INVESTMENT POWERS: DUTIES OF TRUSTEES

HC Deb 05 July 1995 vol 263 cc396-427

'(1) Trustees or managers of a scheme shall, in relation to investments held by the scheme —

1. (a) make available to scheme members a statement of policy on the exercise of shareholder voting,
2. (b) maintain records of shareholder voting,
3. (c) permit the inspection by a scheme member of the voting records described in subsection (b), within 21 days of the date of a written request to trustees, and
4. (d) provide to a scheme member within 21 days of the date of a written request a copy of all or part of the shareholder voting record.'.—[Mr. Dewar.]

Brought up, and read the First time.

4.30 pm

Mr. Donald Dewar (Glasgow, Garscadden)

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

Mr. Deputy Speaker (Mr. Michael Morris)

With this, it will be convenient to discuss also the following: Government amendments Nos. 36 and 38 to 50.

Amendment No. 13, in clause 47, page 30, line 21, leave out 'may' and insert 'must'.

Mr. Dewar

This is a debate on quite an important issue by any standards; in fact, I am not clear why I used the word "quite"—perhaps it is innate moderation. It is an extremely important issue which generated a great deal of anger as certain events in industry and commerce were deeply resented by a wide cross-section of the public, and indeed, of informed and technical opinion.

The new clause addresses the issue of corporate governance. A great deal has been said about that in recent times, but it should be brought before the House during our consideration of the Pensions Bill. As anyone who has examined the facts and figures will recognise, pension funds hold a special place because of their growing financial muscle, which has built up spectacularly in recent years.

Much of the present discontent has been highlighted by one or two spectacular cases. British Gas attracted an enormous amount of publicity and Mr. Cedric Brown became famous. In my view, no reasonable man would want such fame, although there may be private consolations when he inspects his bank balance. Those cases have done a great deal to damage public confidence.

During the passage of the Pensions Bill, we spoke learnedly about the impact of the Maxwell case and what it has done to shake confidence in the management and solidity of pension funds. I do not want to exaggerate, but some recent instances, particularly those concerning private utilities, and the way in which managers have used their muscle and their privileged position to award themselves startling increases in salary and perks have made a profound impression on the public. If I lived in the City, worked in the City and lived on the City, I would be concerned about some of the public responses and the evident worry.

It is not just poor Mr. Brown and British Gas. In some ways, it is more alarming when people who are given the opportunity to enrich themselves do it with vim and vigour, although the chance arose simply through privatisation and not because of some great entrepreneurial skill that has driven out a new platform of economic activity and the opportunity to contribute to national growth.

The national grid might be a example of that. The existing operation ran on under new colours, but those colours provided the opportunity to move very fast in the direction of self-aggrandisement. I do not intend to make a lengthy speech about that aspect. I draw it to the attention of the House because it is a matter of particular sensitivity, but I have no doubt that the arguments can be rehearsed on other occasions.

The foregoing is symptomatic of a much wider problem of which the Secretary of State will be well aware. These days I read the Financial Times regularly. It reports pensions news and related issues in a detail that other papers cannot match. Reading it every day, I have been struck by the number of times I have come across details, now routinely reported, of the emoluments of chief executives and directors of public companies. It is clear that there are now people who are able, out of earned income, to build up significant capital fortunes in a way that some of us would have though inconceivable only 10 or 12 years ago.

Sometimes there are other perquisites, such as pension contributions which outrage common sense, and share options which yield profits comparable to a decent-sized win in the national lottery. I do not want to give the impression—I realise it is likely that the Secretary of State will charge me with this—that I am opposed to reward for initiative. If people work hard, if they have special talents or if they produce special results, that will and ought to be reflected in their earnings and their rewards. That is an inevitable part of the system; I do not protest against it. I am trying to put the case in comparatively low-key terms because I do not want to end up in a slanging match with Conservative Members over what they would describe as the politics of envy. That would not take the argument much further.

I am sure that Ministers will accept, however, that certain cases have raised eyebrows and that there is a worry which is widely reflected right across the sweep of industry and of those who comment on industrial and commercial matters. I wish here to use the words "offensive" in a justified but not excitable fashion. I find it offensive to see rolling contracts extending over a number of years. They mean that if someone has to go because he has not been a success or has not delivered as expected, he is paid sums which seem extraordinary to me—I was going to say "to you", Mr. Deputy Speaker, but that would be an impertinence on my part; I do not know how broad your vision of these matters may be—given that he is paid them simply because he has not succeeded in his job.

I am happy to recognise that worth must be rewarded, but the argument that firms are only paying the market rate has set in motion a ratchet phenomenon, whereby each supports the other and the ante goes up endlessly. There is genuine scope for abuse here. But I also recognise that this is not all about pay and executive perks. That would be a rather narrow basis on which to conduct the argument.

As I have said, we come across extraordinary examples in the papers. I, for instance, have been watching the activities of Mr. Sorrell of Wire Packaging and Plastic with considerable interest. At one time—admittedly, tied to performance targets—he was looking at a rake-in of about £35 million over the next few years. It is interesting to note also that the sum has been moderated and the man has been reined in as a result of shareholder pressure and a revolt by a cross-section of the institutions with an interest in WPP—which, despite its rather prosaic name, turns out to be an advertising agency holding company more familiarly known as JWT, or Ogilvie and Mather, and one or two other names of that sort. This is a startling example of the extreme end of the argument.

It is not just a question of pay. We also believe, in the context of investments in a public company held by a pension fund or any other institutional investor, that those investors ought to take a practical interest in how the company in question is run, in the interests of the beneficiaries of a pension fund or of the shareholders of an institutional investor. That would also lead to the better government of the company under examination. I think of such matters as investment policy, environmental considerations, which often raise sensitive issues, and the difficult balance between profit and environmental considerations. There are other ethical and management issues that should be on the agenda and given active consideration by shareholders, especially institutional shareholders.

Short-termism in investment policy is often debated. It may be said, "This is a general problem. Why do you seek to impose a particular burden upon pension institutions and pension funds?" By the end of 1992—the percentage has probably increased since then—pension funds were reckoned to hold about 34 per cent. of the equity market, getting on for £300 billion. In 1963, it was not 34 per cent. but 8 per cent. There is a real question mark over how that substantial influence will be exercised and the level of responsibility that is expected of the funds.

There is not necessarily a great deal of dispute about many of the basic considerations of what should be expected. But there will be a dispute, I think, about whether we want to do anything about those who fall short of expected standards. That is perhaps the real purpose of the new clause. It is designed to provoke or invite some debate on that issue. We do not want—when it comes to short-termism, this is an important distinction—institutional investors or pension funds to be owners in a superficial sense. We do not want them merely to be dealers in the shares of the companies in which they have an interest. We do not want them watching and waiting to take a percentage profit when a share price reaches a pre-determined level and has a certain added value over the purchase price.

It is compatible and much in the interests of those for whom pension funds are in existence that matters such as research and development, investment and management standards come well to the fore. To encourage that positive interest we want to encourage positive ownership of the sort that I have tried to outline.

I remember talking to a managing director of a firm with a proud record of research and development and investment in it. My constituency does not throw up many such examples. The company was in a highly technical industry in which it did not produce spectacular results at the time. It was investing heavily for the future. A rather aggressive conglomerate came shopping for it with a hostile takeover bid. The managing director—in fact, he was the managing director of one of the subsidiary companies—was asked to see some institutional investors to discuss the issues with them and to try to persuade them that there was genuine interest in the company remaining in independent ownership and continuing its proud traditions of investment and innovation. There was also a national interest.

The managing director told me that what ensued was the most depressing experience of his industrial life. He visited largely Edinburgh investment offices. The House will be aware that Edinburgh is a large centre of investment funds. He said, rather bitterly, that he found people half his age in smart suits. It sounded as though it was rather like looking at the occupants of the Conservative Benches.

Mr. Ingram

They are not very smart.

Mr. Dewar

I think that there is a sartorial distinction between the two sides of the House. No one has ever accused me of being a dandy, but if the Secretary of State wishes to do so, I shall await his speech with interest.

The managing director went around the boardrooms, but the young men would not listen to his arguments. He described them—at least, I am interpreting what he said, so I shall describe them—as having brains like calculating machines and having about as much vision. They made it clear that if the price—the percentage mark-up on what they had originally paid—was right, the door would be slammed shut and the sale could go ahead.

There is a wider worry about institutional investors. That case was symptomatic of a general problem. The Secretary of State would not deny that investment in the United Kingdom, as a percentage of gross domestic product, has not been as good as it should have been. Between 1979 and 1993, our level of investment was lower than that of any of the other G7 countries. The deficit in investment in fixed capital relative to, say, France and Germany, is something like £1,000 per employee.

4.45 pm

It is not easy to put that right and I am not suggesting that a modest new clause in the Pensions Bill will resolve the problem. We have to start trying to resurrect an interest in a definition of ownership and stewardship for shareholders, and especially for institutional investors, that is wider than has been accepted in the past. It was on the basis of a wish to encourage healthy corporate governance that the new clause was tabled.

The new clause is something of a reprise. We have debated it in the House of Lords and in Committee. My noble Friend Lord Haskel raised the issue and argued the case forcefully. Lord Mackay of Clashfern, sounding a little like a boy scout, expressed good intentions but promised no action. We thought it right to return to it in Committee but we got very little help, I am afraid, from the Under-Secretary of State, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot), who took that debate. It was an interesting debate in the sense that he conceded a great deal of the ground that I have outlined in this debate.

The relevant passages come from the Standing Committee's proceedings of 18 May. We had tabled an amendment designed to make sure that when investment principles were being considered and put into written form, the trustees of a pension fund would take into account their ability to exercise their voting rights. It was a comparatively modest peg for a discussion about the way forward.

