the higher education markets to find out where research was being done and then establish the extent to which potential development from it was possible.

Most of our major competitors do that in one way or another. The Japanese economy is driven by huge corporations which are ruthlessly competitive, even within the electronics and car industries. Nevertheless, when the Select Committee on which I have the pleasure to serve went to Japan to look at the information technology industry, we found that, in all sorts of different ways—some direct and some indirect—the Japanese Ministry of International Trade and Industry encouraged pre-competitive research effort and collaboration. In the light of that, the United States has had to encourage its companies to engage in pre-competitive research collaboration.

The decision to privatise BTG does not mean that there is not a need for Government, industry and research establishments to work together under partnership arrangements that enable them to make the best use of the limited investment available. On the other hand, Opposition Members are to prone to confuse mission and ownership. I remember vividly our arguments about the polytechnics. For more than a dozen years, I argued that polytechnics should be removed from local authority control and made part of our national investment in higher education. We heard the parrot cry from Opposition Members that the distinct mission of the polytechnics was to relate closely to their local communities and to serve the requirements of local commerce and industry. Opposition Members said that the polytechnics should be owned by the local community—in other words, the council.

That is nonsense and has been shown to be nonsense. Universities, which were not owned by councils, engaged in distinctive local community activities and served local industry. Leeds university is an example. Moreover, since the polytechnics have been removed from councils' control, they have continued to be geared primarily to the local community. There is no reason at all why BTG should not continue to be the academic broker that it has always been. The academic community has trusted BTG with its ideas in the past. Why should it not continue to do so? It is conceivable that one of the options that the Government will consider is a management buy-out. If that happens, BTG will have the same people, and largely the same approach, and it should command the same trust.

The brokerage role is very important, but it could be even more important. I would expect the BTG in the private sector not just to tap the brilliance of our own research effort but to open itself to a wider range of partnerships, enabling it to tap into research elsewhere in the world.

I do not know whether hon. Members mentioned the two notable examples during my absence from the Chamber. Because the BTG is a state corporation, it was prohibited from having access to French research endeavours. The French Government did not want the British Government to get their hands on projects that they were funding. As we all know, there was an attempt to establish a joint venture agreement with a Spanish company to tap in to research there. That was exactly what should have been done. British industry should have access to the research effort worldwide. The Spanish Cabinet became involved in the negotiations, and the whole thing fell flat.

There are perfectly sound reasons why the brokerage role could be even greater and more successful for Great Britain Ltd. if BTG were privatised, provided that it is not sacrificed on the anvil of total free market forces and, as soon as it is privatised, a large predator does not come along with the narrow, short-termist thinking which prevails so often in the City. It could buy it up and then either wipe it out of existence or divert it into some other international conglomerate's interest. That predator could be a Japanese bank. It has already been said that BTG should not become locked into a particular part of its activities. For example, the group has a wide range of connections and partnership arrangements with the pharmaceutical industry. Clearly it would be wrong for one company to be allowed to buy up the group.

I finish with this plea. We must examine the options for the privatisation format—a trade sale, a management buy-out, or a consortium, which was mentioned earlier. I should like to know exactly what a consortium would entail. I foresee that the best solution would be to put the group in the private sector, with strict guarantees for all academics who have patents with it already, so that the present arrangements are not at risk.

There should be guarantees that the present relationship, partnership and trust with the academic world will remain, so that exploitation and transfer of technology can continue. We could also consider a Government golden share, at least for a short time, so that the trust can be maintained and people abroad can see that the group is not vulnerable to immediate takeover by predators. French and German companies, for example, or the German Government could then believe that we had a respected body which was not Government-owned but was Government-protected. Companies or Governments would then be more ready to participate in collaborative efforts on research initiatives. If we can establish a framework which gives those guarantees, the university world, the industrial world and Britain as a whole will benefit.

6.32 pm
Dr. Lewis Moonie (Kirkcaldy)

I have listened with great interest to the speeches of Opposition Members this afternoon. The hon. and learned Member for Montgomery (Mr. Carlile), the hon. Member for Southwark and Bermondsey (Mr. Hughes) and my hon. Friend the Member for Glasgow, Central (Mr. Watson) made thoughtful speeches, which added to the opening remarks of my hon. Friend the Member for Dunfermline, East (Mr. Brown) many questions which the Government must answer. I shall pass mercifully over most of the speeches made from the Conservative Benches. Words such as "banal" flitted through my mind as I listened to them, but perhaps it would be more merciful not to allocate the term to any individual.

