HC Deb 14 July 1999 vol 335 cc509-24

'. It shall be the duty of the Secretary of State—

  1. (a) in disposing of shares or other securities held by him; or
  2. (b) in directing a person to dispose of shares or other securities held on the Secretary of State's behalf
to ensure that the price obtained for those shares or other securities is in the best commercial interests of the Corporation.'.—[Mrs. Galan.]

Brought up, and read the First time.

10.23 pm
Mrs. Cheryl Gillan (Chesham and Amersham)

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

At this late hour, it is fitting that we return to consideration of the Bill and I am pleased to see the Secretary of State in her place. I understand that she will reply to the debate on the new clause. During the stages of the Bill, the Opposition have been greatly concerned about the way in which the shares and securities in the new Commonwealth Development Corporation will be disposed of and, in particular, the price that will be achieved. None of the replies given during our proceedings on the Bill so far has reassured me that the best possible price will be obtained for the sale of the Commonwealth Development Corporation.

The new clause reflects those concerns, because we need to ensure that the price obtained is the best possible, and that the CDC is not sold off cheaply at a knock-down price.

Clare Short

Unlike your performance.

Mr. Deputy Speaker (Mr. Michael Lord)

Order. Perhaps we might begin as we plan to continue, without sedentary interventions from the Front Benches or even the Back Benches.

Mrs. Gillan

The right hon. Lady intervened from a sedentary position to cast aspersions on the privatisation programme of the previous Conservative Government. In the light of the report that came out today, I hope that she will undertake not to do for the CDC what she did for the Railtrack privatisation. That would make Conservative Members a lot happier.

Clare Short

The hon. Lady should apologise.

Mrs. Gillan

At least we are not talking down the price of the CDC. We are trying to ensure that appropriate safeguards are included in this privatisation process. In any case, methinks the lady doth protest too much. She has been telling us that this is not a privatisation process.

Mr. Douglas Hogg (Sleaford and North Hykeham)

Does my hon. Friend agree that, given the Chancellor's disposal of the country's gold reserves, a statutory obligation of this kind is justified?

Mrs. Gillan

My right hon. and learned Friend is right. I shall come to the question of the Chancellor's gold sales later, as it will have a direct effect on the price achieved on the CDC privatisation. We must make no mistake: Labour Members, when they vote to support the Bill, will be voting for a privatisation.

First, I shall look at some factors that could affect the price. I shall refer to the CDC's annual report for 1998, which contains some interesting facts and figures. The CDC's investments are listed in the final pages—a rather large population of relatively small investments. The number and variety of those investments mean that they are inherently difficult to manage. Also, realising the value of such a large and diverse portfolio will pose problems.

The management problems need to be examined, as at no stage in our proceedings have we explored them properly. They would also, of course, affect the price. I hope that the Secretary of State will comment on the portfolio, and undertake to give the House an analysis of the business itemised between pages 65 and 73 of the report in terms of cost, estimated current values and the income stream produced. That is an essential element in setting out this privatisation so that potential investors can see what is on offer.

I hope also that the Secretary of State will say what percentage of the portfolio produces an income stream. In how many cases is the income stream column blank? In other words, I hope that she will give an idea of the value of all the businesses, as any interested buyer will have to understand that it will be difficult or impossible to realise their value in practical terms. Unless information is readily available to investors, it may be impossible to establish whether we obtain the best price for privatisation.

10.30 pm
Mr. Leigh

My hon. Friend's remarks on price are directly relevant to our earlier debate on new clause 1. The more someone is required to pay for the CDC, the less willing he or she will be to do the corporation's traditional work in difficult markets and with difficult customers. The Government cannot have it both ways.

Mrs. Gillan

My hon. Friend goes to the heart of the matter. The nature of the CDC will be fundamentally changed by its privatisation.

The Secretary of State must tell us what effect the sale of gold has had on the CDC's three gold-mining investments—the Abosso and Satellite gold fields in Ghana and the East Africa gold mines in Tanzania. Has any of those operations been directly affected by the Chancellor's actions? We have heard alarming stories about redundancies and a crisis in South Africa. [Interruption.] The Secretary of State is laughing; she is plainly amused by the thought of a crisis in South Africa. No doubt, like the Under-Secretary, she will blame the crisis on other countries selling their gold. However, has the status of those three investments been affected? If they can be damaged even by the actions of the UK Government, the risk involved in the CDC will be clear, and the portfolio will be even less interesting to investors.

The Secretary of State must consider what buyers might be looking for. The price obtained for the CDC could be badly affected by the amount of Government management control of which the Under-Secretary boasted during our previous debate. The Under-Secretary must appreciate that a full transfer of ownership and management—implying an ability to act commercially—would maximise the value of CDC shares. [Interruption.] The Minister says that I should be referring to the Secretary of State, but it was he who dealt with the previous group of new clauses and amendments, and he who trumpeted the control that he would retain over the CDC.

The golden share and the ability to block CDC actions will also reduce the price. Rather than protecting the CDC, the Government will diminish its value. The Secretary of State must let us know why the vehicle she is using to maintain the CDC's character may work against our obtaining a fair price for it.

