§ '.—(1) The Treasury shall present to Parliament for its approval before the next Budget a report on discretionary share option schemes operated by the privatised utilities which fall within Part IV of Schedule 9 to the Taxes Act 1988 (share options schemes other than savings-related share Option schemes) (-the schemes").1431
§ (2) The Treasury shall report to Parliament on the past and estimated future effects on the public revenues of schemes which are operated by the privatised utilities.
§ (3) The report shall differentiate between public revenues raised from:
- (a) members of these schemes and
- (b) the privatised utilities which operate these schemes.
§ (4) For the purposes of this section privatised utilities will include all companies which produce or distribute water, gas, or electricity in which HMG has sold shares since 1979 and will include other companies which the Treasury may by order determine.'.—[Mr. Andrew Smith.]
§ Brought up, and read the First time.
§ Mr. Andrew Smith
I beg to move, That the clause be read a Second time.
I fear that this new clause will not be so uncontentious as the last one. I would be grateful if the Financial Secretary would nod across the Dispatch Box. We would be pleased to move on, once the Government had accepted it. The Minister is not making any such indication.
The new clause calls for an assessment of the costs to the taxpayer incurred in Government support for discretionary share option schemes in the privatised utilities, and for a report to Parliament before the next Budget. Our case is that such an assessment is long overdue, that the boardroom excesses of the privatised utilities are a national scandal, and that it is high time that the Government took action. I find it difficult to imagine who could possibly disagree with such a reasonable suggestion as that which we are making today—other than perhaps sonic of the beneficiaries, and some right hon. and hon. Members on the Conservative Benches.
Certainly, anyone with an intelligent experience in commerce would be appalled at any enterprise which spent large sums of money without assessing the value created. Yet that is just what the Government are doing. They are underwriting the handouts at the taxpayers' expense. We seek no less prudent supervision of matters involving the public purse.
As has been especially clear in recent months, the 13ritish people are fed up with the Government's excuses and double standards in regard to share options and the excesses of the privatised utilities. They want not mere words—such as the Prime Minister's admission that he found such abuses "distasteful"—but action. Families with ordinary incomes whose living standards fell last year and are falling now, and must pay an extra £812 in tax this year, are angry ahout the ahuses at the top.
The Government should deal with these scandals. The chairman of the National Grid Company is set to make £2 million this year; the chief executive of British Gas has been awarded a 75 per cent. increase in his basic annual salary—an extra £205,000. That is on top of the share options, amounting to more than £100 million, taken out in the privatised utilities alone last year.
The Prime Minister has said that the Government may consider acting after the Greenbury committee has reported—indeed, that they may take legislative action. Even since that statement, however, three directors of Norweb alone have exercised share options netting them a combined benefit of more than £1 million. That will do nothing to make the public feel confident that the Government have any intention of ending the excesses of privatised industries.
1432 We have set out the action that needs to he taken. The regulation of water, gas, electricity and telecommuni-cations must be made open: there must be public hearings enabling customers to question the privatised utilities about their service to the public, and about profits and boardroom pay, before the prices are set. Regulators should have the power to cut prices in the event of "top pay" and share option abuses.
§ Mr. Smith
I was just coming to the part of the new clause that deals with the effects on revenue, Mr. Deputy Speaker. Those effects are considerable. We also want executive share options to be taxed as income to discourage abuse.
It is high time that the Government listened to the public, and ended the indefensible position in which there is one rule for the few and another for the many. These discretionary share options are very expensive to the public purse: even the Government estimate that the cost to the taxpayer in the financial year that is now ending was some £60 million. That is a large amount, even if it is an underestimate—as we have argued it is, because it does not take account of all the opportunities for tax planning and avoidance.
Surely it is right to ask, as our new clause does, how such schemes affect the public purse and what public benefits they produce. I look forward to hearing from the Financial Secretary exactly what benefit the public are receiving in return for the huge handouts involved in the tax subsidies for those schemes.
It is not good enough for the Government to try to subcontract their responsibilities to the Grcenbury committee. Important though that body is, and important though it is that the views of the CBI are taken into account, it cannot stand in for the Government. Paul Foot, writing in The Guardian, provided an amusing insight—although I do not always agree with him politically. Musing on what might have happened if Labour had been in government, he attempted to draw a parallel:Imagine, for instance, that the trade union leaders, in a sudden rush of enthusiasm, pay themselves enormous wage increases. Imagine that Bill Morris or John Edmonds tripled their salaries. Imagine the sustained howl of protest in the newspapers.Investigative journalists Would suddenly flourish at the Daily Mail. The union leaders would be pursued by persistent hacks who would describe in detail every morsel of food they consumed at La Gavroche"—whatever that is—and every gold tap in their country mansions.Imagine, then, the Government being panicked into a response. Imagine the Lord Privy Seal. John Prescott, announcing that his government had decided to suspend all further action on the matter until a committee of trade unionists, previously set up by the TUC, made their recommendations. Imagine. What's more, that the TUC committee was headed by Bill Morris and John Edmonds.Can you conjure up the Daily Mail headline: BLAIR'S BACK-SCRATCHING BUDDIES. A portentous leader in the Daily Telegraph would condemn the Government for insulting Parliament. 'What has become a matter of urgent public interest—a matter which threatens the very integrity of our public life—is to he dealt with by a cabal led by the very brothers who stand accused of enriching themselves beyond the dreams of avarice.Strangely, there are few such headlines or leaders in the Mail or the Telegraph about the Greenbury committee",which, Mr. Foot suggests, comprises
1433a clutch of millionaires appointed by the Confederation of British Industry to investigate the scandal of, er, millionaires paying themselves grotesque salaries and share options.It is a humorous piece, but does it not underline the Government's hypocrisy? This is an issue of vital public interest; there is outrage up and down the land about what the Government are allowing to happen. The Government, however, are happy to propose simply subcontracting their responsibilities to a CBI committee some of whose members are beneficiaries of the very schemes that they are charged with investigating. That is unacceptable to the public, and it should be unacceptable to the House.
§ Mr. Tim Smith (Beaconsfield)
Is the hon. Gentleman suggesting that discretionary share option schemes in the privatised utilities should be treated differently, in tax terms, from such schemes generally? I understood that his policy was to subject them all to income tax. If the former is not his policy, what is the point of producing the report?
§ Mr. Smith
The point of producing a report that is specially geared to the privatised utilities is twofold. First, those utilities have attracted the most public concern, and have involved the most outrageous abuses. Secondly, there is an interaction, in the fiscal consequences and the consequences for the public purse, between the under-valuation of the assets of the utilities when they were sold and the benefits that the bosses have subsequently been able to extract.
The hon. Gentleman asks whether, in this as in other matters, the law relating to tax should apply equally to schemes in the privatised utilities and those elsewhere. Of course it should: we have made it clear that we consider it sensible and prudent to tax executive share options as income.
It would be interesting to hear from the Financial Secretary what reason the Government could possibly adduce for failing to present the report for which we have called. It cannot he that there are too many schemes to assess. Each scheme has to be formally approved, and there are only 5,000 such schemes covering the privatised utilities and others.
In the case of the privatised utilities, there are 12 regional electricity companies, 10 water companies, two major power generators, one gas company and one telecommunications company. Such a report should not be beyond the Government's resources in the time between now and the Budget. I am grateful to the hon. Member for Wirral, South (Mr. Porter), who nods agreement.
§ Mr. Smith
I will not give way, because the hon. Gentleman will have an opportunity to make his views clear in the debate.
1434 Our suggestion is reasonable and feasible, and the Government can have no argument for not accepting the new clause, which is in the public interest. The regulators of the privatised utilities might also find such a report helpful.
Professor Littlechild of Oftel agreed prices with the regional electricity companies, and was subsequently surprised when Northern Electric found an additional £560 million to defend itself against the bid from Trafalgar House. That shows that the resources were not quite what he expected. Mr. Byatt showed equal surprise when North West Water found an additional £35 million to split between customers and shareholders.
Against that backdrop, it is sensible and in the public interest, and that of taxpayers and the public purse, to have precisely such a report and information as an essential guide to enlightened policy.
§ Mr. Barry Legg (Milton Keynes, South-West)
I am surprised that the hon. Gentleman wants to have the regulator involved, or thinks that the regulator will be interested. Share options involve the issue of shares to employees and directors, and have nothing to do with the pricing of gas or any other commodity. The issue is approved in general meeting, when shareholders decide that they are happy to see a dilution of their holding in the best interests of the employees and directors of the company and its good management.
§ Mr. Smith
The hon. Gentleman came into the Chamber so recently that he seemed to be out of breath during his intervention. The schemes have not been approved by shareholders: that is precisely the point of one of the main reforms for which we are calling. We say that shareholders should have the opportunity properly to regulate these schemes.
§ Mr. Smith
Does the hon. Gentleman claim that the amounts that have been paid to these top bosses were agreed by the shareholders, and were subjected to proper scrutiny? They were not, and that is precisely why we want the powers and composition of remuneration committees to be strengthened.
The hon. Gentleman asked about the regulator. It is relevant to pull the regulator into the picture precisely because the top bosses of these firms should not be able to benefit to such an outrageous extent. That benefit is unrelated to their personal performance, or, in many cases, to the performance of the companies of which they are directors.
As everybody knows, the benefit derives primarily from what happens more generally in the market, and that is precisely what the public find so objectionable about these handouts. They also object to their scale, and to the fact that they arc unrelated to performance. They also find it objectionable that a few individuals get a benefit which is not available to the overwhelming majority of our 1435 people. No matter how hard they work, or how much they contribute to their companies, most people would never receive such benefits in a million years.
§ Mr. Smith
I have given way twice to the hon. Gentleman. I shall allow him to catch his breath, and perhaps give way to him again before I finish.
It is in the interests of the public and of customers and taxpayers that the report for which the new clause calls should be produced. A Government refusal to accept it would be consistent with the way in which they have mismanaged fiscal policy generally in this area and elsewhere. For example, the cost of profit-related pay went up from £25 million in 1990–91 to £500 million in 1994–95. It has become one of the largest reliefs.