Yesterday I read an interesting snippet in one of the newspapers. It gave a quote from a Conservative Member of the European Parliament, Lord O'Hagan. He referred to "Calibans of the intellect" on the right wing of his party. Until I heard the Minister's speech today, I wondered exactly what Lord O'Hagan had in mind, but it is all much clearer now.

The Government have presented a pretty thin case for privatisation. We can see why the Secretary of State conveniently chose not to introduce the Bill, but to absent himself from the premises. Clearly, one debate this month with my hon. Friend the Member for Dunfermline, East was enough for him.

Instead of using the generous time available to him to present a coherent case, the Minister for Corporate Affairs spent his time largely on childish abuse. In doing so, he gained no respect for his superficial and flippant attitude to a serious issue.

As today's debate draws to a close, it is worth taking a few moments to reflect on the statutory function of the British Technology Group, as laid down in the Development of Inventions Act 1967. They are:

  1. "(a) securing, where the public interest so requires, the development or exploitation of inventions resulting from public research…
  2. (b) acquiring, holding, disposing of and granting rights (whether gratuitously or for consideration) in connection with inventions resulting from public research…
  3. (c) promoting and assisting, where the public interest so requires, research for satisfying specific practical requirements brought to the knowledge of the Corporation, where they are of opinion that the research is likely to lead to an invention; and
  4. (d) assisting, where the public interest so requires, the continuation of research where it appears to the Corporation that the research has resulted in any discovery such that the continuation may lead to inventions of practical importance."
Those four points outline the importance of the national interest in the debate today, an importance which was not properly touched on by the Government. Assuming that those remain the key objectives of the British Technology Group, it is surely up to Ministers to show why those objectives would be better served in the private sector and how they propose to safeguard them. The comments made so far have sadly been of little help.

For example, in the interview with The Observer to which my hon. Friend referred, the Secretary of State said: The bureaucratic constraints which inevitably impose themselves on statutory bodies are preventing BTG from achieving its full potential. The Government's objectives are to ensure that more, and stronger links are forged between industry and science. What bureaucratic constraints cannot be removed? How will privatisation of BTG strengthen links between industry and science?

Sadly, the substitution of dogmatic assertion for clear argument is all too typical of Ministers today. That is why they have failed to convince anyone of the necessity for or the validity of privatisation. They have failed to convince the vast majority of the staff of BTG. They have failed to convince inventors, whose patents are handled by BTG. They have failed to convince eminent scientists working in research. They have failed to convince financial observers. I refer the Minister for Corporate Affairs to comments made when privatisation was first mooted two years ago to back up the assertion that privatisation was necessary. They have certainly failed to convince, and in this instance also failed to consult, the vice-chancellors and principals of the universities.

The Government have even failed to convince their own advisers. Despite their reticence, we know that Ministers were advised in 1988 that BTG would be better left in the public sector. That is why they have refused to publish any part of the report. It was not because of any issue of commercial sensitivity or anything else: it was merely that the conclusions of the report are inconvenient to Ministers. How, otherwise, can it be right to privatise now, when venture capital is scarce, rather than two years ago, when it was still plentiful?

It is not as if the alternative of a private company has not been tried before by the Government. In the mid-1980s, the then Secretary of State for Defence, the right hon. Member for Henley (Mr. Heseltine), impatient with what he regarded as the inefficiency of BTG in the public sector, set up Defence Technology Enterprises to capitalise on innovatory ideas in his field. The money was provided, somewhat reluctantly, partly by BTG and partly by private institutions. The company came back to the funders for more money a year later. It came back again a year after that. By that time, BTG had had enough and said, "No thanks, we are not putting up any more money."

Two years after it had been set up, Defence Technology Enterprises folded, unable to cope with the twin problems of under-capitalisation and the demand from City investors for an immediate return on their money. Is that what the Government have in mind today for the British Technology Group?

I wish briefly to recap on the reasons why we oppose the sale of BTG. We do not believe that the traditional arguments which the Government advance in favour of privatisation hold in this case. There will be no extension of share ownership. The shares are worth only about £35 million, assuming that the Government abstract the £20 million-worth of working capital which BTG must retain in order to function. I can hardly see the Government selling that off. Little revenue will accrue to the Treasury. The costs of the sale are already substantial and are likely to go up still further. Opportunities for competition after privatisation are likely to decrease rather than increase. There is not the slightest justification for the sale on grounds of efficiency, because BTG is already highly profitable in the public sector.