The hour is late, and I do not wish to delay the House. The Under-Secretary earlier filled some of the gaps that he had left at the Committee stage. He also sent me a letter—it arrived only yesterday—on some points raised in Committee, particularly concerning the CDC's operating costs. [Interruption.] The Minister laughs and asks what is wrong with that. A considerable time has elapsed since the Committee stage, and the Minister could have made an effort to send the replies a little earlier than the day before the debate. That is how the Department has handled the Bill. The taxation provisions for the CDC were tabled at the eleventh hour. The whole passage of the Bill has been punctuated by the late arrival of information.

To give the Minister his due, the letter did arrive, and I thank him for giving us the information. However, once again there are unanswered questions. I raised with the Minister the issue of the large rise in staff costs and operating charges. The staff costs rose between 1997 and 1998 from £13.2 million to £16.3 million, and the other operating charges rose from £11.6 million to £17.6 million in a 12-month period. I asked for a breakdown of the CDC's operating costs.

Will the Secretary of State explain item five in the Minister's letter, which deals with the business change management costs and costs related to the preparation of the PPP, which stand at £1.8 million for the 1998 accounting period? How much does she expect those costs to be in the 1999 accounting period? Will they be similar, or will they be larger? That is an astronomical cost, and I presume that it will not be repeated. However, there must be some carry over into the 1999 financial year, and I hope that she will be able to tell us what those charges are to date.

There is also an item on the increase in general administration costs, which is a round figure of £1 million. That requires further and better explanation. Even at this late stage on Report, the Department and the Secretary of State should give us a breakdown of that £1 million figure, which is a large increase in general administration costs on a relatively small budget. A financial director of any company would look at that item on the accounts and ask those questions. To reassure potential investors that this set of accounts is not profligate, to say the least, we should know to what that £1 million increase in general administration costs is attributed.

The Minister's letter also refers to training costs. He says: Training costs and costs directly related to preparation of the public private partnership are exceptional costs, but are expected to continue over the next few years. Surely exceptional costs are one-off costs, but if they are expected to continue over the next few years they must have an implication for the privatisation of this company and the price that will be paid. At this stage, the Secretary of State should let us know exactly what those costs will be and why they will continue over the next few years. They are exceptional if they are continuing annually. Light needs to be shed on that.

I have taken up enough of the House's time at this time of night. I am letting the Secretary of State off lightly, because so many questions need to be asked. I reiterate what my hon. Friend the Member for South-West Devon (Mr. Streeter) said at the beginning of the last group of amendments. We want the privatisation of the Commonwealth Development Corporation to succeed. We are not content that this matter has been thought through, and we are certainly not content that a fair and good price will be obtained for this investment unless the Secretary of State and her Minister answers these detailed questions. I believe that, long before we get to the market, the Department will be forced to answer even more detailed questions. It is our duty to examine what the Department is doing, and to ensure that it gets it right. After all, the Secretary of State does not have much of a track record on privatisation, other than in talking down the prices of privatisations

Mr. David Heath (Somerton and Frome)

It is a shame that we could not consider this new clause with new clause 2, which was not moved; it would be interesting to judge the effects of incorporation in sub-Saharan Africa on the price of assets on sale.

In the latter part of her speech, the hon. Member for Chesham and Amersham (Mrs. Gillan) addressed some interesting questions about the present functioning of the CDC and its finances. However, the early part of her speech and the main thrust of the new clause deals with the pricing of assets on their disposal. I cannot help but hear the resounding noise of stable doors being firmly closed, several years after some choice horses bolted from the public sector. The structures already exist—through the National Audit Office and the Public Accounts Committee—to provide checks and balances in these matters. Furthermore, I believe that the Secretary of State does have the best interests of that partial flotation in mind, so that it can produce the assets that we hope will enable the corporation to do its job.

The narrowness of the new clause causes me some concern. It proposes that the sole criterion to be used by the Secretary of State is the best commercial interests of the Corporation. It is important that we receive the maximum return compatible with the other objectives set by the House and the Government for the change of status of the CDC.

However, there are conflicting pressures; I hope that the Secretary of State will bear them in mind when the sale of the assets takes place. Those pressures will also bear on the board, which will have a duty under the Companies Acts to maintain the best commercial interest, but that will be qualified by the structures to be established under the Bill in respect of business principles and investment policy. The interests will not be purely commercial; there will be a commercial interest tempered by the need to produce effective development in those parts of the world where it would otherwise not occur.

If the sole criterion were to be the best commercial interests of the corporation, a different picture would emerge. There would be a different distribution of assets within the corporation before flotation; there would undoubtedly be an increasing asset base at the expense of effective investment in many parts of the world. The sole shareholder—the Government with the Secretary of State as their embodiment—should have a range of other interests in mind: development, which we have already discussed; other policies of the British Government, which may or may not be in conflict with the commercial interest; and the diversity of the eventual share holdings, because a diverse ownership of the company will produce that vitality in investment that we want.

