§ 3.36 p.m.
§ Read 3a, with the amendments.
§ Clause 1 [Vesting of property, etc., of British Aerospace in a company nominated by the Secretary of State]:
§ Lord LLOYD of KILGERRAN moved Amendment No. 1:
Page 3, line 13, at end insert—
(c) any reference in this Act to obligations shall also include the obligation to formulate at regular intervals programmes of research and development in relation to aircraft and all aerospace activities and to exploit as far as is practicable and subject to such security conditions as are applicable the results of such research and development for the benefit of the economy of the United Kingdom.").
§ The noble Lord said: My Lords, I beg to move Amendment No. 1, which stands in my name and that of the noble Lord, Lord Wynne-Jones, and with the leave of the House I should like to speak to the related amendments, Nos. 3, 4 and 5. When I discussed the scope of this amendment with Lord Wynne-Jones a couple of days ago, it was agreed that he would 895 present this amendment to your Lordships. I am sure your Lordships will be unhappy to know that he is unwell and so is unable to repeat the persuasive speech he made at Report stage, that an amendment on these lines should be included in this aerospace Bill.
§ The main object of this amendment is to try as far as possible to ensure that we have an efficient, active aerospace industry in this country, having regard to the action proposed by the Government that there should be the sale of shares in the aerospace organisation, which at present has been doing so well. In my view, and in the view of the noble Lord, Lord Wynne-Jones, and many others, the industry could so easily become a second-grade industry in this country. Lord Wynne-Jones eloquently explained at Report stage that the industry could easily become an industry acting merely as a supplier to other countries. Of course, it is not for a moment the intention of the Government that the sale of the assets of this organisation should lead to that position. The Minister dealing with the matter at Report stage said it was unthinkable that this organisation, once sold, would not carry on great research in the aerospace field.
We have had for years an aerospace industry of which we have been proud; and, with the leave of the House, perhaps I may repeat what Lord Wynne-Jones said on 14th April, at Report stage. At col. 41 he said:
It has been the triumph of our British aerospace industry that they have carried out research on a very large scale, and much of this has been financed by Government. In regard to military aircraft a large amount of the expenditure comes from Government. We do not know how much because these details are never fully divulged. But in the civil field as well a very large amount of the cost of research has been borne by Government";
§ and then he gave instances of famous inventions and developments of which we are proud.
§ When commercial aspects are introduced into the composition of an institution such as the one we are discussing in this aerospace Bill, factors must arise which we cannot predicate for the future. We in this country have had a magnificent history in regard to aerospace developments. I do not want to go on in detail 896 about it, but with Sir Frank Whittle's ideas the whole aricraft industry was revolutionised by jet propulsion. There were the great inventions of that pioneer company, De Havilland; and the development of the Comet after the war—and I am delighted to see in this place the noble Lord, Lord Kings Norton, who has made so great a contribution to aeronautical research and development in this country. It was largely because of the efforts of the noble Lord, Lord Brabazon, that the Cornet became a first-class aircraft—a little too early. Then we had the tragedy of the smash-up of three Comets.
§ What happened? After those Cornet disasters there had to be an inquiry into this great jet aircraft. I remember clearly the noble and learned Lord, Lord Cohen, who was the chairman of that commission, and also the Attorney-General at that inquiry, Sir Lionel Heald (one of the greatest patent lawyers of the century) expressing anxiety that the result of the inquiry would mean the disclosure to foreign countries, and particularly to the American countries, of the secrets and know-how associated with that great aircraft which, however, had failed so disastrously. Lord Shawcross, as he now is, was counsel for the De Havilland Company, and I had the privilege of appearing for a large complex then known as AEI. At that inquiry a large amount of confidential information had to be disclosed and was caught up by the American manufacturers who produced their version of the Cornet.
Against that background of success and history, I move this amendment which says:
any reference in this Act to obligations [to be assumed by the successor corporation to the present aerospace institution] shall also include the obligation to formulate at regular intervals programmes of research and development in relation to aircraft and all aerospace activities and to exploit as far as is practicable and subject to such security conditions as are applicable the results of such research and development for the benefit of the economy of the United Kingdom".
I have in my hand the latest British Aerospace News and I should like to congratulate Dr. Austin Pearce on becoming chairman of one of the largest aerospace companies in the world. He says: "Of course, we will design things for the aerospace industry". He is then quoted as saying:
Whatever happens in the future with regard to share ownership, the group which designs, manufactures and sells our aircraft and missiles is to be kept together and have the job of producing the competitive products which the customer wants to buy".