I shall quote a few broken phrases to give the spirit of the Under-Secretary's argument rather than wearying the House with its detail. He said: I am sure that we all agree that the intention behind the amendment—the improvement of good corporate governance—is admirable. Shareholders have a crucial role in influencing and ensuring good governance and the competitiveness of British industry … The Government are concerned that shareholders should take their corporate governance responsibilities more seriously. It is extremely important that they should subject the performance of their companies to critical scrutiny … The role of shareholders is crucial to the country's economic prosperity. At that point, I was in the audience and not an active participant. I felt 10 ft tall and thought that I was going to get a gold star for good conduct. Clearly, the Under-Secretary thought that we were fighting the good fight. Rather oddly, he went off the tracks after that, because he started to consider what we should do, from that platform of agreement, about the nature of the problem. I do not disagree, but he said that good practice in corporate governance does not necessarily translate easily into legislation … The Goode committee considered the matter carefully. On ethical and socially responsibly investment, page 350 of the report says: 'We believe the present law to be satisfactory and do not recommend any change'."—[Official Report, Standing Committee D, 18 May 1995; c. 223–24.] I have no doubt that the report did say that about the narrow issue of the rights of trustees to take into account certain ethical and environmental considerations, but that was not what we were discussing.

The Under-Secretary went on, even more strangely, to accuse us—at least by implication—by charging that the choice that we were offering was between forcing trustees to invest in a particular way and allowing them to make their own decisions on how best to serve the interests of their beneficiaries. I cannot imagine how the notion that we were forcing trustees to follow a certain investment course could be inferred from the nature of that amendment.

The point of rehearsing these arguments is to underline the fact that the Government accept that there is a problem and that a great deal needs to be done but that there is very little sign of their being prepared to consider any likely solution or even a modest first step forward.

We know that in total—I am referring to equity holdings—the assets of pension funds are getting on for about £500 billion. We know that they have a crucial role, especially in the equity market, and that good governance must involve them. If we cannot get them moving, it will be difficult to make any impact on the problem.

The House will know that, although there is a feeling that some progress has been made, there is clearly a long way to go. The National Association of Pension Funds, for example, has been charting the progress and examining in particular the way in which pension funds have been exercising their franchise at the shareholder meetings of the companies in which they have invested. There is no doubt that a good deal of progress has been made but, as the vice-chairman of the National Association of Pension Funds made clear at the association's most recent conference, there is still a long way to go. He accepted that the job was by no means satisfactorily completed.

The Cadbury report had a fair bit to say about corporate governance in general. I do not want to mislead the House, but it is a little odd to find that the Cadbury report referred to the fact that the Goode committee—the Pension Law Review Committee—was sitting and said that, in the light of that, it would be inappropriate for it to deal specifically with pension fund governance issues". However, its comments about institutional shareholders and good governance, which I shall not quote at length, are relevant. It states that institutional investors should make positive use of their voting rights unless they have good reason for doing otherwise and that they should register their votes wherever possible on a regular basis. The committee recommended that institutional investments should disclose their policies on the use of voting rights. Although that report left the matter to Goode, I cannot see that it is any way likely that its general conclusion about corporate governance would not transplant—if that is not too agricultural a simile—to the world of pension funds.

Unfortunately, as the House will know, the Goode committee did not consider the matter. It considered everything else that man could think of, several things that man probably had not thought of and certainly many that man did not want to think about at all, although perhaps he should have wanted to do so. It is indeed a comprehensive report but, strangely—despite what the Cadbury report said—the Goode committee did not say very much about this particular matter on this occasion.

That is the general background. I hope that it will have convinced the Minister that we are not suggesting a sinister approach to an imaginary problem. The new clause is a genuine attempt to deal with a problem that is very real and a worry, whether to the NAPF or Cadbury or in Government circles. There is a recognition in every circle that the situation is unsatisfactory. Our share-owning democracy—a phrase that is occasionally used in Government circles—is not as developed in this country as we would like, partly because of the enormous importance of institutional shareholdings and, of course, pension funds, as I have being trying to outline. The new clause is a modest proposed step on the road to putting that right.

To summarise, the new clause tries to lay certain duties—I say "tries" because we do not know whether it will find favour—on trustees or managers of pension schemes to make available to scheme members a statement of policy on the use of their votes in the affairs of the companies in which they have invested, to maintain a record of what they have done, to permit inspection of that record and to provide copies of that record on written request within 21 days.

I must confess that I am sometimes astonished by the moderation of Labour Members. There is nothing in the new clause that anyone could say was extreme or objectionable. We are not trying to direct. We are not even going as far as saying that it should be mandatory to use the vote. We have tried to make the new clause compatible with the duties and responsibilities outlined in the current legislation.

We have tried to make the new clause a harmonious proposition that fits in the Bill well and have tried to ensure that it is not something that would panic or frighten the horses. That is, perhaps, an unfair way to refer to Ministers, but I am sure that the House will understand the reference. When I am trying to persuade people, I always try to use language that they understand. I do not think that the Secretary of State is a horsey type, so I fear that he does not conform—but I cannot really be responsible for his individuality, in a Conservative sense. I did not use the word "peculiarity" as I thought that it might put him off.

I now return to the argument, from which I was temporarily diverted. The new clause is modest but not unimportant, and it deserves serious consideration. Although it is modest, it is sensible and very much fits in with the provisions contained in clause 35. Hon. Members who served on the Committee will remember that clause 35 deals with investment principles. It reads: The trustees of a trust scheme must secure that there is prepared, maintained and from time to time revised a written statement of the principles governing decisions about investments for the purposes of the scheme. It goes on to say that the statement must cover matters, which include the kind of investments to be held, the balance between different kinds of investments, risk, the expected return on investments, the realisation of investments, and such other matters as may be prescribed.

Given that there is to be a written statement, it seems to me that a positive attempt must therefore be made to formulate a coherent investment plan, that it is not unreasonable to say that, as part of that process—if one likes, not as an addendum but perhaps as a parallel to that process—those same trustees should consider how they will cast their votes in corporate governance and produce guidance as to the general position they will adopt in these matters. That seems to be absolutely reasonable. It will draw attention to the matter and encourage a positive approach. It will also give information, and these days we are all interested, rightly, in transparency and in allowing people who have an interest as potential or actual beneficiaries in a pension scheme to know how their funds are managed. It will give them an opportunity to assess how their affairs are run.

One of the reasons why we are picking out pension funds in this way, as opposed to other institutional investors, is that pension funds hold the money in trust for others. Trustees act on behalf of others, and a pension fund is a very important trust because it is a nest egg that, one hopes, will bring security in retirement. Surely, given those circumstances, it is not unreasonable to ask trustees to state their approach and to make that statement available to those who have a genuine interest.

5 pm

We could have gone much further. As the Secretary of State will know, in America it is mandatory, and has been since 1988, for the managers of pension funds to cast their votes. It is possible to escape the commitment only if the costs outweigh the benefits from the point of view of the beneficiaries of the pension trust. When I asked someone who was more familiar with such matters than I for an example of costs outweighing benefits, I was told that it might not be wise for a person with a holding in a Swiss company to exercise his mandatory duty to vote, as under Swiss law he would have to appear in person. Although that might prove popular with the executive sent on such a dangerous mission, it might not make much sense in other respects.

I have made the point light-heartedly, but we are discussing the heartland of capitalism, often cited by the Secretary of State as an exemplar to us all—especially in terms of the job creation record and the policies that he mistakenly imagines to have been responsible for that record. As I have explained, in the United States it is not enough to provide a coherent statement of policy to serve as guidance, which is what we are suggesting; votes must be cast.

I mentioned Switzerland because I understand that in August the rule was extended to overseas holdings. There have been some spectacular examples in that context, involving, for instance, the affairs of Saatchi and Saatchi, over which I shall draw a decent veil. We can all think of many other companies with substantial American holdings, however.

There has been an interesting shift in the statistics. American pension funds that used to invest a much smaller percentage of their total portfolio abroad than British funds are now increasing that investment markedly: there has been a large rise in the amount of buying of overseas holdings. Under American law, more and more will have to "punch their weight"—that is the cliché of the moment—and exercise their rights as shareholders at companies' annual general meetings. Many of the drug companies are involved, including Hanson—a company from over here that is doing very well over there. Its American shareholders will take a close interest in its affairs as a matter of legal duty. We have not gone as far as that in the amendment, because we realise that the Minister might bolt at the prospect.

Ours is a reasonable and sensible proposition. It concentrates the mind; it increases the pressure; it recognises the difficulties that still exist, as defined by the National Association of Pension Funds; and it fits easily into a slot in the Bill, as a natural continuation of clause 35.

The Minister is an individualist and may not advance the arguments that I expect him to advance, but certainly all his junior colleagues, such as Lord Mackay of Ardbrecknish and the Under-Secretaries of State, have taken shelter behind the Greenbury report—and his ex-junior colleagues. I hope that it was not listening to many hours of speeches in Committee that drove the hon. Member for Richmond, Yorks (Mr. Hague) to seek shelter in the Cabinet; I suspect that he may regret the choice, but there we are. We may have to wait for a final decision on Greenbury, although there are rumours that the committee will not recommend legislation.

In any event, our measure does not attempt to anticipate what Greenbury may or may not say. We are certainly not going into the more controversial issues such as mandatory voting, or the view—with which I have some sympathy—that if incentive payments are to be made they should not take the form of share options and the like but should constitute a bonus in the company's stock, to confer a sense of identification with the organisation and a vested interest in its future success. I understand that that is currently a strong trend in America.

We have not tried to infringe, preclude, anticipate, pre-empt or do any of the things that we might have tried to do by tabling a new clause that was simply propaganda and would have us shouting abuse from the roof tops. Our new clause is a genuine attempt to encourage a positive approach rather than leaving matters to a system that has not been performing as it should, and hoping that it is a case of "Physician, cure thyself."

The idea may not appeal to the Secretary of State, but I believe that the Government have a duty not to dictate or inhibit unnecessarily but to regulate sensibly and to set a framework within which people can realise the potential of their companies, and their own potential, to the best of their ability. I consider the new clause helpful, and I hope that the Secretary of State will view it in a friendly spirit.

Sir Andrew Bowden (Brighton, Kemptown)

I hope that the hon. Member for Glasgow, Garscadden (Mr. Dewar) will feel that I am suitably dressed, in view of his comments about Conservative Members' clothes.

When I first studied the new clause, it struck me as fairly reasonable, but having listened to the hon. Member for Garscadden, I have become somewhat disillusioned. It is possible that I completely failed to understand what new clause 4 was all about. If that is so, it is entirely my responsibility; but I put my name to the new clause because I assumed that it was essentially about supplying information to pension scheme members.

