HL Deb 14 April 1980 vol 408 cc14-25

3.3 p.m.

Report received.

Clause 1 [Vesting of property, etc., of British Aerospace in a company nominated by the Secretary of State]:

Lord TREFGARNE moved Amendment No. 1:

Page 2, line 21, at end insert— ("() Without prejudice to subsection (3)(6) above, any proceedings on an application made by British Aerospace before the appointed day under section 31(3) of the Act of 1977 may be continued on and after that day by the successor company, and any order made under subsection (9) of that section with respect to any loss resulting to British Aerospace from the transaction to which the application relates shall be made in favour of the successor company.").

The noble Lord said: My Lords, this is a technical amendment. Under Section 31 of the Aircraft and Shipbuilding Industries Act 1977, British Aerospace has been enabled to seek compensation for so-called "onerous transactions" undertaken by any of the vesting companies before nationalisation. At the moment, arbitration proceedings under the section are in hand in respect of one alleged "onerous transaction". After the day appointed for the vesting of the undertaking in the successor company the right to continue those proceedings under Section 31 will vest, along with the other rights, in the successor company. However, Section 31(9), which enables the arbitration tribunal to make an order for compensation in respect of an "onerous transaction", provides that the order may only be made in favour of the corporation and not the successor company. Because Clause 1(3) (c) specifically exempts enactments from the general provisions of Clause 1(3) that references to the corporation are to be taken after the appointed day as references to the successor company, this would mean that, if proceedings were still pending after the appointed day, they would be carried on by the successor company but any order for compensation could only be made in favour of the "shell corporation". An amendment to Section 31 is therefore necessary to ensure that, after the vesting, an order for compensation is made in favour of the successor company and not the corporation, so that the right to compensation will vest, with all other property rights, liabilities and obligations of the corporation, in the successor company.

This short amendment therefore proposes to add a new subsection to Clause 1 of the Bill. We believe that it is necessary because the arbitration proceedings to which I have referred are of uncertain duration, and there is a risk that an order for compensation would not be made until after the appointed day. What the amendment does is very simple. It makes clear that proceedings on an application made by British Aerospace before the appointed day under Section 31(3) of the 1977 Act may be continued on and after that day by the successor company, and provides that any order made under Section 31(9) with respect to any loss to British Aerospace shall be made in favour of the successor company.

I hope your Lordships will agree that this is a sensible and equitable amendment. As I have said, it is a technical one and is fully in accordance with the Government's overall policy. I beg to move.

Lord PONSONBY of SHULBREDE

My Lords, may I thank the noble Lord for explaining this amendment to the House. As he says, it is a technical amendment and we have no objection to it.

On Question, amendment agreed to.

Clause 7 [Target investment limit for Government shareholding under sections 3 and 5]:

3.8 p.m.

Lord PONSONBY of SHULBREDE: moved Amendment No. 2: Page 6, line 47, leave out ("and").

The noble Lord said: My Lords, for the convenience of the House I should like to speak to this amendment, which is a paving amendment, and to Amend- ments Nos. 3 and 4 together. Although the subject matter of Amendments Nos. 3 and 4 is different, the reason behind these three amendments on the Marshalled List today is the same. The contents of Amendments Nos. 3 and 4 are Government policy.

Ministers in this House and in the other place have reiterated on more than one occasion that it is their intention that the Government shareholding in British Aerospace shall not fall below 25 per cent, and that foreign ownership in British Aerospace shall not be allowed to exceed 15 per cent. We believe that the Government shareholding should not drop below 51 per cent, and we proposed an amendment to that effect at the Committee stage, but it was rejected on a vote by the Committee. I am not pressing that amendment again today, but we are pressing that the undertaking which the Government have given concerning the 25 per cent, and the 15 per cent, should be included in the Bill.

Throughout our discussions on the Bill the Government have used the argument that British Aerospace should be a normal commercial enterprise and that it must make its way in the rigours of the market place. Let us examine for a second this thesis of the Government. If British Aerospace were to be a normal commercial enterprise, then there would not need to be any statement that there should be a Government shareholding of 25 per cent., and there would be no need for a limitation to be included in the articles of a maximum of 15 per cent, foreign ownership. By the very nature of its business, British Aerospace will not and never can be an ordinary, normal public company.

