LORDS AMENDMENT (Hansard, 16 November 1976)

§ Lord CARR of HADLEY
My Lords, I beg to move that this House doth not insist on their Amendment No. 53, but doth propose the following Amendment in lieu thereof:

§ Lord MELCHETT
My Lords, Amendment No. 53A seeks to qualify the meaning of "fair'', including the Amendment No. 53 with which the Commons disagreed. During our lengthy debates on the compensation provisions of this Bill, the Government have repeatedly made clear that a stock market-based valuation of securities reflects the earning power of the 1234 underlying assets. When the Stock Exchange seeks to fix a price for a previously unlisted security, it assesses the value of that security on the potential investor. The value is based to a significant extent on what earnings the investor can expect from that security and hangs on the earning power of the underlying assets.
In order to achieve the result, the Stock Exchange works on the basis of the very detailed requirements of the Listing Agreement which we discussed when talking about the previous Amendment. This Listing Agreement which serves as a code of practice for all stock market dealings, requires very wide-ranging information about the records and prospects of companies to be made available well beyond the minimum statutory requirements. Under the Bill exactly the same process will apply. The Bill already provides that the arbitrator shall have regard to all relevant factors. Either party in the negotiations, either the Secretary of State or the stockholders' representative, can bring into the negotiations and ultimately before the arbitration tribunal any factor which he or she considers relevant to a particular case. The first part of Amendment No. 53A therefore is already covered in the current text of the Bill.
My Lords, as to the reference to fairness, I have already, and repeatedly, made the Government's position clear. The Stock Exchange employs a detailed process for fixing the price of a previously unlisted share and, so far as I am aware, no one suggests that this is unfair. We are using the same mechanism. I suggest that if it is fair in one case, it is likely to be fair in the other. It is the view of the Government that the present compensation terms are, for the reasons I have outlined, fair to all parties. In those circumstances, Amendment No. 53A at best adds up to the existing provisions of the Bill and at worst it reduces the clarity of the provisions as they are in the Bill, if your Lordships insist on the Amendment. I hope, therefore, that the noble Lord, Lord Carr, will not press his Amendment.

§ Lord SELSDON
My Lords, the noble Lord, Lord Melchett, had reference to some sort of document which I had hoped he had dismissed a few moments ago. The professionals are all agreed that the share price is not a fair basis. What I am asking the Government to 1235 say is that that be the starting basis, nothing more. I hope we can get away from that, which is the emotive factor about which I spoke earlier.

§ Lord CARR of HADLEY
My Lords, I should be a great deal happier if the noble Lord, Lord Melchett, had not made the speech which he has just made, because I now go away feeling that, I am sure unintentionally, he has back tracked on what the noble Lord, Lord Winterbottom, and he himself said in discussion on the previous Amendment. Perhaps I am wrong. I can only speak as a listener. I am sure that unintentionally—that is what he seemed to be doing; he started off by objecting to the Amendment because it put a qualification on the meaning of the word "fair". The only qualification it is putting on the meaning of the word "fair'' is his own definition of the word, in the words that he had used on more than one occasion.
We started off by fearing, and I think also believing, that the Government's view of what was fair did not coincide with our view of what was fair. As we proceeded with our rather lengthy debates, the noble Lord, Lord Melchett, and also the noble Lord, Lord Winterbottom, on more than one occasion gave a definition of their intentions which was very satisfactory to us and led us to feel that at least we could share their objectives.
Because there has been this doubt arising from the wording of this Bill, not only inside this House but outside it, we really believed that by writing in the Government's own definition of what was fair and their objective in compensation, we would be doing something not only to allay our own doubts but also, above all, to allay the very real doubts of people outside who have not all been here listening to the speeches of noble Lords, therefore judging the sincerity and integrity of the Government's intentions. Whatever we may think about them having heard the noble Lords, they are not held so confidently outside this House, because the people merely read the Bill, see the basic method proposed, and think it cannot possibly lead to a fair result.
It is because the Government appeared to be running away from their own 1236 decision in rejecting this Amendment that I said a few moments ago that I wished the noble Lord had not made the speech that he had made, and perhaps we could have ended on the basis of the previous speeches. I am not going to advise your Lordships to vote on this Amendment. I think we have got to the stage now when the proof of the pudding is going to be in the eating. I only hope that the confidence which was rather increased by our debates on the previous Amendments will not be dissipated by what happens in practice.
I must only say to the Government, as my noble friend Lord Selsdon said in his speech leading up to the withdrawal of the last Amendment, that if the end result of this is seen not to be fair, it will not only be the shareholders of the assets who will suffer, it will be the whole of this country which will suffer; its unique name in finance and trading right across the world, and the chances of further investment in this country from people outside. I say only this to the Government at this stage of the Bill, "For goodness' sake live up in practice to the best of your assurances, not to the least clear of them''. My Lords, I beg leave to withdraw the Amendment.