When my hon. Friend the Member for Edinburgh, Central (Mr. Darling) inquired of the Chancellor of the Exchequer about evidence of the effects of such schemes on companies which operate them and on the economy, he was told:Studies on profit-sharing schemes generally suggest that they are associated with increased employee involvement and increases in productivity."—[Official Report, 22 March 1995; Vol. 257, c. 241.]The Government should be less vacuous and more specific than that. What studies are they talking about, and what are the changes in productivity? In opening up what has become a bonanza for the privatised utilities and the bosses, the Government must justify themselves and their record to the electorate a good deal better than that.
The Government could make a start by accepting our new clause. If they refuse to accept it, and our arguments on behalf of the overwhelming majority of the public, it will be further confirmation of their hypocrisy. They would never allow any fully public service to be so profligate in the management of finances as they are in respect of these executive share option schemes and their tax subsidies. They will stand guilty yet again of incompetence, because any enterprise, whether publicly or privately owned, could not prosper if it operated in the way in which the Government operate these schemes. Moreover, they will stand guilty of failing to look after the interests of taxpayers as a whole, because it is they who subsidise the few who benefit from the schemes.
It is high time that the country had a Government who properly looked after the interests of the many, instead of allowing the few to feather their nests. That is what the privatised utility bosses are doing under the schemes which the Government seem so ready to tolerate, and which they have done so much to encourage. Our new clause makes prudent sense for the public and the taxpayer.
§ Mr. Barry Porter
I listened with great interest to the hon. Member for Oxford, East (Mr. Smith). I am sorry that he spoiled his case by using emotive words such as "bosses", and by deploying the envy argument. That is a green argument, not in the environmental sense but in the sense of envy and jealousy. If he had reduced his rhetoric, I might have agreed with him a hit more.
I shall not vote for the new clause, or abstain. It is not merely the forces of envy and jealousy that have reservations about what has happened in quasi-monopolistic privatised industries, because many people believe in rewards for endeavour. I am not arguing that the managers and chief executives of the privatised 1436 utilities are being overpaid; I do not know how we can judge that. It must be a matter for the shareholders, which is what the Government have been arguing.
However, I hope that my right hon. Friend the Financial Secretary will outline the framework of what the Government intend to do about the problem. I agree with the hon. Member for Oxford, East that, while the Greenbury committee is of serious importance, the matter cannot be left until we get its report.
I am sure that Ministers are exercising their little grey cells in that direction. I hope that we will get some specific indication, rather than a broad generalisation, of what the Government intend to do, my right hon. Friend the Prime Minister having accepted in principle that something needs to be done. I await with interest the Financial Secretary's reply.
§ Mr. David Winnick (Walsall, North)
It will be interesting to see the Financial Secretary's reaction to the debate. As my hon. Friend the Member for Oxford, East (Mr. Smith) said, it is very much a test of how concerned the Government really are about the share option scandal, and the outrage felt about it.
Through no fault of my own, I hope, I have spent more time outside the House than inside it during the past two months. Therefore, I can tell the Financial Secretary that we are not exaggerating the sense of outrage felt by so many people throughout the country—by no means only Labour voters—that so much can accrue to so few people who, at the end of the day, are simply doing precisely the work they did previously, when the utilities were in public ownership.
Not only have the salaries of those who run the privatised industries increased substantially, but they have been given various perks—altogether almost as though they had won the top prizes in the national lottery a number of times over. In addition, if they were to realise the share options, a great deal more money would accrue to them, which would cause further concern throughout the country.
I have been studying some of the figures. Based on share prices at 30 March, the value of shares held under option by the directors of the water, electricity and gas companies totals no less than £80 million. The profit that could be made were those shares to be sold would be about £27 million, to be shared by only a few individuals.
The hon. Member for Wirral, South (Mr. Porter) made a fair-minded speech, except that he took my hon. Friend the Member for Oxford, East to task for using what he called emotive language about bosses. But they are bosses; they run the industries. Almost without exception, those same people were running the industries when they were in public ownership and they were receiving a reasonable salary; but since privatisation, they have received salary increases far, far in excess in percentage terms of anything our constituents could ever get. They have also had various perks, and now they have share options.
The Government's only response is to say that, although they do not really like it, there is nothing they can do about it. As the hon. Member for Milton Keynes, South-West (Mr. Legg) said, they think that it is a matter for the shareholders. I can tell the Government that what 1437 has been happening with these directors smells as much among the electorate as what happened with Westminster council—
§ Mr. Deputy Speaker
Order. It is nice to see the hon. Gentleman in his place once again, but I must tell him that we are not debating Westminster council this afternoon.
§ Mr. Winnick
I was merely using that council as an illustration, Mr. Deputy Speaker.
I cannot help but compare the Government's attitude to bosses' salaries with their attitude towards the shabby way in which nurses and others in the national health service have been treated. However, I will not go any further down that road, Mr. Deputy Speaker, as I know that you would rule me out of order.
Tonight, the Government have a test on their hands. If they are truly concerned about what has been happening and about the sense of outrage felt throughout the country, they will accept Labour's very reasonable new clause. After all, it is not in such terms that the Government could say that it ran wholly against their philosophy; it would not return the industries to public ownership. It is a reasonably phrased new clause, which is concerned with public revenues.
Time and again, the Government say how concerned they are about public revenues, but when it comes to the fat cats, the bosses—I make no apology for using what Conservative Members may consider emotive language—and the need to deal with the scandal of the past few years, the test will be whether the Financial Secretary is prepared to respond positively to the new clause.
If the Government want to know why they are suffering from such unpopularity throughout the country—more so, perhaps, than any other Government since the war—I can tell them that it is because people believe that they deal differently with the fat cats than they do with the rest of the population. Ordinary employees know that they are likely to get a raw deal from the Government, but they do not believe that the Government will act in the same way towards the fat cats.
Although Conservative Members may not like what I am saying, and may feel that I am not presenting the picture fairly, the truth is that a great deal of the Government's unpopularity and the way in which, increasingly, they are held in contempt, is a result of the very strong belief that the Government do not give a damn about the ordinary people, be they the nurses or any other group who earn an ordinary living. The Government could not care less about what sort of wage increases—
§ Mr. Deputy Speaker
Order. I know that the hon. Gentleman has been absent through illness, and I realise that now that he has returned, he wishes to cover a whole spectrum of issues, but he must not do so under this new clause. His remarks must relate to share option schemes.
§ Mr. Winnick
I appreciate your guidance, Mr. Deputy Speaker. I was concluding my remarks, and trying to show why people throughout the country feel very strongly that the Government treat ordinary people—even when they lose their jobs—very differently from the way that they treat the fat cats.
1438 If the Government want to show a genuine concern about the scandal surrounding the chief executives of the privatised industries, they will accept the new clause. However, Labour Members know full well that they have no intention of doing anything of the sort. That proves the point that we have made repeatedly—that the fat cats can do what they like because it is they whom the Government think should be rewarded in every possible way.
§ Mr. Tim Smith
It is good to see the hon. Member for Walsall, North (Mr. Winnick) back in his place. There is no doubt that there is considerable public disquiet about the matters that he raised.
I have some sympathy with the proposal of the hon. Member for Oxford, East (Mr. Smith) that the Treasury should produce a report. Reports are useful, and they provide information on which decisions can be made. He was kind enough to support my proposal that the Inland Revenue should produce a report, which the Committee considering the Bill agreed to.
§ Mr. Andrew Smith
I congratulate the hon. Gentleman again on his initiative in relation to the tax simplification clause. Does he agree that it would only be right for that clause to be known as the Smith clause?
§ Mr. Smith
Certainly. As the hon. Gentleman was good enough to support it, it should undoubtedly be known as the Smith clause.
In an intervention, the hon. Gentleman told me that he did not think that the tax system should distinguish between private utilities and companies in general. I am doubtful, therefore, about the value of producing the report. The question is how we should respond to the public disquiet that we all accept exists. Should we do so through the tax system, through the regulator, or by trying to persuade shareholders to do something about the matter?
I think that Paul Foot drew an interesting parallel with trade unions in an article in The Guardian. Clearly, accountability works much better in trade unions. It is obvious that, if trade union officials tried to abuse their position in the way that it has been suggested chairmen and chief executives of some companies have, union members would not stand for it. They would take action to deal with that. A direct relationship exists there between union members, the union council, and the general secretary.
When it comes to companies, however, clearly something is wrong with the system. We talk about large shareholders and institutional shareholders, but behind those shareholders stand the ordinary people who are so concerned about what is going on.
§ Mr. Stephen Timms (Newham, North-East)
Does the difficulty not lie in the fact that customers of those companies are the victims of what is happening? Shareholders may, in a narrow sense, think that they benefit from that activity, hut surely it is the customers who are suffering. They are the ones who need to he given a voice.
§ Mr. Smith
I do not accept that customers are suffering. The amounts involving customers are trivial. My right hon. Friend the President of the Board of Trade recently gave some figures about British Gas. They 1439 showed that, if the director of British Gas were paid nothing, the annual benefit to each customer would be trivial. I do not think that it is a matter for customers.
The other important point is that, since privatisation, both the customers and shareholders of those companies have benefited. If one takes British Gas, in the past nine years, the price of gas has fallen by 20 per cent. in real terms. At the same time, the business's profitability has increased substantially, because new pressure has been placed on management to become more efficient and to drive costs down. As profitability has risen, so has the share price.
§ Mr. Timms
May I give the hon. Gentleman the example of Thames Water? Last week, it was revealed that it had agreed with the regulator that it would invest £2.1 billion, and that it would set its prices according to that agreement. Now it has emerged that, in the next five years, it will invest only £1.75 billion; therefore, it is investing significantly less than had been agreed. Undoubtedly that is boosting the share price and share options, but it is leading to inadequate investment in Thames Water's infrastructure in its region. That is of particular concern to my constituents.
