HC Deb 21 October 1991 vol 196 cc739-46

Lords amendment considered.

Lords amendment: After clause 6, insert the following new clause—Offers for sale of securities— Where an offer for sale of any securities of the successor company is to be made by or on behalf of the Crown or any invitation or advertisement is to be issued by or on behalf of the Crown in connection with the offer, the Secretary of State shall consult such persons appearing to him to be representative of the universities of the United Kingdom as he considers appropriate.

Read a Second time.

Mr. Speaker

With this we will take amendments (a), (b) and (c) to the Lords amendment, and consequent Government amendments Nos. 1 and 2.

10.30 pm
Dr. Lewis Moonie (Kirkcaldy)

I beg to move, as an amendment to the Lords amendment, amendment (a): in line 6, after 'universities', insert 'and research councils'.

We remain implacably opposed to the principles behind the Bill. We believe that it is ill conceived, and poses a real danger for the future of the British Technology Group. However, that is not the substance of our discussion tonight. I have to recognise that the House has already made its decision on the British Technology Group Bill. It therefore remains only for us to consider the Lords amendment and to see in what way it might be improved.

The Lords amendment, a cross-Bench amendment, was carried last week. As we can see from the amendment paper, the Government have agreed to accept it. It offers a small concession from the Government on the safeguards surrounding the sale that we attempted to have built into the Bill—that, before offering for sale any securities in the successor company the Secretary of State shall consult such persons appearing to him to he representative of the universities of the United Kingdom as he considers appropriate. The purpose of our amendment is merely to tease out some additional concessions from the Government. As they have been decent enough to accept this small amendment, they might be broad-spirited enough to consider some further improvements to the Bill.

Our amendment (a) seeks to insert "and research councils" after universities. That is self-explanatory. We seek to broaden slightly, and only slightly, the terms of consultation which have already been agreed in principle. In amendment (b) we have attempted to specify some of the information about which universities should he consulted. After all, in theory it is possible for the Government to phone the Committee of Vice-Chancellors and Principals, tell it that they are selling securities and call that consultation. I am sure that, being a decent man, the Under-Secretary would not dream of doing anything so underhand and out of keeping with the spirit of the Lords amendment. Nevertheless, we feel that it would be valuable to add this additional safeguard.

Amendment (c) is also self-explanatory. We feel that the Secretary of State ought to allow a reasonable period for consultation on the Bill and have suggested a period of three months to allow the Bill to be gone into in proper detail.

Much of the argument in Committee, in both this House and another place, dealt with the independence, integrity and impartiality of the British Technology Group following any privatisation. To some extent, the Government have met those concerns. Indeed, in Committee I remember the Under-Secretary saying clearly that he intended to safeguard those three important principles. He appears to have done so in two ways. One is by certain inclusions in the articles of association. He has certainly tried to do so. The other is by accepting the Lords amendment.

I should be grateful if he would spend a few minutes looking at those principles in tandem with the articles of association and explain to the House how he feels that his objectives have been achieved. There was no disagreement on those objectives in Committee, merely considerable discussion of how they might be achieved.

In conclusion, I reiterate that we are opposed to the sale in principle. Should the Bill not go through before a change of Government, which happily will occur in the next six months, we will certainly reverse the proposal. If the reports in the press are accurate, it may well be that a rather more interventionist Secretary of State is about to be chosen to see out the twilight of this Administration, in which case we might see changes in the Bill before then. Who knows? I am sure that neither the Minister for Corporate Affairs nor the Under-Secretary of State would welcome that. I ask that Under-Secretary to give some explanation of how he thinks that those important safeguards have been handled.

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

I am grateful for the constructive spirit in which the hon. Member for Kirkcaldy (Dr. Moonie) moved his amendment. He is right that there is no agreement on the principle of privatisation, but that matter has been well aired in this Chamber, and we do not need to go over that ground again. Both sides of the Chamber are united in the firm hope that the impartiality, independence and integrity of the British Technology Group can be retained. I give a commitment on behalf of the Government that we are fully committed to those three Is. The concessions made in the House of Lords will allay any residual concerns in those areas.