It is in the national interest to have a public sector body to take responsibility for developing ideas from publicly financed universities and polytechnics. It has a crucial role, as it allows a long-term view of projects to be taken. The sale of BTG represents the Government's abandonment of one of the few examples of long-term thinking within their Administration—BTG will be abandoned to a market that acts as though it is unaware of the meaning of that phrase.

BTG owns a stock of 8,500 patents, and the cost of renaming them will be enormous—again, a waste of money. It regularly takes legal action against people who infringe its patents, but that may not necessarily be true of a private company that is constrained by the demands of its shareholders for a return on their investment.

Perhaps the most important reason for opposing privatisation now is the one that made the Government refrain from privatising two years ago—the many conflicts of interest and problems that will beset the Government when they try to sell the company. Those problems were highlighted in the report to the Government by their advisers. I am certain that no sensible person would be in favour of a single large company being given the go-ahead to buy BTG, although some might be attracted by that idea. There is nothing in the Bill to suggest that the Government have found a way out of their dilemma.

I have listened in vain for the slightest logical justification for the proposed privatisation of BTG. That absence has led me to the inescapable conclusion that, once again, dogma has triumphed over reason, prejudice over good sense.

It is no accident that BTG has flourished in the public sector. The translation of new ideas into successful products and techniques is a long, hard process beset by disappointment and frustration. That task needs patience and the ability to see beyond the next quarter's figures or the next year's dividend.

A consideration of the range of products and inventions with which BTG is now presently associated gives one some idea of the hard task undertaken by it. In science, it is considering assays of blood constituents and the production of monoclonal antibodies. In materials technology, one of the key areas of development today, it is considering the production of high-performance plastic fibres. It is also involved with the development of advanced semiconductors. Its pharmaceutical work includes the development of anti-cancer drugs, various pain killers and the therapeutic use of monoclonal antibodies. BTG is also responsible for a wide range of potentially beneficial products in engineering and electronics.

A long-term approach is sadly lacking in most sectors of British industry. Perhaps I have a biased view, as I worked for several years for the pharmaceutical industry, which is the best exponent of such an approach.

Sir Trevor Skeet

Glaxo, Smith and Nephew, and Beecham are in the private sector. If such companies can undertake such long-term work—the hon. Gentleman has already acknowledged that—why not put BTG in the private sector as well?

Dr. Moonie

Obviously Conservative Members have no idea what early technology transfer is about, so it is difficult to convince them of the difficulties of operating in such work. BTG undertakes much of its work before there is any evidence that a specific product is likely to be successful. It takes out patents in no secure knowledge that there will be a return on them. It must look 10 or 15 years ahead.

The pharmaceutical industry may undertake such long-term work, but pharmaceuticals represent just one sector of BTG work, which covers every area of invention. I do not want to repeat myself, but I have already cited the number of sectors in which BTG is involved. I do not believe that researchers or other companies would be happy if a company owned by another pharmaceutical firm, however reputable, took over their ideas and developed them. Those other companies would have taken leave of their senses if they welcomed such a change; that is why so many of them are opposed to BTG going into the private sector. It should remain where it has carried out its job efficiently and well for many years—it should remain in the public sector.

By privatising BTG, the Government have confirmed that they are incapable of seeing the value to our nation of such an asset. I hope that, on reflection, they will think again. The privatisation of BTG is being carried out merely for privatisation's sake, despite the damage that that will cause to British industry, science and technology. That is why we shall oppose the Bill.

6.45 pm
The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh)

Let me deal with the essence of the debate: should BTG be privatised? Should it operate fully within the stimulus and realities of market conditions, or should it be used as an instrument of state intervention?

The hon. Member for Kirkcaldy (Dr. Moonie) should know that Britain's total research and development effort amounts to £6.9 billion spent by industry and £4.5 billion spent by the Government. A total of £11.4 billion is spent on research and development. Last year, the research spend of polytechnics and colleges amounted to £1.5 billion, while BTG's spend on projects and patents was a mere £11 million. The House should set the debate in proper context—BTG spends £11 million, while the value of total research effort in this country is equivalent to more than £11 billion. Those figures suggest that BTG's contribution amounts to less than one tenth of 1 per cent. of total United Kingdom spend on research and development and less then 1 per cent. of the moneys available to its traditional inventive resources—

Mr. Watson

Why the fuss to privatise BTG?

Mr. Leigh

It is the Opposition, not us, who are making the fuss.

BTG has a staff of just 188 and a turnover of £30 million a year and by most estimates it would rank as a small to medium-sized enterprise.