Thames Water is undertaking major sewer renovation work in my constituency in an extremely penny-pinching way, which is causing enormous difficulties for my constituents. The arrangement whereby Thames Water's objective boosts its share price, and therefore share options, is causing the problems.
§ Mr. Smith
I am not familiar with the details of Thames Water. Some of my constituents are customers, so I would be concerned about that matter. The normal effect, however, of reducing investment is to reduce profitability. Last week, North West Water announced that extra dividends would be paid to shareholders, and that there would be extra investment for customers, and a reduction in customers' bills.
I am sure that my hon. Friend is pleased about that, because the customers will benefit along with the shareholders. That has been the double benefit of privatisation.
I still think that the hest way to tackle share option schemes is to try to persuade shareholders to do something about them. The Greenbury committee has been criticised because it consists, or so it is alleged, of the very people who are abusing the system, but they are the people best placed to deal with the matter.
Behind institutional shareholders stand the millions of people who put money into pension schemes. Every hon. Member has an interest, because our pension scheme has no doubt been invested in British Gas, and in water, electricity and other companies. If we consider the pension scheme's accounts, we shall find that it is no different from any other pension scheme.
Pension scheme members and people who invest in life policies stand behind institutional shareholders. If those people were able to have more of a say in the matter, something would be done about it.
§ Ms Margaret Hodge (Barking)
It is interesting that the hon. Gentleman thinks that shareholders should exert greater pressure. The Government are a substantial 1440 shareholder in both PowerGen and National Power. Does he therefore agree that the Government have failed in their duty to protect the public's interest by not exerting their shareholder powers in those companies?
§ Mr. Smith
The hon. Lady is a few weeks out of date, as the Government sold their remaining shareholding in those companies a few weeks ago. The Government are, of course, a unique shareholder. I am not in favour of the Government using their shareholding to achieve those objectives. The Government used to interfere in nationalised industries for all sorts of nefarious reasons that had nothing to do with providing a decent service. It is down to shareholders. After all, directors will benefit from discretionary share option schemes only if the share price rises; otherwise, they will not.
Since privatisation, electricity businesses have been far more successful in driving down costs than anyone—including the Treasury and the City—had anticipated. Nobody had understood just how inefficient the electricity companies were when they were owned by the Government. Generally, nationalised industries are inefficient. Costs have been driven down substantially. As a result, profits have risen rapidly. As a consequence, the share price has risen rapidly.
Perhaps the regulator should have taken a tougher stance; that is another issue. Management has been successful in producing more efficient companies. The share price has risen. Why should not the directors of companies benefit in those circumstances? That is what a share option scheme is about.
As I said in Committee, it is not widely appreciated that retained profits, and not money borrowed from banks or raised on the stock exchange, arc the main source of investment for companies. Those profits are important. The profitability of industry is extremely important. In any company, the principal people who can determine the profitability level are, of course, the senior management—the directors. That is why it is right that a special discretionary share options scheme should be widely available. It encourages efficiency, more investment and more profitability.
Particular cases of abuse in privatised utilities have been mentioned. We must move as quickly as we can away from their monopolistic position by injecting more competition into the system. That is what the Government are doing.
§ Mr. Gerry Sutcliffe (Bradford, South)
Is not the whole point that we are talking about privatised monopolies? That is the base from which directors work. They do not do anything over and above what other shareholders do. Those shareholders take risks, but no risk was involved for those directors. They work in privatised monopolies. Surely the Government should have done something at an early stage.
§ Mr. Smith
It is true that those companies have not been subject to the same competition as, for example, major retailers, which face intense competition, but they have been subjected at least to the pressures that come from having shareholders. As a consequence, they have become much more efficient. They have driven their costs down. It is right that management should be rewarded for that.
1441 I agree, however, that we need to go further and to remove, as far as we can, those companies' monopolistic status. That is what we are doing with the Gas Bill, which introduces competition at all levels of the gas supply industry. We shall have the same provision for the electricity industry. Such competition will not be introduced in the water industry, which is a natural monopoly, where it is much more difficult to inject competition. I accept that, but it is important to introduce competition into the system so that management are subject to the same pressures as people in other businesses.
§ Mr. Smith
I know that it is difficult to introduce competition into the water industry, because I made an inquiry after we passed the Competition and Service (Utilities) Act 1992, which introduces an element of competition into the water industry. I am a customer of the Three Valleys water company, and Thames Water is half a mile down the road, so I wrote to Thames Water to see whether I could change suppliers. It told me that, if I paid £10,000 to have the main extended to my house, I would be welcome to buy its water.
The hon. Gentleman is right to say that competition in the supply of water is more difficult to organise, but it can be done on the same basis as it is being done for gas. The pipes could be kept in public ownership, and different suppliers could supply the water. It is possible, but it is much more difficult.
As far as possible, we need more competition to put the utilities on the same basis as other businesses. These are the right pressures to place on those companies, rather than trying to tackle the problem through the tax system. It is tempting to try to use the tax system to achieve different, social objectives but I do not believe that we should do so in this instance.
§ 6 pm
§ Mrs. Helen Liddell (Monklands, East)
I am sorry that the hon. Member for Wirral, South (Mr. Porter) is no longer in his place because he mentioned greed and envy. I find it interesting that every time we discuss this matter, Conservative Members use those words. That says rather a lot about them and their view of remuneration and not quite so much about Opposition Members.
The hon. Member for Wirral, South failed to recall that one person who has prosecuted the case for a more equitable means of controlling share options is Mr. Alistair Ross Goobey, chief executive of POSTEL, who is not known for his radical views or support of Labour Members as he was previously a special adviser to a Chancellor of the Exchequer.
Indeed, I am interested in several points made by Conservative Members about share options because they merely highlight the point that the Member for Wirral, South made: we are debating a divided society, a them-and-us society, and most people in the advanced world who are concerned about the operation of industry in the public and private sectors are very much aware of the need to reduce the them-and-us divide.
1442 It is extremely difficult to convince people, in this week of all weeks, when they are about to have the 20th increase in taxation since the Government were elected, that those who control the privatised utilities should be treated more favourably by the tax system than those who actually work in those industries and the rest of us, who will face increased taxation from 6 April.
It beggars belief that Conservative Members can be so naive as not to see the inequities in the system. New clause 1, which I support, gives us a minor opportunity to consider in some detail the difficulties that have arisen as a result of discretionary share options in privatised utilities.
A debate is being held in this country about the effectiveness of share options. The same debate is taking place in the United States, where there is concern in the private sector about the use of stock options to allow remuneration of senior managers in a way that is not directly affected by the performance of the industries in which they are employed.
The debate is meaningful because there is considerable evidence to show that granting share options does not so much affect the performance of an industry as the performance of its share price. The share price and the performance of an industry are in many cases not directly related. Indeed, when the time comes for the publication of annual accounts, it is possible through creative accounting to make the operation of a business look much better than it has in fact been.
I would be much more convinced of the rectitude of those who argue for share option schemes if they were also prepared to build disincentives into the remuneration structure. When a company's share price increases, senior executives benefit. If there is a reduction in the share price or performance of that company, why should not those who run the company be disadvantaged? We should be in a position where true targets are set for businesses in place of the rather bizarre structure of share options that we have at the moment.
It is only in this country, the United States and France that such tax-attractive schemes tend to be introduced for senior executives. Most other countries recognise the true value of building a structure where employers and employees share together in the destiny of a company and are motivated by the destiny of that company, whether it be in the public or private sector.
§ Mrs. Liddell
I am sure that the hon. Gentleman is aware that there are different kinds of share option schemes. The 36,000 ordinary employees of British Gas usually benefit from savings-related share schemes and tend to be less able to have an impact on the share price than the senior executives who can directly affect it.
The hon. Member for Beaconsfield (Mr. Smith) mentioned the impact that institutional shareholders can have on controlling the excesses of senior management. That was a preposterous suggestion. Part of the argument of Mr. Ross Goobey has been that institutional shareholders are limited in their ability to control the senior management of companies. There is an informal network that operates among institutional shareholders. They are the same people, usually male and usually from 1443 the same schools, and they are recycled time and again. They turn up at the same annual meetings, eat the same prawn cocktails and have the same impact on the share remuneration schemes because they benefit from share remuneration schemes.
I hope that the Financial Secretary will make it clear how it is equitable that the taxation system that applies to the sale of share options should be different from that which applies to other aspects of earned income. That is extremely difficult to explain to members of the public who, like my constituents, see their service from British Gas reduced by the closure of gas showrooms. There are fears about what will happen to assistance for disabled people from the gas industry.
It is difficult to explain to people why senior executives in the gas industry can choose when to activate their options and can phase in the activation of their options over time to take advantage of allowances that are available through capital gains tax. They can even pass on those share options to their spouse to allow their wife or husband to benefit from those share options and from the capital allowances that are available to them.
That is manifestly unfair and people are not that gullible. They see that the rich are getting richer on the backs of the rest of us. The privatised utilities have been seen as basic to the structure of our country. They mainly operate as monopolies or quasi-monopolies. Those who are or have been in a position to benefit from the first tranches of share options—and they were granted options at a rate that was greatly deflated and had been massively underestimated—can now become millionaires, in some cases millionaires many times over.
The new clause seeks only a rational report and analysis of what is happening and of the impact on the Exchequer of the proposals so that people can make genuine judgments. It was not so very long ago that we were told by the Prime Minister of his commitment to ending inequality. The most fundamental inequality is this system of share options, which is unfair and inefficient. No one can put hand on heart and prove that the existence of share options dramatically improves, or in any way affects, the performance of a company or of an executive. Research published at the weekend suggested that the schemes have a limited impact on improving company performance.
The Financial Secretary has the opportunity to instigate an examination into the operation of such schemes and their impact on the economy and to consider the structure of the tax system in such a way as to get rid of the inequalities and convince the people that the Government are not prepared just to govern in the interests of the few at the expense of the many.
