HL Deb 22 December 1982 vol 437 cc1132-8

4 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)

My Lords, with your permission, I should like to repeat a Statement that is being made by my honourable friend the Minister for Trade in another place. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement on the Monopolies and Mergers Commission report on the proposed merger between Anderson Strathclyde and Charter Consolidated and my decision not to prevent Charter Consolidated from renewing their bid for Anderson Strathclyde, if they decide to do so.

"The MMC submitted their report on 1st December. Since my right honourable and noble friend the Secretary of State for Trade had a shareholding interest in one of the parties to this merger, he considered that he ought not to take the decision on this report.

"The MMC report was a divided one. The commission concluded by a majority of 4:2 against the proposed merger. They recommended that it should not be allowed. Where the commission find against a merger. Parliament has left it a matter of discretion whether a report against a merger should be followed, or whether the merger should be allowed.

"I have considered carefully both the majority report and the dissenting report of the minority. The dissenting report was no ordinary note of disagreement. On the contrary it voiced the opinions of the chairman of the commission, and one other member, and represented a root and branch disagreement with the conclusions of the majority.

"In considering the majority and minority views, I have also taken account, as I am obliged to do under the Fair Trading Act, of the views of the Director-General of Fair Trading. He recommended strongly against preventing the merger. It is common ground that this merger would not lead to any restriction of competition. The sole question therefore was whether the merger would have harmed other aspects of the public interest. While sensitive to arguments based on possible industrial implications in Scotland, I found that the argument that the merger would harm the public interest was too speculative. I therefore decided that it would not be right in all the circumstances of this case to stop the merger. But in leaving Charter free to renew their bid I sought an assurance from them that Anderson Strathclyde would remain a Scottish company with its registered office in Scotland. This assurance has been given me by the company."

My Lords, that is the Statement.

Lord Underhill

My Lords, the House will be grateful to the noble Lord, Lord Trefgarne, for repeating the Statement. Although it is a short Statement, it involves very serious consequences. I want to deal with the Statement primarily from the point of view of what the Opposition regard as unfortunate policy and economic judgment. I appreciate that because of his personal financial involvement with Charter Consolidated, the Secretary of State—who I am delighted to see is in his seat—passed consideration of the commission's report to the Minister for Trade.

I should like to ask whether the Secretary of State has power to divest himself of the responsibilities given to him under the Fair Trading Act 1973. Moreover, is it desirable that a Secretary of State should divest himself of those responsibilities? Can the Minister reply to a question put to the Prime Minister in the other place yesterday, which was not answered: Is there any precedent for such action by a Secretary of State? Is it not also correct that this is the first time that a Minister has rejected recommendations of the commission concerning a proposed merger?

Is not the decision to reject the recommendation a very serious one, and are not the views of the commission expressed very strongly in paragraph 9.20 of the report, which says:

We conclude that the proposed merger may be expected to have an adverse effect upon the management effectiveness and labour relations of Anderson Strathclyde and that this would tend to diminish effective competition in the supply of goods, would be contrary to the interests of purchasers of goods in the United Kingdom and would not promote competitive activity by Anderson Strathclyde in markets outside the United Kingdom. We also conclude that both because it would affect employment within Anderson Strathclyde and because it would detract from the dynamism of business in the region, it may be expected to have an adverse effect upon employment in a relatively depressed part of the United Kingdom. These effects may be expected to operate against the public interest unless offset by some advantages."? My Lords, is it proper to disregard the views of three influential Scottish economic planning bodies?—namely, the Scottish Council (Development and Industry), the Scottish Development Agency and the Scottish Economic Planning Department, all of whom gave evidence in opposition to the proposed takeover. Also, does not the report emphasise that most of the witnesses who sent written views were similarly opposed to the proposal? Although emphasis is given in the Statement to the views of the chairman of the commission and to the consultative views of the Director-General of Fair Trading, is that justification for putting on one side the views of the majority, the four members, who had heard all the evidence on this matter?

I have said that I wish to concentrate on the political and economic consequences of this matter, but there are one or two questions I must ask in addition. First, is it justifiable that a Minister should not divest himself of shareholdings during a period of office? I ask this from the standpoint of public confidence. When the proposal was first referred to the commission, would it not have been advisable at that stage for a statement of the Minister's financial holdings to have been made public? Is it not regrettable that this matter was only brought to the attention of the general public arising from a point of order raised at Question Time yesterday in the other place?

