HL Deb 03 December 1984 vol 457 cc1120-5

3.37 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, with the leave of the House, I shall now repeat a Statement on the allocation of shares in British Telecom plc which is being made in another place by my honourable friend the Minister of State for Industry and Information Technology. The Statement is as follows:

"With permission, Mr. Speaker, I wish to make a Statement to the House about the allocation of shares in British Telecommunications plc.

"First, employees and pensioners. Approximately 184,000 employees out of an eligible total of just over 230,000 responded to the "matching offer" by putting their own money into the company. Of these, more than 62,000 employees, together with 25,000 BT pensioners, applied for shares over and above the matching offer. I welcome this impressive commitment to BT's future by its own workforce. Including those employees who have taken up the free offer alone, some 222,000 of all BT's employees—over 96 per cent. of those eligible—have become shareholders in the company.

"Secondly, the general public. We received more than 2 million applications for the 1,000 million shares available. Almost half of these applications were for 200 shares or 400 shares. The Government has decided to give priority to smaller applications, and all applications for 200 and 400 shares are therefore being met in full.

"Applicants for 800 and 1,200 shares will receive 500 and 600 shares respectively. Applicants for higher numbers up to a maximum of 100,000 shares will receive 800 shares. No allocation will be made to applicants for over 100,000 shares. As a result of these arrangements, BT commences its role as a publicly-quoted company with very substantially more shareholders than any company in this country.

"The arrangements for institutional priority applicants and overseas markets are as I indicated to the House on 16th November. The offers of BT shares in Canada, Japan and the United States are now taking place.

"Mr. Speaker, British Telecom has now been successfully privatised. I am sure that Members on all sides of the House will wish success to Sir George Jefferson, to BT's management and to its employees, who have shown by their commitment to the company their confidence in its future success".

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, we on this side of the House thank the noble Lord for having repeated the Statement made in another place. We observe that the noble Lord claims that British Telecom has now been successfully privatised. One of the aspects of this issue, whether or not successful, is that it does not result in the employment of one additional person in the United Kingdom. It has no impact whatever on the industrial state of the country. It does not affect unemployment in the slightest.

Since the announcement was made in another place I observe from the tape outside that the shares are already being traded at a premium of some 45 pence. On that basis, of course, the price fixed on 16th November last, as we indicated in another place, represents a gross under-pricing. Anybody can obtain a queue when selling their house if they deliberately price it some 35 per cent. under its value. Indeed, this is what has happened in this particular case. What has occurred represents, at any rate on paper, a potential £1,200 million which the Exchequer would have received if it had sold at the existing price. We know perfectly well, of course, that there has to be tolerance in these matters, but by any showing, as we warned a long time ago and as I warned your Lordships in the course of the passage of the British Telecom Bill, the value put on these shares by the Government was a gross under-valuation. On the basis of the trading so far the value of British Telecom is somewhere in the region of £10,000 million rather than the £7,000 million that has been bruited about these many days.

All that has happened is that a part of the shares—some 34.3 per cent. of the issue for which the Government were a trustee—has been transferred from the ownership of the whole of the country and all the taxpayers in this country (and by taxpayers I mean not only those who pay income tax but those who pay VAT, excise duties and all the rest of the taxation that is paid in this country) to one-twentieth of the population. There has been a switch from the public at large to a small fraction of the public.

I have no doubt that the institutions which are such good friends of the noble Lord's party will be rejoicing at the fact that on today's say-so they have already made some £500 million on this issue. Noble Lords opposite may think that is a very good thing. They have their philosophy to sustain them, and, of course, their tame media to put over their propaganda. But anyone looking at the facts dispassionately will see that this is one of the biggest public scandals that has occurred this century. It will be regretted. Moreover, it will be regretted that already overseas investors who are not taxpayers in this country will have made a paper profit of somewhere in the region of £150 million.

Noble Lords opposite may defend their principles, but sooner or later the public will realise that they have been hoodwinked. This is one of the biggest scandals of this century.