In these circumstances, I feel that it is only right that Parliament should be asked to approve any variation in these percentage figures. A future Government could well have different ideas from the present Government as to what should be a minimum or a maximum percentage of ownership, and I think it is essential that there should be parliamentary approval if there is to be any change in these particular percentages.

I should say that there is some public concern about this matter. The noble Lord, Lord Trefgarne, may have glanced at the pages of The Times of 24th March and seen a letter there from Squadron Leader Bedford concerning the future of British Aerospace. In his letter Squadron Leader Bedford said that as an employee (in fact, as a manager) of British Aerospace, and, hence, likely to be affected by the detailed application of the Bill as it stands, I wish to express my concern about the future of aerospace in Britain".

Then he continues: While I accept that denationalisation seems now to be inevitable, I am concerned about two major deficiencies in the Bill: (a) there is no defined minimum per cent, of Government shareholding; (b) there is nothing which prevents the possibility of foreign ownership (or dominance) of this vital national industry. Such omissions are potentially dangerous in that they do not protect the national interest. If the omissions are deliberate, then I ask why; if they are by default, then surely they must be rectified".

I hope that the noble Lord will give sympathetic consideration to this batch of three amendments and to including the subject matter within the Bill. I would not for one minute say that the wording of the amendments is absolutely correct in parliamentary terms. What I am seeking from the House this afternoon is a decision that the content of these two matters of vital importance shall be included within the Bill. I beg to move.

The LORD CHANCELLOR

My Lords, the Question is that Amendment No. 2 be agreed to. The noble Lord has spoken also to Amendments Nos. 3 and 4, but I understood from him that he would wish to move them separately when the time comes. The Question is that Amendment No. 2 be agreed to.

3.12 p.m.

Lord TREFGARNE

My Lords, I certainly agree with the noble Lord that we should take these three amendments together because although, as he said, they are not precisely identical points they do hang together conveniently and I will speak to all three now.

By tabling the substantive amendment, Amendment No. 3, which is of course paved for by No. 2, the noble Lord is seeking, as he said, to make statutorily binding the Government's undertaking to maintain their shareholding of at least 25 per cent. But before coming on to the other points made by the noble Lord I want to say that his amendment would not achieve that purpose and, as I shall explain in a moment, it is in any event not necessary.

It might help your Lordships if, first, I explain the workings of the target investment limit embodied in Clause 7. Any order made under Clause 7 will set a target investment limit, which is to say a limit that must not be exceeded, for the Government's proportionate shareholding in the successor company. The limit will therefore set a maximum but not a minimum level. A first limit will be required to be set by order as soon as the successor company ceases to be wholly owned by the Government and at the level of the Government's proportionate shareholding at that time. Thereafter, the Government's shareholding may be less than, or equal to, the limit but may not exceed it.

If the Government's proportionate shareholding in the company were to fall from the initial level—through, for example, a rights issue for which the Government chose not to subscribe—it would not require any change to the limit; there would be no necessity for a new and lower target investment limit to be set. All that Clause 7(4) does is to enable the Secretary of State to set a new limit, which must be lower than the last limit, if he so decides. If a lower limit is set, however, it will become the new ceiling on the Government's proportionate shareholding in the successor company. Since the Government's proportionate shareholding may never exceed the limit at any time in force, setting a new limit will either reduce the target level so that it equals or more nearly coincides with the actual proportionate shareholding at that time, or it will require a disposal of shares so that the shareholding conforms with it.

The vital point is that the limit is a maximum—not a minimum. Thus, even if by law the Government were required to maintain a target investment limit above 25 per cent., there would nevertheless be nothing in law to prevent the Government from reducing their shareholding below 25 per cent., even though the target investment limit in force was in fact higher than that. I hope that from this it is clear that the proposed amendment would not serve its purpose.