§ Dr. Pearce is at this stage, no doubt, deciding to continue with the research and development associated with the past history of this successful organisation. Therefore, if the Ministry says that it is unthinkable that there should be any change in this attitude, then I am sure they would not wish to oppose this amendment, which merely inserts this further obligation that programmes for research should he prepared and submitted at regular intervals.
§ When the noble Lord, Lord Wynne-Jones, proposed an amendment at the Report stage of the Bill, he introduced it in relation to the form of the memorandum and articles of association of the company which is now to be formed. The Minister pointed out that there would be no authority whatever by merely amending the memorandum and articles of association. After discussion with Lord Wynne-Jones, we prepared this amendment which would put into Clause 1 of the Bill a further obligation about formulating research programmes at regular intervals.
§ In my submission this is an important amendment which could be of great assistance to the economy of this country. Its form may be capable of improvement, but the basic theme of the amendment seems to me to be of great consequence to the aircraft industry of this country. I beg to move.
§ Lord BALFOUR of INCHRYE
My Lords, may I ask the mover of the amendment to clarify one point? As I read the amendment, it has two purposes: first, that a programme of research and development should be formulated and be made known; and, secondly, that the results of that research and development, subject, rightly, to security, should be made known. But, surely, mere formulation of a programme of research and development may contain such security items as should not be made known. Surely, the same security that the amendment throws over making known the results should cover also the making known of the research programmes, as well.
§ Lord LLOYD of KILGERRAN
My Lords, I am obliged to the noble Lord, Lord Balfour, for raising this point. With his great experience of this matter, he realises the problems of administration and security that may arise. But, with respect, it seems to me that this amendment puts an obligation that they should formulate at regular intervals programmes of research but always subject to security restrictions.
§ Lord CULLEN of ASHBOURNE
My Lords, if I may remind the House, the noble Lord is not entitled to speak again without asking leave of the House.
§ Lord BALFOUR of INCHRYE
My Lords, I am grateful to the mover for making this clear.
§ 3.46 p.m.
§ Lord TREFGARNE
My Lords, may I remind the House that this is a Third Reading debate and that, unlike when we are in Committee, when we have more freedom, we are therefore required to speak only once upon each amendment. With the two substantive amendments in this group—the one to Clause 1 and the new clause—we return to a subject which has been discussed by your Lordships on two previous occasions at least during the Committee and Report stages. I believe it came up at Second Reading as well. The noble Lord, Lord Wynne Jones—and I am sorry that he is not well and is unable to be with us—moved a new clause on Report similar to the one now before the House, and on that occasion your Lordships chose to reject the amendment. I mention those two previous debates to make the point that your Lordships have already devoted a not inconsiderable amount of time to the subject of these amendments and have expressed an opinion on the principle at issue.
I understand the interest that the noble Lord, Lord Wynne-Jones, has in research and development in the aerospace industry, and I also appreciate the interest shown by the noble Lord, Lord Lloyd of Kilgerran. As your Lordships may know, I, too, have an interest in aircraft and in flying. May I therefore say that I share the wish of the noble Lords, Lord Wynne-Jones and Lord Lloyd of Kilgerran, to see a strong and healthy aerospace indus- 899 try in this country, and one which has a vigorous and forward-looking programme of research and development. But that, I fear, is the limit of the common ground between us on this matter.
The amendments which the noble Lord has moved seek to impose statutory duties upon the successor company. At the moment, as your Lordships will be aware, the only duty imposed by the Bill on the successor company is that contained in Clause 10 relating to the vesting in itself of the undertaking. This duty is a purely administrative one to ensure that any small tasks of tidying up that are required following vesting are achieved satisfactorily. But that is all it is; it does not amount to a duty that dictates how the successor company should run the business itself. Indeed, the Bill does not contain any provisions of that kind, and your Lordships are aware that this is the deliberate policy of the Government.
While there will be complete continuity between the statutory corporation and the successor company in so far as the business, workforce and management are concerned, there will be a complete break between the former nationalised industry status of the corporation and the Companies Act status of the company. I have, on a previous occasion, explained to the House that the major difference will be that, whereas the statutory corporation has specific duties to perform and was subject to control by Government, the company will be free to follow its commercial interests subject only to the general law and to the provisions of its memorandum and articles of association. It is no part of the Government's policy that the company should be dictated to on the way in which it should conduct its business.