Lord Diamond

My Lords, I can at all events say with complete sincerity that we are grateful to the noble Lord for having repeated the Statement in your Lordships' House. Inasmuch as the Statement makes absolutely clear that there has been a most massive participation by employees of the company, we on these Benches, who believe in such wide participation, warmly welcome that fact. I do not know whether the position has yet gone far enough for the Minister to be able to say what proportion of the total shareholding will now be held by the total force of employees.

Whether or not this has been done rather expensively remains to be seen. I am not one of those people who believe that one can forecast these things with such accuracy as to be able to make a deep criticism immediately after the event. We shall have to see how the operation goes. I recognise that the Government had a duty, given their unwise policy of so-called privatisation, to encourage the widest possible participation in the offer. This they have pursued with great energy, and it has been seen to be done by all concerned.

As regards the claim that British Telecom has now been successfully privatised, I think it is a pity that the Government added that to their Statement. If the Statement had been purely about the launch we could have had a fairly amicable exchange of views. However, to say that British Telecom has now been successfully privatised when we have no means of knowing whether this private monopoly will be managed in the public interest and in the interests of the nation is anticipating the event. The question I have to ask the Government now is: are they firmly committed to taking whatever powers may be necessary—because it is possible the Act does not give sufficient powers—to ensure that this huge company and this important service is managed in the interests of the nation?

Lord Lucas of Chilworth

My Lords, I am grateful to both noble Lords who have responded to the repetition of the Statement. I shall first deal with the point made by the noble Lord, Lord Bruce of Donington, who suggested that the shares had been under-priced. I make three points in reply to that charge. The House will recognise that there is likely to be a great difference between the price at which a holding of 800 shares can be sold and the price at which a substantial shareholding can be sold. The noble Lord would be mistaken if he assumed that today's premium whatever that premium might be would be obtainable to all sellers if a great number of shares were on the market.

The figures which the noble Lord gave towards the end of his short speech are, to say the least, I think I can justifiably say, somewhat speculative, since when he spoke only 12 minutes of dealing time had elapsed. For example, many applicants cannot be certain that they are receiving shares. They will not know until the letters of acceptance are sent out next week. I think that it is much too early to determine the level at which the price will settle.

Thirdly, when the price was set on 15th November, commentators remarked that it was fair, even though it was at the higher end of the expected range. The Government remain of the view that the price was and is fair. Hindsight is a valuable attribute. No doubt we should be criticised just as much by the noble Lord opposite had the shares opened at a discount. There is no scandal in this at all. It is part of the Government's policy to encourage wider share ownership.

It is interesting to note—and this possibly answers the question of the noble Lord, Lord Diamond—that some 4.5 per cent. of the shares on offer have been taken up by employees. Under the free and matching scheme the figure was 222,000, which accounted for 1.8 per cent.; employees' priority shares accounted for 2 per cent.; and the pensioner priority shares accounted for 0.7 per cent. of the total issue of shares.

The noble Lord, Lord Diamond, mentioned the cost of the operation. I can tell him at this stage that the £126 million to £128 million of firmly identifiable costs as at this moment are quite proportionate to other issues of this sort. The balance of the costs will not be known for 18 months or so. We shall not know until that time the level of take-up of the telephone vouchers, nor indeed of the bonus share offer.

3.52 p.m.

Lord Nugent of Guildford

My Lords, is my noble friend aware that to a great many people it will appear that the launch of this massive operation has been a great success? It is not fair of the noble Lord, Lord Bruce, to suggest that it is one of the greatest scandals of the century. The very wide shareholding, particularly of employees—and here I should like to agree with the noble Lord, Lord Diamond—is very much to be welcomed. One of the major problems in our economy is the division of labour and capital. To that extent, the share issue is very much to be welcomed. I hope that many of the employees have also taken up shareholdings privately. In any event, the policy of giving the smaller shareholder a full allocation of his application seems to me to be a very wise plan in order to get the widest possible shareholding, so that this will truly be seen to be a national holding by a very large number of people in the community. That is bound to be a good thing.