The potential buyers of the business will want to consider other factors, such as the exceptional tax status that has been invoked as the main thrust of the Bill. I still have some residual concerns as to that tax status, although I am willing to suspend some of my disbelief in order to see the measure through. However, I am worried about the way in which profits and dividend will be apportioned between the tax-exempt parts of the company and those that are not exempt. I am concerned about the potential for windfall earnings during that seven years of grace, if the golden share is disposed of. Although 1 pay tribute to the Minister's willingness to provide lucid answers to those points, he did not entirely convince me in Committee. Some matters remain opaque.

All those factors must be borne in mind. That is why I must reject the new clause; it puts too close a straitjacket on the Secretary of State, by asking her to consider only the commercial interests of the corporation in finding a price.

As I said, of course we want to see the maximum return on the investment that the Government and the British people have put into the company over the years, but we also want a successful flotation and continuing interest to ensure that there is investment in developing countries in the future. A basket of criteria is involved, and the amendment will not provide the Secretary of State with the freedom of choice that will allow her to do her duty by the House and the Government.

10.45 pm
Mr. Hogg

I listened carefully to the hon. Member for Somerton and Frome (Mr. Heath). He is wrong because he has failed to focus on the purpose of the new clause. His remarks would have some force if we were discussing the general investment policy of the Commonwealth Development Corporation. There is a distinction to be drawn between the CDC's general investment policy and the price at which one subsequently seeks to dispose of shares. They are not the same. Clearly, the disposal of shares reflects in part the pre-existing investment policy, but the two considerations are different, and it is fair-minded of the hon. Gentleman to acquiesce on that point.

I support the remarks of my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan), who spoke from the Front Bench. Reading the new clause, it seems to me that we are doing little more than asserting in the Bill the obligations that are already those of directors under the Companies Act 1989. I find it difficult to understand why Ministers should resist the incorporation of a general statutory obligation into the Bill, unless they have a private agenda.

Mr. Heath

Does not the right hon. and learned Gentleman accept that there is a difference between the obligation on directors and the obligation on the shareholder, who is the Secretary of State? The Secretary of State has other interests that she must consider in determining what is the appropriate disposal price.

Mr. Hogg

I am grateful to the hon. Gentleman for making that point because he reinforces my concern. We must remember that when the CDC has been privatised, there will be many private investors who will hold up to 75 per cent. of the equity. They have a right to expect that their equity price will be protected against the depredations of a Secretary of State who may be minded to dispose of equity for a price other than a commercial one. That is the point that the hon. Gentleman is making.

Mr. Foulkes

indicated dissent.

Mr. Hogg

The Under-Secretary shakes his head, but he is a little premature because he has not yet heard my argument. If he wants to intervene, I will of course give way. If not, perhaps he would be well advised not to interrupt.

The point is that we are discussing the equity in the CDC, in which there will be many private investors. If we are to encourage private investment in the CDC, it is essential that prospective investors feel confident that their investment will be treated in a proper commercial way. The new clause would do no more than assert that in the Bill. Prospective investors will be entitled to be concerned about the security of their investment if there is no statutory protection.

The hon. Member for Somerton and Frome observed that there might be other, proper considerations that the Secretary of State could take into account. If I were an investor, I would not want the value of my shares to be determined at the disrcetion of the Secretary of State, however well intentioned she might be. I should want the value of my shares to be determined by straightforward commercial criteria.

Mr. Foulkes

Well, we know that.

Mr. Hogg

Of course I should want that. If the hon. Gentleman wants to get investment into the CDC, he would be well advised to ensure that the investment is safe. [Interruption.] The hon. Member for Hove (Mr. Caplin) is right to gesture to the Under-Secretary that if he wants to keep the debate short, he should keep quiet. I praise the hon. Member for Hove. After the 19 or so years in which the Under-Secretary has been a Member of the House, I should have thought that silence would have been commended to him by experience and practice.

Mr. Crispin Blunt (Reigate)

He is a well-known control freak.

Mr. Hogg

The Labour party is full of control freaks.

I may be enjoying myself, but there is a serious point to be made about the protection of investors.

Mr. Heath

I am listening carefully to the right hon. and learned Gentleman's argument which might have some force if it were envisaged that the sale of shares should take place in a series of tranches—a sequential sale—so that the Secretary of State would be affecting the price of shares that were already held by members of the public. However, that would not and could not apply if the shares were sold in a single block.

Mr. Hogg

I am grateful to the hon. Gentleman for coming some way towards my position. He should come the whole way, however, as giving the Secretary of State the ability to crystallise the value of an equity holding—as that is what happens when there is a disposal for value—also determines the value of the residual equity. Giving the Secretary of State the right to dispose of shares other than at their commercial value also crystallises the value of shares held by the other equity holders. The price might be less than the commercial value so that would be wrong.

This is not idle speculation. Anyone who is aware of the Government's policy on realising the gold reserve will recognise that they are not to be trusted with the realisation of assets. Not only have they managed to sell the gold reserve at a low value, but they have had a permanently diminishing effect on the gold reserve held by others; and, incidentally, they have diminished the employment in South African and other gold mines for which the Secretary of State for International Development and the Commonwealth Development Corporation have some responsibility. So we are absolutely justified in being very cautious.