We therefore do not accept the philosophy of imposing on the company a duty to formulate a research and development programme. I must make this point of principal crystal clear. But equally I must make clear that the Government believe the amendments are both unnecessary and ineffective. They are unnecessary because the best possible guarantee already exists to require the company actually to perform research and development. I refer of course to the commercial reality that compels any business devoted to new 900 projects to do research and development. It is this—not some statutory duty—that compels companies like BP, ICI, Racal and Plessey to carry out such programmes, and the same will apply to British Aerospace Limited. How else would a company whose business lies in the development of new aircraft—both civil and military—of new missiles, and of new weapon systems survive?
To believe the idea that British Aerospace—already spending in one year £1.27 million on research and a further £39.1 million on launching costs—will cease to do research without the stimulus of a statutory duty is to live in Cloud Cuckoo-land. I have argued that the amendments are unnecessary. I must also point out that they would be ineffective in obtaining what the noble Lord, Lord Lloyd of Kilgerran, and the Government both seek; namely, a company carrying out research and development on a scale appropriate for the new company. The amendments would require no more than the formulation of programmes, and the exploitation of their results. It would be open to the company to formulate minimal programmes—small expenditure, few qualified technologists, restricted facilities.
I am confident this will not happen, but I wish to point out merely that it could happen under the terms of these amendments. The safeguard against this lies not in legislation, but in the underlying reality of the industry and the business. The safeguard in legislation proposed by the noble Lord would be a paper requirement. I must tell your Lordships that the Government are opposed to such cosmetic devices, which obscure, but add nothing to, the real demands on the future company. I hope that the noble Lord will not press his amendment.
§ 3.55 p.m.
§ Lord PONSONBY of SHULBREDE
My Lords, I should like to support the amendment as moved by the noble Lord, Lord Lloyd of Kilgerran. I am very sorry that because of poor health my noble friend Lord Wynne-Jones is unable to be with us today. The amendment, as it stands, is an eminently sensible one and the fact that the Government have resisted it—as they have resisted previous amendments to this Bill—points to one of 901 the great difficulties which we have had throughout our debates on this Bill: the unwillingness of the Government to include in the Bill anything other than the setting up of the skeleton of the new company, and being unwilling to include in the Bill additional duties for the company.
It is clear, as has already been said, that both the noble Lord, Lord Wynne-Jones, and the noble Lord, Lord Trefgarne, at an earlier stage of this Bill agreed that it would be fatal to the company if programmes of research and development were not carried out. This was accepted by the noble Lord, Lord Trefgarne. What is at issue here is whether this should be included within the Bill. Despite the remarks made by the noble Lord, Lord Trefgarne, this afternoon, my view is that it should still be included within the Bill.
§ Lord RENTON
My Lords, with respect to the noble Lord, Lord Ponsonby of Shulbrede, I would have said that one is bound to agree with my noble friend Lord Trefgarne that this amendment is unnecessary. It attempts to do two things: first, to insist that the successor company should formulate proposals. But it is unthinkable that the successor company could carry on without formulating proposals for research and development—quite unthinkable in the very nature of its obligations under this Bill. Therefore, to that extent the amendment is unnecessary.
Then it goes on to say that the successor company shall exploit so far as practicable the proposals that it has formulated. Having had to formulate proposals, it would be very strange if it did not attempt to exploit them. Therefore, one has to consider the effect of the words "so far as practicable". I think it necessarily follows that those words must mean "if they have the money available". The only thing about which I am uncertain is whether they themselves will he the sole raisers and providers of money. If they are to get the money from the market or to be self-financing by charging the consumer for whatever it is they may be selling, then they alone command the situation and will know what is practicable. But because of the enormous cost and the national interest involved in research and development, they may have to go to the 902 Treasury, which they will also have power to do. Therefore, it would appear that these words "so far as practicable" merely relate to financial circumstances which are in themselves inherently plain in the situation in which the successor company will find itself. Therefore I feel obliged to support my noble friend on this matter.
§ Lord LLOYD of KILGERRAN
My Lords, I am sure that your Lordships will agree that we are fortunate this afternoon to have had as a Minister dealing with this matter the noble Lord, Lord Trefgarne, with his great experience in aeronautic matters. May I say how surprised I am that he should say of me that in regard to this matter I am living in Cloud Cuckoo-land. This is the first time that charming phrase has been directed to anything that I have been doing professionally. Therefore, at least it is a unique occasion for me. He used extreme language and, with great respect, he was very positive in reading his brief, and the emphasis that he gave to certain aspects indicates quite clearly to me that he himself may not be in conformity with the brief.
He says that the Government desire a complete break between nationalised industry and its successor. He said that the Government wish this successor to follow its commercial interests. Those who have had anything to do with commercial interests in scientific matters, in know-how and patents and that field of realistic commercial activities for the creation of wealth, know how commercial interests can be modified.