In 1985 BTG lost the right of first refusal of public sector inventions and with it inventors lost what they considered to be an implied right that BTG should exploit their inventions. Now the whole purpose of BTG is to turn inventions into profit. It is a commercial company.

The hon. and learned Member for Montgomery (Mr. Carlile) got it right—BTG is primarily a patent-creating mechanism to defend ideas in the increasingly predatory international marketplace. BTG chooses inventions and exploits the science base for one purpose only—profit. BTG, having chosen and patented a product, negotiates the sale and licences it with revenue-sharing agreements.

The hon. and learned Member for Montgomery made a characteristically frank and robust speech, but he should know that, by its very nature, the work of BTG is already commercial. It is already a commercial, profit-making enterprise, and it therefore sits uneasily and unnaturally within the statutory framework. The case for privatisation is as simple as that.

The hon. and learned Gentleman said that he generally favours privatisations, but the hon. Member for Southwark and Bermondsey (Mr. Hughes) was less sure. The case is simple—BTG is a profit-making, commercial operation, and there is simply no reason why it should not be privatised.

BTG's operating profits have averaged more than £4 million a year, rising to £6.8 million in 1989–90. It has been self-financing for more than 20 years and it is involved in 1,600 inventions, 8,500 patents and nearly 500 licences. BTG is a strong, indeed an obvious, candidate for privatisation. It is not surprising that the management of BTG has been pressing for privatisation for some time.

The hon. Member for Dunfermline, East (Mr. Brown) asked a question of my hon. Friend the Minister which my hon. Friend was unable to answer at the time. It related to an alleged publicity campaign concerned with privatisation. It is not surprising that my hon. Friend could not reply. First, BTG has its own public relations budget and Ministers in the Department of Trade and Industry are not consulted; secondly, it is merely a proposal from a public relations company to BTG and BTG has not yet adopted the campaign. So how my hon. Friend the Minister of State could be expected to know about it, I do not know. The hon. Member for Dunfermline, East made great play of that. What I have said is surely the end of it.

I can tell the hon. Member for Glasgow, Central (Mr. Watson) that management look forward to being freed from restrictions on its borrowing powers and obligations to submit approvals to the DTI. Also relevant is the inappropriateness of the domestic statutory duties laid on BTG decades ago and the direction which BTG wants to take on the international stage. Already BTG derives some 70 per cent. of its licence income from outside the United Kingdom, mainly from Japan, the United States and the European Community.

I welcome my right hon. Friend the Secretary of State back to the Chamber. He has just arrived back from India, where he was opening the largest ever trade fair there. BTG was exhibiting at that fair. No doubt the whole House was unimpressed by the carping remarks by some Opposition Members about my right hon. Friend.

Points about BTG's international involvement were made forcefully by my hon. Friends the Members for Bedfordshire, North (Sir T. Skeet) and for Amber Valley (Mr. Oppenheim). My hon. Friend the Member for Bedfordshire, North made a very pertinent point about BTG being unable to exploit a patent in Turkey.

Sir Colin Barker, BTG's chairman, heads a successful international profit-making organisation. He looks forward to BTG entering private life as an independent and integral organisation. I assure my hon. Friends the Members for Bedfordshire, North and for Leeds, North-West (Dr. Hampson) that we believe that our objective of privatising so as to maximise the net returns to the Exchequer, consistent with a good prospect of BTG's technology transfer activities continuing, is the correct way forward.

That objective provides the flexibility to accommodate the privatisation options of public flotation, private placing, trade sale, or management buy-out, and the involvement of any parties with potential interests, such as companies, universities, institutions and BTG's staff. It recognises the reality that the future of a privatised BTG must essentially be a matter for its new owner, management and staff.

I was delighted to read the comments of the hon. Member for Kirkcaldy in The Independent yesterday that a group of British universities was interested in taking over BTG, backed by money from investment funds. How pragmatic of him to enhance and advance the case of capitalism so publicly.

Dr. Moonie


Mr. Leigh

If the hon. Gentleman wishes to retract what was in The Independent, I shall give him the opportunity to do so.

Dr. Moonie

One possibility is that a group of universities, backed by money, might take it over. I do not at present have any knowledge of such a group. It would be wrong to leave the Minister with the impression that I do.

Mr. Leigh

Of course, it would be wrong for anyone to expect the Opposition spokesman to look at the matter with an open mind. One might think that there was nothing intrinsically wrong with the proposal that the hon. Gentleman was advocating in The Independent. Clearly, his knuckles have been rapped and he is beating a hasty retreat.

