§ 4.59 p.m.
§ The Minister of State, Scottish Office (The Earl of Mansfield)
My Lords, with the leave of the House I shall now repeat a Statement that my right honourable friend the Secretary of State for Energy is making in another place. The Statement reads as follows: "With permission, Mr. Speaker, I wish to make a Statement about the privatisation of Britoil.
"Almost exactly a year ago, I told the House that I hoped to transfer the entire oil-producing business of the British National Oil Corporation to the private sector this year.
"These plans were set out in full and debated at length during the passage of the Oil and Gas (Enterprise) Act. That Act is now on the statute book. Britoil has been set up as a BNOC subsidiary, and the oil-producing business has been transferred to it. As from next Monday, shares in Britoil will be directly owned by the Government.
"The way will thus soon be clear for an underwritten Offer for Sale of 51 per cent. of the shares in the company. Subject to market conditions, I intend the flotation to take place next month.
"The choice between a conventional fixed price offer and a tender must he made nearer the time. I will inform the House, as I have undertaken to do. If the sale is by tender, consideration will be given to the inclusion of special arrangements for small investors to buy shares at the striking price, without having to bid a specific price in advance. In either case, payment for the shares will be in two instalments, spread over a period of several months.
"The offer will also include special arrangements to encourage small investors not only to participate but also to retain a long-term interest in the company.
"Finally, arrangements will be made to encourage Britoil's own employees to take a stake in their company. BNOC employees, too, will enjoy the right to make preferential applications for Britoil shares.
"Mr. Speaker, as the House knows, the privatisation of Britoil will in no way affect the system of participation agreements, which will remain in place, under 100 per cent. Government control, as a means of safeguarding our national security of supply. But what it will do is enable the people of Britain to take a direct personal stake in the North Sea. It will create an independent British oil company free to seize the opportunities open to it. And it will substantially reduce the size of the public sector in an area where state ownership has no rational justification whatsoever."
My Lords, that concludes the Statement.
§ Lord Bishopston
My Lords, I am sure that we are grateful to the noble Earl the Minister for reading the Statement which has been given in another place. I should like to put a few questions to the Minister. After all the stages of the Bill he will, of course, be aware that we have very strong views on this side of the House that such vital and successful national assets should not be sold. But is the noble Earl aware that even among those who agree to the sale there is deep concern because, although the Secretary of State says that he will sell subject to market conditions in November, there is a feeling that he is determined to sell this year regardless of the consequences? This view has been made a number of times in the responsible sections of the press. Will the noble Earl assure the House that he will be flexible on this in view of possible changing circumstances?
In view of the fact that Britoil is a great public asset which has substantially helped the Treasury, does the noble Earl expect such help to continue after privatisation takes place, or are the public to be deprived of this assistance? Does the Minister consider that although he is seemingly facilitating the sale with payments for shares in two instalments, there could yet be the possibility of immediate profits for buyers? The House will, of course, remember the experience of Amersham International, where very quick gains were made from the sales of public assets. Of course, since then there has been the report of the Public Accounts Committee, which, in paragraph 27, says:We recommend that they"—that is, the Treasury—With departments should re-examine carefully what steps could he taken in any future sales to minimise the risk of further large profits being made at the taxpayer's expense".Very briefly, in the next paragraph, paragraph 28, the Committee say:We are concerned that in the course of this re-examination the Treasury should look again at the practice of underwriting such sales".This is another case of underwriting. Does the Minister expect to spend any public money to prepare Britoil for privatisation? Finally, how do the Government hope to make it possible to achieve the aim to sell widely to small investors? On these important issues I am sure that the House will hope that the Secretary of State will keep Parliament informed on future proposals in this so-called "sale of the century".
§ Lord Tanlaw
My Lords, we too wish to thank the noble Lord the Minister for giving us this Statement, which was made in another place. I think that the Statement shows all the problems of a Government that wish to make a commercial business proposition for political reasons; the point taken up by the noble Lord, Lord Bishopston, about "subject to market conditions" is one on which I should like clarification. As the noble Earl is aware, the oil sector of the share market relative to the Financial Times index is at the lowest that it has been for seven years. Would he say quite clearly that these are market conditions in which Britoil should be launched—in other words, these are conditions in which it should be launched at this moment? If those conditions prevail, will he therefore delay the flotation until at least the oil sector relative to the Financial Times index is higher than its all-time low at the present time?