Moreover, new clause 3 has another great benefit. When one sets out a duty, as new clause 3 does, one also presrcibes a remedy. If the Bill states that the Secretary of State has a duty to realise at commercial value and it then appears that the Secretary of State is not doing that and there is some private agenda or other motive such as the hon. Member for Somerton and Frome alluded to, it is possible for a private investor to go to the court, first for an injunction—I hope that we are all in favour of the rights of the citizen—and, secondly, alleging loss arising from misfeasance on the part of the Secretary of State.

The proposal set out by my hon. Friend the Member for Chesham and Amersham is very desirable. It crystallises within the Commonwealth Development Corporation an obligation which is extraordinarily similar to that imposed on a board of directors. It provides a protection to prospective investors that means that there will be more prospective investors and it provides them with a remedy. The House should seek to assert and protect all those measures—[Interruption.] I am awfully glad to see that on this matter I have the support of the Deputy Chief Whip.

Mr. Leigh

As I said on Second Reading and in respect of new clause 1, many of us who take an interest in the future of the corporation are concerned about whether the unique work that it has carried out over the years can continue. Opposition Members are also concerned about whether the articles of association that the Government tell us are adequate and the golden share are sufficient to ensure that.

As the articles of association make clear—it will be inevitable in what will be a privatised company—the corporation will have to put the shareholders' interests first. We receive assurances from the Government that by retaining the golden share the Government will be able to ensure that the corporation continues the valuable work that it has undertaken in the past, not only in difficult markets in countries where other investment institutions may be less than willing to take an interest but in helping smaller, struggling companies in those difficult markets.

We live in the real world and we all know that if the new clause is voted on in a few minutes from now, the Government will vote it down. However, I hope that it will crystallise some of the arguments. When the Secretary of State responds, we must try to get out of her more information about how the sale will be financed to ensure that the traditional work of the corporation is maintained and protected.

This privatisation is quite different from many others with which we were involved with in the past, which were fiercely opposed by the Labour party. They were often difficult privatisations. There was considerable public interest. We were concerned with British Gas and British Telecom, for example. They were difficult but at least we were dealing with companies that were fundamentally commercial. They were engaged in what would become, once they were privatised, very profitable work.

We are now undertaking a different sort of privatisation and not one that the previous Conservative Government were prepared to undertake because of the unique difficulties that would be faced. When we were dealing with large monopolies in the highly successful market that appertains in this country, it was easy to obtain a good price. There was argument about whether the best price was obtained, but let us not go back over all that.

Mr. Deputy Speaker (Sir Alan haselhurst)

Order. Indeed, let us not go back on all that, nor on the hon. Gentleman's speech during an earlier part of the proceedings on the Bill. I must ask him to direct his remarks specifically to the duty of the Secretary of State to obtain the best price in the commercial interests of the corporation. That is the point that is under consideration.

Mr. Leigh

That is the point, Mr. Deputy Speaker. It would be easy for the Secretary of State to obtain a very good price if it became generally known that the Government were watering down their commitment to maintain the traditional work of the corporation. I do not think that we have received adequate reassurances so far that the Government are prepared to sell the corporation for rather less than they might otherwise hope because they are determined to maintain the traditional work of the corporation.

It would be easy for the Government to obtain an extremely good price for the corporation. Will they do that, or are they prepared in the marketplace to remind people in the most forceful terms possible of the articles of association, of the existence of the golden share and of their determination to maintain the corporation's work in very difficult markets? If they do all that, the price that they obtain may be very different from what it would be in the open marketplace.

The Government cannot have it both ways. They must be honest with the House and with others who take an interest in these matters. They must make clear their aim. If it is to maintain the corporation in its present form following a pseudo-privatisation and to maintain its ethos—[Interruption.] The Under-Secretary is shaking his head. If the Government adopt that approach, they will not get a very good price. They will find that investors fight shy. I suspect that investors will see through what the Government are saying. They will see through the sham reassurances that have been given. They will realise that the golden share and the articles of association mean very little. Previous privatisations have always started with a golden share—

Mr. Deputy Speaker

Order. The hon. Gentleman is repeating himself, in territory where I suggested that he should not be treading.

Mr. Leigh

I am coming to the end of my remarks, Mr. Deputy Speaker.

On the issue of price, we are entitled to obtain a reassurance from the Government that they will not undersell the traditional work of the corporation

11 pm

Clare Short

This is a rather depressing set of events. We all agree that it is an important principle of democracy, and the tradition of the House, that it is the duty of the Opposition to oppose, but that does not mean that it is the duty of the Opposition not to understand anything that is discussed on Second Reading or in Committee. There is either a complete incapacity on their part to understand, or a necessity continually to repeat mantras, which means that none of our proceedings have created any understanding on the part of those on the Opposition Front Bench. That is regrettable and disappointing.

All parties claim—I believe that it is the position of the Liberal party—that the Commonwealth Development Corporation is a precious asset, and that the creation of a public-private partnership would enable its development interests to be entrenched. That could not be achieved by a privatisation, but through the change that we are making, we can get more private sector involvement into very poor countries which are not attracting much private sector investment, thereby enhancing their economic growth and demonstrating that a good rate of return can be gained by the private sector in those countries. Everyone agrees that that would be a success, and that it is a shared objective, but much of the discussion proceeds as though we had not previously agreed on that principle.