Also, is it not correct that the evidence shows that in every way Anderson Strathclyde is an excellent company with good labour relations and is thoroughly opposed to the proposed takeover? Does it not now mean that if the takeover proceeds, a conglomerate with very large South African interests will take over this effective concern? Finally, will steps now be taken to halt any move towards a takeover bid until Parliament has had the fullest opportunity to discuss both the report and the rejection by the Minister of Trade?

Lord Tordoff

My Lords, this Statement, for which we are grateful, clearly comes in two parts and perhaps I may deal first with the part relating to the Secretary of State. It is, of course, very easy in another place to make a lot of political capital out of this situation. I hope that noble Lords in this House will not go down that track. The suggestion that, for a modest shareholding, the whole of the Government's judgment is to be corrupted seems to me to be nonsense; and I am very glad that the Secretary of State is in his place to hear the views from at least these Benches.

On the question of overturning a finding of the Monopolies and Mergers Commission, I think that your Lordships would expect a certain rising of hackles on these Benches. I believe we have a powerful record of wishing to see monopolies on all sides brought to heel. Therefore one's instinct is to say that the Government have done something dastardly and really should not have overturned this finding. But I think that, when we look at this in greater detail, it is not so simple as that.

It seems to me that the Statement does touch on the important parts of this problem. The sentence which deals with the restriction of competition, which, after all, is the important matter when it comes to a question of monopoly, seems to me to answer a very large part of the questions that might be asked. The final sentences, which deal with the situation in Scotland, also answer pretty fully some of the questions that might well have been asked by my noble friends who look after Scottish matters. Provided that the interests of Scottish industry are being looked after properly—this is a serious judgment which the Government must come to in this matter, and they will be judged in retrospect, as to whether they have come to a proper conclusion—I think, on the whole, although one's instinct is to attack the Government, it may well be that, bearing in mind the integrity of the chairman of the commission, who is an independent-minded man if ever there was one, the Government have come to the right conclusion on this occasion, and from these Benches we would not wish to push the matter any further.

4.10 p.m.

Lord Trefgarne

My Lords, I am obliged to the noble Lord, Lord Tordoff, for his response to this Statement and, indeed, to the noble Lord, Lord Underhill. First, on the question of assigning responsibility for this decision, which my noble friend chose to do on this occasion, there is very good legal precedent for that. A number of cases have produced decisions in support of that arrangement and, indeed, it has long been the practice that such a thing can be done. I shall be happy to provide the noble Lord with detailed legal references, if he would like to see them. As for my noble friend's personal position in this matter, which the noble Lord, Lord Underhill, chose to question, my noble friend has, of course, acted with complete propriety in this matter right from the very start, and that is why he delegated this decision to my honourable friend Mr. Rees.

As to the merits of the case, which the noble Lord, Lord Underhill, complained of as well, it is a fact that it was necessary to determine where the public interest lay in this matter and it was incumbent upon the MMC to show that the public interest would be damaged if this merger were allowed to go ahead. I think my honourable friend was right to conclude that the evidence adduced in the report, and the conclusions drawn from that evidence, were not sufficiently strong to enable him to draw that conclusion. I am convinced, therefore, that my honourable friend made the right decision.

Lord Harris of Greenwich

My Lords, is the noble Lord aware that, although many of us take the view that it may well be right to question the judgment of the Government in this matter—and one can understand some of the anxieties which have been, and will be, expressed in Scotland on this question—we share his view, and the view of my noble friend Lord Tordoff, that there is something rather squalid in some of the personal attacks which have been made on the Secretary of State in the past 24 hours? Although many of us may differ from the noble Lord on matters of policy, no one could conceivably question his honour.

Lord Kaldor

My Lords, I should like to associate myself——

Lord Trefgarne

My Lords, I think that it would be in order for me to intervene at this moment. I am grateful to the noble Lord, Lord Harris, for that intervention, with which I agree.

Lord Kaldor

My Lords, I should like to associate myself with what the noble Lord, Lord Tordoff, has just said. I consider that the Secretary of State's holding of shares in a particular company is a trivial matter, and I am sure there is no question that it has played any role in the decision. But, personally, I very greatly regret that, perhaps out of a misguided sense of propriety, he sought to divest himself from any responsibility for the decision. For, unlike earlier speakers, when we come to the substantive issue, I fear that the Government's decision was a thoroughly bad one, for reasons which I shall proceed to explain. Had he approached the matter with his knowledge of economics and his general views as to favourable and unfavourable factors for the economic development of this country, I am quite sure that the noble Lord, Lord Cockfield, would not have come to the same conclusion as his Minister of State. So it is unfortunate that he did not deal with the matter.