§ Mr. George Stevenson (Stoke-on-Trent, South)
I think that I am right in saying that the Standing Committee on the Finance Bill had 25 sittings. Obviously, it discussed many issues, but I suspect that this is the one that the public will consider very carefully. It is difficult to identify many of the other issues that we discussed in our number-crunching sittings in Committee as being in the forefront of public consciousness.
The public will carefully watch the Government's reaction to the new clause, which is not a radical attempt to bring down the Government, much as we would like to do so, but merely asks for a report back to the House. Why do we want such a report? We are talking about the 1444 principle of discretionary approved share option schemes, which are of massive public concern, as has been accepted by hon. Members on both sides of the House.
We are also considering the way in which such schemes are taxed. Approved schemes are taxed not as earned income but as a capital gain—I would argue about the concept of earned income, but perhaps that is an argument for another day. As far as I and many members of the public can see, the share option schemes have been established by a relatively small cabal and have enabled executives to freeload on privatized monopolies—Conservative Members have accepted that they are such monopolies—and to gain tremendously.
The speech of the hon. Member for Beaconsfield (Mr. Smith), who made a considerable contribution to the Standing Committee—some of it was useful and no doubt he would say the same for Opposition Members—was striking, but I gained the feeling that, the longer that he went on, the more desperate he became. Having created the conditions in which abuses—the word that the hon. Member for Beaconsfield used—can take place, the Government are turning their faces steadfastly against any reports to the House on those abuses, which is interesting. The public will be rightly outraged if they perceive that executive share options are being used to line the pockets of people who have done nothing to earn such largesse, while the Government refuse the House the opportunity to study in more detail the effect that the schemes are having on revenue. The new clause is the minimum that the public can expect as regards knowing exactly what is going on.
I listened carefully to the hon. Member for Beaconsfield, and the other thing that shocked me about his speech was that he tried to argue that such executive share option schemes are necessary to encourage executive directors to work hard. It is interesting that Mr. Cedric Brown has to have nearly £700,000 worth of share options to work harder, but people in gas showrooms have to have a 3 per cent. pay cut to make them do so. It is a nice philosophical question, with which the Government singularly failed to deal throughout our debates in Committee.
The Government have also failed to recognise the chronic sense of injustice and unfairness that is felt throughout the country about the way in which executive share option schemes are operating. For some reason that is beyond me, the Government simply refuse to recognise it and the new clause is extremely important in that regard.
Many of us will be watching with great interest. In reply to an intervention by my hon. Friend the Member for Barking (Ms Hodge), the hon. Member for Beaconsfield said that the Government had disposed of their 40 per cent. shareholding in PowerGen and National Power. Another task is coming up, however, and it will be a test of the Government's approach to the issue. What will be their attitude to the give-away of the national grid? It was valued at £1 billion and handed over as the most massive Christmas present in history to the regional electricity companies, which are going to give it away, throw it away, privatise it, or sell it off for £4 billion—and that is the conservative estimate. What have the executive directors of the regional electricity companies done to warrant that massive unearned profit? They have done 1445 absolutely nothing. We shall watch extremely carefully how the Government approach the latest instalment of the largesse represented by the executive share option schemes.
Why should there be a report to the House? I mentioned the fact that the public are extremely concerned about the issue. The House should reflect that concern. Even at this late stage, I hope that the Government will recognise that it exists and that this is the place to deal with it.
It appears that the shares of the companies involved have gone up not only because they were undervalued in the first place but because many hundreds of thousands of jobs have been lost in the past few years. That is bad enough, but the hon. Member for Wirral, South (Mr. Porter) spoke of envy and jealousy. He should speak to my constituents, and to those of every other hon. Member who have lost their jobs as a result of those very same executive directors and ask them what they feel about envy, jealousy and the feel-good factor. He should ask them how they feel about the fact that the privatised utilities seem to be employing a strategy of maintaining or increasing their share value at whatever cost not in the interests of the country or of investment but because they are constantly looking over their shoulders for the next hostile takeover hid. Those issues are not peripheral; they arc fundamental and are rightly reflected in the public's concern.
The least that the House can do is support the new clause, which proposes that the Government should report to Parliament so that extremely important issues can be examined in more detail. If Conservative Members vote in the Lobby to defeat the new clause, as we expect they will, I do not believe for a moment that the great British public will understand their action.
§ Ms Hodge
I congratulate my hon. Friend the Member for Oxford, East (Mr. Smith) on his speech, which was excellent and reasonable. It is difficult to understand how anyone could not be moved by such reason. This would be a sad day if Conservative Members were moved by party interests rather than national interests in rejecting this small move to bring to public account an issue that has caused such outrage in the community at large.
As my hon. Friend the Member for Monklands, East (Mrs. Liddell) said, the Prime Minister is on record as saying at Prime Minister's questions that he believes that it is the Government's responsibility to reduce inequality. The new clause strikes at the heart of that obligation.
The hon. Member for Beaconsfield (Mr. Smith) reiterated what many other Tory Members have said—that everybody has benefited from the efficiencies gained from privatising public utilities. Were there efficiencies to be gained, there is no reason why they could not have been gained while retaining those utilities in the public sector. If they were not attained, it is because of the Government's inefficiency and it reflects their mismanagement of those important sectors of the economy. It has nothing to do with privatising the public utilities.
The Labour party wants an economy that is run in the public interest. Two essential features of such an economy are fairness and openness, both of which are severely undermined by the scandal of discretionary share option schemes in the privatised utilities, particularly when 1446 low-paid workers are being offered paltry wage increases. We have had considerable interest recently in demonstrations by health service workers about the 1 per cent. pay increase that has been guaranteed nationally. Everybody's sense of social justice—
§ Mr. Deputy Speaker
Order. The hon. Lady must address the majority of her speech to discretionary share option schemes. Other allusions are acceptable, but so far the minority of her comments have related to the new clause.
§ Ms Hodge
I understand what you say, Mr. Deputy Speaker. I was trying to juxtapose the two areas of public interest.
It adds insult to injury when people cannot even hold those responsible for such huge gains made through discretionary share option schemes to account for their actions. That is the purpose of the new clause.
We have already witnessed a massive unfair pay explosion among the bosses of the private monopolies. For example, last year the board of National Power awarded itself a 25 per cent. increase in remuneration, which was in stark contrast to the 4 per cent. average increase for its employees. The gap between the pay of people in the boardroom and people on the shop floor is even more stark. A comparison of last year and the year before privatisation shows that the total remuneration package for the highest-paid directors of the privatised utilities rose by an average of 321 per cent. In three of the privatised utilities, the directors gave themselves rises of more than 400 per cent. The boss of North West Water heads what I consider to he the roll of shame with an increase of 619 per cent.
Share option schemes are another side of the same coin. Some £500 million was paid out to just nine directors of PowerGen and National Power last year alone. That is an average of more than £500,000 each, which would be enough to pay for an extra 30 staff in a hospital or more than 100 full-time places in a good nursery school. Have we got our national priorities right? In addition, a further £18 million is yet to be cashed in by the very same directors and chief executives. Last year alone, the chief executives of PowerGen and National Power earned more than £l million each in pay and share options, and they are set to make a further £1 million each in the coming year. It is a scandal of momentous proportions.
The greatest scandal of all is National Grid, as this year alone its chairman could make an astounding £2 million, almost £1.8 million of which is immediate share option profits. That is in a company that is yet to trade properly. With such handouts, the Government are giving private ownership a bad name.
Those are just a selection of the abuses being committed by the private utilities. We object not to rewards for excellence, entrepreneurship or enterprise but to the fact that the bosses of those private monopolies vote themselves handsome packages whereas their employees are forced to tighten their belts and consumers must make ends meet. More often than not, they are not new people who have been attracted into those industries since privatisation but the same old faces who arc making a quick buck because there is nobody around to stop them doing so. That is the unacceptable face of capitalism.
The new clause simply seeks to make this area a little more transparent and open it up to public scrutiny. Parliament has a duty to monitor the operation of those 1447 share option schemes. Furthermore, I cannot see the argument against taxing share options as income. People have a right to know what is happening, how much a small number of very well-paid people are earning and what potential revenues are being lost to the public purse by the Government's refusal to tax share options as income. The new clause simply provides a new opportunity to put that information in the public domain.
The Government have claimed that those issues are the business of shareholders, and the hon. Member for Beaconsfield seemed to support that view. In a private monopoly that serves a vital public interest, such a contention is wrong. The Government have a responsibility to consider the interests of the general public, consumers and the environment. Shareholders could have greater opportunities to hold their utility bosses to account by electing a remuneration committee, to include people who are not on the board of directors. It could be told the pay and perks of individual board members and could vote on their remuneration.
The Government have a duty to act to safeguard the interests of taxpayers and consumers. Monopoly industries simply cannot be left to their own devices in the hope that, at some time in the future, some sort of competition will emerge.
Last week, we were lobbied by users and workers of the health and education services. The contrast between their situation and that of the people whom we are discussing tonight could not be more stark. It is a classic case of private greed against public need; of the interests of the many against the privileges of the few.
There is widespread public concern that the House and the Government have got their priorities badly wrong. The new clause provides the means of starting to undo that damage. We should start to hold the privatised utilities to public account. New clause 1 provides the foundation for doing so and I commend it to the House.
§ Mr. Clive Betts (Sheffield, Attercliffe)
I wonder whether Conservative Members will dare to venture out in the next few weeks to canvass during the local government elections. I wonder whether that possibility offers them any great opportunities or is a pleasant prospect to them.
The Financial Secretary to the Treasury might like to come to my constituency and knock on one or two doors. Perhaps he could introduce himself with the words, "I am here from the Government. I have come to help you." I am sure that one of the instinctive responses from the people he spoke to would be that they consider that the Government are extremely unfair. I am sure that the right hon. Gentleman would be offered many anecdotes to back up that instinct, but what would come out most strongly is how unfair people consider share option schemes and other pay excesses in the privatised utilities. People feel incensed about that. They feel that it is wrong and that the Government should do something about it.