The hon. Member for Somerton and Frome (Mr. Heath) made clear the purpose of the new clause. The official Opposition are trying to impose on the Secretary of State a duty, when disposing of shares, to ensure that the price obtained for those shares or other securities is in the best commercial interests of the corporation. However, on new clause 1, the official Opposition stated that they were anxious to retain the development objectives of the corporation, and therefore that commercial objectives must not be primary.

Two absolutely contradictory new clauses have been moved tonight, but it is the duty of the Opposition to oppose and not to be coherent or intelligent or to understand the purpose of the Bill. They have argued for two entirely contradictory sets of objectives. That is interesting and notable.

Mrs. Gillan

The hour is late.

Clare Short

That partly explains it.

We agree with the Opposition that the CDC needs a strong balance sheet that will equip it for the challenges under the new structure. Both the Government and the CDC have a strong interest in the partnership leading to the CDC's long-term success. We agree that that should be achieved through financial restructuring, and that that should not be dependent on the proceeds from the sale. Those proceeds are important, but they are no substitute for the effectiveness of the financial restructuring and the track record created by it.

Restructuring is likely to involve the conversion of existing Government debt into equity or commercial debt with an appropriate repayment profile. We need a track record so that any private-sector interest considering investing in the new partnership CDC can see the likely rate of return. The purpose of the restructuring is to give the CDC a capital structure that balances the needs of the business, the capacity for future growth and financial prudence.

Opposition Members are game-playing for purely ideological reasons and pretending that this is a privatisation, and that they are against the outcome of a privatisation. As we said repeatedly in Committee, a straightforward privatisation would mean that, within a short time, the CDC would move out of the poorest countries and into investment in countries with a safer rate of return. It would cease to be a development instrument. Conservative Members claim to be opposed to that, but the new clause requires that—the biggest and fastest rate of commercial return on the sale, although that is not the objective of the exercise.

Mr. Hogg

Will the right hon. Lady give way?

Clare Short

I will, but I shall come to what the right hon. and learned Gentleman had to say. He is quite clever, and thinks that he is enormously clever, but what he said today showed that he had not attended to the Bill's detail and the arrangements that are being made for the partnership, or to previous proceedings, so what he said did not make sense.

Mr. Hogg

The right hon. Lady does not advance her case by insulting her opponents. I suggest that she addresses new clause 3, which deals with the realisation of the equity. That is different in kind from the fashioning of the investment policy. She may well be right to say that, in the structuring of the investment policy, there is a case for having regard to the broad developmental considerations, to which she has referred, but, in realising the equity, does she not understand that she has the same kind of duty that the board of directors has to ordinary equity holders?

Clare Short

If the right hon. and learned Gentleman listens for a little while, he might understand better the whole structure of the arrangements that we are making, and then he would see that his arguments do not hold up and that the point that he made just now is not of much value to the House.

The hon. Member for Chesham and Amersham (Mrs. Gillan) said—

Mrs. Gillan

Will the right hon. Lady give way?

Clare Short

No. I would like to proceed.

Mrs. Gillan

Will the right hon. Lady give way?

Clare Short

No, I am sorry.

Mrs. Gillan

Will the right hon. Lady give way?

Clare Short

No. That is the third time. Is that clear?

The hon. Lady claimed that she was greatly concerned about the way in which the shares were to be disposed of and the price that they were likely to obtain, then she made a series of points that were not connected with that. For example, she talked about the disposal of Railtrack. As you allowed that, Mr. Deputy Speaker, I presume that an answer to that is in order.

The way in which Railtrack was privatised, the increase in the subsidy from the public sector and the factoring of the railways, astonished the markets and meant that the price obtained was low in terms of the assets being privatised. The hon. Lady might have read the press today, but I bet that she has not read the prospectus for the sale. Had she done so, she would have seen that the policy commitments that I put in there on behalf of the Labour party said that we would use the regulatory regime, in the way in which the new regulator now says that he will use the regulatory regime, to ensure that the railways operate efficiently in the interests of the—

Mr. Deputy Speaker

Order. I think that honour is satisfied on that point now. May we return to the Bill?

Clare Short

I am sorry, Mr. Deputy Speaker, but surely an ill-informed insult cannot be made and the short answer not be provided. That is surely not the usual practice of the House.

Mr. Deputy Speaker

Order.

Clare Short

rose—

Mr. Deputy Speaker

Order. When I am on my feet, the right hon. Lady will sit down. I decided that enough had been said and that honour had been satisfied. We must now return to the subject matter of the debate.

Clare Short

As the hon. Member for Chesham and Amersham said, Railtrack was sold—

Mr. Leigh

Mr. Deputy Speaker has told you to stop talking about that.

Mr. Deputy Speaker

Order. I am sorry to interrupt the right hon. Lady. The hon. Gentleman would do well to leave me to judge these matters. I do not need his advice.