Contrary to what some speakers have said, I find the arguments advanced in the note of dissent against the majority report extraordinarily weak. I should like to quote one or two sentences from the note of dissent: Charter, despite its policy of building up or acquiring subsidiary industrial companies, is still to a large extent a financially-orientated investment company. Anderson Strathclyde is a specialised engineering company. We do not dissent from this description of the companies, but we do not consider that any inference is to be drawn from it adverse to the proposed merger". This is an extraordinary statement. This country, as is well known—I have put forward this view without contradiction on numerous occasions—has suffered for many years from the excessive influence of financial capitalism as against industrial capitalism. It has suffered too much from takeover and merger activities whose sole purpose has been to build up and enlarge financial empires. This has served to dissociate specialised knowledge, loyalty and devotion to a particular sphere of work from the ownership of companies. In the 1970s, and earlier, we had an orgy of takeover bids. It is now generally known—

Several noble Lords

Question!

Lord Kaldor

I apologise. If I may finish the sentence, I shall then proceed to my question. It is generally known that the effect of such takeover bids by financial investment companies is wholly adverse to most industrial relations and to the dynamic and expert management and development of industry. This is a case in question. Is there any reason why a South African multinational conglomerate whose main interests are in gold and diamonds should acquire an industrial engineering company in Scotland? I do not see that the case has been made out. There is every possible argument to the contrary.

Lord Trefgarne

My Lords, I do not see any reason why this company should not acquire Anderson Strathclyde. A number of possible ill effects have been pointed to, but they are all purely speculative. For example, the suggestion that the management of Anderson Strathclyde would suddenly collapse under the new ownership does not seem to me to be a proven assertion. Of course mergers occasionally bring some management difficulties which have to be ironed out, but I see no reason to believe that those difficulties would be any more acute in the case of this company, which is to remain a Scottish company with its registered office in Scotland.

Lord Oram

My Lords, while I agree with those who have said that the noble Lord, Lord Cockfield, has acted perfectly responsibly and honourably in this matter, is there not a procedural point upon which with hindsight, he—the noble Lord, Lord Cockfield—might reflect? When it occurred to him that because of his, I acknowledge quite small, shareholding he was unable to fulfil his ministerial duties under the Fair Trading Act 1973, and decided therefore to pass these matters to his junior colleague, ought he not at least to have come to this House to make a personal statement of his position? This would not have been debatable, but it would at least have been an expression of his responsibility in this House.

Lord Trefgarne

My Lords, all departments of state make a large number of decisions every day of the week—some large, some small. Very many of those decisions are delegated to junior Ministers, and many more are delegated to officials in the department. It has long been established by tradition that this is an appropriate way in which to proceed. Indeed, it has long been established by the courts that this is an appropriate way in which to proceed—and this was the way in which my noble friend chose to proceed on this occasion.

Lord Hatch of Lusby

My Lords, in the Statement repeated by the noble Lord, Lord Trefgarne, mention was made of national interest and, in his replies, the noble Lord has spoken of public interest. May I ask him whether the Government have not considered that the national interest and the public interest will be gravely damaged if the British Government are seen to be facilitating the takeover of a Scottish company by a South African company which inevitably has been giving strength and support to the policy of apartheid and which was known to be supporting the illegal régime of Ian Smith in the then Rhodesia? Is this feeling of shame in this country not likely to be strengthened by the news of the activities of South African agents, revealed in the courts last week, and the invasion of a fellow member of the Commonwealth, Lesotho, at the same time?

Lord Trefgarne

My Lords, the noble Lord, Lord Hatch of Lusby, raises points which are wholly irrelevant. There is nothing to prevent British people from investing in South African companies or in companies which have interests in South Africa. There is no law against that. The shareholders of Anderson Strath-clyde are perfectly entitled to sell their shares where they will, subject only to the provisions of the Fair Trading Act which we are considering today. It was on that basis that my honourable friend took his decision.

Lord Hatch of Lusby

My Lords, with respect to the noble Lord, Lord Trefgarne, that is no answer to my question. I asked whether he had considered, on behalf of the Government, whether the national interest and the public interest would not be damaged by the revelation that the British Government were facilitating the incursion into industry in this country of a South African company.

Lord Trefgarne

My Lords, the answer to that question is. No. The South African element was in any event considered in the report, and I would refer the noble Lord to paragraph 9.13.

Lord Campbell of Alloway

My Lords, is my noble friend aware that public interest as defined by the relevant statute does not embrace the kind of political situation on an international plane to which reference has just been made?

Lord Trefgarne

My Lords, my noble friend is, of course, quite right.