Privatisation of BTG would not in any way weaken the Government's policy on innovation. Although BTG makes a significant contribution to the United Kingdom's innovative performance, it has rightly not been given a special role in the Government's innovation policy support measures. For example, although BTG's prime focus is as an exploiter of the science base, it has no special role—I use those words carefully—in the LINK scheme for collaborative research between companies and higher education institutions. Nor has BTG any special role in my Department's support for technology transfer through regional technology centres and overseas missions. The absence of such a role for BTG is quite deliberate. I do not believe, and I am sure that the chairman of BTG would agree with me, that an organisation successfully operating within the commercial disciplines of BTG should also act as an instrument of Government support programmes.

The Opposition ask why there is a need to privatise BTG; cannot the same objective be achieved, they say, by removing the present statutory constraints? I am sure that, when hon. Members think carefully, they will agree that bodies in the public sector must have monitoring arrangements. Loosening constraints will not get around that requirement. It is not for Government to second-guess the commercial decisions of companies, which must subject themselves to the discipline of the marketplace.

The Opposition view is that these proposals are tantamount to tampering with BTG's business. They say that BTG fills a gap where the United Kingdom is weak—turning ideas into products. I stress that we are not tampering with BTG's business of turning ideas into marketable products. BTG's management believes that privatisation will afford it the opportunity to compete more effectively without bureaucratic constraints.

It has been suggested that privatisation will not bring new capital to BTG. I disagree. The United Kingdom has the advantage of being one of the largest and most sophisticated capital markets in the world. There has never been a problem in attracting capital for worthwhile investments.

It has also been suggested today that a privatised BTG would no longer be obliged to act in the public interest. Where the public interest coincides with commercial interest, there should be no problem. However, where the two diverge or are in conflict, it will be up to the management to act in the best commercial interests of the company.

It has been suggested that BTG's business is so inherently long-term and risky that it is impossible to pick winners, and that only a public sector organisation can carry out this function; but many private sector organisations look to the long term—for example, in the oil and pharmaceuticals industries, as my hon. Friend the Member for Amber Valley said—and any prospective purchaser of BTG will also be looking to the long term.

We have heard very little in the debate of the Labour party's plans for BTG. At the beginning of my few words, I said that we must set BTG in perspective, remembering that it spends about £11 million a year out of a total research effort of over £11 billion. From what we understand from its policy document, "Looking to the Future", it seems that the Labour party would give an enhanced role to BTG. That smacks of the old-fashioned dirigiste interventionist approach.

We did not hear from the hon. Member from Dunfermline, East one word about the old National Enterprise Board. The Bill abolishes the NEB. My hon. Friends may be surprised to learn that the NEB is still alive. It has been in long hibernation, no doubt awaiting the arrival of the hon. Member for Dunfermline, East to awaken it. He will not. The Bill kills it off. The powers of the NEB which remain on the statute book are frightening. It can borrow up to £750 million, it can form companies, it can buy shares and it can make acquisitions—[Interruption.] How significant that the Opposition now laugh about the NEB; how significant that they are no longer prepared to defend it. It is not surprising, given its history. Have they forgotten Chrysler, with £160 million poured into that company only for it to go bust within a couple of years? Have they forgotten Nexos, mentioned by my hon. Friend the Minister of State, which went into liquidation owing the taxpayer about £32 million? That is the history of the NEB.

The Opposition are not prepared to accept the resuscitation of the NEB, but they have various sons of NEB in view. They have the BTE, the NIB, the RDA and the LIC. These are only initials to my hon. Friends, but in the unlikely event of a Labour Government, the names would become all too familiar—a national investment bank and regional development associations. They are the same policies, repackaged and revamped. The Bill will abolish the NEB, and I commend it to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 275, Noes 198.