Clare Short

Railtrack was sold cheaply because the commercial sector was astonished by the privatisation. Proper regulation will ensure that it acts in the interest of the public. That means that the rate of return will be lower, and that is relevant to the question of a public-private partnership, how one secures a public interest, and whether one obtains a high price at the point of sale. That is relevant to the CDC.

Mrs. Gillan

rose—

Clare Short

No, I shall not give way.

The hon. Lady went on to say that the Opposition were not talking down the likely interest in the CDC's partial flotation. It may come in tranches or in one block. That is yet to be determined. It does not have to be sold at one time.

Either the official Opposition do not understand the structure, or they are trying to talk it down by saying that it will not work. They cannot have it both ways, and, because I want to be charitable, I shall conclude that they do not understand. That is probably the reality.

As for the question of gold sales—I am not sure that this is in order or relevant, Mr. Deputy Speaker—

Mr. Leigh

Try it.

Clare Short

Remarks have been allowed. Can they be answered? May I invite you to make a ruling, Mr. Deputy Speaker?

Mr. Deputy Speaker

The right hon. Lady is stretching things to the limit. The raising of matters as comparative examples in debate does not provide a platform for discussion. All that I seek is a sense of proportion. I am not saying that the right hon. Lady cannot refer to such matters, but I believe that she went on far too long—even beyond the extent of my ruling—on the previous matter.

Clare Short

We shall all look at Hansard tomorrow, and see how much time was devoted to the subject of gold sales in the earlier speech. I accept your ruling that the point cannot be responded to, Mr. Deputy Speaker, but I feel that there is a slight imbalance.

Mrs. Gillan

Will the Secretary of State give way?

Clare Short

No.

If it were the duty of the Government to secure the maximum commercial return when the shares were sold, either as one block or in tranches, it would be impossible to entrench the development interests about which Opposition Members claim to be so concerned. The whole structure of the partnership—the requirement that there should be an ethical investment strategy, and an entrenched requirement to invest in the poorest countries—is there not to maximise the return when the shares are sold, but to develop a public-private partnership, and to ensure that the private sector invests more in the poorest countries. If Opposition Members pushed the new clause to a vote, they would be trying to secure the highest possible short-term price for the shares, and trying to diminish the strength of the new Commonwealth Development Corporation.

Let me say to the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg)—is that right? It is an unusual-sounding constituency—that the structure of the public-private partnership does not depend on the fickle intervention of a Secretary of State. As the right hon. and learned Gentleman suggested, that would cause unpredictability for the markets, and would be likely to affect the price. This does not depend on political intervention. Those who buy into the new arrangements will know that they are buying into a development organisation, seeking a return that is reasonable for the private sector, but not the maximum commercial rate. Those who seek the maximum rate should invest in a different organisation.

It is difficult to discuss these matters thoroughly and rationally at such a late hour, but we are talking about a public-private partnership that seeks to build on the best of what the CDC has achieved in the past. We consider it to be a complete misapprehension on the Opposition's part that there can be only highly labour-intensive investments with a low rate of return in developing countries. It is perfectly possible for the CDC to move to equity investment, to secure a reasonable rate of return, to persuade the private sector to hold some shares in it, to increase private-sector investment in the poorest countries, to increase their rate of economic growth, and to increase private-sector investment generally.

That is the purpose of the organisation. The new clause would destroy that objective, and we ask the House to reject it.

11.15 pm
Mrs. Gillan

I used to have respect for the Secretary of State, but, after that performance, I will have to revise my opinion of her. I made the points on the new clause in good faith. She overreacted. She has not answered a single point that was made by Conservative Members. Observers of her performance will be bitterly disappointed because she has let down both herself and the Commonwealth Development Corporation.

Observers will find it difficult to understand why the Secretary of State did not accept the new clause. In particular, she has signalled to the market that she is willing to sell the CDC off cheap to her friends—at a low price. That is a betrayal of what the CDC has stood for during its 50-year existence. [Interruption.] The Under-Secretary says from a sedentary position that I am making cheap political points. I will give way to him if he wishes to intervene. He is saying that I am talking the CDC down. I have not talked it down, but the Secretary of State has. She is going to sell it cheap.

I asked the Secretary of State, reasonably, to provide us with an analysis of the portfolio of all the businesses in the annual report. She did not reply. She has not addressed the management issues that we raised, on which the price will turn.

The more control that is exercised by Government as the golden shareholder, the more the opportunity to make commercial returns diminishes. To spell it out for the Minister and the Secretary of State, if there is 75 per cent, ownership and 45 per cent, management control, that will be poor for value and poor for the price at which the CDC can be sold. The reverse, of course, would be good for the price at which the CDC could be sold.

A crippling influence on the price flows from Government and the proposals on control. The Secretary of State has let the House and all potential investors know that she is willing to sell the CDC cheap. I and other Conservative Members have been appalled by her performance.

Mr. Foulkes

Will the hon. Lady confirm that, in Committee, when we discussed the matter in detail, she and her colleagues did not divide the Committee on one occasion? We provided four days for the Committee. That time was not taken up. She could have asked all those questions in Committee. She is making cheap party political points, undermining the whole basis of the CDC. It is a disgrace to her and to the House.