Many pension scheme members feel that they are boxed into an arrangement that prevents them from receiving much information about what is going on. Beneficiaries in particular feel isolated from the operation of the scheme in which they are involved. I should have thought that, in principle, they were entitled to have as much information as possible, so that they know how their scheme is doing and can express to the appropriate people any views that they wish to express. I shall listen with interest to what my right hon. Friend the Secretary of State has to say.

Let me explain why I originally put my name to the new clause. I am sorry that the hon. Member for Garscadden has left the Chamber, but I did not think that most of his speech was very relevant to the new clause—especially the first part, which was a thinly veiled attack on various executives in individual businesses. I look forward to an explanation from my right hon. Friend, not having received much of an explanation from the Opposition. If the new clause is about supplying information to pension scheme members so that they can understand better how their money is being used, where it is being invested, what the impact is and whether they have a role to play or a view to express, I consider it a reasonable proposal —

Mr. Geoffrey Hoon (Ashfield)

Will the hon. Gentleman give way?

Sir Andrew Bowden

I should like to give way to the hon. Gentleman, but I understand that time is short and I gave a pledge that I would make a short speech.

If I have got the new clause right, I look forward to my right hon. Friend telling me about it, and I shall then judge what action I should take in the Division Lobby.

Mr. Hoon

May I make it clear to the hon. Member for Brighton, Kemptown (Sir A. Bowden) that new clause 4 makes it plain that it is concerned simply with the provision of information? As I hope to explain, such provision has implications for pension funds and the companies in which they invest, but the new clause is primarily an exercise in transparency for the benefit of people who contribute to their pension funds and therefore indirectly purchase shares in companies, specifically British companies.

We are concerned with corporate governance. We are trying to promote greater corporate responsibility on the part of trustees or managers of pension schemes in respect of shares held by a pension fund and of the use of associated voting rights.

The starting point for the debate must be the fact that United Kingdom pension funds hold assets totalling about £500 billion. It has been estimated that they hold about 35 per cent. of the total shares available on the UK equity market. Pension funds, along with many other institutional investors, are frequently the most significant institutional grouping among shareholders in any company. In practice, they may hold a controlling interest in a company.

It is important that, as pension funds are such significant shareholders in UK companies, they should exercise the responsibilities that go with voting rights and the holding of shares in a proper way. That should be in the national interest, as they receive significant tax concessions. They may have been able to accumulate shares in companies as a result of those tax concessions, which are, in effect, paid for by the UK taxpayer. The taxpayer must therefore have an interest in how those shares are held and in the manner in which funds are used and voting rights exercised.

The new clause therefore deals specifically with the accountability of pension funds for their actions, both on behalf of people who have paid into a fund and their consequential position as indirect shareholders in major companies. With the new clause, we are seeking to establish the responsibilities that pension funds have to people who have, in effect, paid for shares by their pension fund contributions.

The basic principle should be that scheme members who contribute to funds that are then invested in UK companies should have the right to know how the trustees or managers of the fund intend to use their voting rights to influence the policy and strategy of the company in question. Scheme members pay into the company, be it indirectly through their pension contributions, so surely it is not unreasonable to expect some information about how associated voting rights are then deployed. In essence, that is the purpose of the new clause.

We know that the Cadbury committee has made recommendations on good corporate governance. It concluded that the trustees or managers of pension funds have a responsibility to vote their shares. As has already been mentioned by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), to a great extent, that practice has been adopted in the United States of America. In 1974, legislation was introduced to encourage the process. Since 1988, it has been recognised that a shareholder's vote is an asset of a fund. That means that, in United States law, a pension fund has become under a duty to vote shares, unless there has been a positive decision not to do so.

Moreover, as I understand the position in the United States, it flows from that that the pension fund is required to inform itself of the role that its shareholding has in a given company and therefore of the role that its shareholding plays in influencing the direction of corporate activities.

5.15 pm

It appears that the Government do not especially object to that practice. Lord Mackay of Ardbrecknish said in another place: We are in no doubt that institutional investors, as owners of shares, have a responsibility to the companies in which they invest. As part of that responsibility, it is extremely important that shareholders should subject the performance of their companies to critical scrutiny. If shareholders see that their companies are not competitive … they must demand changes in the management and impose them if they must. It is not an exaggeration to say … that that function is crucial to our economic prosperity."—[Official Report, House of Lords, 13 February 1995; Vol. 561, c. 536.] In Committee, the Under-Secretary of State for Social Security made similar observations, but, notwithstanding the acceptance of the general principle, it appears that the Government are not prepared to recommend legislation to bring about the very objective that they appear to support. Their argument appears to be that it is best to leave it to the market to decide, that the market will bring about appropriate changes in the way in which companies operate, and that, therefore, it is not necessary to legislate.

It is significant, however, to contrast the Government's view on shareholdings with the way in which they have repeatedly sought to regulate trade unions, which are, after all, voluntary unincorporated societies. Since 1979, they have faced a welter of legislation from Conservative Governments who have interfered in the internal working and democracy of what, after all, are voluntary organisations. Why should the internal activities of such organisations be regulated by legislation? The answer, as I am sure Conservative Members would tell us, is that trade unions play a vital role in our society, and that their functions are so important that they must be subject to legislation.

I do not disagree with that conclusion. Clearly, it is necessary that trade unions should be regulated. If they should be regulated in the interests of society, however, that must surely apply as much to pension funds, and in particular, the use of pension fund shareholdings in our major companies. If pension funds are able to determine the investment strategy of UK companies because of the size of their shareholding, surely that is as significant as the need to regulate trade unions.

Unfortunately, too often in practice pension fund shareholders have, in effect, opted out of their responsibilities. Too often, they have handed over proxy votes to the chairman of the company concerned and allowed him to use the proxy vote to preserve the status quo. Even when there was significant opposition to the position set out by the British Gas chairman from the floor of its annual general meeting, it was clear that institutional voters had lined up behind the existing management to preserve the status quo and to stifle the opposition. That is a perfectly proper use of their votes, if that is how they see their best advantage, but it is not unreasonable—this is all that the new clause would do—to suggest that pension funds in particular should be able to justify their decisions to people who have contributed to the pension fund. This modest clause does no more than that.

It is clear that pension funds' attitude towards the exercise of their voting rights has changed. Surveys have suggested that, between 1990 and 1993, only 20 per cent. of pension funds voted their shares at all times. By 1993, that figure appeared to have improved, with about 26 per cent. using their voting rights at all times. From other surveys, it appears that that improvement is proceeding steadily and that many more pension funds are prepared to recognise their corporate responsibility in this respect.

Where pension funds do vote, however, there is a concern, particularly in respect of contentious takeovers, that they employ their votes in an especially short-term and negative way, and that the culture in the UK has often been to establish, as a result of disputed takeovers, management teams that will guarantee simply the highest rate of return in the form of dividends. That encourages companies to concentrate on maximising dividends, perhaps sometimes at the expense of productive investment. We are concerned that a significant institutional shareholding in major companies encourages the attitude that develops dividends and profits at the expense of returning profits to, perhaps, research and development or new productive capacity.

The community has a clear interest in the sense that if pension fund shareholdings have been built up as a result of significant tax concessions, those concessions should be used for the benefit of British industry rather than simply for maximising profits. In the short term, that may not necessarily appear to be in the interests of the pension fund whose managers want to maximise the return year by year. However, it will be in the longer-term interests of contributors to the pension fund.

It is significant that the United States practice has developed in a way that ensures that investment is in the wider national and corporate interest. A United States institutional investor in a UK company could look at the wider interests of the company's performance, whereas a British pension fund manager, who might have narrower, short-term perceptions, would simply be concerned about dividends from one year to the next. There has been considerable academic criticisms of the United Kingdom practice of concentrating on short-term returns instead of looking at the longer-term benefits to United Kingdom industry.

Describing the new clause as a modest measure might encourage the idea that contributors to pension funds have a right to know how their contributions are being used, and whether the pension fund managers are exercising their voting rights, and if so, in what respect, so as to encourage, we hope, productive investment in British industry and in our ability to compete in the world.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

The 30-minute speech by the hon. Member for Glasgow, Garscadden (Mr. Dewar) caused me some concern because I think that he was in danger of being too reasonable for his own good. Perhaps he is getting soft in his old age. He tiptoed on eggshells all over the issue, and that was quite unnecessary. I am sure that the hon. Gentleman had his reasons for doing that: there are tactical reasons for deciding whether to go in hard or gently. I am sure he knows what he is doing because he always does. I take a more robust view.

I thought that the hon. Member for Garscadden had just entered the Chamber, but I see that it is the hon. Member for East Lothian (Mr. Home Robertson) who is one of my constituents, from Paxton Mains.

Mr. John Home Robertson (East Lothian)

I hope that the hon. Gentleman is looking after my interests.

Mr. Kirkwood

I am, and I always do.

I take a different view from that of the hon. Member for Garscadden. The new clause is clearly in the interests of fund members, and that is one of the overriding interests that the House should consider, certainly in relation to clause 35, which goes a long way towards giving pension scheme members a series of new bits of information. That is right, but the new clause is quite unexceptional. However, it is important in terms of giving powers in addition to those set out in clause 35.

I can see no argument of any kind against the new clause. It would have been better in gremio of clause 35 because a new, free-standing clause does not make it any easier for a practitioner who is trying to use the legislation to find his way round the Bill's provisions. I found my argument in support of the new clause on the fact that it clearly establishes new rights and entitlement to information that pension fund members must have. For that reason alone, the clause deserves support.

I take a keen interest in freedom of information and I assume that the powers in the Bill are new. I have no idea of the arrangements for pension fund members who want to ask for information under the existing rules. I assume that no pension fund manager in his right mind would deny normal, legitimate requests for information from bona fide members. As the hon. Member for Garscadden said, the new clause would enhance transparency. In the context of freedom of information and enhanced rights, it should be supported and encouraged, and I hope that the Government will do that.