Division No. 63] [7 pm
Adley, Robert Bennett, Nicholas (Pembroke)
Aitken, Jonathan Benyon, W.
Alexander, Richard Bevan, David Gilroy
Alison, Rt Hon Michael Biffen, Rt Hon John
Allason, Rupert Blackburn, Dr John G.
Amess, David Blaker, Rt Hon Sir Peter
Arbuthnot, James Bonsor, Sir Nicholas
Arnold, Sir Thomas Boscawen, Hon Robert
Ashby, David Boswell, Tim
Aspinwall, Jack Bottomley, Peter
Atkins, Robert Bottomley, Mrs Virginia
Atkinson, David Bowden, A (Brighton K'pto'n)
Baker, Nicholas (Dorset N) Bowden, Gerald (Dulwich)
Baldry, Tony Bowis, John
Barnes, Mrs Rosie (Greenwich) Braine, Rt Hon Sir Bernard
Batiste, Spencer Brazier, Julian
Bellingham, Henry Bright, Graham
Bendall, Vivian Bruce, Ian (Dorset South)
Buchanan-Smith, Rt Hon Alick Hill, James
Buck, Sir Antony Hind, Kenneth
Burns, Simon Hogg, Hon Douglas (Gr'th'm)
Butler, Chris Hordern, Sir Peter
Butterfill, John Howard, Rt Hon Michael
Carlisle, John, (Luton N) Howarth, G. (Cannock & B'wd)
Carlisle, Kenneth (Lincoln) Howell, Rt Hon David (G'dford)
Carrington, Matthew Howell, Ralph (North Norfolk)
Carttiss, Michael Hughes, Robert G. (Harrow W)
Cash, William Hunt, David (Wirral W)
Chapman, Sydney Hunt, Sir John (Ravensbourne)
Chope, Christopher Hunter, Andrew
Churchill, Mr Hurd, Rt Hon Douglas
Clark, Rt Hon Alan (Plymouth) Irvine, Michael
Clark, Dr Michael (Rochford) Jack, Michael
Clark, Rt Hon Sir William Janman, Tim
Colvin, Michael Jessel, Toby
Conway, Derek Johnson Smith, Sir Geoffrey
Coombs, Anthony (Wyre F'rest) Jones, Gwilym (Cardiff N)
Coombs, Simon (Swindon) Jones, Robert B (Herts W)
Couchman, James Jopling, Rt Hon Michael
Cran, James Kellett-Bowman, Dame Elaine
Critchley, Julian Key, Robert
Currie, Mrs Edwina King, Roger (B'ham N'thfield)
Curry, David Knapman, Roger
Davies, Q. (Stamf'd & Spald'g) Knight, Greg (Derby North)
Day, Stephen Knight, Dame Jill (Edgbaston)
Devlin, Tim Knowles, Michael
Dicks, Terry Knox, David
Dorrell, Stephen Lang, Rt Hon Ian
Douglas-Hamilton, Lord James Lawrence, Ivan
Dover, Den Lee, John (Pendle)
Dunn, Bob Leigh, Edward (Gainsbor'gh)
Durant, Sir Anthony Lennox-Boyd, Hon Mark
Eggar, Tim Lester, Jim (Broxtowe)
Evans, David (Welwyn Hatf'd) Lilley, Peter
Evennett, David Lloyd, Sir Ian (Havant)
Favell, Tony Lloyd, Peter (Fareham)
Fenner, Dame Peggy Lord, Michael
Field, Barry (Isle of Wight) Luce, Rt Hon Sir Richard
Finsberg, Sir Geoffrey Lyell, Rt Hon Sir Nicholas
Fishburn, John Dudley MacGregor, Rt Hon John
Fookes, Dame Janet MacKay, Andrew (E Berkshire)
Forman, Nigel McLoughlin, Patrick
Forsyth, Michael (Stirling) McNair-Wilson, Sir Michael
Fowler, Rt Hon Sir Norman McNair-Wilson, Sir Patrick
Fox, Sir Marcus Madel, David
Franks, Cecil Malins, Humfrey
French, Douglas Mans, Keith
Fry, Peter Maples, John
Gale, Roger Marland, Paul
Gardiner, Sir George Marlow, Tony
Garel-Jones, Tristan Marshall, John (Hendon S)
Gill, Christopher Marshall, Sir Michael (Arundel)
Gilmour, Rt Hon Sir Ian Martin, David (Portsmouth S)
Glyn, Dr Sir Alan Maxwell-Hyslop, Robin
Goodhart, Sir Philip Mayhew, Rt Hon Sir Patrick
Goodlad, Alastair Mellor, Rt Hon David
Gorman, Mrs Teresa Meyer, Sir Anthony
Grant, Sir Anthony (CambsSW) Miller, Sir Hal