527 The question of Amersham has been raised. Perhaps the Government are suffering from their embarrassing success in that quotation. Given the poor market conditions at the moment, are they not over-reacting by making sure of an embarrassing failure with the Britoil shares? Therefore, would the noble Earl say that the underwriters, who had a very easy time with Amersham International, should be the same underwriters, who may not have quite such an easy time with the underwriting of Britoil? I think that they would at least balance out some of the criticisms that have been made.
I welcome the point made in the Statement about small investors. This is very important and was overlooked during the Amersham sale. The suggestion of partly paid shares is perhaps the only way by which Britoil will ever be launched. There will be very serious capital gains tax worries for the small investor about participation because of the complexity of a partly paid share and the lapse of several months, as is mentioned in the Statement. He may not wish to take up the shares and, therefore, there is the possibility of capital gains tax worries. I hope that these will be clarified nearer the time.
Will the noble Earl also clarify another point which looks like departmental jargonese for what is a convertible debenture? The only way in which a small investor can participate in a company and also retain a long-term interest in a company is to own a convertible debenture. If that is the case, perhaps the noble Earl would say so and help us all to know what he means by this particular statement. I think that we should welcome what the noble Earl said about employee participation, which is something about which we on these Benches are particularly enthusiastic.
Finally—and this is perhaps the most worrying part of the Statement—the Statement goes as far as to say that this flotation will:enable the people of Britain to take a direct personal stake in the North Sea".This statement runs completely contrary to statements by the chairman of Britoil who says that it is the avowed intention of Britoil to invest overseas in opportunities as and when they arise. Can the noble Earl make this abundantly clear, because if that is true, this is a misleading statement. When the prospectus is printed I believe that any person who wishes to participate in Britoil must know whether it will be British exploration and exploitation or whether it is to be a global oil company with global aspirations.
§ The Earl of Mansfield
My Lords, perhaps I could respond first to both noble Lords. Of course, I welcome the remarks of the noble Lord, Lord Bishopston. If he goes down oft trod and well-known paths, who are we to stop him, even when he reads out chunks from the report of the Public Accounts Committee? His first question to me concerned Amersham. The proceeds of the sale at 10 times the original investment were an excellent return on the taxpayers' money. That should not be forgotten. Perhaps I could respond to the stagging points of both the noble Lord and the noble Lord, Lord Tanlaw. There will be a number of arrangements to discourage stagging. For instance, we will be reserving the right to 528 cash cheques on receipt. As I have said, we shall also be encouraging small investors not only to participate but also to retain a long-term interest in the company.
Both noble Lords then took up the point as to the state of the Stock Market at the time of the issue of the prospectus. As my right honourable friend has been at pains to point out, the Government's aim is for the flotation to take place next month. But this, of course, must be dependent on market conditions. My right honourable friend no doubt will watch conditions closely. He will take advice, and no decision to go ahead will be taken until the time is right. I have no doubt that the investing public will take a long-term view of Britoil and the opportunities open to it.
The noble Lord, Lord Tanlaw, asks me about the identity of the underwriters, and I do not suppose that he will be altogether surprised if I tell him that I do not propose to tell him. The other matters which he and the noble Lord, Lord Bishopston, raised are all matters which w ill be contained in the prospectus, and I obviously am not in a position this afternoon to tell your Lordships about that, and noble Lords will therefore have to wait, I fear, until the prospectus comes out.
§ Lord Whaddon
My Lords, may I also thank the noble Earl for his Statement. He will no doubt recall the doubts expressed from this Bench regarding the creation of yet another political football for party political reasons. Can he recall the assurance of the Government at the time that there would be a valuation of the assets of Britoil by consultants? We were assured that this was normal procedure. Perhaps he will recall the suggestion made also at the time from this Bench that reassurance might be given to the public that they were getting value for money in privatisation by an assurance from the Government that the shares would not he sold below such valuation. Is he in a position to give that assurance to the House today?
§ The Earl of Mansfield
My Lords, valuation of Britoil assets is an extremely complicated and indeed complex matter, and there are several factors to be taken into account, and the actual valuation itself can be approached in a number of different ways. These have been considered by the Government. I am not prepared to place what would only be an academic estimate on the value of Britoil. It will be for the market eventually to place a value on the shares.