§ House again in Committee on Clause 1.
§ Clause 1 agreed to.
§ 5.15 p.m.
Lord Taylor of Gryfe moved Amendment No. 2:
After Clause 1, insert the following new clause:—
("Share holdings for deposit holders and employees.
From the vesting day 49 per cent of the shares in the TSB Group shall be held in trust for holders of deposits in the TSB Group and employees of the TSB Group, the trustees being elected annually in equal numbers by appropriate Associations of both groups.").
§ The noble Lord said: This is a compromise amendment and I hope it will be accepted in that spirit. Your Lordships will recall that when the Trustee Savings Bank structure was reviewed it followed a report known as the Page Report. The Page Report recommended that the Trustee Savings Bank should be transformed into a mutual organisation. The White Paper and the Bill did not accept that principle. At the same time, I think there is a feeling that this interesting organisation should not be just another clearing bank 677 in the high street and that we should try to retain some of its rather special character. This amendment is aimed at achieving something of that kind.
§ There were two questions that we discussed at some length on Second Reading. One was the issue of centralisation and how you deal with this problem of centralisation; and the other was the character and nature of the Trustee Savings Bank as a rather special financial institution. I hope that the amendment which is now being moved reaches some kind of compromise in considering this matter. It would make the board and the structure of the bank different from those of other banks because 49 per cent. of the shares would be held in trust for the holders of deposits in the group and the employees. Why the holders of deposits? It is quite simple. There is no ownership of this bank—that is established—but the people who have created the £700 million of reserves that exist are the depositors. The depositors, under the new arrangement, have no rights. They can of course buy shares in the company and be general shareholders. The amendment suggests that employees, who have also made their contribution to the success of this bank, should be recognised. Forty-nine per cent., which is not a controlling interest, would appear to be a reasonable proposition and I hope that it will commend itself to the Minister.
§ I apologise to the Minister that I cannot quote Karl Marx or Walter Scott in support of this important principle. I see he is not listening. I thought that might appeal to him. But perhaps Thomas Jefferson is the appropriate person to quote in this case because it does establish a very democratic concept in the running of this company. I hope the amendment will commend itself to the Government.
§ Lord Jacques
I rise to support this amendment. I should like to direct the attention of the Committee to the fact that unless this Bill is amended in this way it is going to set up a new body of shareholders who are going to get the bank, as it is now, given to them completely free of charge. This is not privatisation; it is daylight robbery. The only purpose of this amendment is to reduce the amount of the loot.
The new shareholders will get the bank completely free of charge for the following reasons. Any money that is paid by the shareholders for the shares will be retained by the company. The shareholders will own the company and consequently they will obtain the present value of the bank completely free, as a gift. Let us describe it in terms of mathematics. If the present value of the bank is x and y is paid for the shares and that is retained by the bank, then the shareholders will receive x plus y, but will pay only y. Therefore, they are getting x, the present value of the bank, as a complete gift free of charge. Only an amendment of the kind that is now being moved can prevent that from happening—or at least not prevent it entirely but can reduce the loot.
We shall probably be told by the Minister that a shareholder cannot necessarily realise the total base value of his shares on the market. That applies to every shareholder and to every company. It is no answer. In the long run it is the base value of the shares that matters and the base value of the shares in total is the present value of the bank plus the cash which is paid 678 for the shares, because the company keeps that cash. Therefore, there can be no doubt about it. It is not a question of opinion; it is a question of fact, of elementary mathematics.
The bank has been built up over the period of 150 years largely due to the way in which the bank has looked after the small deposits of working people. It is true that it has been stated in the White Paper that the shares will be dealt with in such a way that the depositors and employees of the bank will get preference. However, that again is ignoring the facts. The fact is that a substantial number—indeed, I would say the majority—of the depositors and the employees have neither the funds nor the know-how to go on to the equities market, and should not be tempted to go on to the equities market unless they have both the funds and the know-how. What is required to protect their interests is to allocate shares to trustees on their behalf and those trustees will act on their behalf and will use the income from the shares for their benefit. That is the only way in which we can give benefit to them.
Parliament has a very great responsibility in this matter, because for 150 years the Treasury has sponsored, has helped to initiate, and has certainly used the Trustee Savings Banks throughout the country. It has done that for 150 years. Consequently, the bank can only be given away with the consent of Parliament. Parliament should modify its consent in the way which is proposed in the amendment. The amendment will not deny accountability. It is not necessary to have shareholders for the management to be accountable to somebody.