I am grateful to the noble Lord, Lord Renton, for his intervention. He was quite right when he referred to that aspect of my amendment which refers to whether it is practicable and also in relation to the money available. Of course, with this great industry in the hands of some commercial enterprise, the question of money and development will he of great importance, but what again would be of great importance is the question: where are they to get that money? In my submission, the successor company, the new commercial company, could so divide its interests after a period of years—because I am not talking about the immediate future—that other foreign countries, with their large billions of dollars and perhaps of marks available to them, would 903 come over here and buy up aspects of this company. If that happened, this country would lose the great aerospace industry of which we have boasted and of which we are so proud.
The noble Lord, Lord Renton, is probably quite right in his support of the noble Lord, Lord Trefgarne, in the short term but we here, in my view, must look at the long term. Therefore this obligation which is introduced is to me of very great importance for the future.
Again, the noble Lord the Minister has mentioned the word "unthinkable". He also said something about the nature of the obligations under this Bill; and that my amendment was unnecessary. Such an argument is totally unfounded because there are no obligations in the Bill at the present time for the commercial successor to the nationalised industry to proceed with aerospace research. He says it is "unthinkable", having regard to the way the organisation is now constructed, that they will not continue in this way.
The noble Lord, Lord Renton, put his finger on the matter when he said that
§ the question of money will arise in the future; and money may lead to this aerospace commercial company becoming a sub-contractor or even a part of some foreign organisation, because there would be money available there which is not made available from sources in this country.
§ I am grateful to the noble Lord, Lord Ponsonby of Shulbrede, for his support and in these circumstances I am sure that your Lordships will realise that we are dealing with the transfer of assets in an industry of great importance to the economy of this country. It seems to me highly desirable that we should try to safeguard the future of the company by putting upon it an obligation to undertake research and development along the general lines I have indicated.
§ 4.4 p.m.
§ On Question, Whether the said amendment (No. 1) shall be agreed to?
§ Their Lordships divided: Contents, 72; Not-Contents, 95.905
|Airedale, L||Hall, V.||Ritchie-Calder, L.|
|Amherst, E.||Henderson, L.||Rochester, L.|
|Amulree, L.||Houghton of Sowerby, L.||Sainsbury, L.|
|Ardwick, L.||Hylton-Foster, B.||Sefton of Garston, L.|
|Aylestone, L.||Irving of Dartford, L.||Shinwell, L.|
|Banks, L.||Jacobson, L.||Snow, L.|
|Barrington, V.||Jacques, L.||Spens, L.|
|Birk, B.||Janner, L.||Stewart of Alvechurch, B.|
|Boston of Faversham, L.||Kaldor, L.||Stewart of Fulham, L.|
|Bourne, L.||Kearton, L.||Stone, L.|
|Brockway, L.||Kilbracken, L.||Strauss, L.|
|Bruce of Donington, L.||Leatherland, L.||Tanlaw, L.|
|Clancarty, E.||Listowel, E.||Underhill, L.|
|Cledwyn of Penrhos, L.||Llewelyn-Davies of Hastoe, B.||Wade, L.|
|Collison, L.||Lloyd of Hampstead, L.||Wallace of Coslany, L.|
|Cooper of Stockton Heath, L.||Lloyd of Kilgerran, L. [Teller.]||Wedderburn of Charlton, L.|
|David, B.||Lovell-Davis, L.||Wells-Pestell, L.|
|Elwyn-Jones, L.||McCarthy, L.||Whaddon, L.|
|Evans of Hungershall, L.||Mishcon, L.||White, B.|
|Fisher of Rednal, B.||Morris of Grasmere, L.||Wigoder, L.|
|Gaitskell, B.||Oram, L.||Wootton of Abinger, B.|
|Gordon-Walker, L.||Peart, L.|
|Goronwy-Roberts, L.||Piercy, L.|
|Gosford, E.||Ponsonby of Shulbrede, L. [Teller.]|
|Granville of Eye, L.|
|Hale, L.||Rathcreedan, L.|
|Alexander of Tunis, E.||Bolton, L.||Crathorne, L.|
|Amory, V.||Buckinghamshire, E.||Cullen of Ashbourne, L.|
|Armstrong, L.||Campbell of Croy, L.||Daventry, V.|
|Balfour of Inchrye, L.||Cathcart, E.||De Freyne, L.|
|Bellwin, L.||Clwyd, L.||De La Warr, E.|
|Berkeley, B.||Cottesloe, L.||Drumalbyn, L.|
|Bessborough, E.||Craigavon, V.||Dulverton, L.|