However, I wish now to move away from theory towards fact and to the Government's undertaking to maintain a shareholding of at least 25 per cent. It is this which will prevent the shareholding from falling below that level—not an amendment such as that which is before us now. This undertaking, as I am sure your Lordships are aware, was given by my honourable friend the Minister of State for Industry, Mr. Butler, in another place during consideration of the Bill in Committee. The undertaking was given in the context of the Government's willingness to vote their shares to prevent the election to the board of the successor company of a director representing foreign interests or to prevent prejudicial changes to the articles of association of the company providing for United Kingdom control. I reaffirm that undertaking here and now. The Government have made it clear that they have set a minimum limit on their proportionate shareholding in the company and I have re-stated that also. Therefore, once more I ask your Lordships to accept that undertaking.

The noble Lord, Lord Ponsonby, questioned the efficacy of ministerial statements and thus deduced that it was necessary to write these requirements into the Bill. Even supposing that the amendments before us were effective—which I fear they are not—let us suppose that the Government were compelled by law, somehow, to hold 25 per cent, of the company's shares, there would be no guarantee that a future Government would use the voting powers attached to their shares in any particular way. In theory they might simply refuse to vote their shares. It is impossible to secure the ends that the noble Lord is advocating by means of legislation, since the use of the minimum shareholding that is desired cannot be determined by legislation. I must therefore put it to your Lordships that the amendments are doubly defective: first by reason of misunderstanding of Clause 7, and, secondly, and more importantly, by a misconception of what can be achieved by this means.

I wish now to make a reference to the last amendment in this group, Amendment No. 4. There is another, particular reason why this amendment could not be agreed to. It stems from the fact that the company is to be like any other private sector company—which is a point that I have made from this Box several times during the passage of this Bill. The noble Lord said that it could not be argued of the successor company because the foreign ownership article would prevent it operating on all fours with other companies. That is really not so. Many companies have restrictions in their articles of association on the proportion of shares that may be foreign owned. Examples may be found in the articles of Cable and Wireless, P. & O. and Rolls-Royce Motors Limited.

What we propose is, therefore, entirely in line with precedent, which has been shown through long usage to be effective. On the other hand, the amendment before the House would prevent a company being treated on all fours with other private sector companies, for it presupposes that the Secretary of State should have the duty to set a statutory limit on the proportion of shares that could be owned by foreigners and to provide that any issue or transfer of shares which could cause the foreign investment limit to be breached, should be void. This would lead to an ability for the Secretary of State to intervene in the affairs of the company that is quite contrary to the Government's intention.

What the Government have done is to draft provisions in full consultation with the present board of British Aerospace that will ensure that the successor company will not fall under foreign control. The directors of the company will have duties to see that the provisions of the articles are enforced and will obtain declarations from people to whom shares are issued or transferred so that foreign-owned shares can be identified and registered separately. Where foreign-owned shares exceed the 15 per cent, limit, the excess shares will be disenfranchised and unless they are transferred to the United Kingdom ownership will be sold by the directors as necessary. These provisions of the articles cover the intention of the noble Lord's amendment, but they impose duties on the directors not upon the Secretary of State. The Government are clear that this is the right way. It is consistent with the Government's policies that the company should be like other companies and that the Government should not intervene in its day-to-day management. In view of this full and detailed reply, I hope that the noble Lord will not press his amendments, but I confess I am not hopeful.

3.22 p.m.

Lord WYNNE-JONES

My Lords, the noble Lord, Lord Trefgarne, has entertained us to one of those beautiful exhibitions at which he is becoming extremely skilled. One used to have the time when the scholiast would argue about how many angels could dance on the point of a needle. The noble Lord is trying to demonstrate to us how many needles on whose points he can dance at the same time without getting impaled. The noble Lord repeats the statement made previously in another place by the Minister; that it is not the Minister's intention to allow the percentage to fall below 25 per cent. The noble Lord repeats it himself and gives us his guarantee. But he knows perfectly well, as was pointed out to him repeatedly at Committee stage and at Second Reading, that no such ministerial statement or guarantee is worth anything at all, except for the Minister concerned; it does not bind anyone in the future at all. In other words, we are asked to accept the statement, made I have no doubt in good faith; I have not the slightest doubt that the noble Lord makes the statement in good faith. Will he also tell us if he is certain that he will be equally responsible for dealing with this subject in one, two, three or four years' time, because unless he can make such a guarantee to us this statement is of no significance at all? It does not tell us one little bit about what will happen to British Aerospace.