The hon. Gentleman mentioned the articles of association. There are two key provisions in the articles of association protected by the special share. These are, first, a 15 per cent. limit on individual shareholdings, which will continue in the articles even after the special share is redeemed at the end of five years. The Government will be prepared to consider higher individual shareholdings, should that prove necessary, to attract the right consortium, but we are looking at a benchmark of some 15 per cent. The second is a restriction on substantial disposals of assets above a certain level—25 per cent. of net assets or of the income raised by the assets disposed —without the special shareholder's consent.

In addition, there are two further safeguards in the articles of association. The first is a provision for one director of the company to be directly appointed by the universities in consultation with the polytechnics. The universities will thus have the power of appointment to the board, in contrast with the current situation, in which universities have no right of representation on the present board. Secondly, one director, in addition to the Committee of Vice-Chancellors and Principals, shall be someone who appears to the members to have wide experience in the commercialisation of public sector research. Those will be entrenched in the articles of association. In my judgment and the Government's. there is no doubt that those provisions, entrenched in the articles and protected by the special share held by the Government, will preserve the impartiality, independence and integrity of the BTG.

As the hon. Gentleman said, we accept the amendment proposed by Lord Flowers in another place. It will ensure that there is full consultation with the universities. We believe that the hon. Gentleman's amendments are unnecessary. Amendment (a) would require the Secretary of State to consult the research councils. I should draw the attention of the House to the role of Government research councils. They have historically provided the BTG with a small proportion of its inventive ideas. In the year ending 31 March 1991, about 10 per cent. of new inventions accepted by the BTG came from this source, compared with around 50 per cent. from the academic sector.

I hope that the hon. Member for Kirkcaldy will accept that the fact that we have accepted the Lords amendment, and will ensure that there is proper consultation with the universities, will meet any concern that might exist.

Amendments (b) and (c) attempt to set out some of the details of the kind of consultation which the Secretary of State must conduct with the universities and to fix a three-month period for that to occur. The Government do not consider that that is appropriate. We will conduct proper consultation with the universities before any offer for sale is made. We will certainly ensure that there is sufficient time for them to make representations and for us to consider them.

We do not believe that it will be in the interests of the long-term viability of the BTG to extend the consultation period over a fixed three months. I can only assume that there is something else behind the amendments—that the Opposition are attempting to delay full privatisation beyond next spring. I cannot understand why. If one was solely concerned with the future of the BTG—there is considerable interest in the country in purchasing it as a viable entity—on should reject the amendments.

Dr. Moonie

Implicit in that statement is the suggestion that the BTG will be privatised immediately. Is that the case?

Mr. Leigh

There will be a full consultation period. I cannot give a firm date when privatisation will take place. As soon as Royal Assent is received, an information memorandum will be issued. I can tell the House that considerable interest has been expressed in purchasing the BTG. We are confident that we will find a purchaser or purchasers who will ensure that the impartiality, independence and integrity of the BTG is maintained.

I cannot give a firm date when the privatisation will take place, but I hope that it will be some time in the new year or shortly after.

Mr. Simon Hughes (Southwark and Bermondsey)

The Minister and his colleagues will be aware that I, in common with the hon. Member for Kirkcaldy (Dr. Moonie), have been extremely sceptical from the outset about the interests and motivations of the Government.

We believe that the Government consider the BTG to he yet another publicly owned asset which, for dogmatic reasons rather than anything else, they want to privatise.

It is welcome that at least the cross-Bench proposal —described as minimalist—was approved by their Lordships. That will lead to some consultation with the universities. Effectively, that has been the only concession wrung out of the Government by electoral defeat. However, I am glad that they have not sought to overturn that in the fag-end of the parliamentary Session.

On the amendments, although the Minister has sought to say that the research councils have a lesser share of BTG business that does not invalidate the point that they should be the subject of consultation. As a result of the amendment in the other place, which the Government now recommend to us to accept, there will he consultation with the universities. However, that does not exclude the advantage of consultation with the research councils as well. The Minister's answer did not deal with that point effectively.