|Ebbisham, L.||Kings Norton, L.||Redmayne, L.|
|Eccles, V.||Linlithgow, M.||Reigate, L.|
|Effingham, E.||Long, V.||Renton, L.|
|Elliot of Harwood, B.||Lothian, M.||Robbins, L.|
|Erne, E.||Lucas of Chilworth, L.||St. Aldwyn, E.|
|Ferrers, E.||Lyell, L. [Teller.]||St. Davids, V.|
|Fortescue, E.||Macleod of Borve, B.||St. Just, L.|
|Fraser of Kilmorack, L.||Macpherson of Drumochter, L.||Saint Oswald, L.|
|Gainford, L.||Malmesbury, E.||Sandys, L. [Teller.|
|Galloway, E.||Mancroft, L.||Sligo, M.|
|Gisborough, L.||Mansfield, E.||Stamp, L.|
|Glenarthur, L.||Marley, L.||Strathclyde, L.|
|Godber of Willington, L.||Massereene and Ferrard, V.||Strathcona and Mount Royal, L.|
|Gormanston, V.||Montagu of Beaulieu, L.||Strathspey, L.|
|Gridley, L.||Morris, L.||Swansea, L.|
|Hailsham of Saint Marylebone, L. (L. Chancellor.)||Mowbray and Stourton, L.||Swinton, E.|
|Murton of Lindisfarne, L.||Teviot, L.|
|Hankey, L.||Newall, L.||Trefgarne, L.|
|Harvington, L.||Norfolk, D.||Trenchard, V.|
|Hemphill, L.||Northchurch, B.||Trumpington, B.|
|Henley, L.||Nugent of Guildford, L.||Vaux of Harrowden, L.|
|Holderness, L.||Onslow, E.||Vivian, L.|
|Hornsby-Smith, B.||Orr-Ewing, L.||Wakefield of Kendal, L.|
|Jellicoe, E.||Pender, L.||Willoughby de Broke, L.|
|Killearn, L.||Polwarth, L.||Wise, L.|
Resolved in the negative, and amendment disagreed to accordingly.
§ 4.12 p.m.
§ Clause 7 [Target investment limit for Government shareholding under sections 3 and 5]:
§ Lord PONSONBY of SHULBREDE moved Amendment No. 2:
§ Page 7, line 21, leave out ("is reasonably practicable") and insert ("it is expedient to do so.").
§ The noble Lord said: My Lords, we now return to Amendment No. 2, which we discussed in a different form at Committee and Report stages. At Report stage, the noble Lord, Lord Cullen of Ashbourne, promised to look again at the final words of this clause. He has now written to me and I should like to take this opportunity of thanking him very much for his very full letter concerning the wording of this clause. I understand that copies of his letter have also gone to the noble Lords, Lord Lloyd of Kilgerran and Lord Robbins.
§ The question was when, and how quickly, the Secretary of State should have thrust upon him a duty to get rid of any surplus shareholding over the target investment limit. The parameter placed in the clause is that he should get rid of this holding "as soon … as is reasonably practicable". I attempted at the Committee stage to add that he should also 906 have regard to the price which he would obtain for his surplus shareholding. My argument did not meet with the favour of the Committee and at Report stage I used the terminology "as appropriate"; that is, that the Secretary of State would have to consider what was the appropriate time to get rid of his surplus shareholding. My amendment on this occasion would make the subsection read, "as soon … as it is expedient to do so".
§ The point here is that there seems to be a need for an element of flexibility. There should be two considerations which the Secretary of State should have in mind when he has to get rid of his surplus shareholding. The first is that he has to do it as soon as possible; but, secondly, he must not be rushed into doing it in such a way that he gets a lower price for the shares than he might otherwise do.
If I may read from the letter which I received from the noble Lord, Lord Cullen of Ashbourne, that states:
I entirely agree with you that a degree of flexibility is essential and this is what the Bill's wording is intended to achieve, while not detracting from the Secretary of State's basic duty to comply with the target investment limit. The phrase 'as soon after that time as is reasonably practicable' was deliberately preferred to alternatives such as "as soon … as possible' because it allowed greater flexibility".
He went on to say:
The limits of what is 'reasonably practicable' could only be decided in the light of the circumstances at the time. For example, the Secretary of State would be entitled to wait until the immediate effect on the price of the shares brought
about by the issue of new shares or the conversion of stock into shares had worn off; exactly how long this took could only be judged at the time".