The new clause has an important bearing on the way that joint stock companies organise and operate their decision-making process in the United Kingdom. I entirely agree that there are substantial worries that companies which are limited by shares are beginning to use their enormous financial power in a way that has caused concern in the past. The Government would be well advised to look more widely at the issue. It is not relevant, and technically not in order in debating the Bill, but the Department of Trade and Industry under its new Secretary of State, the right hon. Member for Galloway and Upper Nithsdale (Mr. Lang) should look at the whole question of how joint stock companies that are limited by shares are running well ahead of the game in terms of board decisions and the impact of pension funds on their decisions. That should be one of the Secretary of State's first jobs when he arrives at his new desk tomorrow morning.

That brings me to the fears that were expressed by the hon. Member for Brighton, Kemptown (Sir. A. Bowden). He was right to draw attention to the fact that the hon. Member for Garscadden entered into some potentially controversial issues about what would happen after people got the information and whether it would encourage them to take political decisions in the context of what was being done by those in charge of the pension funds and how they voted. But, with respect, that is a matter for them. The hon. Gentleman's interpretation of the clause was accurate, but the measure is more neutral than that. It does not seek to knock people into political positions one way or the other: they are entitled to make their own decisions and reach conclusions on the information that is available to them.

Like the hon. Member for Kemptown, I think that we cannot possibly take exception to the basic provision of information because that must be good in its own right. The hon. Gentleman's support is valuable. His signature on the clause adds an enormous amount of weight and will certainly concentrate Ministers' minds much more than would support by me or by the hon. Member for Garscadden. I expected the hon. Gentleman to say that he intended to withdraw his support because of his fears about the clause, but I assure him that his original interpretation of the clause was right. However, if people make up their minds to disagree with him politically, that is a matter for them.

I do not think that it is possible for the Government to remain agnostic on this question, and it is completely disingenuous to say that they will wait until Greenbury reports, because we shall all be on the beaches by then. I look forward to reading my copy of the Greenbury committee report on the beaches, as I am sure does the Secretary of State. It is no answer for the Government to say, as they have in the past—the hon. Member for Garscadden rightly pointed this out—that we should wait and see. It is a good Asquithian response, I am sure, but it does not measure up to the Government's responsibility.

The Secretary of State has a duty to say whether the Government are in favour of, or against, the proposal. It is a perfectly clear proposal. If the Government say that new clause 4 is technically inadequate, or that they will implement its proposal through guidance, or that they will use any of the other multifarious devices available, it would certainly be enough for me. But they must come off the fence to say one way or the other whether the proposal is a good idea or not. This is the last chance for Ministers on the Treasury Bench to express a view on that important question.

I certainly support the spirit of the new clause and will be looking to the Government to say something a little more positive in the debate than they have been able to say so far.

5.30 pm

Mrs. Helen Liddell (Monklands, East)

A number of points have been made about the moderation of the new clause. Indeed, the moderating influence of my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) is always with us. It is very tempting to explore more general issues about standards in public life because a great deal of the background to the tabling of this new clause relates to such issues, but that is not the first point of interest.

The new clause is about transparency and allowing pension fund members to know how the fund, to which they have contributed and on which they are dependent, is being managed. It is a common sense measure. Like the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), I cannot understand why the Government are taking a negative line. Implementation of the proposal would be of considerable value in the operation of pension funds and it would also make people more aware of the possible impact of pension funds on the overall running of our corporate and industrial life in Britain.

In the British system, which is heavily reliant on self-regulation, it is important to use the mechanisms available to ensure the highest possible standards in the operation of companies. Pension fund members have the opportunity, through fund managers, to exercise an influence which would be for the general good of the companies and would play a role in transforming the landscape of our corporate and industrial life.

I have one specific criticism of the operation of fund management in relation to the boardrooms of Britain. It is, bluntly: the boardrooms of Britain are populated by a self-perpetuating clique. It is very rare that I find cause to pay tribute to the Prime Minister but, in one area, he drew attention to the fact that our boardrooms are a self-perpetuating clique whenever he referred to the absence of women in them. Indeed, he began Campaign 2000 as a means of trying to break some of those glass ceilings. The fact that he has manifestly failed in his endeavour is neither here nor there. At least it has been recognised that such cliques need to be broken.

I say that with a degree of passion because it was my misfortune to be involved in investor relations. Indeed, I was involved with investor relations with Mirror Group Newspapers immediately after the crisis was discovered following the misappropriation of company and pension funds. I was involved in a number of presentations made to the fund managers and I never want to see a prawn vol-au-vent or a canapé again. Much work is done behind closed doors by people who all work within walking distance of one another, who share the same clubs and, increasingly, share the same schools. Frankly, that is not sensible for the good governance of pension funds.

The other side of the coin of that exercise was having cause to make presentations to fund managers in the United States. I can assure the House that I would rather appear before a Labour party selection meeting than go again before fund managers in the United States because it was a brutal experience. They wanted answers, and they were entitled to them. That very determination to get answers has led to legislation in the United States.

Reference has been made to the Cadbury report. Some people assume that just because there has been such a report, all is well in the boardrooms of Britain. That is arrant nonsense. In more cases than not, the Cadbury report is honoured in the breach rather than in the observance. Any influence that can be brought to bear to increase standards is to be welcomed.

My hon. Friend the Member for Garscadden referred to the fact that institutional shareholders hold about 62 per cent. of UK equity in pension funds: roughly 35 per cent. of the equity market. If we want good stewardship of public companies, the institutional shareholder must use that power. It can be a boost to corporate power.

One example, although not directly related to pensions, shows the impact that action by companies can have, not only in the way that they do their business, but in the way that Governments can be influenced. Would Nelson Mandela be President of South Africa had it not been for the actions, not only of trade unionists and men and women throughout the world, but of companies? Indeed, a number of pension funds decided that they would take an ethical line on their investments regarding South Africa.

Increasingly, too, companies are taking a line on the environment. It is an important aspect of the life of those who can determine the future of companies that they act with the broader community in mind. Furthermore there is a responsibility to the pensioners to ensure that corporate decisions are soundly taken.

As I said, a self-perpetuating clique can allow boardroom inaction and certain aspects of boardroom behaviour can have a detrimental effect on the company. We hear about pay-offs. I shall not go down the road of condemning pay deals in the privatised utilities because that has been debated often enough in this House, but, from the point of view of pensioners, I am concerned that the impact on company performance and dividends available to pension funds of rolling contracts and big pay-offs must be taken into account.

Someone who is perhaps closer to the Secretary of State than anybody on the Opposition Benches, Mr. Alastair Ross Goobey, has very much made the case on behalf of POSTEL, now Hermes, on the whole issue of rolling contracts. The new clause will not affect the situation directly but it will mean that pension fund members will be able to see the voting records of their fund managers.

The case of British Gas has been mentioned. There was swingeing criticism of the activity of institutional shareholders at its recent annual meeting. Dr. Ann Robinson, formerly of the Institute of Directors and now of the National Association of Pension Funds, drew attention to the fact that it is extremely rare for institutional shareholders even to turn up at annual meetings. Dr. Robinson—not me—claims that institutional shareholders prefer quiet dialogue behind closed doors. That is not in anyone's interest.

It is also extremely important that there is no suggestion that pension fund managers for institutional shareholders in any way may be swayed by a conflict of interest. In ensuring that there is no conflict of interest, new clause 4 is very important. There must be transparency at all levels.

In the LEX column in the Financial Times on 31 December 1994, clear allegations were made that because executive directors who are trustees of pension funds award the mandates which give these very fund managers their lifeblood, it is not in their best interest to offend the hand that feeds them. That is a powerful argument for this new clause. In an article in The Times, Professor Tom Clarke of Leeds business school referred clearly to the environment of self-regulation. In such a climate, the penalties for non-compliance are hardly severe. They work in an environment which is like a gentlemen's club.

I refer to the situation in the United States where there has been a dramatic turn, as my hon. Friends the Members for Garscadden and for Ashfield (Mr. Hoon) have pointed out. Since 1988, it has been enshrined in statute in the United States that pension funds in the private sector have a duty to vote under the Employment Retirement Income Security Act. Since 1994, that duty has been extended to shares outside the United States. United States institutional investors now vote in 71 per cent. of all foreign companies in which they own a stake, according to the investor responsibility research centre, Washington. That figure was only 24 per cent. in 1991.

A classic example, which has been referred to before, is that it was a United States institutional investor who set in train the process that led to the ousting of Maurice Saatchi from Saatchi and Saatchi. Activities by US pension fund managers are expected to increase dramatically in the near future, which raises an issue for us here. There are a number of companies in which 25 per cent. of shares are held by US institutional investors and those investors will dictate standards within our companies. Does not logic suggest that British institutional shareholders should do the same?

One powerful argument was summed up by Mary Ellen Anderson, the director of investment and corporate relations at the State of Connecticut retirement and trust fund, who said of US companies: They want our money. We have made it clear we are interested in investing but we are also interested in voting. We don't really want to do one without the other. The new clause would secure that aim.

In March this year, the Teachers Insurance and Annuity Association College Retirement Equity Fund, the world's largest pension fund—and the one with the longest name—engineered the board room coup that brought down Peter Grace, the 81-year-old chairman of W. R. Grace. All of that led to a warning by Bill Crist, who is the board president of the California public employees retirement scheme. He said: There will be an increase in the application of standards we attempt to maintain in the US to other parts of the world. That is a lesson to us here in Britain. If the institutional funds of other countries are concerned about the operation of companies here, it is a damning indictment of all of us that we are not setting up the mechanisms whereby we can secure those high standards through British institutional funds.

The new clause would not represent a dramatic move. It is in the interests of transparency and it flags up the fact that we wish to see the highest possible standards in this country.

Mr. Clifford Forsythe (Antrim, South)

I have reservations about the new clause; I am torn in different directions and I shall explain why. I support all that the new clause says on the surface about transparency and I support the idea that members of pension funds should know what is going on in terms of investment and so forth. That is an excellent thing. However, there is another aspect to the matter which I ask those who have tabled the new clause to consider.

It was the mention of the United States that alerted me to a problem. Some of the pension funds in the United States are being used by certain elements to try to impose the MacBride principles on certain United States firms in Northern Ireland. That is being done despite the fact that the United States Government are against the MacBride principles and despite the fact that all the legislation for Northern Ireland passed by this House is designed to look after the interests of all citizens in Northern Ireland and to ensure that there is fairness, regardless of political, religious or any other views.