People are angry because their basic sense of reasonableness has been offended by such excessive pay increases and share option schemes. They are angry that directors and the like are receiving mega sums of money, which those people could not possibly dream of, unless, perhaps, they won the lottery. People are also angry that 1448 the Government either do not want to, or cannot, do anything about those excesses—either way, people are angry.
People are aggrieved not only because their basic sense of fairness has been offended but because those excesses carry a basic hallmark of the Government and their policies—their inability to act. Week after week, the Prime Minister came to the Chamber and said that such share options were not the Government's responsibility. He said that the Government had merely been responsible for privatising the utilities and introducing the regulations that govern them. He claimed, however, that the Government were not responsible for share option schemes and other pay excesses. Then, suddenly, one Prime Minister's Question Time, in one sentence, the right hon. Gentleman sold a dummy that sent all his hon. Friends the wrong way, when he said that he was concerned about the issue. He had claimed that it was nothing to do with the Government and all to do with the utility companies and their directors, but, suddenly, he accepted that the issue caused him concern. He did not promise any action, however, but said that the Government would await the Greenbury report. That is unacceptable.
The Greenbury committee, however well intentioned, is equivalent to the captains of industry reporting on themselves. It is no substitute for the Government taking a view and proposing some measures to deal with the matter. It is almost as though a new word has entered the English language. In future, "to Greenbury" may mean to delegate an issue which one feels uncomfortable about and about which one has no real idea what to do, in the basic hope that it will go away.
That seems to be the Government's attitude. They feel uncomfortable about share options, but they have no idea what to do about them. They hope that if they refer the problem to some committee that will report some months later, the steam will go out of the issue and it will go away. In that way, they hope that they will not have to make any difficult choices.
That is not the public's reaction to share options. They are angry at the unfairness, because directors vote for such schemes for themselves. Those directors decide how much money they should award themselves. Most people do not feel that that is right, not least because the Government have created the circumstances by which directors can make such decisions. The public also believe that directors are voting themselves pay increases through share option schemes to reward themselves for doing precisely the same job as they did before their companies were privatised. That may not be true of every utility, but it is true of the water industry, whose chairmen and chief executives are doing precisely the same job, with no more competition than that to which they were subject before privatisation. Those individuals have voted pay awards for themselves.
Share option schemes do not represent an attempt to involve executives in the ownership of a company. They are not the means by which, in the long term, executives will receive genuine rewards for the way in which they have managed their company and because that company has become more efficient. Those share options are one-way tickets, because it is not possible to make a loss. If the share price goes down, the executives suffer no loss; they simply fail to make a windfall gain. That offends people, including many in industry who may have made 1449 arrangements in the past whereby they took a stake in a company as managers and directors. They lost as well as gained when share prices went down and up. Those individuals sat on a company board for a number of years and were genuinely responsible for the management and running of their company as part-owners of it. They benefited or lost accordingly. Share option schemes do not operate in the same way. They are one-way bets, which result in winners only and no losers. That offends people greatly.
I am sorry that the hon. Member for Beaconsfield (Mr. Smith) is not in his place, but today he repeated the argument he made in Committee about retained profits. I accept that they are an important means of investment, but as the Opposition made clear in Committee, the problem with this country is the low level of retained profits. Share option schemes are an incentive because, although the beneficiaries may not keep them for a long time—usually they sell them quickly to make a profit—executives are keen to pay out dividends to boost share prices in the short term. In that way, those executives make their gains by selling the shares that are part of their share option scheme packages. That is what they are all about. They are not an incentive to retain profits for investment.
Reasonable people are offended when they hear about cases like that of one of my constituents, whom I saw today. Mrs. Wells, from Darnall in my constituency, lives beside a brook. In the past few months, the river served by that brook has gone into full flow several times due to heavy rainfall, and when that happens, the brook becomes an open sewer. As it flows over my constituent's garden wall, it carries with it raw sewage, which then flows past my constituent's home. That pollutes the river, creates an awful smell and attracts rats, which have even entered her home.
My constituent has asked Yorkshire Water to invest sufficient money in its next five-year capital programme to deal with the problem, but it has said that it cannot afford to do so. It has told her that it does not have sufficient money from its retained profits to afford that. In the next five years, however, what Yorkshire Water will pay in share option schemes to its directors is more than it would cost it to make a modest investment to deal with the raw sewage that passes the home of someone who lives 50 yd from a major shopping centre. That is unacceptable. It is another reason for people's outrage and why they believe that share option schemes are grievously unfair and action is needed to tackle them.
The Labour party has made a number of basic proposals to deal with the problem, and that the Government could adopt if they were minded to. We have argued for greater disclosure. It is all right for Conservative Members to say that shareholders are told about share option schemes, but why were we treated to the performance of Cedric Brown before the Select Committee on Employment? He had to have his pay package extracted from him as if having teeth drawn without anaesthetic. He did not want to give that information and others have been embarrassed by what he said, because he was too up front. The name of the game has been to vote pay packages through in such a way that companies hope that no one notices what is going on. Nasty questions will thus be avoided. There must be a better system of disclosure.
1450 The Cadbury proposals must be extended, so that separate remuneration committees, made up of those who do not stand to benefit, vote for share option schemes. Basic reasonableness must be introduced into the system. It should be a basic tenet of the operation of such share schemes that the people who benefit from them do not vote for them. Go and ask the public about that. I do not believe that anyone would find one person in a hundred who felt that that proposal was unfair. Why do the Government not do something about that?
Why are not the schemes taxed as income? Conservative Members say that there is only £6,000 of untaxed income. Many people who live in my constituency do not earn £6,000 a year, let alone £6,000 of untaxed income. For many people, £6,000 is a great deal of money. When Conservative Members say that it is only £6,000, they badly misjudge public opinion.
Why should the regulator be worried about share option schemes? We have clearly demonstrated that they are linked to prices, profits and investment. They make up one package, and the Government have to adopt an opinion of the whole. The regulator has been given powers, which we believe need to be extended.
The new clause is fundamentally mild and moderate. As my hon. Friend the Member for Barking (Ms Hodge) said, it is reasonable and moderate. We have not asked for all the things that we have said need to be done. We ask only that a report be made to the House to let the House know precisely what is going on and what is the impact of those schemes; whether, in total, the Exchequer and the British public gain or lose from those schemes.
We have already had a clear demonstration that the Government are incapable of acting on the issue. Are they now also incapable of providing information about it? Or is it not their capacity that is in doubt, but their desire to produce a report on that issue? Are they so embarrassed about it that they want to avoid further debate? If that is the case, people will not judge them kindly for their disgraceful attitude towards the issue. The Government should be prepared to produce a report and let the people know precisely what is going on.
§ Mr. Sutcliffe
This issue is not about greed, envy or even political advantage, as the hon. Member for Wirral, South (Mr. Porter) suggested. It is about fairness and equity. Every Conservative Member who has spoken has recognised that the problem exists, but none has come up with a solution.
It will be interesting to hear the way in which the Financial Secretary to the Treasury replies to the debate. I hope that he will not push us to one side and tell us to wait for the Greenbury recommendations. I hope that he will tackle the issue because, if the regulator cannot consider the matter, the only organisation that can consider it is the Inland Revenue, via the tax system, and that is where the Minister's responsibility lies.
It is patently unfair that executives of privatised utilities make large sums when they are devoting no more effort to their work than they did when they worked for public utilities that benefited everyone. When those public utilities were privatised, the Government said that they would be privatised for the greater good and that many people would benefit. That was not the case. In that respect, we have witnessed the classic unfairness that has become a trademark of this Government.
1451 The Government recognise the problem. They say that the money does not matter, but those people have benefited to the tune of £150 million. The hon. Member for Milton Keynes, South-West (Mr. Legg) said that 36,000 people in British Gas also have share option schemes. They do, but those share option schemes are usually "buy one, get one free" schemes, in which people have to invest their own money and take the risks. The executives have taken no risks and made no investment.
I hope that the Financial Secretary, who is very eloquent and who has been eloquent in Committee, will give the answer for the Government. It is no good the Prime Minister recognising that there is a problem but not suggesting a solution. Lei us have it. Will the Government tell us what they will do about those abuses, or shall we hear nothing from the Government, as we forecast? That is patently unfair. It is not a party political issue. People throughout the spectrum are upset about those abuses, and it is about time that the Government did something about them.
§ Mr. Ian Pearson (Dudley, West)
I extend a warm welcome to my hon. Friend the Member for Walsall, North (Mr. Winnick) and assure him, as a fellow Member of Parliament for the black country, that the anger and disgust felt about discretionary share option schemes among the private utilities is as strong and severe in Dudley, West as it is in Walsall.
Let me say at once that the directors of private utilities have done nothing illegal. All that they have done is to join the club, albeit with gathering haste in some cases. I suppose that it is the modern equivalent of the key to the executive washroom. It is the key to the executive dosh room of cosy remuneration committees, offering sybaritic salary perks to directors for what they should be doing anyway, which is acting in the best interests of their companies.
We have to draw a distinction between legislation pertaining to the privatised utilities and legislation relating to companies that are subject to the full forces of market competition, but what is basically at fault is some very lax legislation as regards Inland Revenue-approved executive share option schemes. Those schemes offer a perk because, rather than income tax, capital gains tax is payable on share options, which can be deferred almost indefinitely. Those schemes also offer an extremely generous treatment whereby share options up to the level of four times inflated salaries can be awarded to directors and senior executives.
Only the few benefit. We have heard talk about 36,000 people in British Gas who benefit from share-linked option schemes. The directors of British Gas who benefit from share-linked option schemes—they obviously have far greater schemes than any of the individual employees—have benefited to the tune of about 50,000 shares. Contrast that with their discretionary share options, whereby they have been awarded 1.3 million shares. That shows the scale of difference between properly organised share incentive schemes and executive share option schemes, which are a one-way bet and a perk to directors.