The amendments seek to ensure that the consultation exercise is wider and longer than it might otherwise have been. That is the risk behind the procedure. I accept that one normally would not specify that the details of consultation should be contained in legislation. However, the danger is that the Government will proceed more quickly than would be wise even if one accepted the premise of their privatisation proposal. The Minister did not deal with that problem. My party, in common with the Labour party, does not accept that premise.

I accept that the Government made some concessions in the other place on the articles of association, and dealt with some of the concern about the independence and integrity of the BTG being sustained. The large bulk of the employees of the BTG work in my constituency. Apart from the senior management, those employees have never been persuaded that the privatisation proposal was in their best interests. so those concessions on the articles of association arc welcome. The fact that there will be some-protection and that the BTG will not be sold off wholesale to one interest is at least progress. It appears that the argument has been won.

However, it will be unfortunate if the Government do not accept the amendments tabled tonight. They do nothing disadvantageous but give some protection, and they would be welcomed by the employees. They would not be disadvantageous to the British Technology Group or the public interest. Therefore, although the Minister's initial response was to resist them, I hope that he will accept them in the same way as the Government have accepted the principal Lords amendment before us, which provides for consultation. Our scepticism, however, remains. We think that the Government are wrong and, if the opportunity arises, we—like the Labour party—would seek to change the course that the Government are piloting for the BTG. We hope that that opportunity will arise. In the meantime, I hope that the Government will accept that the amendments have been tabled in good faith and will, even at this late stage, accept them.

10.45 pm
Dr. Jeremy Bray (Motherwell. South)

The Minister is right to say that a number of the points that Labour Members have argued on Second Reading and in Committee were subsequently accepted in the Lords, and that some of them have been embodied in the published articles of association. However, I am surprised that he has not continued in that spirit in reply to our amendments to the Lords amendments before us tonight. They were tabled in good faith with the intention of serving the purpose of an efficient future for the British Technology Group.

It may be true that, in the past and until now, the research councils have directly accounted for only a relatively small proportion of the IPR that has come to BTG. However, I should he surprised if the Department of Trade and Industry, of all Departments, were to take the view that that would necessarily he so in the future. Does he value the link programme so little that the joint interest between the Minister's Department and the Science and Engineering Research Council might not produce a more abundant supply of IPR which BTG might wish to consider in the future?

As for the scope of the consultation, I expected the Minister to stand up and say, "Yes, of course we shall consult on those matters. It would only be common sense to do so. It is not necessary to put it into the legislation, but it is certainly our intention, in safeguarding the integrity and impartiality of the BTG, that there should be scope for consultation." There is a practical reason for this: there have been reports, confirmed in a sense by the Minister, that more than one group is interested in bidding for BTG. However, the universities have been approached by only one potential group, and they have no knowledge of what other bidders may be in the market.

Surely the Minister sees that it would be in the DTI's interest and the interests of the future of the BTG, for the universities to be properly consulted about the bids that are received. In recognising that one might well be more closely associated with the universities than others, it is not beyond the wishes of the Minister and his Department to handle such consultations. It need not be a sensitive matter but may be related to the acceptability of the partners, what is known about them, and so on. A vast fund of knowledge exists within the universities and the research councils, which I should have thought the Minister would want to tap.

Had we wished to table a blocking amendment, the period would not have been three months but six months or a year. Had our intention been to wreck the Bill, you, Mr. Speaker, would not have selected the amendments for consideration, because they would have been out of order. So it is a bona fide point that there are substantial issues on which practical consultation is needed about the nature of the Bill, particularly given the concessions that the Government have made—the special share, the 15 per cent. holding and the disposal of more than 25 per cent. All those factors point to a desire to carry with BTG the support of the public in the higher education and research council sectors.

Therefore, even if the Minister is not of a mind to accept the amendment—I understand the procedural complications that that might cause, because, if the amendment were to return to the Lords further amended tomorrow, that might lead to delays and embarrassment for the Government—surely, in view of the worries felt in the universities and research community, the Minister could say that it was his intention to conduct consultations in the manner and with the scope suggested in the amendments.