The reason why we are worried about the whole situation is that British Aerospace happens to be, as the noble Lord knows perfectly well, one of the most important industries in this country; it happens to be an industry with an enormous export sale. If our motorcar industry were as successful, then we should be jubilant about it. It so happens that British Aerospace is extremely successful, and it is successful because of the way in which it has been operated. It was operated originally as a number of private industries, but private industries with enormous Government support and with continued Government direction. They were not industries which acted absolutely on their own with no direction at all. Now the noble Lord comes along and says, "Ah, but we have a better prescription. We have now got an infallible prescription which will guarantee that what has been done so successfully may continue to go on successfully, if it is lucky. What we are saying is that this industry is not to be treated any longer as it has been throughout its whole history, as an industry of a special character, but is to be left to be exactly like an industry that produces boots or shoes or slot machines, or anything else you like".

It is no longer to be an industry which is guaranteed to be an industry directed towards aerospace. I am able to show that perfectly clearly. If noble Lords would wish to go to the Library and get the memorandum and articles of association of the company—and there is not a word in the Bill as to what they are to do; it does not say in the Bill they are to produce aircraft—one finds that there are 28 purposes for this company. It starts by saying that the object is: … to invent, design, develop, manufacture, construct, assemble, test, repair, maintain, buy, sell, hire, let on hire, operate, import, export, and deal in aeroplanes et cetera". That is one, and it goes on like that. But when we come towards the end we find that they may: … sell, lease, grant licences, easements and other rights over, and in any other manner deal with or dispose of the undertaking, property, assets, rights and effects of the company". In other words, we reach the point where we find that this company by the memorandum and articles of association can get rid of itself. It is under no obligation to continue in existence, under no obligation at all. All this in order to preserve the grand myth that it would be done better under private control. Of course it will, because under public control it would not be disposed of like that. If one wants to dispose of it here we have a Bill which guarantees that they can do so under the very articles of association which I have here. They have these 28 articles and they are not bound to carry out any of them. Well, I am sorry; they are bound to carry out some of them, but they are so widely drawn that they include dissolving the company, getting rid of the assets of the company; they include, in other words, not manufacturing aircraft, not manufacturing anything concerned with aerospace. It is precisely because of that that we ask for a degree of precision in the Bill which defines something.

I know the noble Lord has pleaded all the way through Committee stage that we should not put a single thing in the Bill which binds the company to do anything at all. Why? Because, he says, in that case it is no longer an independent free company. My Lords, this is a national asset. It is something which has been built up not only by people owning shares in the company; it has been built up by tremendous Government effort. You look round the country and you find Government research associations built up entirely by national money. Without those research associations there would be no aircraft industry today. Without Farnborough there would be no aircraft industry in this country. It is the contribution from the people of this country which has built up the industry. We are now asked to hand the thing over with no guarantee at all.

This is pure fantasy. If the Government want to do this sort of thing, why do they not come out frankly and say, "We don't care a damn about the people of this country or the industry of this country. We will fling it all away. Anyone else can take it; so long as they give us some money for it, they can have the whole industry"? That is not our idea of what an aerospace industry should be. We urge that this amendment is absolutely vital to preserve a little—only a minimum but a little—control over what happens to this industry in the future.

Lord TREFGARNE

My Lords, that was an extraordinary speech, if I may say so, of the noble Lord, Lord Wynne-Jones. First of all, I think it was better addressed to one of the later amendments standing in his name; I do not think it had too much to do with this amendment which relates to the percentage shareholding.

This is the argument that the noble Lord, Lord Ponsonby, has put. The other cornerstone of the noble Lord's speech was, as I understood it, that this enterprise, having been built up over all these years, should not now be returned to private ownership. But I would remind him that it has been a public corporation for only two years or a little more. It was a group of separate private companies for many, many years before that. I do not deny that it has been not unsuccessful under public ownership, but I firmly believe, as I said at length at Second Reading, that this process of "privatisation", as we have called it, is the right thing to do. The fundamental concepts advanced by the noble Lord, Lord Ponsonby, and supported here to a certain extent by the noble Lord, Lord Wynne-Jones, are quite contrary to Government policy and I hope your Lordships will not agree to these amendments.