One fact that has not been fully discussed in the debate but that has merit is that discretionary share option schemes can provide some benefit to consumers who have 1452 pensions that are invested in those companies, and who therefore benefit from the increase in the share price. That has been mentioned by some Conservative Members.
Hon. Members on both sides of the House must recognise that there is tension between the interests of two groups of people. On one hand, consumers whose pensions may be invested in share option schemes may benefit because directors are given an incentive and are focused on improving share performance. On the other, consumers may suffer from the consequences when certain companies are run in an aggressively short-term profit-maximising way in a deliberate attempt to boost the share price and thereby increase directors' income. That is one of the reasons why a report is very much needed, because there are potential benefits as well as the extreme costs of executive share option schemes of which we are all aware.
It is important to recognise the practical difficulties when Conservative Members speak of the need to enfranchise the people who stand behind shareholders. The shareholders of most of the private utilities are very much the shareholding institutions. I do not know how I, as a personal pension plan holder before I came to the House, could talk to the person who sold me a pension and say, "By the way, can you talk to someone who can talk to someone who can ensure that, at the next annual general meeting, you vote against those discretionary share options?" Similarly, I do not think that the House of Commons Members' pension scheme can exercise any reasonable legitimate influence on those companies at annual general meetings.
The hon. Member for Beaconsfield (Mr. Smith) has a good idea in trying to enfranchise those who stand behind shareholders, but I can envisage no practicable means by which that can be exercised.
§ Mr. Tim Smith
As an example of what already happens, we already have ethical investment and unit trusts. An individual can choose to invest in one of those trusts because it has, for example, made a policy decision not to invest in tobacco companies, drinks companies or whatever.
§ Mr. Pearson
I am well aware of ethical investment trusts and I have been pleased to note that their share fund performance has in many instances outperformed those of unit trusts that invest in a broader spectrum of companies without imposing those narrow criteria. I do not think that the hon. Member for Beaconsfield is seriously suggesting that shareholder pressure can operate in a broader sense against executive share option schemes, other than in those limited ethical considerations.
The simple fact is that a report is needed badly to investigate why directors of privatised utilities need executive share options at extremely lucrative levels to do what they should be doing anyway—acting in the best interests of their company—and why, as my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) said, it can be right and reasonable that a director needs a £700,000 package to make him improve his performance when his staff are expected to accept a 3 per cent. wage cut to encourage them to increase their performance. That cannot be right.
§ Sir George Young
During the debate on new clause 1, Opposition Members have focused on what they perceive to be excesses resulting from the privatisation of 1453 the utilities. That part of the debate has been rather narrow. They have argued that consumers and taxpayers have been disadvantaged. If one stands back and looks at the policy as a whole, that is demonstrably not the case.
To begin with, let us take, for example, the interests of taxpayers. When we came into office, taxpayers were losing about £50 million a week through funds invested through the nationalised industries. From the industries that we have privatised, we are now getting £50 million a week coming in, so there has been a massive turnaround in the fortunes of the nationalised industries.
The figures which concern the taxpayer totally dwarf some of the figures mentioned in this debate. Before 1979, by and large, prices for consumers were going up and, by and large, they are now going down. The case on which new clause 1 is founded—that there has been some disadvantage to taxpayers and consumers through privatising the utilities—simply does not stand up to any examination at all.
What I found more worrying about the speeches of Opposition Members, with the exception of that from the hon. Member for Monklands, East (Mrs. Liddell), was that nobody touched on the principle of whether it was worth trying to link the fortunes of a company and its shareholders with the interests of senior executives. I believe that there is a case for bridging the gap between employers and shareholders by promoting executive option schemes and the hon. Member for Monklands, East recognised it. The whole tone of the debate was critical of the principle of share option schemes for senior executives. To put the matter in some perspective, the average value of shares covered by executive share option schemes is £22,000, not the exorbitant figures mentioned by some hon. Members.
The hon. Member for Oxford, East (Mr. Smith) began by demanding action. If one looks at new clause 1, one sees that it would not produce any action at all, it would produce a report. I shall say in a moment why I do not believe that that report is necessary. I was pleased to hear that, instead of using the figures that the shadow Chancellor, the hon. Member for Dunfermline, East (Mr. Brown) has sometimes used, the hon. Member for Oxford, East used the figure of £60 million as the cost of executive share option schemes and abandoned the more extravagant claims which we have sometimes heard. The hon. Gentleman accused the Government of subcontracting their policy on this matter to the Greenbury committee—we are certainly not doing that—and he then subcontracted most of his speech to Paul Foot.
Our case is that the system has worked well for consumers. Consider what has happened to the caps. The regulators, by and large, have tightened the caps post-privatisation. BT started off at a retail prices index of minus 3 per cent. and it is now minus 7.5 per cent.
I was grateful for the speech of my hon. Friend the Member for Wirral, South (Mr. Porter). His views contrasted with what was said by the right hon. Member for Copeland (Dr. Cunningham), who believes that the regulator should intervene and said that he wanted him to interfere, regardless of whether that makes any difference to consumers' bills. The reality is that many Opposition Members are interested only in the politics of envy, regardless of any benefit to the consumer.
1454 The hon. Member for Walsall, North (Mr. Winnick) made two points on which I want to touch. One of them was replicated by the hon. Member for Sheffield, Attercliffe (Mr. Betts). The hon. Member for Walsall, North alleged that those who now run the privatised utilities are doing the same work as before. That simply is not the case. I speak as someone who once worked for a nationalised industry. When industries are nationalised, Ministers and civil servants take a large number of the decisions, such as those about the size of the investment programme.
The nationalised industries were overmanned and not particularly well run. They certainly did very little exporting. So it is not the case that those who now run the privatised utilities are doing exactly the same work as those who ran them before. I was delighted, however, to see the hon. Member for Walsall, North back after a spell away. He was looking much better at the end of his speech than at the beginning, so I assume that that is some part of his therapy in which it was a pleasure to take part.
My hon. Friend the Member for Beaconsfield (Mr. Smith) rightly posed the question of why we should pick out the privatised utilities. Why single them out? They are in the private sector. There is no case in principle why they should have a different regime to other industries in the private sector.
§ Mr. David Shaw (Dover)
My right hon. Friend will have noticed that I tabled an amendment to the new clause. Why does he think that the Opposition are moving this new clause, which hits home at the directors and executives in the privatised utilities, but ignores other directors, especially those in the broadcasting industry, such as the directors of London Weekend Television who had lavish pay-outs on their share options and then donated a large part of them to the Labour leader's leadership campaign? Is there some preference between the Labour leader's election campaign and the fact that executives may be benefiting by helping the nation?
§ Sir George Young
If my hon. Friend's amendment had been in order, I would, of course, have been able to answer that question. As it is, the House will just have to guess what the answer might have been.
My hon. Friend the Member for Beaconsfield also rightly made the point that the shareholders bear the cost of executive share options. It is they who are agreeing to diluting their interest in the company by allowing others to buy shares in the company at a preferential price. He made the point that the consumers benefit. He also said that one should examine the role of competition as an extra dimension in bringing pressure to hear on prices. In the Gas Bill, which is going through the House, we are implementing that principle.
The hon. Member for Monklands, East implied that the options were transferable to a spouse. They are not. She may have been alluding to the possibility of transferring the shares after the option has been exercised, but that is not what she said.
The House will not be surprised to hear that I cannot advise hon. Members to accept the new clause. The Inland Revenue publishes annually figures of the Exchequer costs for past years of the various tax-relieved employee financial participation schemes, including executive share option schemes. The Revenue does not break those global cost figures down between particular groups of companies and I see no good policy reason why it should.
1455 In any event, there is a considerable amount of relevant information in the public domain. Companies are required by the Companies Act 1985 to maintain a register, which anyone can inspect, in which details of directors' interests in the companies' shares must be recorded. Where the scheme involves the issue of new shares, the register must show the number of shares under option, the period during which the option is exercisable and the exercise price. When options are exercised, it must be also be recorded in the register. The company is also obliged by law to list in its annual report or accounts the interests of its directors in the company's shares.
The stock exchange listing rules require listed companies to obtain shareholder approval at an annual general meeting for any share option schemes that involve or may involve the issue of new shares. The rules also require companies to give details to the stock exchange of all directors' share option schemes and of directors' interests in the company's shares. Much of the information mentioned in the new clause is already in the public domain. In any event, I see no basis on which the Inland Revenue could be expected to estimate the future cost of those schemes, as is required in the new clause.
Share option schemes are intended to enable companies to motivate key executives and the aim is to improve company profitability and so to benefit all shareholders, including, as was made clear in the debate, pensioners. As I said when we debated this subject in Committee, we need to remember that the main cost of such schemes falls properly on those who chiefly benefit from them—the companies and their shareholders. They carry the principal cost, not the customer nor, indeed, the taxpayer.
Tax relief schemes can be designed to link the exercise of options directly with performance. I welcome the fact that it is increasingly recognised as best practice for companies to ensure that the exercise of options depends on the attainment of tough performance targets. A recent survey found that 90 per cent. of companies floated last year intend to set targets. Indeed, the institutional investors, the Association of British Insurers and the National Association of Pension Funds, insist that it is fundamental to the exercise of options that they be subject to a realistic measure of management performance, as that is in the best interests of the company, its shareholders, customers and employees.
My right hon. Friend the Prime Minister said a few weeks ago that bonuses and share options should be based on the performance of a company, and that stricter criteria may be required for the price at which shares are issued and for the circumstances in which they are exercised. All those matters are currently being examined by Sir Richard Greenbury's committee, whose report we await.
We have no quarrel with the idea that executives should be asked to deliver enhanced performance if they are to enjoy the benefits that share options can bring, but it is as well to remember that, unless the people at the top pull their weight and achieve good results, no one wins. If the company does not do well and the share price fails to rise, options deliver no rewards to the executives who hold them.