Mrs. Gillan

It is good to see that the age of chivalry is not dead and that at least some men on the Labour Benches rush to the defence of the ladies in their party. However, the Minister's reaction only goes to make my point.

We were not going to divide the House on the matter, but this evening's performance has led Conservative Members to believe that the Secretary of State does not know what she is doing and that the CDC will suffer. Therefore, I will press the new clause to a vote.

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

The House divided: Ayes 21, Noes 293.

Division No. 244] [11.18 pm
AYES
Blunt, Crispin Iaing, Mrs Eleanor
Boswell, Tim Lewis, Dr Julian (New Forest E)
Brady, Graham Lidington, David
Brooke, Rt Hon Peter McIntosh, Miss Anne
Fabricant, Michael Stanley, Rt Hon David
Garnier, Edward Streeter, Gary
Gillan, Mrs Cheryl Tredinnick, David
Hammond, Philip Young, Rt Hon Sir George
Hawkins, Nick
Hogg, Rt Hon Douglas Tellers for the Ayes:
Howarth, Gerald (Aldershot) Mr. Eric Forth and
Jackson, Robert (Wantage) Mr. Edward Leigh.
NOES
Adams, Mrs Irene (Paisley N) Buck, Ms Karen
Ainger, Nick Burgon, Colin
Alexander, Douglas Burnett, John
Allen, Graham Butler, Mrs Christine
Anderson, Janet (Rossendale) Caborn, Rt Hon Richard
Atherton, Ms Candy Campbell, Alan (Tynemouth)
Atkins, Charlotte Campbell, Mrs Anne (C'bridge)
Austin, John Campbell, Rt Hon Menzies (NE Fife)
Barnes, Harry
Barron, Kevin Campbell-Savours, Dale
Bayley, Hugh Cann, Jamie
Beard, Nigel Caplin, Ivor
Beckett, Rt Hon Mrs Margaret Casale, Roger
Begg, Miss Anne Caton, Martin
Benn, Rt Hon Tony (Chesterfield) Cawsey, Ian
Benton, Joe Chapman, Ben (Wirral S)
Bermingham, Gerald Chaytor, David
Best, Harold Clapham, Michael
Betts, Clive Clark, Rt Hon Dr David (S Shields)
Blackman, Liz Clark, Paul (Gillingham)
Boateng, Paul Clarke, Charles (Norwich S)
Bradley, Keith (Withington) Clarke, Rt Hon Tom (Coatbridge)
Bradley, Peter (The Wrekin) Clarke, Tony (Northampton S)
Bradshaw, Ben Clelland, David
Brinton, Mrs Helen Clwyd, Ann
Brown, Russell (Dumfries) Coaker, Vernon
Browne, Desmond Coffey, Ms Ann
Cohen, Harry Hutton, John
Coleman, Iain Iddon, Dr Brian
Colman, Tony Illsley, Eric
Connarty, Michael Jackson, Ms Glenda (Hampstead)
Cook, Frank (Stockton N) Jackson, Helen (Hillsborough)
Corbyn, Jeremy Jamieson, David
Cousins, Jim Jenkins, Brian
Cox, Tom Johnson, Miss Melanie (Welwyn Hatfield)
Crausby, David
Cryer, Mrs Ann (Keighley) Jones, Rt Hon Barry (Alyn)
Cryer, John (Hornchurch) Jones, Mrs Fiona (Newark)
Cunningham, Jim (Cov'try S) Jones, Helen (Warrington N)
Dalyell, Tam Jones, Ms Jenny (Wolverh'ton SW)
Darling, Rt Hon Alistair
Darvill, Keith Jones, Jon Owen (Cardiff C)
Davey, Valerie (Bristol W) Jones, Dr Lynne (Selly Oak)
Davidson, Ian Jones, Martyn (Clwyd S)
Davis, Terry (B'ham Hodge H) Jowell, Rt Hon Ms Tessa
Dawson, Hilton Kaufman, Rt Hon Gerald
Dean, Mrs Janet Keeble, Ms Sally
Dismore, Andrew Keen, Alan (Feltham & Heston)
Dobbin, Jim Keen, Ann (Brentford & Isleworth)
Donohoe, Brian H Khabra, Piara S
Doran, Frank Kidney, David
Dowd, Jim King, Andy (Rugby & Kenilworth)
Drew, David Kumar, Dr Ashok
Eagle, Maria (L 'pool Garston) Ladyman, Dr Stephen
Efford, Clive Lawrence, Ms Jackie
Ellman, Mrs Louise Laxton, Bob
Ennis, Jeff Lepper, David
Etherington, Bill Leslie, Christopher
Fitzpatrick, Jim Levitt, Tom
Fitzsimons, Lorna Linton, Martin
Flint, Caroline Livingstone, Ken
Flynn, Paul Lloyd, Tony (Manchester C)
Follett, Barbara Lock, David