There are those who bring pressure to bear on the shareholders and trustees of funds and who say that the funds should be used in a political manner—in an anti-British manner in terms of Northern Ireland. I wonder whether those who have tabled the new clause considered that point. People who are against smoking, for example, might not want investments in companies that deal in tobacco. Others might be against any number of things and might insist that although the trade concerned was genuine, the fund should not invest in it. We could open up the door to all sorts of things.

5.45 pm

Legislation for Northern Ireland is passed by Members of this House. Even with all the parties in Northern Ireland opposing the MacBride principles, the pension funds and those who bring pressure to bear on them insist that some of the US firms in Northern Ireland should do certain things. That has an adverse effect on Northern Ireland; it does not help relationships in Northern Ireland. In that situation, the new clause and the ideas behind it could be counter-productive.

I would be happy for the system to be transparent and I would be happy for people to know about it, but I have the reservations that I have described. When the hon. Member for East Kilbride (Mr. Ingram) winds up, perhaps he would consider that point and make some comments which would be helpful to me.

Mr. Jim Cunningham (Coventry, South-East)

The interpretation of the new clause by the hon. Member for Antrim, South (Mr. Forsythe) is not mine. I believe that the new clause is all about transparency, as some of my hon. Friends have suggested. I cannot understand why the Government cannot accept the new clause, given that about £500 billion is held in pension funds, in some cases not very stringently accounted for in terms of how the money is spent and how it is invested. Anyone who has experience of pension funds knows that. It should be a basic principle that anyone contributing to or investing in a pension fund should know what the fund's policy is. Unless one knows what the pension fund's policy is, one can encounter all sorts of problems. It is because certain pension funds made information available that great pressure was brought to bear on the South African Government to make changes, which led to the election of Nelson Mandela. I hope that the Government will take that aspect on board. Equally, if representatives cast their votes in pension funds, we should know what issues the representatives have voted on and how they have represented the pension fund members.

Another area which is of tremendous concern to people outside the Chamber after the events of the Maxwell fiasco, which I shall not repeat today, is the power of trustees and the accountability, or lack of it, of trustees. I should have thought that the Minister would give an early indication that he accepted the new clause. From time to time, Ministers—some of my hon. Friends have mentioned this—have referred to the reasons why they had to introduce legislation against the trade unions. That was all about what they claimed to be transparency and accountability. For the life of me I cannot understand why the Government cannot adopt the same principle here—after all, it is their principle—and accept the new clause.

Hon. Members must remember that pension funds derive many tax concessions from the taxpayer. Taxpayers contribute their taxes and rebates are given back in their name, but they do not seem to have much influence on what is done with the money.

Then there is British Gas, for example, or the water companies. Money has been invested in them but there is not much transparency or accountability. Some of my hon. Friends have said that not many people know, for example, the policy of the water authorities—I shall not mention British Gas—on executive perks. People, especially the people who contribute to the pension funds, should have some influence on such matters.

A further aspect worries me, and it has not yet been touched on in the present debate. Employers often use pension funds to invest in their companies when there is a question of whether they can survive. Yet they do not refer to the employees to see what they think about it. That issue is not highlighted often, but there certainly have been instances of employees finding that their money has been used to prop up a company that has eventually gone bankrupt, and they have lost their pensions.

Equally, employees often find that some of the conditions that they thought that they would have after retirement are not available. As many as 6 million people could be in that position, because during the 1980s when there was not much transparency about pension funds many people were encouraged to move out of the state earnings-related pension scheme into private pension schemes. Many hon. Members will know that such people now turn up at our surgeries and ask us to try to sort out their pension problems. That is another reason why the Government should accept our reasonable amendment.

Ms Judith Church (Dagenham)

It is clear that comprehensive information is a vital prerequisite of any correctly functioning market. Full information for scheme members is all the more important in the pension fund market, given the concentrated nature of the power in the hands of a few trustees and fund managers.

Efficiency depends on each level of authority being accountable to those whom it represents, yet at present scheme members do not even have a right to see the voting records of their trustees. Clearly that information would have a significant bearing on whether members are satisfied with the conduct of those trustees.

The logical solution—it certainly seems logical to Opposition Members, and we have heard many excellent arguments about why the measure is sensible—is to have a legal commitment to proper disclosure. That move is obviously necessary following the pensions industry's pallid response to the Cadbury report.

The recent actions of fund trustees in backing enormous pay rises for utility bosses serve only to emphasise the problem, which has been in existence for some time. Conservative Members are just beginning to realise how people throughout the country have been sickened by the way in which decisions taken in secret to award huge bonuses and enhanced pension rights to executives have feathered the nests of people whose nests they consider to be over-feathered already.

All that is done in secret, so it is detected only by quite difficult forensic investigations. As the Barber judgment defined pensions as deferred pay, it seems only fair that employees should have better information about how their trustees are using their future income.

This is not a trivial matter—far from it—and I hope that the Government realise that. The failure of those affected by the various operations of different enterprises to find out what is going on within those enterprises litters history, especially recent history. That covers the prominent failures to disclose information on vital health and safety issues that has led to the loss of life in incidents such as the Piper Alpha disaster, the Herald of Free of Enterprise sinking, the Clapham rail disaster, the King's Cross fire and others too numerous to mention now.

Conservative Members may think those disasters remote from the operations of the pensions market, but there is a striking common factor—the culture of secrecy and the failure to provide information to people who are not only entitled to it but whose lives may be seriously adversely affected if it is withheld.

Contrast that with the charters that the Government have promoted, which are stuffed with information, much of it unintelligible and only remotely relevant to people's everyday lives, but which are heralded by the Government as their contribution to open government. Why are the Government permitting the secrecy that will seriously imperil the security of pension funds and the recipients of pensions? We can think only that their stated central objective of setting a framework for an efficient market is to be undermined by their refusal to accept our proposals.

If we are to have a properly functioning efficient market, the core of the structure has to rest on assuring proper information flows. Without the new clause the Government will create an environment in which full information is not a right but a privilege. How can there be confidence in such a market when scheme members are denied basic information on the voting records of their trustees? If the Bill is not changed it will create a market characterised by secrecy, inequity and inefficiency. Is that really what the Government want to achieve? Millions of pension scheme members think otherwise, and they look to the Government to back their words with action, but I fear that they will be disappointed.

The measures that we propose would give a further boost to trust and confidence in the operation of the pensions market, which badly needs such a boost. Do the Government not realise that the public have lost confidence in those operations—rightly, I believe, in view of all the scandals and mismanagement? Why do they not take the opportunity to tackle that serious problem and to put right what so desperately needs correcting?

From the perspective of the public, the only conclusion to be drawn if the Government fail to support our proposals is that the Labour party will champion the interests of the typical fund member, improve the operations of the fund market and bring transparency and security to the pension fund arrangements of thousands of our retired citizens.

Mr. John Denham (Southampton, Itchen)

The hon. Member for Antrim, South (Mr. Forsythe) posed an important and challenging question. Fortunately I do not have the responsibility of speaking from the Front Bench, so any views that I express spring from my own interpretation. I would love to give the hon. Gentleman a totally reassuring answer, but in all honesty I cannot. He asked whether we were prepared to live with the consequences of allowing members of pension funds to exercise greater rights over their money as held in investments in those funds.

I am a deferred member of an occupational pension scheme managed by one of the leading ethical investment houses in this country. When I was self-employed and took out a personal pension I also, as an individual, chose to invest in an ethical scheme. If I buy a personal pension I can make an ethical choice about how I want the money to be invested, and if I am a member of a collective scheme I should, with other members of the scheme, be able to exercise the same rights. Clearly, the new clause does not take us to that situation, as it is more limited in its scope and deals mainly with transparency.

The hon. Member for Antrim, South rightly said that if we go further down that road, as I hope that we shall, all sorts of safeguards and procedures will need to be brought into place to ensure that some of the problems to which he referred, including the policies of a democratic Government being subverted by such measures, can be properly dealt with. I see the new clause as part of what I hope will be a series of changes that will influence corporate governance in this country and help us to tackle the fundamental contradictions of British economic and pensions policy.

6 pm

The growth of pension funds in this country in the past 50 or 60 years is a remarkable phenomenon which has not occurred in most other European countries to the same extent. It is a voluntaristic—one might say socialistic—approach to employers and employees contributing towards pension fund savings, and it has produced a huge mass of funds. At the same time as that growth in savings by employees and employers has occurred, British industry has been starved of investment. This country has an appalling investment record, and it has been particularly appalling in the past 15 years. I do not think that anybody could suggest that there has been a "golden age" in the past 15 years when the level of investment—particularly in manufacturing industry—has been at a satisfactory level.

I hope that the new clause will help to start a process of attacking the contradiction in which people in this country are putting aside huge sums in savings while there is a total failure by financial institutions and businesses to invest that money where it is needed. It is clear that there is a problem at the interface between the management of funds and the small and medium-sized enterprises which are currently being starved of investment. Something in the interface between the savings that people put aside and the needs of the economy is breaking down badly.

There are two reasons why that interface has broken down. The new clause begins to address the first of those reasons, which is that members of pension funds have become totally detached from the use and investment of their money. They have no say in and no knowledge of how their money is used. It is taken away from them and put in the hands of a professional elite who are, of course, supposed to be bound to act on behalf of the members' interests, but whose decisions, values and judgments cannot be challenged or questioned by the members. It is dangerous to see so much money and power slipping out from the grasp of members.

The second problem, which the new clause also addresses in part, is that the criteria by which pension funds are managed contributes to the problem of short-termism and the lack of funds for investment in the economy. There is a lack of information coming through to members. It is a remarkable feature of our lengthy discussions on the Pensions Bill that while we have discussed minimum funding requirements and a number of other investment criteria, we have not had a debate about where the money held by pension funds is invested. It has been assumed throughout that the narrowest definition of a return on pension funds is the most appropriate one, and that if the fund manager aims to produce the highest short-term investment result the wonders of the market will ensure that the money is invested in a most efficient and effective way within the economy. Yet that is clearly not the case. Short-term gains being pursued by pension funds will create a society in which people will not wish to enjoy their retirement because unemployment is too high—

Mr. Deputy Speaker

Order. The hon. Gentleman's speech is getting rather broad. His remarks are very interesting, but they are not directly relevant to the new clause. I would be grateful if he would get back to the new clause.