Greenway, Harry (Ealing N) Miscampbell, Norman
Greenway, John (Ryedale) Mitchell, Andrew (Gedling)
Gregory, Conal Mitchell, Sir David
Griffiths, Sir Eldon (Bury St E') Moate, Roger
Griffiths, Peter (Portsmouth N) Monro, Sir Hector
Grist, Ian Montgomery, Sir Fergus
Ground, Patrick Moore, Rt Hon John
Grylls, Michael Morrison, Sir Charles
Hague, William Moss, Malcolm
Hamilton, Hon Archie (Epsom) Neale, Sir Gerrard
Hamilton, Neil (Tatton) Neubert, Sir Michael
Hampson, Dr Keith Newton, Rt Hon Tony
Hannam, John Nicholls, Patrick
Hargreaves, A. (B'ham H'll Gr') Nicholson, David (Taunton)
Harris, David Norris, Steve
Haselhurst, Alan Onslow, Rt Hon Cranley
Hayhoe, Rt Hon Sir Barney Oppenheim, Phillip
Hayward, Robert Page, Richard
Heathcoat-Amory, David Patnick, Irvine
Hicks, Robert (Cornwall SE) Pawsey, James
Peacock, Mrs Elizabeth Sumberg, David
Porter, David (Waveney) Summerson, Hugo
Portillo, Michael Tapsell, Sir Peter
Powell, William (Corby) Taylor, Ian (Esher)
Raffan, Keith Taylor, John M (Solihull)
Raison, Rt Hon Sir Timothy Taylor, Teddy (S'end E)
Redwood, John Tebbit, Rt Hon Norman
Rhodes James, Robert Temple-Morris, Peter
Riddick, Graham Thompson, D. (Calder Valley)
Ridley, Rt Hon Nicholas Thompson, Patrick (Norwich N)
Ridsdale, Sir Julian Thorne, Neil
Rifkind, Rt Hon Malcolm Thornton, Malcolm
Roberts, Sir Wyn (Conwy) Tracey, Richard
Roe, Mrs Marion Tredinnick, David
Rossi, Sir Hugh Trippier, David
Rost, Peter Twinn, Dr Ian
Rowe, Andrew Viggers, Peter
Rumbold, Rt Hon Mrs Angela Wakeham, Rt Hon John
Ryder, Rt Hon Richard Walden, George
Sackville, Hon Tom Walker, Bill (T'side North)
Scott, Rt Hon Nicholas Walker, Rt Hon P. (W'cester)
Shaw, David (Dover) Waller, Gary
Shaw, Sir Giles (Pudsey) Ward, John
Shaw, Sir Michael (Scarb') Warren, Kenneth
Shelton, Sir William Wells, Bowen
Shephard, Mrs G. (Norfolk SW) Whitney, Ray
Shepherd, Colin (Hereford) Widdecombe, Ann
Shepherd, Richard (Aldridge) Wilkinson, John
Sims, Roger Wilshire, David
Skeet, Sir Trevor Winterton, Mrs Ann
Smith, Sir Dudley (Warwick) Winterton, Nicholas
Speller, Tony Wolfson, Mark
Spicer, Sir Jim (Dorset W) Wood, Timothy
Spicer, Michael (S Worcs) Woodcock, Dr. Mike
Stanbrook, Ivor Yeo, Tim
Stanley, Rt Hon Sir John Young, Sir George (Acton)
Steen, Anthony Younger, Rt Hon George
Stevens, Lewis
Stewart, Allan (Eastwood) Tellers for the Ayes:
Stewart, Andy (Sherwood) Mr. Timothy Kirkhope and
Stewart, Rt Hon Ian (Herts N) Mr. David Davis.
Stokes, Sir John
Adams, Mrs. Irene (Paisley, N.) Cousins, Jim
Anderson, Donald Cox, Tom
Archer, Rt Hon Peter Crowther, Stan
Armstrong, Hilary Cryer, Bob
Ashley, Rt Hon Jack Cummings, John
Ashton, Joe Cunliffe, Lawrence
Barnes, Harry (Derbyshire NE) Cunningham, Dr John
Battle, John Dalyell, Tam
Beckett, Margaret Darling, Alistair
Benn, Rt Hon Tony Davies, Rt Hon Denzil (Llanelli)
Bennett, A. F. (D'nt'n & R'dish) Davies, Ron (Caerphilly)
Benton, Joseph Davis, Terry (B'ham Hodge H'I)
Bermingham, Gerald Dewar, Donald
Bidwell, Sydney Dixon, Don
Blair, Tony Doran, Frank
Blunkett, David Dunnachie, Jimmy
Boateng, Paul Dunwoody, Hon Mrs Gwyneth
Boyes, Roland Eadie, Alexander
Bradley, Keith Eastham, Ken
Bray, Dr Jeremy Evans, John (St Helens N)