Then he went on:
Thus while, as I said at Committee stage, I doubt whether the delay would be more than a month, I cannot rule out the possibility. What the wording will not permit, however, is that the Secretary of State should hold on to his shares indefinitely in the hope that the factors which have nothing to do with the circumstances in which the target investment limit was exceeded might enable him to get a better price".
§ I am not seeking by this amendment to impose on the Secretary of State a duty to hold on to the surplus shares indefinitely. What I am seeking is an element of flexibility, so that he can also take this into account when disposing of the surplus shares. One could have a situation where British Aerospace with many overseas contracts, some of a particularly valuable nature, finds that because of changes in international circumstances the price of its shares suddenly drops. There may he a disturbance of some political character in the Middle East, which has the effect that a long-hoped-for order is lost and it may take some time for the situation to right itself.
§ Therefore, I should have thought there was no reason why the Government could not accept the new amendment which I have placed on the Marshalled List, which adds a degree of flexibility into the timing of the disposal which is not there at the present time, according to the explanation of the wording which the noble Lord, Lord Cullen of Ashbourne, gave at the Committee stage. If we are clear that the present wording allows a greater element of flexibility than appears to be the case from the previous explanation, then I shall certainly consider withdrawing this amendment. However, if the interpretation is as has been stated previously, then I shall press it. My Lords, I beg to move.
§ 4.18 p.m.
§ Lord TREFGARNE
My Lords, during the Report stage of the Bill, the noble Lord, Lord Ponsonby, pressed my noble friend Lord Cullen to reconsider the wording of Clause 7(6), which provides that if the Government shareholding at any time exceeds the target investment limit, it shall be the duty of the Secretary of State to dispose of the excess shares "as soon after that time as is reasonably 908 practicable". We have looked at the matter carefully, but remain convinced that the present wording is the best that can be devised. My noble friend Lord Cullen wrote to the noble Lord explaining our reason for this conclusion, and I apologise if the letter arrived after the noble Lord had tabled the present amendment. There is nothing in this amendment which leads us to change our view about the present wording of the Bill being preferable. Indeed, rather the reverse, for I think that, together with the other versions suggested by the noble Lord, it illustrates the difficulties of alternative approaches.
I should like first to emphasise that the scale of the problem that we are talking about is very small. There are no circumstances in which the Government could be required to dispose urgently of a very large number of shares, which I think is what noble Lords are particularly concerned about. The subsection applies only where shares held by the Government, by virtue of the provisions of this Bill, exceed the target investment limit. This could arise only if the Government, as shareholder, had exercised a right open to them and to others to an extent that had not been matched by the others on, for example, a rights issue or the conversion of loan stock into equity.
Even on a rights issue, it is inconceivable in practice that a breach of the target investment limit could occur, since any issue would almost certainly be underwritten and all the shares would therefore be held by someone. It is more likely that a breach could occur as a result of a conversion of loan stock. To maintain a given proportion of shareholding, the Government might convert loan stock into equity on the assumption that all other holders of that stock would do the same. If some other holders did not convert, the target investment limit might be marginally exceeded, but I think your Lordships will agree that in these circumstances the excess Government shareholding would be only small.
There are circumstances in which the Government might wish to dispose of a larger number of shares or might find that their total holdings significantly exceeded the target investment limit, but such a case would not in practice be covered by Clause 7(6). The case most likely to occur is a Government decision, as a matter of 909 deliberate policy, that their initial proportionate shareholding, or some lower proportion that they subsequently reached, should be reduced. In this case, the Government would dispose of their shares first and would then consider whether to make a corresponding reduction in the target investment limit. They would not be compelled to do so. There would be no question of first lowering the limit and then selling. To do so would create a totally unnecessary difficulty, quite contrary to the Government's interests.
Secondly, it is conceivable that the Government's shareholding might increase well above the target investment limit if the company fell into financial difficulties and was given assistance by the Government's acquiring some of their equity under Section 8 of the Industry Act 1972. This would be the broad equivalent but not the precise equivalent of the way in which the Bank of England acquired shares in BP as a result of aiding Burmah—the example which the noble Lord, Lord Ponsonby of Shulbrede, referred to in his speech on Report. But in these circumstances the target investment limit would not bite. Under Clause 7(1) it is fixed in relation to the shares for the time being held in that company by the Secretary of State or his nominees by virtue of any provision of this Act. Shares acquired under any other Act do not count against the limit. Thus, the Secretary of State would be under no obligation to dispose of shares acquired under Section 8 of the Industry Act 1972, and if he subsequently chose to do so he could sell them in his own time.