Lord PONSONBY of SHULBREDE

My Lords, the noble Lord has reiterated, in his initial speech from the Dispatch Box, the undertakings which have previously been made elsewhere. He has also told us why it was unnecessary to include these undertakings within the Bill. But he has not given us a full reason as to why we could not give statutory force to these particular undertakings. I would have thought that the ingenuity of parliamentary counsel could have provided a means for giving a statutory force to these undertakings. In view of the noble Lord's attitude, I have no option but to force this particular amendment to a Division.

3.33 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 65; Not-Contents, 77.

CONTENTS
Airedale, L. Brockway, L. Crowther-Hunt, L.
Amulree, L. Brooks of Tremorfa, L. David, B. [Teller.)
Aylestone, L. Bruce of Donington, L. Denington, B.
Balogh, L. Byers, L. Donaldson of Kingsbridge, L.
Banks, L. Clancarty, E. Elwyn-Jones, L.
Birk, B. Cledwyn of Penrhos, L. Evans of Hungershall, L.
Blease, L. Clwyd, L. Gaitskell, B.
Blyton, L. Collison, L. Gladwyn, L.
Boston of Faversham, L. Cooper of Stockton Heath, L. Goronwy-Roberts, L.
Gosford, E. Oram, L. Stedman, B.
Hale, L. Paget of Northampton, L. Stewart of Alvechurch, B.
Hampton, L. Peart, L. Stewart of Fulham, L.
Hatch of Lusby, L. Piercy, L. Stone, L.
Henderson, L. Plant, L. Strauss, L.
Hunt, L. Ponsonby of Shulbrede, L. Underhill, L.
Janner, L. Porritt, L. Wallace of Coslany, L. [Teller.)
Kearton, L. Roberthall, L.
Leatherland, L. Sainsbury, L. Walston, L.
Lee of Newton, L. Seear, B. Wells-Pestell, L.
Listowel, E. Segal, L. Willis, L.
Lloyd of Hampstead, L. Shinwell, L. Wootton of Abinger, B.
Mishcon, L. Spens, L. Wynne-Jones, L.
NOT-CONTENTS
Adeane, L. Elton, L. Mowbray and Stourton, L.
Ailesbury, M. Emmet of Amberley, B. Murton of Lindisfarne, L.
Airey of Abingdon, B. Faithfull, B. Northchurch, B.
Alport, L. Ferrers, E. Nugent of Guildford, L.
Auckland, L. Fortescue, E. Orkney, E.
Balfour of Inchrye, L. Fraser of Kilmorack, L. Orr-Ewing, L.
Barnby, L. Gainford, L. Rathcreedan, L.
Bellwin, L. Galloway, E. Reilly, L.
Belstead, L. Gibson-Watt, L. Richardson, L.
Birdwood, L. Glasgow, E. Rochdale, V.
Brock, L. Greenway, L. St. Just, L.
Campbell of Croy, L. Gridley, L. Sandys, L. [Teller.]
Carrington, L. (A Principal Secretary of State.) Grimston of Westbury, L. Sempill, Ly.
Hailsham of Saint Marylebone, L. (L. Chancellor.) Sharples, B.
Chesham, L. Somers, L.
Cottesloe, L. Hanworth, V. Stamp, L.
Craigavon, V. Hatherton, L. Strathclyde, L.
Cromartie, E. Henley, L. Strathcona and Mount Royal, L.
Cullen of Ashbourne, L. Hill Norton, L. Strathspey, L.
Daventry, V. Hylton-Foster, B. Tenby, V.
de Clifford, L. Kinross, L. Trefgarne, L.
Denham, L. [Teller.) Long, V. Vaux of Harrowden, L.
Drumalbyn, L. Lothian, M. Vickers, B.
Ebbisham, L. Loudoun, C. Vivian, L.
Effingham, E. Lyell, L. Willoughby de Broke, L.
Ellenborough, L. McFadzean, L.
Elliot of Harwood, B. Merrivale, L.

On Question, Motion agreed to.

[Amendments Nos. 3 and 4 not moved.]