Foster, Michael Jabez (Hastings) Love, Andrew
Foster, Michael J (Worcester) McAvoy, Thomas
Foulkes, George McCabe, Steve
Fyfe, Maria McCafferty, Ms Chris
Gapes, Mike McDonagh, Siobhain
George, Andrew (St Ives) Macdonald, Calum
George, Bruce (Walsall S) McDonnell, John
Gerrard, Neil McIsaac, Shona
Gibson, Dr Ian McKenna, Mrs Rosemary
Gilroy, Mrs Linda Mackinlay, Andrew
Godman, Dr Norman A McNamara, Kevin
Godsiff, Roger McNulty, Tony
Goggins, Paul Mactaggart, Fiona
Gordon, Mrs Eileen Mahon, Mrs Alice
Griffiths, Jane (Reading E) Mallaber, Judy
Griffiths, Nigel (Edinburgh S) Marsden, Gordon (Blackpool S)
Griffiths, Win (Bridgend) Marsden, Paul (Shrewsbury)
Grogan, John Marshall, Jim (Leicester S)
Hain, Peter Meacher, Rt Hon Michael
Hall, Mike (Weaver Vale) Meale, Alan
Hall, Patrick (Bedford) Merron, Gillian
Hamilton, Fabian (Leeds NE) Michael, Rt Hon Alun
Hanson, David Michie, Bill (Shef'ld Heeley)
Heal, Mrs Sylvia Mitchell, Austin
Healey, John Moffatt, Laura
Heath, David (Somerton & Frome) Moonie, Dr Lewis
Henderson, Doug (Newcastle N) Moran, Ms Margaret
Henderson, Ivan (Harwich) Morgan, Alasdair (Galloway)
Hepburn, Stephen Morgan, Ms Julie (Cardiff N)
Heppell, John Morgan, Rhodri (Cardiff W)
Hesford, Stephen Morley, Elliot
Hinchliffe, David Mullin, Chris
Hopkins, Kelvin Murphy, Jim (Eastwood)
Howells, Dr Kim Naysmith, Dr Doug
Hoyle, Lindsay Norris, Dan
Hughes, Ms Beverley (Stretford) O'Brien, Bill (Normanton)
Hughes, Kevin (Doncaster N) O'Hara, Eddie
Hughes, Simon (Southwark N) Olner, Bill
Humble, Mrs Joan Osborne, Ms Sandra
Hurst, Alan Palmer, Dr Nick
Pendry, Tom Starkey, Dr Phyllis
Perham, Ms Linda Steinberg, Gerry
Pickthall, Colin Stevenson, George
Pike, Peter L Stewart, David (Inverness E)
Plaskitt, James Stewart, Ian (Eccles)
Pollard, Kerry Stinchcombe, Paul
Pond, Chris Stoate, Dr Howard
Pope, Greg Stott, Roger
Prentice, Ms Bridget (Lewisham E) Stringer, Graham
Prentice, Gordon (Pendle) Stuart, Ms Gisela
Primarolo, Dawn Stunell, Andrew
Prosser, Gwyn Sutcliffe, Gerry
Purchase, Ken Taylor, Rt Hon Mrs Ann (Dewsbury)
Quinn, Lawrie
Radice, Rt Hon Giles Taylor, Ms Dari (Stockton S)
Rammell, Bill Taylor, David (NW Leics)
Rapson, Syd Thomas, Gareth (Clwyd W)
Raynsford, Nick Thomas, Gareth R (Harrow W)
Reed, Andrew (Loughborough) Timms, Stephen
Rendel, David Tipping, Paddy
Roche, Mrs Barbara Todd, Mark
Rooney, Terry Tonge, Dr Jenny
Roy, Frank Touhig, Don
Ruane, Chris Trickett, Jon
Ruddock, Joan Turner, Dennis (Wolverh'ton SE)
Russell, Bob (Colchester) Turner, Dr Desmond (Kemptown)
Salter, Martin Turner, Dr George (NW Norfolk)
Sanders, Adrian Twigg, Derek (Halton)
Savidge, Malcolm Twigg, Stephen (Enfield)
Vaz, Keith
Sawford, Phil Vis, Dr Rudi
Sedgemore, Brian Walley, Ms Joan
Shaw, Jonathan Wareing, Robert N
Sheerman, Barry Watts, David
Short, Rt Hon Clare White, Brian
Simpson, Alan (Nottingham S) Wicks, Malcolm
Singh, Marsha Williams, Rt Hon Alan (Swansea W)
Skinner, Dennis
Smith, Angela (Basildon) Williams, Alan W (E Carmarthen)
Smith, Miss Geraldine (Morecambe & Lunesdale) Williams, Mrs Betty (Conwy)
Wise, Audrey
Smith, Jacqui (Redditch) Wood, Mike
Smith, John (Glamorgan) Worthington, Tony
Smith, Llew (Blaenau Gwent) Wright, Anthony D (Gt Yarmouth)
Smith, Sir Robert (W Ab'd'ns) Wright, Dr Tony (Cannock)
Soley, Clive
Southworth, Ms Helen Tellers for the Noes:
Spellar, John Mr. Keith Hill and
Squire, Ms Rachel Jane Kennedy.

Question accordingly negatived.

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