Mr. Denham

The problem is that members of pension funds have no information about how their funds and savings are invested on their behalf. They are unable to scrutinise the policies adopted by the fund managers, or the criteria used by them. If those criteria are too narrow, it creates a situation in which the funds are invested in a way that is not in the long-term interests of members. That is the issue that I am seeking to address.

Mr. Deputy Speaker

Order. I have been listening attentively to the hon. Gentleman and I am well aware of his point, but there is nothing in the new clause about what the rules and regulations of fund managers should be. I accept that there is a debate to be had on that matter, but not during discussions on the new clause.

Mr. Denham

One of the issues that fund managers must address is the question whether they follow market trends and shift investments from one company to another or whether they stick with individual companies for a long period. When more information is made available to the members of funds about the voting record of their fund managers, it will become more apparent to the members whether the company is backing major British companies over a long period of time and exercising its voting rights responsibly in seeking to influence the development of the company—as advocated by the Cadbury report—or whether the fund managers are switching the funds on a regular basis from one company to another because they anticipate a short-term increase in profits.

Once the information becomes available to members of pension schemes, as sought by the new clause, they will be able to interpret the strategy being pursued on their behalf by fund managers. Making information available to fund members will raise awareness in a healthy way of the power of the money that they have invested in a pension fund and the need to see that that power is exercised responsibly.

It is true that the public debate on the issue over the past few months has centred on the important, but rather narrow, issue of payments to the bosses of privatised industries. It may well be that, in the short term, the immediate effect of publishing voting records will be to focus attention on questions of executive pay, over-pay and perks. That would be reason enough for making voting records available to members of schemes, but the real prize in the long term for members of a scheme is to know whether their funds are being applied in their interests and in the long-term interests of the British economy.

As the debate on the application of pension funds is generated, we shall begin to bring about the change in culture that is needed if we are to produce a better economic performance in this country and to make the maximum use of the funds of pension fund members which, as hon. Members have said in the debate, have now reached a very large sum of money in total.

By increasing the transparency and operation of funds and seeking the publication of voting records, the new clause may provide a middle way between the "do nothing" approach of the Government—who do not want make to make any changes to the culture of investment and operation in the City or to the investment policies of funds—and the other argument, which is more or less in favour of the sequestration of pension funds. The latter argument is that instead of fund members knowing how their funds are to be dealt with, the funds are sequestered by a Government agency and invested on their behalf. That is neither politically nor economically desirable.

If we wish to raise the awareness of the members of pension funds about where their savings are going and how they will be applied, we must give them information about how their votes and influence will be used by the pension fund managers. That would, over time, send some shock waves through the culture of the City of London. There are many people who vote those funds or who do not vote those funds who assume that, by virtue of their professional position as fund managers, they have an absolute right to use those funds as they think best. They also assume that their criteria and their judgment are best. It will be good to open the culture of the fund managers in the City to the scrutiny of pension fund members. Those managers will then be asked to justify the decisions that they take on behalf of millions of people.

The Secretary of State for Social Security (Mr. Peter Lilley)

I enter, or re-enter, the debate on the Bill with humility, conscious as I am of the depth of expertise that has been built up by those hon. Members who served long hours and days in Committee. I recognise the quality of the debate that has taken place on many of the issues not just in Committee but on Report.

I pay tribute to the calibre of the Members involved from both sides. My opposite number has played a full part, often a constructive one, in the discussions. I also pay tribute to my hon. Friends the Minister for Social Security and Disabled People and the Under-Secretary of State, to whom I shall refer again on Third Reading, when I hope that they will be present, despite renewed responsibilities for both of them in, I regret to say, other areas than my own. One of the consequences of working for me is that one gets promoted.

Mr. Dewar

Perhaps the Secretary of State will agree that there is a lot to be said for a policy of short sentences.

Mr. Lilley

Yes. That is something of which I have a little experience, having been one of the longest-serving Secretaries of State at the Department of Trade and Industry—once I passed the 11-month mark. I have been in office at the Department of Social Security for three years.

I have chosen to participate in the debate on new clause 4 not just because of the chance of timing, and certainly not because it is the most important issue, nor because I am totally opposed to the spirit at least of what some hon. Members believe lies behind the new clause. After all, I would welcome, if I believed that it was wholehearted, the Opposition's conversion to belief in shareholders' power. I agree that institutional investors should be encouraged to exercise their shareholders' power and to develop long-term relationships with companies. That has long been the Government's objective. We endorse the Cadbury recommendation that institutional investors should use their voting rights positively". We facilitated the Myners group working party into co-operation between corporate management and institutional investors. I strongly approve of the initiative led by Postel to adopt best standards and, notably, to limit the length of rolling contracts.

I recognise the concerns that some shareholders have about executive pay. If I were a shareholder in one or two companies I would want to be convinced that the managers were paid neither more nor less than their market worth, because if they were paid more than their market worth I would know that that money was coming out of shareholders' funds.

What distinguishes our approach from that of the Opposition is that we recognise that there is already an obligation on trustees, and through them on those whom they appoint to manage their funds, to act in the interests of the beneficiaries of that fund. That includes acting in their interests when deciding whether and how to exercise the voting rights on their shares. The question is whether we should decide how they should fulfil that obligation and spell it out in law.

I have distinct reservations about the Opposition's approach because it exemplifies, albeit in miniature, three characteristics of the Labour party's approach to investment in industry which give rise to concern.

First, the new clause would impose unnecessary specific burdens on the management and trustees of investment funds through extending unnecessarily the bureaucratisation of best practice. If anything is good, the Opposition tend to think it should be imposed by statute. I fear that if that practice were carried a little further we would see a Labour Britain in which anything that was not forbidden would be made compulsory.

It is true that it is a good thing that trustees should take their responsibilities seriously, and that may involve thinking through systematically their approach to how they use their voting rights, but that does not automatically mean that we then have to impose on each and every trust and fund a requirement that they work out and specify a statement of such policy. The practical effect of that would be to impose a time-consuming burden on the trustees. They would have to sit down and try to think out an abstract statement of policy. That may be quite easy to pursue in practice, but rather difficult to express in abstract form. It would inevitably lead to vague platitudes, meaningless generalisations or to the rigid codification of whatever is current fashion. All too often those trustees would simply be unable to foresee the actual problems on which they would have to vote, and they therefore would be unable to spell that out. They would have to go back to their beneficiaries subsequently to explain a change in policy in the light of unforeseen circumstances.

6.15 pm

The second reason why I have reservations about the Opposition's approach is that it would lead inevitably to the politicisation of business and investment. For all I know, that may be the consequence of what remains an instinctive Opposition approach to business and investment—and, indeed, to life in general. They see life as a political process. It is significant that all the examples cited by Opposition Members of how institutional shareholders should use their votes related to political matters—sex equalisation and job equalisation. The hon. Member for Antrim, South (Mr. Forsythe) pointed out how businesses in America are compelled by pressure groups to use their votes for political purposes, involving them in the politics of Ireland and backing Irish republicanism.

Opposition Members have also referred to pay and inequalities in pay, but we have heard absolutely nothing from them about how voting power could be used to improve the performance of business in the normal economic process.

Mr. Hoon

With respect, the only example I gave of how the new clause might encourage the use of investment was investment in the productivity capacity of British industry. Does the Secretary of State object to that?

Mr. Lilley

I will certainly read what the hon. Gentleman said, although I thought that he distinguished between some national interests in investment and the interests of the businesses concerned. I may be mistaken about that. I will certainly discuss the issue of long-termism versus short-termism.

Mr. Denham

For the record, I hope that the Secretary of State will concede that I also said that one of the reasons for publishing the voting record is that it would enable members of a pension scheme to see whether their fund managers were making a long-term commitment to the company.

Mr. Lilley

That is splendid. I should have made reference to that. All the specific points raised were political, however, and the hon. Gentleman did not tell us specifically—unless my attention slipped—how trustees should spell out in their policy statements, as the new clause requires, any policies towards business which would make it more efficient.

The danger of politicising the decision making of companies is that it distracts business leaders from the business of business, which is business, to political considerations. We, and even the Labour party, lost faith in nationalisation because it diverted attention from business to political considerations. Conservatives still reject Government intervention in industry because it means the inevitable politicisation of industry. It is a great paradox that the clause is known as new clause 4, which seems to suggest that it will socialise industry. In fact, one Labour Member spoke about a socialisation process and referred to the instruments of collective government. That is a legitimate view, but it is not one that we endorse.

Of course businesses and investors should be ethical, honest and honourable in all their business activities. I agree with Samuel Johnson, who said: There are few ways in which a man can be more innocently employed than in getting money". That does not mean that we should try to pretend that a prime concern of business is addressing the political and social problems of the day rather than running the businesses concerned in an honest, honourable and efficient fashion to the long-term benefit of their shareholders—the members of the pension trusts.

I have a third reservation about the new clause and the direction in which it is heading. It could lead to a transfer of power from trustees to political activists and to a conflict of responsibilities for the trustees. At present, trustees have a clear legal responsibility to act in the interests of the beneficiaries of the trust. New clause 4 implies that trustees should represent the views of current members and, in practice, the views of the most articulate and politically motivated members.

Labour Members may argue that new clause 4 imposes no such obligation. If it stopped short at subsection (a), that would be fair enough. However, subsections (b), (c) and (d) would have the inevitable effect of subjecting trustees to pressure from scheme members—especially those who are motivated and organised by pressure groups. That would have an insidious and undesirable coercive effect on trustees which, to the extent that they succumbed to it, would be improper. Their responsibility is to the long-term interests of beneficiaries and not to the short-term pressures or views of any group of members. We would be very unwise to create any such conflict of interest. I hope that that is not the intention of the Opposition amendment, although it may be a consequence of it.

Opposition Members suggested that the normal time horizon of investors is a short-term one. I hope that the time horizon of any managers of pension funds in which I am involved will be long-term. I would like to think that they were investing for a retirement that was due to begin only at a considerable distance into the future and which would continue for some decades after that. At least my own retirement has not begun today.

I believe that it is logical, legal and natural to oblige people running a pension fund to take a long-term view. They should not be terribly concerned about the precise movement of profits from quarter to quarter if they do not reflect the underlying trends and prospects of the company.