My right hon. Friend the Prime Minister noted that the recommendations of the committee would be addressed to companies and shareholders, but he has also said that the Government would be ready to consider any proposals 1456 that might require legislative back-up. In short, we shall be considering further the whole question of executive remuneration—including share options—in the light of the committee's findings.
I conclude by reminding the House that, under the last Labour Government, electricity prices rose by 2 per cent. every six weeks. Under this Government, they have fallen. The House now needs to ask itself: under which management regime do consumers really prosper? Our case is that they prosper under ours. Consequently I invite the House to reject new clause 1.
§ Mr. Andrew Smith
I should like to acknowledge the powerful arguments made by my hon. Friends the Members for Monklands, East (Mrs. Liddell), for Stoke-on-Trent, South (Mr. Stevenson), for Barking (Ms Hodge), for Sheffield, Attercliffe (Mr. Betts), for Dudley, West (Mr. Pearson) and for Bradford, South (Mr. Sutcliffe). I warmly welcome back to the Chamber our hon. Friend the Member for Walsall, North (Mr. Winnick). It was good to see him making a characteristically robust contribution to the debate.
Replying to the debate, the Financial Secretary spent more time attempting to defend privatisation than defending the—admittedly indefensible—abuses of executive share options. In that respect he differed from the hon. Members for Wirral, South (Mr. Porter) and for Beaconsfield (Mr. Smith), who at least acknowledged that there was a problem and that something needed to be done. They must have been as disappointed as we were not to hear any promise of Government action.
The Minister did not deal with the case that my hon. Friends have made. Action is needed on the ground of fairness, and because of our responsibility for taxpayers' money. It is especially needed in the case of the privatised utilities because of their ability to exploit their monopolies and because of the fact that their share options are a one-way bet.
Having said that the Government were not subcontracting their policy on this matter to the Greenbury committee, the Financial Secretary proceeded to do just that: he said that action would follow Greenbury. That is not good enough. I commend our new clause to the House. Let us show the public that we want to act against these outrageous abuses of share options.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 244, Noes 283.1460
|Division No. 123]||[7.03 pm|
|Abbott, Ms Diane||Benn, Rt Hon Tony|
|Adams, Mrs Irene||Bennett, Andrew F|
|Ainger, Nick||Benton, Joe|
|Ainsworth, Robert (Cov'try NE)||Bermingham, Gerald|
|Allen, Graham||Berry, Roger|
|Alton, David||Betts, Clive|
|Anderson, Donald (Swansea E)||Blair, Rt Hon Tony|
|Anderson, Ms Janet (Ros'dale)||Blunkett, David|
|Armstrong, Hilary||Boateng, Paul|
|Ashton, Joe||Bradley, Keith|
|Austin-Walker, John||Bray, Dr Jeremy|
|Banks, Tony (Newham NW)||Brown, Gordon (Dunfermline E)|
|Barron, Kevin||Brown, N (N'c'tle upon Tyne E)|
|Battle, John||Burden, Richard|
|Bayley, Hugh||Byers, Stephen|
|Beckett, Rt Hon Margaret||Caborn, Richard|
|Beith, Rt Hon A J||Callaghan, Jim|
|Campbell, Mrs Anne (C'bridge)||Howells, Dr. Kim (Pontypridd)|
|Campbell, Menzies (Fife NE)||Hoyle, Doug|
|Canavan, Dennis||Hughes, Robert (Aberdeen N)|
|Cann, Jamie||Hughes, Roy (Newport E)|
|Chidgey, David||Hughes, Simon (Southwark)|
|Chisholm, Malcolm||Hutton, John|
|Church, Judith||Illsley, Eric|
|Clapham, Michael||Jackson, Glenda (H'stead)|
|Clark, Dr David (South Shields)||Jackson, Helen (Shef'ld, H)|
|Clarke, Eric (Midlothian)||Jamieson, David|
|Clarke, Tom (Monklands W)||Janner, Greville|
|Clelland, David||Jones, Barry (Alyn and D'side)|
|Clwyd, Mrs Ann||Jones, leuan Wyn (Ynys Mon)|
|Coffey, Ann||Jones, Lynne (B'ham S O)|
|Cook, Frank (Stockton N)||Jones, Martyn (Clwyd, SW)|
|Cook, Robin (Livingston)||Jones, Nigel (Cheltenham)|
|Corbett, Robin||Jowell, Tessa|
|Corbyn, Jeremy||Kaufman, Rt Hon Gerald|
|Corston, Jean||Keen, Alan|
|Cousins, Jim||Kennedy, Jane (Lpool Brdgn)|
|Cunliffe, Lawrence||Khabra, Piara S|
|Cunningham, Jim (Covy SE)||Kilfoyle, Peter|
|Dalyell, Tam||Lestor, Joan (Eccles)|
|Darling, Alistair||Lewis, Terry|
|Davidson, Ian||Liddell, Mrs Helen|
|Davies, Bryan (Oldham C'tral)||Litherland, Robert|
|Davies, Rt Hon Denzil (Llanelli)||Lloyd, Tony (Stretford)|
|Davies, Ron (Caerphilly)||Lynne, Ms Liz|
|Denham, John||McAllion, John|
|Dewar, Donald||McAvoy, Thomas|
|Dixon, Don||McCartney, Ian|
|Dobson, Frank||McCrea, The Reverend William|
|Donohoe, Brian H||McFall, John|
|Dowd, Jim||McKelvey, William|
|Dunnachie, Jimmy||Mackinlay, Andrew|
|Dunwoody, Mrs Gwyneth||Maclennan, Robert|
|Eagle, Ms Angela||McMaster, Gordon|
|Eastham, Ken||MacShane, Denis|
|Etherington, Bill||McWilliam, John|
|Ewing, Mrs Margaret||Madden, Max|
|Field, Frank (Birkenhead)||Maddock, Diana|
|Fisher, Mark||Mahon, Alice|
|Flynn, Paul||Mandelson, Peter|
|Foster, Rt Hon Derek||Marek, Dr John|
|Foster, Don[...]||Marshall, David (Shettleston)|
|Fraser, John||Marshall, Jim (Leicester, S)|
|Fyfe, Maria||Martlew, Eric|
|Galloway, George||Maxton, John|
|Gapes, Mike||Meacher, Michael|
|Garrett, John||Meale, Alan|
|George, Bruce||Michael, Alun|
|Gerrard, Neil||Michie, Bill (Sheffield Heeley)|
|Gilbert, Rt Hon Dr John||Michie, Mrs Ray (Argyll & Bute)|
|Godman, Dr Norman A||Milburn, Alan|
|Godsiff, Roger||Miller, Andrew|
|Golding, Mrs Llin||Moonie, Dr Lewis|
|Gordon, Mildred||Morgan, Rhodri|
|Graham, Thomas||Morley, Elliot|
|Grant, Bernie (Tottenham)||Morris, Rt Hon Alfred (Wy'nshawe)|
|Griffiths, Win (Bridgend)||Morris, Estelle (B'ham Yardley)|
|Grocott, Bruce||Morris, Rt Hon John (Aberavon)|
|Gunnell, John||Mowlam, Marjorie|
|Hain, Peter||Mudie, George|
|Hall, Mike||Mullin, Chris|
|Hanson, David||Murphy, Paul|
|Harvey, Nick||Oakes, Rt Hon Gordon|
|Hattersley, Rt Hon Roy||O'Brien, Mike (N W'kshire)|
|Henderson, Doug||O'Brien, William (Normanton)|
|Heppell, John||O'Hara, Edward|
|Hill, Keith (Streatham)||Olner, Bill|
|Hinchliffe, David||O'Neill, Martin|
|Hodge, Margaret||Orme, Rt Hon Stanley|
|Hoey, Kate||Parry, Robert|
|Home Robertson, John||Pearson, Ian|
|Hoon, Geoffrey||Pendry, Tom|
|Howarth, George (Knowsley North)||Pickthall, Colin|
|Pike, Peter L||Steel, Rt Hon Sir David|
|Pope, Greg||Steinberg, Gerry|
|Powell, Ray (Ogmore)||Stevenson, George|
|Prentice, Gordon (Pendle)||Stott, Roger|
|Prescott, Rt Hon John||Strang, Dr. Gavin|
|Primarolo, Dawn||Straw, Jack|
|Purchase, Ken||Sutcliffe, Gerry|
|Quin, Ms Joyce||Taylor, Mrs Ann (Dewsbury)|
|Radice, Giles||Taylor, Matthew (Truro)|
|Randall, Stuart||Tipping, Paddy|
|Raynsford, Nick||Turner, Dennis|
|Redmond, Martin||Tyler, Paul|
|Reid, Dr John||Vaz, Keith|
|Robinson, Geoffrey (Co'try NW)||Walker, Rt Hon Sir Harold|
|Roche, Mrs Barbara||Walley, Joan|
|Rogers, Allan||Wardell, Gareth (Gower)|
|Rooker, Jeff||Wareing, Robert N|