The noble Lord, Lord Bruce, said that it was a transfer from the nation to individual shareholders. Is my noble friend aware that it has never felt as if British Telecom belonged either to the noble Lord, Lord Bruce, or to me, but at least this very large number of shareholders will now feel that they have a small share of ownership in this enormously important piece of the economy? To that extent it is a very good thing. Will my noble friend accept my congratulations on behalf of the Government and their managers on a successful launch?

Lord Lucas of Chilworth

My Lords, I am most grateful to my noble friend Lord Nugent of Guildford for those very encouraging words. I thank him very much for them. We totally endorse what he says. We believe this to be a very satisfactory launch, and it is the biggest of its kind in the world. It is interesting to note that the bulk of the applicants—about two-thirds of them—have opted to take the bonus share offer rather than the voucher, which indicates that certainly at this time they intend to hold the shares. With this example behind us, we hope that we shall be able in the future to encourage further wider ownership of shares by individuals. That is part of our policy. We believe that when people have a stake in various companies, particularly in those in which they work, those companies will be viable and prosper more quickly.

Lord Mayhew

My Lords, is the noble Lord aware—and there will be widespread agreement with this point—that it is too early to assess the level of the share price? The price of shares may well go down, but equally it may well go up still further. Is it not plain that the Government have launched the shares too low in terms of the market value? Is it not also plain that that is contrary to the interests of the general public?

Lord Lucas of Chilworth

My Lords, I think that I have answered the noble Lord's question generally. I take his first point of course that the price of the shares can go up or it can go down. We believe that British Telecom has a very fine future in front of it. With 96 per cent. of its employees making their own contribution to their own company they also seem to see a prosperous and long-lasting future for themselves in that company.

Lord Bruce of Donington

My Lords, will the noble Lord answer two questions? First, will he explain what special arrangements will have to be made for the attendance of shareholders at annual general meetings? He will recall that in the prospectus in small print—and this was something that was not in the original articles of association—it was stated that the Government may have to take special measures in regard to the attendance of shareholders at annual general meetings, without of course affecting their voting rights. Can he say what the Government have in mind? My second point is this. Will the Government, as they are still the majority shareholder in British Telecom, give an undertaking that in six months' time they will give an analysis of the shareholding, showing how many small shareholders remain at that time?

Lord Lucas of Chilworth

My Lords, the noble Lord is again this afternoon being somewhat mischievous. It was made abundantly clear in the prospectus by the company—it is not at all a question of small print—that: If a very large number of persons are allocated shares the company may need to seek authority to restrict or regulate so far as necessary attendance at general meetings on a basis as fair as possible to all members and without prejudice to voting rights". The company clearly has a practical problem. Her Majesty's Government would not want to see BT resolve that problem in a way that would arbitrarily restrict shareholders' rights; but it is of course a matter for the company and the company with its shareholders. It is not for the Government to publish an analysis of the shareholding in six months' time or at any other time. That would be for the company. The noble Lord's second point concerned the Government's remaining shareholding of 49.8 per cent. The Goverment gave an undertaking that they would not deal in those shares until 9th April 1988.

Lord Diamond

My Lords, the word "scandal" is much overused in your Lordships' House. Nevertheless, does not the Minister think that it is near scandalous that all the funds that we are currently discussing will be handed over to the Chancellor, will be lost sight of in the national accounts and will be used to pay for the groceries in the usual way?

Lord Lucas of Chilworth

Not at all, my Lords. The money will be returned to the Exchequer from whence all the money comes; and the money comes to the Exchequer via the taxpayer, and it is returned to the taxpayer. There is no scandal about that.

Lord Tordoff

My Lords, may we then have an assurance that the Government will use that money for capital and not revenue spending?

Lord Lucas of Chilworth

My Lords, of course, I cannot give the noble Lord an assurance as to exactly where the money may be used.