Mr. Denham

The Minister said that it would be logical to take a long-term view and not to move with prices from quarter to quarter, but does he really believe that that is what pension fund managers are doing? I believe that many pension fund managers are driven by pressures to operate according to quarterly results, which diverts them from a long-term commitment and involvement in major and growing companies.

Mr. Lilley

We could spend a long time debating the subject—I am not sure how much time the Front Bench spokesman wishes to spend responding to the points that I and other hon. Members have raised. My point is that it is not just a logical obligation: fund managers are obliged legally to act in the interests of the fund beneficiaries. There are long-term interests to match the liabilities which are imposed on the schemes.

One must distinguish between taking that legal obligation seriously and responding to the long-term interest, and simply sitting indefinitely on a company, unmoved and inactive. It may be best to sell a company if one thinks that its value is out of line with its price in the marketplace. That would have a beneficial effect in the long term through the operation of market forces on the allocation of capital and, conceivably, on the management of the company. We should not equate taking a long-term interest with not trading in shares. A case can be made for trading in shares and thereby fulfilling the obligation to the beneficiaries of the scheme.

If trustees were subject to political pressures through the sort of approach indicated in new clause 4, we would impose a much shorter time horizon upon them. The time horizon of those who were likely to manipulate the processes under the new clause would be that of the political process, which is usually much shorter than the time horizon of pension funds. It involves current fashion and current issues or those matters associated with the electoral cycle. It would be regrettable if those pressures were brought to bear on companies in the way that new clause 4 implies.

I am not suggesting that the new clause would mean an end to capitalism and a return to the contents of the old clause IV, from which the Labour party has so recently escaped. However, I think that it has some of the symptoms that concern us about the Labour approach to business and industry, such as the belief that ever-increasing burdens may be imposed upon industry without a thought about the costs involved in diverting attention from the main function of management investment. There is also a cost in terms of politicising the process and in terms of creating a conflict of interest between the real responsibilities of trustees to the long-term beneficiaries and the short-term pressures of the views of the more articulate members of the schemes.

I am afraid that I am unable to recommend that my colleagues endorse the measure—moved though I was by the plea from the hon. Member for Glasgow, Garscadden (Mr. Dewar) that I should approach it in a friendly fashion, and charmed though I was by his suggestion that we were in any way sartorially superior to Labour Members—I see no good evidence of that, although no doubt he has a better view from his side of the House.

Mr. Dewar

There are great hazards in parliamentary life, one of which is that one starts to get quite fond of one's opposite number. The Secretary of State must be the last man in Britain who believes that the arrival of a Labour Government will mean that everything that is not forbidden will be made compulsory. That is a very quaint view. He always gives me the impression that he has been dragged screaming and struggling into the 19th century. If we wait a few months or years, he may even get there.

The Secretary of State's speech was an embodiment of the conspiracy theory. I am slightly embarrassed that this poor new clause—which seemed to me to be almost harmless—is now being seen as part of the great conspiracy to politicise pension funds. I think that that is quaint and curious. So far as I can see, the politicisation charge boils down to the fact that the clause would ensure that members of funds receive information which would allow them to take an interest in the management of the funds. I suppose that that may be a form of politicisation, but I understood that it was a form of politicisation that everyone approved and wanted to encourage.

If the Minister is worried about the proposal and gives it such sinister connotations, he had better read the rest of the Bill before it is too late. That wicked left-wing group the Goode committee, the Pension Law Reform Committee, has been making all sorts of nasty suggestions about giving more information and giving scheme members a greater say in the running of schemes. I fear that it may encourage people to take a political approach to such matters. This is a obviously very dangerous Bill and the Minister had better do something about it before it gets an unopposed Third Reading later tonight. The fact that the Labour party is not voting against the Bill is proof positive of just how dangerous it is.

6.30 pm

It is a great pity that the Secretary of State was not on the Committee because he would have discovered that the whole point about conspiracies is that they are secret. The Minister for Social Security and Disabled People, who is about to be his Cabinet colleague, is clearly part of the conspiracy because he has not warned the Secretary of State that clause 35 is full of nasty regulations on which creeping socialism can be based. To mix metaphors, it is a big Trojan horse full of people like me who will spring out and destroy capitalism as we know it. I have decided that that is my historic role. The Secretary of State should realise that that is all nonsense.

New clause 4 is a good clause which attempts simply to bring into legislative form best practice and to ensure that what most good pension funds are doing is done by all. I commend it to the House and we shall certainly divide the House on it.

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

The House divided: Ayes 249, Noes 275

Division No. 199]	[6.31 pm
AYES
Abbott, Ms Diane	Faulds, Andrew
Adams, Mrs Irene	Field, Frank (Birkenhead)
Ainger, Nick	Fisher, Mark
Ainsworth, Robert (Cov'try NE)	Flynn, Paul
Alton, David	Forsythe, Clifford (S Antrim)
Armstrong, Hilary	Foster, Rt Hon Derek
Ashton, Joe	Foster, Don (Bath)
Banks, Tony (Newham NW)	Foulkes, George
Barnes, Harry	Fraser, John
Barron, Kevin	Galloway, George
Bayley, Hugh	Gapes, Mike
Beckett, Rt Hon Margaret	Garrett, John
Beggs, Roy	Gerrard, Neil
Bell, Stuart	Godman, Dr Norman A
Bennett, Andrew F	Godsiff, Roger
Bermingham, Gerald	Golding, Mrs Llin
Berry, Roger	Gordon, Mildred
Betts, Clive	Graham, Thomas
Blunkett, David	Grant, Bernie (Tottenham)
Boateng, Paul	Griffiths, Nigel (Edinburgh S)
Bradley, Keith	Grocott, Bruce
Bray, Dr Jeremy	Gunnell, John
Brown, N (N'c'tle upon Tyne E)	Hall, Mike
Bruce, Malcolm (Gordon)	Harman, Ms Harriet
Burden, Richard	Harvey, Nick
Byers, Stephen	Hattersley, Rt Hon Roy
Caborn, Richard	Hill, Keith (Streatham)
Callaghan, Jim	Hinchliffe, David
Campbell, Mrs Anne (C'bridge)	Hodge, Margaret
Campbell, Ronnie (Blyth V)	Hoey, Kate
Campbell-Savours, D N	Hogg, Norman (Cumbernauld)
Canavan, Dennis	Home Robertson, John
Cann, Jamie	Hood, Jimmy
Carlile, Alexander (Montgomery)	Hoon, Geoffrey
Chidgey, David	Howarth, George (Knowsley North)
Chisholm, Malcolm	Howells, Dr. Kim (Pontypridd)
Church, Judith	Hoyle, Doug
Clapham, Michael	Hughes, Kevin (Doncaster N)
Clark, Dr David (South Shields)	Hughes, Robert (Aberdeen N)
Clarke, Eric (Midlothian)	Hughes, Roy (Newport E)
Clarke, Tom (Monklands W)	Hughes, Simon (Southwark)
Clwyd, Mrs Ann	Hutton, John
Coffey, Ann	Illsley, Eric
Cohen, Harry	Ingram, Adam
Connarty, Michael	Jackson, Glenda (H'stead)
Cook, Robin (Livingston)	Jackson, Helen (Shef'ld, H)
Corbett, Robin	Jamieson, David
Corbyn, Jeremy	Janner, Greville
Corston, Jean	Jones, Barry (Alyn and D'side)
Cousins, Jim	Jones, Ieuan Wyn (Ynys Môn)
Cunliffe, Lawrence	Jones, Lynne (B'ham S O)
Cunningham, Jim (Covy SE)	Jones, Martyn (Clwyd, SW)
Cunningham, Roseanna	Jones, Nigel (Cheltenham)
Dalyell, Tam	Kaufman, Rt Hon Gerald
Darling, Alistair	Keen, Alan
Davidson, Ian	Kennedy, Jane (L'pool Br'dg'n)
Davies, Bryan (Oldham C'tral)	Khabra, Piara S
Davies, Rt Hon Denzil (Llanelli)	Kilfoyle, Peter
Davis, Terry (B'ham, H'dge H'l)	Kirkwood, Archy
Denham, John	Lestor, Joan (Eccles)
Dewar, Donald	Lewis, Terry
Dixon, Don	Liddell, Mrs Helen
Dobson, Frank	Litherland, Robert
Donohoe, Brian H	Livingstone, Ken
Dowd, Jim	Lloyd, Tony (Stretford)
Dunnachie, Jimmy	Llwyd, Elfyn
Dunwoody, Mrs Gwyneth	Lynne, Ms Liz
Eagle, Ms Angela	McAllion, John
Eastham, Ken	McAvoy, Thomas
Etherington, Bill	McCartney, Robert
Evans, John (St Helens N)	McCrea, The Reverend William
Ewing, Mrs Margaret	Macdonald, Calum
Fatchett, Derek	McFall, John