|Rooney, Terry||Watson, Mike|
|Ross, Ernie (Dundee W)||Wicks, Malcolm|
|Rowlands, Ted||Wigley, Dafydd|
|Ruddock, Joan||Williams, Rt Hon Alan (Sw'n W)|
|Sedgemore, Brian||Williams, Alan W (Carmarthen)|
|Sheerman, Barry||Winnick, David|
|Sheldon, Rt Hon Robert||Wise, Audrey|
|Shore, Rt Hon Peter||Worthington, Tony|
|Skinner, Dennis||Wray, Jimmy|
|Smith, Andrew (Oxford E)||Young, David (Bolton SE)|
|Smith, Chris (Isl'ton S & F'sbury)|
|Smith, Llew (Blaenau Gwent)||Tellers for the Ayes:|
|Soley, Clive||Mr. John Cummings and|
|Spellar, John||Mr. Jon Owen Jones.|
|Ainsworth, Peter (East Surrey)||Carlisle, Sir Kenneth (Lincoln)|
|Aitken, Rt Hon Jonathan||Carrington, Matthew|
|Alexander, Richard||Carttiss, Michael|
|Alison, Rt Hon Michael (Selby)||Channon, Rt Hon Paul|
|Allason, Rupert (Torbay)||Chapman, Sydney|
|Ancram, Michael||Clappison, James|
|Arbuthnot, James||Clark, Dr Michael (Rochford)|
|Arnold, Jacques (Gravesham)||Clarke, Rt Hon Kenneth (Ru'clif)|
|Arnold, Sir Thomas (Hazel Grv)||Clifton-Brown, Geoffrey|
|Ashby, David||Coe, Sebastian|
|Atkins, Robert||Colvin, Michael|
|Atkinson, Peter (Hexham)||Congdon, David|
|Baker, Rt Hon Kenneth (Mole V)||Conway, Derek|
|Baker, Nicholas (North Dorset)||Coombs, Anthony (Wyre For'st)|
|Baldry, Tony||Coombs, Simon (Swindon)|
|Banks, Matthew (Southport)||Cope, Rt Hon Sir John|
|Banks, Robert (Harrogate)||Cormack, Sir Patrick|
|Bates, Michael||Couchman, James|
|Batiste, Spencer||Cran, James|
|Bellingham, Henry||Currie, Mrs Edwina (S D'by'ire)|
|Bendall, Vivian||Curry, David (Skipton & Ripon)|
|Beresford, Sir Paul||Davies, Quentin (Stamford)|
|Biffen, Rt Hon John||Davis, David (Boothferry)|
|Bonsor, Sir Nicholas||Day, Stephen|
|Booth, Hartley||Dicks, Terry|
|Boswell, Tim||Douglas-Hamilton, Lord James|
|Bottomley, Peter (Eltham)||Dover, Den|
|Bottomley, Rt Hon Virginia||Duncan, Alan|
|Bowden, Sir Andrew||Duncan-Smith, Iain|
|Bowis, John||Dunn, Bob|
|Boyson, Rt Hon Sir Rhodes||Durant, Sir Anthony|
|Brandreth, Gyles||Eggar, Rt Hon Tim|
|Brazier, Julian||Elletson, Harold|
|Bright, Sir Graham||Emery, Rt Hon Sir Peter|
|Brooke, Rt Hon Peter||Evans, Jonathan (Brecon)|
|Brown, M (Brigg & Cl'thorpes)||Evans, Nigel (Ribble Valley)|
|Browning, Mrs Angela||Evans, Roger (Monmouth)|
|Bruce, Ian (Dorset)||Evennett, David|
|Budgen, Nicholas||Faber, David|
|Burns, Simon||Fabricant, Michael|
|Burt, Alistair||Field, Barry (Isle of Wight)|
|Butler, Peter||Fishburn, Dudley|
|Carlisle, John (Luton North)||Forman, Nigel|
|Forsyth, Rt Hon Michael (Stirling)||Luff, Peter|
|Forth, Eric||Lyell, Rt Hon Sir Nicholas|
|Fowler, Rt Hon Sir Norman||MacGregor, Rt Hon John|
|Fox, Dr Liam (Woodspring)||MacKay, Andrew|
|Fox, Sir Marcus (Shipley)||Maclean, David|
|Freeman, Rt Hon Roger||McLoughlin, Patrick|
|French, Douglas||McNair-Wilson, Sir Patrick|
|Fry, Sir Peter||Maitland, Lady Olga|
|Gale, Roger||Malone, Gerald|
|Gallie, Phil||Mans, Keith|
|Gardiner, Sir George||Marland, Paul|
|Garel-Jones, Rt Hon Tristan||Marshall, John (Hendon S)|
|Garnier, Edward||Martin, David (Portsmouth S)|
|Gill, Christopher||Mellor, Rt Hon David|
|Gillan, Cheryl||Merchant Piers|
|Goodlad, Rt Hon Alastair||Mills, Iain|
|Goodson-Wickes, Dr Charles||Mitchell, Andrew (Gedling)|
|Gorman, Mrs Teresa||Mitchell, Sir David (NW Hants)|
|Gorst, Sir John||Moate, Sir Roger|
|Grant, Sir A (SW Cambs)||Monro, Sir Hector|
|Greenway, Harry (Ealing N)||Montgomery, Sir Fergus|
|Greenway, John (Ryedale)||Moss, Malcolm|
|Griffiths, Peter (Portsmouth, N)||Needham, Rt Hon Richard|
|Gummer, Rt Hon John Selwyn||Nelson, Anthony|
|Hague, William||Neubert, Sir Michael|
|Hamilton, Rt Hon Sir Archibald||Newton, Rt Hon Tony|
|Hamilton, Neil (Tatton)||Nicholls, Patrick|
|Hampson, Dr Keith||Nicholson, David (Taunton)|
|Hanley, Rt Hon Jeremy||Nicholson, Emma (Devon West)|
|Hannam, Sir John||Norris, Steve|
|Haselhurst, Alan||Onslow, Rt Hon Sir Cranley|
|Hawkins, Nick||Oppenheim, Phillip|
|Hawksley, Warren||Ottaway, Richard|
|Hayes, Jerry||Page, Richard|
|Heald, Oliver||Paice, James|
|Heathcoat-Amory, David||Patnick, Sir Irvine|
|Hendry, Charles||Patten, Rt Hon John|
|Higgins, Rt Hon Sir Terence||Pattie, Rt Hon Sir Geoffrey|
|Hill, James (Southampton Test)||Peacock, Mrs Elizabeth|
|Hogg, Rt Hon Douglas (G'tham)||Pickles, Eric|
|Horam, John||Porter, Barry (Wirral S)|
|Hordern, Rt Hon Sir Peter||Porter, David (Waveney)|
|Howard, Rt Hon Michael||Portillo, Rt Hon Michael|
|Howarth, Alan (Strat'rd-on-A)||Powell, William (Corby)|
|Howell, Rt Hon David (G'dford)||Rathbone, Tim|
|Howell, Sir Ralph (N Norfolk)||Redwood, Rt Hon John|
|Hughes, Robert G (Harrow W)||Renton, Rt Hon Tim|
|Hunt, Rt Hon David (Wirral W)||Richards, Rod|
|Hunt, Sir John (Ravensbourne)||Riddick, Graham|
|Hunter, Andrew||Rifkind, Rt Hon Malcolm|
|Jack, Michael||Robathan, Andrew|
|Jackson, Robert (Wantage)||Roberts, Rt Hon Sir Wyn|
|Jenkin, Bernard||Robertson, Raymond (Ab'd'n S)|
|Johnson Smith, Sir Geoffrey||Robinson, Mark (Somerton)|
|Jones, Gwilym (Cardiff N)||Roe, Mrs Marion (Broxbourne)|
|Jones, Robert B (W Hertfdshr)||Rowe, Andrew (Mid Kent)|
|Jopling, Rt Hon Michael||Rumbold, Rt Hon Dame Angela|
|Kellett-Bowman, Dame Elaine||Ryder, Rt Hon Richard|
|Key, Robert||Sackville, Tom|
|King, Rt Hon Tom||Sainsbury, Rt Hon Sir Timothy|
|Knapman, Roger||Scott, Rt Hon Sir Nicholas|
|Knight, Mrs Angela (Erewash)||Shaw, David (Dover)|
|Knight, Greg (Derby N)||Shaw, Sir Giles (Pudsey)|
|Knight, Dame Jill (Bir'm E'st'n)||Shephard, Rt Hon Gillian|
|Knox, Sir David||Shepherd, Colin (Hereford)|
|Kynoch, George (Kincardine)||Shepherd, Richard (Aldridge)|
|Lait, Mrs Jacqui||Shersby, Michael|
|Lang, Rt Hon Ian||Sims, Roger|
|Lawrence, Sir Ivan||Skeet, Sir Trevor|
|Legg, Barry||Smith, Tim (Beaconsfield)|
|Lennox-Boyd, Sir Mark||Soames, Nicholas|
|Lester, Jim (Broxtowe)||Spencer, Sir Derek|
|Lidington, David||Spicer, Sir James (W Dorset)|
|Lightbown, David||Spicer, Michael (S Worcs)|
|Lilley, Rt Hon Peter||Spink, Dr Robert|
|Lloyd, Rt Hon Sir Peter (Fareham)||Spring, Richard|
|Sproat, Iain||Trend, Michael|
|Squire, Robin (Hornchurch)||Twinn, Dr Ian|
|Stanley, Rt Hon Sir John||Vaughan, Sir Gerard|
|Steen, Anthony||Waldegrave, Rt Hon William|
|Stephen, Michael||Walden, George|
|Stem, Michael||Walker, Bill (N Tayside)|
|Stewart, Allan||Waller, Gary|
|Streeter, Gary||Wardle, Charles (Bexhill)|
|Sumberg, David||Waterson, Nigel|
|Sweeney, Walter||Watts, John|
|Sykes, John||Wells, Bowen|
|Tapsell, Sir Peter||Whitney, Ray|
|Taylor, Ian (Esher)||Whittingdale, John|
|Taylor, John M (Solihull)||Widdecombe, Ann|
|Taylor, Sir Teddy (Southend, E)||Wiggin, Sir Jerry|
|Temple-Morris, Peter||Winterton, Mrs Ann (Congleton)|
|Thomason, Roy||Wolfson, Mark|
|Thompson, Sir Donald (C'er V)||Wood, Timothy|
|Thompson, Patrick (Norwich N)||Yeo, Tim|
|Thornton, Sir Malcolm||Young, Rt Hon Sir George|
|Townsend, Cyrll D (Bexl'yh'th)||Tellers for the Noes:|
|Tracey, Richard||Mr. Timothy Kirkhope and|
|Tredinnick, David||Mr. David Willetts.|
§ Question accordingly negatived.