Mr. Leigh

I am grateful to the hon. Members for Southwark and Bermondsey (Mr. Hughes) and for Motherwell, South (Dr. Bray). We believe that the universities can he taken as representatives of the whole research community. That point was made by Lord Flowers in another place, when he moved the original Lords amendment.

I shall remind the House of the figures that I gave previously. As the hon. Member for Motherwell said, they might change but as a benchmark they provide useful information. In the year ending 31 March, about 10 per cent. of new inventions accepted by the BTG came from research councils, compared with about 50 per cent. from the academic sector. Therefore, the universities are in a wholly predominant position, and enjoy a unique relationship with the BTG. We do not believe that it is necessary to make similar provisions in the Bill for other interest groups.

Dr. Bray

Is the Minister saying that the universities, which were the source of the proposals, were not funded by the research councils in any of the research leading to their proposals?

Mr. Leigh

I can only repeat what I said, which I think was absolutely clear. We were rightly told that the universities have a predominant role in BTG's affairs. They provide BTG with about 50 per cent. of its inventions. Lord Flowers told us that the universities can represent the research councils in the consultations. Therefore, we accept the amendment in a spirit of conciliation.

If we were to accept the logic of what the hon. Member for Motherwell, South said, we would have to broaden the further consultation provided for by the Bill to include a raft of other interested parties, including private sector companies, investors, management and employees, polytechnics and licensees—all of which have legitimate interests. We have listened to representations on the Bill made to us while formulating our policy on the special share provisions. However, we do not intend to include special provisions in the Bill to consult all those groups, because it simply would not be feasible to do so.

Timing was mentioned by the hon. Members for Motherwell, South and for Southwark and Bermondsey. We believe that a period as long as three months is neither necessary or possible. The best way to explain the subject to allay any fears—particularly those expressed by the hon. Member for Southwark and Bermondsey—is that the consultation process will not be rushed. It will take as long as is required—no longer and no less. With good will on both sides, it need not be a process that takes months rather than weeks to resolve.

Preparations for the sale are well advanced, and there are a large number of potentially interested parties. Therefore, it would send the wrong message to the market and have a prejudicial effect on the sale if there were now to be a three-month hiatus in the privatisation process to allow for consultation. I hope that I can reassure the hon. Gentleman that there will be proper consultation, but it would in no way aid the group's future as an organisation maintaining impartiality, independence and integrity if there were to be a three-month hiatus.

The hon. Member for Motherwell, South said that the privatisation of the BTG was ideologically driven. The BTG already operates on a fully commercial basis. It is entirely self-financing and profitable, with no Government subsidy. It no longer enjoys the right of first refusal on public sector inventions. It has been competing for this business since 1985. Lastly, and most importantly—this meets the charge that our privatisation is merely ideologically driven and not concerned with the better management and future of this organisation—its current public sector status restricts the commercial freedom of the business and has restricted its development, especially overseas.

We believe it right not for ideological reasons but for the future of this group, for its impartiality, independence and integrity, that we should complete the process tonight which will, incidentally, result in the abolition of the National Enterprise Board.

Dr. Bray

Does the Minister intend to consult the universities on any bids received, given the universities' right to nominate a director to the board?

Mr. Leigh

No, because the universities may place a bid themselves. We have taken great care to allay all their concerns. I met the Committee of Vice-Chancellors and Principals, as did my noble Friend Lord Rea. It is very possible that the universities may want to bid for a share in this consortium. In that event, it would be inappropriate to give preferential treatment to the universities in the bidding process. We will be bound by this Lords amendment—I hope that the House will accept it in a few moments' time—at the time when the memorandum of information is sent out, to consult the universities on it and on the advertisements associated with it. That will reassure the universities that we intend to continue the constructive dialogue that we have held with them on this issue in recent months.

Dr. Moonie

We are not very happy with the Minister's reassurances, but I see no point in pursuing the matter. I therefore beg to ask leave to withdraw the amendment.

Amendment, to the Lords amendment, by leave, withdrawn.

Lords amendment agreed to.

Consequent Government amendments Nos. I and 2 agreed to.