Having tried to set out the context, I now turn to the drafting. I believe that the wording now proposed is open to the same objection as the version which the noble Lord put forward on Report. It holds open the possibility that the Secretary of State could delay the disposal of shares for so long as to frustrate the effectiveness of the target investment limit. It would introduce an element of doubt because it leaves open to interpretation what criteria could be taken to determine what is expedient. Indeed, it is not hard to imagine some Secretaries of State who might never find it expedient.
The Bill as it stands is clearly narrower since it lays down a single criterion— that of reasonable practicability—to guide 910 the Secretary of State in deciding when to dispose of shares in order to comply with the target investment limit. There is no dispute between us on the need for a degree of flexibility, and that is what the Bill's wording is intended to achieve. However, there must be no detraction from the Secretary of State's basic duty to comply with the target investment limit, which is the main purpose of Clause 7(6).
When we discussed this matter at Committee stage, my noble friend Lord Cullen of Ashbourne suggested that the Secretary of State might have up to a month in which to sell the excess shares after it had become clear that the target investment limit had been breached. This seems to me to be about the measure of it, but I must stress that the permissible period of delay must vary from case to case. The limits of what is "reasonably practicable" could be decided only in the light of the circumstances at the time. For example, the Secretary of State would be entitled to wait until the immediate effect on the price of the shares brought about by the issue of new shares or the conversion of stock into shares had worn off. Exactly how long this took could be judged only at the time. The timing could also be affected by minor factors such as public holidays. Thus, while, as my noble friend said at the Committee stage, I doubt whether the delay could be more than a. month, I cannot rule out the possibility. What the wording will not permit, however, is that the Secretary of State should hold on to his shares indefinitely in the hope that factors which have nothing to do with the circumstances in which the target investment limit was exceeded might enable him to get a better price. I am sure that this is right. To allow such flexibility would be contrary to the principle of the target investment limit.
In the light of what I have said, I hope your Lordships will agree that there is no question of the Secretary of State having to sell a large number of shares very quickly and that the present wording of Clause 7(6) gives sufficient flexibility for the small disposals that may be necessary. I hope that the noble Lord will not press his amendment.
§ 4.27 p.m.
§ Lord ROBBINS
My Lords, I ought to say a word, having intervened at the 911 Report stage. I must confess that the letter from the noble Lord, Lord Cullen of Ashbourne, reached me only as I was leaving home. Although I perused it, I was not able to give it the attention that it deserved. Although the position is not ideal, in the light of the elucidations which have been given by the noble Lord, Lord Trefgarne, I personally would not feel inclined to go into the Lobby against it.
§ Lord LLOYD of KILGERRAN
My Lords, I am very grateful to the noble Lord, Lord Cullen of Ashbourne, for sending me this very long letter upon this highly technical matter. I am glad to hear that the Government are still agreeable that there should be a certain element of flexibility in the way that the noble Lord, Lord Ponsonby of Shulbrede, has indicated. Therefore, the question is whether the words "is reasonably practicable" give appropriate flexibility as compared with the words in this amendment: whether it is expedient so to do.
It seems to me that the word "practicability" is an unhappy word. What is meant by being practicable in this matter? Is it, as I indicated at Report, whether it is practicable for somebody to get at once some kind of interview with his broker? What is it?
The only reason why the Government do not like the wording of the amendment moved by the noble Lord, Lord Ponsonby of Shulbrede, is that it allows for flexibility. The Government agree that the proposed amendment does give a little more flexibility, but they say that that
§ flexibility would be contrary—contrary to what? Not contrary to something practicable but contrary to the principle of the target investment limit. And that, it seems to me, is already a vague matter.
§ Nothing, therefore, seems to me to support the arguments of the Government. Therefore, with great respect I would support the wording proposed by the noble Lord, Lord Ponsonby of Shulbrede, as being the kind of expression that one would expect to find incorporated—I am so sorry. I thought that the noble Lord wished to interrupt; I thought that he was making an observation from a sedentary position, and I should be delighted if he could make the matter clearer than, unfortunately, it is following Lord Cullen's letter. I would support the amendment proposed by the noble Lord, Lord Ponsonby of Shulbrede.
§ Lord PONSONBY of SHULBREDE
My Lords, I am sorry that the noble Lord, Lord Trefgarne, in responding to this amendment, did not in fact go any further than in the letter which I received from the noble Lord, Lord Cullen of Ashbourne. I am heartened by the renewed support of the noble Lord, Lord Lloyd of Kilgerran, on this and I should have thought that the word "expedient" was a better word to be in the Bill than the word "practicable". Therefore I must press the amendment.