McKelvey, William	Reid, Dr John
Mackinlay, Andrew	Robertson, George (Hamilton)
McLeish, Henry	Robinson, Geoffrey (Co'try NW)
Maclennan, Robert	Robinson, Peter (Belfast E)
McMaster, Gordon	Roche, Mrs Barbara
McNamara, Kevin	Rogers, Allan
MacShane, Denis	Rooker, Jeff
McWilliam, John	Ross, Ernie (Dundee W)
Madden, Max	Ross, William (E Londonderry)
Marek, Dr John	Rowlands, Ted
Marshall, David (Shettleston)	Ruddock, Joan
Marshall, Jim (Leicester, S)	Salmond, Alex
Martin, Michael J (Springburn)	Sedgemore, Brian
Martlew, Eric	Sheldon, Rt Hon Robert
Maxton, John	Shore, Rt Hon Peter
Meacher, Michael	Short, Clare
Meale, Alan	Simpson, Alan
Michael, Alun	Skinner, Dennis
Michie, Bill (Sheffield Heeley)	Smith, Andrew (Oxford E)
Michie, Mrs Ray (Argyll & Bute)	Smith, Llew (Blaenau Gwent)
Milburn, Alan	Smyth, The Reverend Martin
Miller, Andrew	Spearing, Nigel
Molyneaux, Rt Hon James	Squire, Rachel (Dunfermline W)
Morgan, Rhodri	Steinberg, Gerry
Morley, Elliot	Stevenson, George
	Straw, Jack
Morris, Rt Hon Alfred (Wy'nshawe)	Sutcliffe, Gerry
Morris Estelle (B'ham Yardley)	Taylor, Mrs Ann (Dewsbury)
Morris, Rt Hon John (Aberavon)	Taylor, Rt Hon John D (Strgfd)
Mowlam, Marjorie	Taylor, Matthew (Truro)
Mudie, George	Timms, Stephen
Mullin, Chris	Tipping, Paddy
Murphy, Paul	Touhig, Don
Oakes, Rt Hon Gordon	Trimble, David
O'Brien, Mike (N W'kshire)	Turner, Dennis
O'Brien, William (Normanton)	Tyler, Paul
Olner, Bill	Walker, Rt Hon Sir Harold
O'Neill, Martin	Wallace, James
Orme, Rt Hon Stanley	Walley, Joan
Paisley, The Reverend Ian	Wardell, Gareth (Gower)
Parry, Robert	Watson, Mike
Pearson, Ian	Wicks, Malcolm
Pickthall, Colin	Williams, Rt Hon Alan (Sw'n W)
Pike, Peter L	Williams, Alan W (Carmarthen)
Pope, Greg	Wilson, Brian
Powell, Ray (Ogmore)	Winnick, David
Prentice, Gordon (Pendle)	Wise, Audrey
Prescott, Rt Hon John	Worthington, Tony
Primarolo, Dawn	Wright, Dr Tony
Purchase, Ken	Young, David (Bolton SE)
Quin, Ms Joyce
Radice, Giles	Tellers for the Ayes:
Randall, Stuart	Mr. John Cummings and
Raynsford, Nick	Mr. Jon Owen Jones.

NOES
Ainsworth, Peter (East Surrey)	Beresford, Sir Paul
Alexander, Richard	Biffen, Rt Hon John
Alison, Rt Hon Michael (Selby)	Bonsor, Sir Nicholas
Allason, Rupert (Torbay)	Booth, Hartley
Amess, David	Boswell, Tim
Ancram, Michael	Bottomley, Rt Hon Virginia
Arbuthnot, James	Bowls, John
Arnold, Jacques (Gravesham)	Boyson, RI Hon Sir Rhodes
Arnold, Sir Thomas (Hazel Grv)	Brandreth, Gyles
Ashby, David	Brazier, Julian
Atkins, Rt Hon Robert	Bright, Sir Graham
Atkinson, David (Bour'mouth E)	Brooke, Rt Hon Peter
Atkinson, Peter (Hexham)	Brown, M (Brigg & Cl'thorpes)
Baker, Rt Hon Kenneth (Mole V)	Browning, Mrs Angela
Baker, Nicholas (North Dorset)	Bruce, Ian (Dorset)
Baldry, Tony	Burns, Simon
Banks, Matthew (Southport)	Burt, Alistair
Batiste, Spencer	Butler, Peter
Bellingham, Henry	Butterfill, John
Bendell, Vivian	Carlisle, John (Luton North)

Carlisle, Sir Kenneth (Lincoln)	Heald, Oliver
Carrington, Matthew	Heathcoat-Amory, David
Carttiss, Michael	Hendry, Charles
Cash, William	Hicks, Robert
Channon, Rt Hon Paul	Higgins, Rt Hon Sir Terence
Chapman, Sydney	Horam, John
Churchill, Mr	Hordern, Rt Hon Sir Peter
Clappison, James	Howarth, Alan (Strat'rd-on-A)
Clark, Dr Michael (Rochford)	Howell, Rt Hon David (G'dford)
Clifton-Brown, Geoffrey	Howell, Sir Ralph (N Norfolk)
Coe, Sebastian	Hughes, Robert G (Harrow W)
Colvin, Michael	Hunt, Rt Hon David (Wirral W)
Congdon, David	Hunt, Sir John (Ravensbourne)
Conway, Derek	Hunter, Andrew
Coombs, Anthony (Wyre For'st)	Jack, Michael
Coombs, Simon (Swindon)	Jackson, Robert (Wantage)
Cope, Rt Hon Sir John	Jenkin, Bernard
Cormack, Sir Patrick	Jessel, Toby
Couchman, James	Johnson Smith, Sir Geoffrey
Cran, James	Jones, Gwilym (Cardiff N)
Curry, David (Skipton & Ripon)	Jones, Robert B (W Hertfdshr)
Davies, Quentin (Stamford)	Kellett-Bowman, Dame Elaine
Davis, David (Booth ferry)	Key, Robert
Day, Stephen	King, Rt Hon Tom
Deva, Nirj Joseph	Kirkhope, Timothy
Devlin, Tim	Knapman, Roger
Dicks, Terry	Knight, Mrs Angela (Erewash)
Dorrell, Rt Hon Stephen	Knight, Grge(Derby N)
Douglas-Hamilton, Lord James	Knight, Dame Jill (Bir'm E'st'n)
Dover, Den	Knox, Sir David
Duncan, Alan	Kynoch, George (Kincardine)
Duncan-Smith, Iain	Lait, Mrs Jacqui
Dunn, Bob	Lawrence, Sir Ivan
Durant, Sir Anthony	Legg, Barry
Elletson, Harold	Leigh, Edward
Evans, David (Welwyn Hatfield)	Lennox-Boyd, Sir Mark
Evans, Jonathan (Brecon)	Lester, Jim (Broxtowe)
Evans, Nigel (Ribble Valley)	Lidington, David
Evans, Roger (Monmouth)	Lightbown, David
Evennett, David	Lilley, Rt Hon Peter
Faber, David	Lloyd, Rt Hon Sir Peter (Fareham)
Fabricant, Michael	Lord, Michael
Fenner, Dame Peggy	Luff, Peter
Field, Barry (Isle of Wight)	MacGregor, Rt Hon John
Fishburn, Dudley	MacKay, Andrew
Forman, Nigel	Maclean, Rt Hon David
Forth, Eric	McLoughlin, Patrick
Fowler, Rt Hon Sir Norman	McNair-Wilson, Sir Patrick
Fox, Dr Liam (Woodspring)	Madel, Sir David
Fox, Sir Marcus (Shipley)	Maitland, Lady Olga
Freeman, Rt Hon Roger	Malone, Gerald
French, Douglas	Mans, Keith
Gale, Roger	Marland, Paul
Gallie, Phil	Marlow, Tony
Gardiner, Sir George	Martin, David (Portsmouth South)
Garnier, Edward	Mates, Michael
Gill, Christopher	Mayhew, Rt Hon Sir Patrick
Gillen, Cheryl	Merchant, Piers
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)	Montgomery, Sir Fergus
Greenway, Harry (Ealing N)	Needham, Rt Hon Richard
Greenway, John (Ryedale)	Nelson, Anthony
Griffiths, Peter (Portsmouth, N)	Neubert, Sir Michael
Hague, William	Newton, Rt Hon Tony
Hamilton, Rt Hon Sir Archibald	Nicholls, Patrick
Hamilton, Neil (Tatton)	Nicholson, David (Taunton)
Hampson, Dr Keith	Nicholson, Emma (Devon West)
Hanley, Rt Hon Jeremy	Norris, Steve
Hargreaves, Andrew	Onslow, Rt Hon Sir Cranley
Harris, David	Oppenheim, Phillip
Haselhurst, Sir Alan	Ottaway, Richard
Hawkins, Nick	Paice, James
Hawksley, Warren	Patnick, Sir Irvine
Hayes, Jerry	Pattie, Rt Hon Sir Geoffrey

Pawsey, James	Sumberg, David
Peacock, Mrs Elizabeth	Sweeney, Walter
Pickles, Eric	Sykes, John
Porter, Barry (Wirral S)	Tapsell, Sir Peter
Porter, David (Waveney)	Taylor, Ian (Esher)
Portillo, Rt Hon Michael	Taylor, Sir Teddy (Southend, E)
Powell, William (Corby)	Temple-Morris, Peter
Rathbone, Tim	Thomason, Roy
Redwood, Rt Hon John	Thompson, Sir Donald (C'er V)
Renton, Rt Hon Tim	Thompson, Patrick (Norwich N)
Richards, Rod	Thornton, Sir Malcolm
Riddick, Graham	Thurnham, Peter
Rifkind, Rt Hon Malcolm	Townend, John (Bridlington)
Robalhan, Andrew	Townsend, Cyril D (Bexl'yh'th)
Roberts, Rt Hon Sir Wyn	Tracey, Richard
Robertson, Raymond (Ab'd'n S)	Tredinnick, David
Robinson, Mark (Somerton)	Trend, Michael
Roe, Mrs Marion (Broxbourne)	Trotter, Neville
Rowe, Andrew (Mid Kent)	Twinn, Dr Ian
Rumbold, Rt Hon Dame Angela	Vaughan, Sir Gerard
Sackville, Tom	Viggers, Peter
Sainsbury, Rt Hon Sir Timothy	Waldegrave, Rt Hon William
Scott Rt Hon Sir Nicholas	Walden, George
Shaw, David (Dover)	Walker, Bill (N Tayside)
Shaw, Sir Giles (Pudsey)	Waller, Gary
	Wardle, Charles (Bexhill)
Shephard, Rt Hon Gillian	Waterson, Nigel
Shepherd, Colin (Hereford)	Watts, John
Shersby, Sir Michael	Wells, Bowen
Sims, Roger	Whitney, Ray
Smith, Tim (Beaconsfield)	Whitlingdale, John
Soames, Nicholas	Widdecombe, Ann
Spencer, Sir Derek	Wiggin, Sir Jerry
Spicer, Sir James (W Dorset)	Willetts, David
Spicer, Michael (S Worcs)	Wilshire, David
Spink, Dr Robert	Winterton, Mrs Ann (Congleton)
Spring, Richard	Winterton, Nicholas (Macc'f'ld)
Sproat, Iain	Wolfson, Mark
Stanley, Rt Hon sir John	Yeo, Tim
Steen, Anthony	Young, Rt Hon Sir George
Stephen, Michael
Stern, Michael	Tellers for the Noes:
Stewart, Allan	Mr. Timothy Wood and
Streeter, Gary	Mr. Michael Bates.

Question accordingly negatived.