Brown, Gordon (D'mline E) Ewing, Harry (Falkirk E)
Brown, Nicholas (Newcastle E) Fatchett, Derek
Brown, Ron (Edinburgh Leith) Faulds, Andrew
Caborn, Richard Fearn, Ronald
Callaghan, Jim Field, Frank (Birkenhead)
Campbell, Menzies (Fife NE) Fields, Terry (L'pool B G'n)
Campbell, Ron (Blyth Valley) Flynn, Paul
Canavan, Dennis Foot, Rt Hon Michael
Carlile, Alex (Mont'g) Foster, Derek
Clarke, Tom (Monklands W) Foulkes, George
Clelland, David Fraser, John
Clwyd, Mrs Ann Fyfe, Maria
Cohen, Harry Galloway, George
Cook, Robin (Livingston) Garrett, Ted (Wallsend)
Corbett, Robin George, Bruce
Corbyn, Jeremy Gilbert, Rt Hon Dr John
Golding, Mrs Llin Morgan, Rhodri
Gordon, Mildred Morley, Elliot
Gould, Bryan Morris, Rt Hon A. (W'shawe)
Graham, Thomas Morris, Rt Hon J. (Aberavon)
Grant, Bernie (Tottenham) Mowlam, Marjorie
Griffiths, Nigel (Edinburgh S) Mullin, Chris
Hardy, Peter Murphy, Paul
Hattersley, Rt Hon Roy Nellist, Dave
Heal, Mrs Sylvia Oakes, Rt Hon Gordon
Healey, Rt Hon Denis O'Brien, William
Henderson, Doug O'Hara, Edward
Hinchliffe, David O'Neill, Martin
Hoey, Ms Kate (Vauxhall) Orme, Rt Hon Stanley
Howarth, George (Knowsley N) Parry, Robert
Howell, Rt Hon D. (S'heath) Patchett, Terry
Howells, Dr. Kim (Pontypridd) Pendry, Tom
Hoyle, Doug Pike, Peter L.
Hughes, John (Coventry NE) Powell, Ray (Ogmore)
Hughes, Robert (Aberdeen N) Prescott, John
Hughes, Roy (Newport E) Primarolo, Dawn
Hughes, Simon (Southwark) Quin, Ms Joyce
Illsley, Eric Randall, Stuart
Ingram, Adam Rees, Rt Hon Merlyn
Jones, Barry (Alyn & Deeside) Reid, Dr John
Jones, leuan (Ynys Môn) Richardson, Jo
Jones, Martyn (Clwyd S W) Robertson, George
Kaufman, Rt Hon Gerald Robinson, Geoffrey
Kinnock, Rt Hon Neil Rogers, Allan
Kirkwood, Archy Rooker, Jeff
Lambie, David Rooney, Terence
Leadbitter, Ted Ross, Ernie (Dundee W)
Lestor, Joan (Eccles) Rowlands, Ted
Lewis, Terry Ruddock, Joan
Litherland, Robert Salmond, Alex
Livingstone, Ken Sheerman, Barry
Livsey, Richard Shore, Rt Hon Peter
Lloyd, Tony (Stretford) Short, Clare
Lofthouse, Geoffrey Skinner, Dennis
Loyden, Eddie Smith, Andrew (Oxford E)
McAllion, John Smith, C. (Isl'ton & F'bury)
McCartney, Ian Smith, Rt Hon J. (Monk'ds E)
Macdonald, Calum A. Snape, Peter
McKay, Allen (Barnsley West) Soley, Clive
McKelvey, William Spearing, Nigel
McLeish, Henry Steinberg, Gerry
Maclennan, Robert Stott, Roger
McMaster, Gordon Strang, Gavin
McNamara, Kevin Thompson, Jack (Wansbeck)
McWilliam, John Turner, Dennis
Madden, Max Vaz, Keith
Mahon, Mrs Alice Walley, Joan
Marek, Dr John Wardell, Gareth (Gower)
Marshall, David (Shettleston) Wareing, Robert N.
Marshall, Jim (Leicester S) Watson, Mike (Glasgow, C)
Martin, Michael J. (Springburn) Williams, Rt Hon Alan
Martlew, Eric Williams, Alan W. (Carm'then)
Maxton, John Wilson, Brian
Meacher, Michael Winnick, David
Meale, Alan Wise, Mrs Audrey
Michael, Alun Worthington, Tony
Michie, Bill (Sheffield Heeley) Wray, Jimmy
Michie, Mrs Ray (Arg'l & Bute)
Mitchell, Austin (G't Grimsby) Tellers for the Noes:
Molyneaux, Rt Hon James Mr. Thomas McAvoy and
Moonie, Dr Lewis Mr. Frank Haynes.

Question accordingly agreed to.

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