§ 4.30 p.m.
§ On Question, Whether the said amendment (No. 2) shall be agreed to?
§ Their Lordships divided: Contents, 61; Not-Contents, 93.913
|Airedale, L.||Henderson, L.||Ritchie-Calder, L.|
|Amulree, L.||Houghton of Sowerby, L.||Rochester, L.|
|Ardwick, L.||Jacobson, L.||Sainsbury, L.|
|Aylestone, L.||Jacques, L.||Sefton of Garston, L.|
|Beswick, L.||Janner, L.||Segal, L.|
|Birk, B.||Jeger, B.||Shinwell, L.|
|Boston of Faversham, L.||Kaldor, L.||Stewart of Alvechurch, B.|
|Brockway, L.||Kilbracken, L.||Stewart of Fulham, L.|
|Bruce of Donington, L.||Leatherland, L.||Stone, L.|
|Cledwyn of Penrhos, L.||Listowel, E.||Tanlaw, L.|
|Collison, L.||Llewelyn-Davies of Hastoe, B. [Teller.]||Underhill, L.|
|Cooper of Stockton Heath, L.||Wade, L.|
|David, B.||Lloyd of Hampstead, L.||Walston, L.|
|Elwyn-Jones, L.||Lloyd of Kilgerran, L.||Wedderburn of Charlton, L.|
|Evans of Hungershall, L.||Lovell-Davis, L.||Wells-Pestell, L.|
|Fisher of Rednal, B.||McCarthy, L.||Whaddon, L.|
|Gaitskell, B.||Mishcon, L.||White, B.|
|Gordon-Walker, L.||Oram, L.||Wigg, L.|
|Gosford, E.||Peart, L.||Wigoder, L.|
|Hale, L.||Ponsonby of Shulbrede, L. [Teller.]||Willis, L.|
|Hall, V.||Wootton of Abinger, B.|
|Ailesbury, M.||Gisborough, L.||Newall, L.|
|Alexander of Tunis, E.||Glenarthur, L.||Norfolk, D.|
|Alport, L.||Godber of Willington, L.||Northchurch, B.|
|Amory, V.||Gridley, L.||Nugent of Guildford, L.|
|Armstrong, L.||Hailsham of Saint Marylebone, L. (L. Chancellor.)||Orr-Ewing, L.|
|Auckland, L.||Pender, L.|
|Balfour of Inchrye, L.||Hankey, L.||Polwarth, L.|
|Bellwin, L.||Harvington, L.||Rathcreedan, L.|
|Berkeley, B.||Hemphill, L.||Rawlinson of Ewell, L.|
|Bessborough, E.||Henley, L.||Redmayne, L.|
|Bolton, L.||Holderness, L.||Reigate, L.|
|Caithness, E.||Hornsby-Smith, B.||Renton, L.|
|Campbell of Croy, L.||Hylton-Foster, B.||St. Aldwyn, E.|
|Cathcart, E.||Jellicoe, E.||St. Davids, V.|
|Cawley, L.||Killearn, L.||St. Just, L.|
|Chesham, L.||Linlithgow, M.||Sandys, L. [Teller.]|
|Craigavon, V.||Long, V.||Sempill, Ly.|
|Crathorne, L.||Lothian, M.||Stamp, L.|
|Cullen of Ashbourne, L.||Lucas of Chilworth, L.||Strathclyde, L.|
|Daventry, V.||Lyell, L.||Strathcona and Mount Royal, L.|
|De Freyne, L.||Macleod of Borve, B.||Strathspey, L.|
|Ebbisham, L.||Macpherson of Drumochter, L.||Swansea, L.|
|Eccles, V.||Malmesbury, E.||Swinton, E.|
|Effingham, E.||Mansfield, E.||Teviot, L.|
|Elliot of Harwood, B.||Marley, L.||Trefgarne, L.|
|Erne, E.||Massereene and Ferrard, V.||Trenchard, V.|
|Ferrers, E.||Merrivale, L.||Trumpington, B.|
|Ferrier, L.||Morris, L.||Vaux of Harrowden, L.|
|Forester, L.||Mowbray and Stourton, L. [Teller.]||Vivian, L.|
|Fortescue, E.||Wakefield of Kendal, L.|
|Fraser of Kilmorack, L.||Moyne, L.||Wise, L.|
|Gainford, L.||Murton of Lindisfarne, L.|
§ Resolved in the negative and amendment disagreed to accordingly.
§ [Amendments 3, 4 and 5 not moved.]