Let us take, for example, the John Lewis Partnership. In the John Lewis Partnership the shares belong to the partners; namely, the employees. However, in the John Lewis Partnership the accountability is to trustees acting for those employees. The trustees appoint the directors of the Company. There is no reason at all why as regards this bank we should not have trustees to appoint some of the directors of the bank. The suggestion that, instead of the whole of the shares being allocated to trustees (as in the case of the John Lewis Partnership) only 49 per cent. should be so allocated, is a very modest proposal indeed and something which cannot be regarded in any way as one-sided.
Furthermore, this bank will continue to be called the Trustee Savings Bank. Unless this Bill is amended it will not be a trustee savings bank because there will be no trustees. Therefore, the acceptance of this amendment will at least justify the continued use of the name, Trustee Savings Bank.
I would plead with the Committee to accept that if we want to do things right in this country we must be prepared to compromise and the amendment is a fair compromise between mutuality and privatisation. We are saying that 49 per cent. should continue to be the subject of mutuality and that, all right, the other 5 I per cent. should be privatised. But to privatise it 100 per cent. is completely wrong. That might be in accordance with the spirit of this Government, but that does not make it right.
The Earl of Gowrie
I know that other noble Lords may wish to comment, but I should like to point out 679 that the usual definition of "privatise" is for the Government to sell assets which they own, or to float assets for which they are responsible, in return for money. That is not happening here at all.
§ Lord Jacques
I made it quite clear that this is going beyond privatisation—it is sheer daylight robbery. We are giving the bank away to a new body of shareholders.
§ Lord Bruce-Gardyne
I have already declared my interest in this matter. I hope that your Lordships will resist the amendment moved by the noble Lord, Lord Taylor, for the following fundamental reasons. Of course, I accept what the noble Lord, Lord Jacques, said about accountability, and how, under the amendment, the board of the TSBs will be accountable to the trustees who are proposed to be established under the amendment. I do not think that that is the objection to the amendment.
As I see it, there are two points to be made. First, there is the point which the noble Lord, Lord Houghton, made as regards the earlier amendment, and I thought that it was a very fair point. I do not want to misquote the noble Lord, but if I recollect him aright he used words to the effect that the real ownership of the TSBs rested in the graveyards. That seems to me to be a very fair point. The only trouble is that graveyards are difficult places in which to lodge equity or any other form of ownership of an on-going asset. Nevertheless, that to my mind highlights the point.
If your Lordships were to accept the amendment and 49 per cent. of the shares in the TSB group were held in trust for holders of deposits and employees of the group, then to that extent you might say that a special privilege was given to those who happened to have deposits at the relevant date. However, as the noble Lord, Lord Houghton, said, that ignores the role which has been played by those now in the graveyards in the establishment of the assets about which the noble Lord, Lord Jacques, is concerned.
§ Lord Jacques
Will the noble Lord give way? Surely the people who are supporting the bank at the moment, namely, the present depositors, have a greater right than new shareholders who may have had nothing to do with the bank in the past?
§ Lord Bruce-Gardyne
As I argued on Second Reading, if we went down this road we would have agonisingly difficult demarcation problems between those who had acquired deposits just in time and those who had abandoned their deposits before the relevant date. I do not think that we could easily arrive at equity down that route.
As regards the more fundamental objection to this amendment, I personally—and of course this is a matter of opinion and judgment—attach enormous importance to the principle of direct individual shareholding. The noble Lord, Lord Jacques, said—and again I do not wish to misquote him—that it was all very fine talking about the depositors and the employees having a priority right to subscribe to shares 680 in the issue, in the flotation, but a very large number of them would have neither the funds nor the know-how to do so.
That is an argument which I should have thought carried perhaps somewhat more weight before the flotation of British Telecom than it could possibly carry thereafter, when we saw not scores, not hundreds, not hundreds of thousands, but millions of new individuals coming forward and taking individual direct shareholdings in British Telecom. I would very much hope that precisely the same would apply in the case of the TSBs.
I would hope that we shall see here a second major advance towards direct personal share ownership in a major asset, in this case a major banking asset. That is by no means the least attractive of the arguments in favour of the propositions contained in this Bill. I would be very unhappy to see that notion of direct individual share ownership adulterated and emasculated by the vesting of the ownership of those shares in trustees. Apart from the other complications, which are substantial, that is an overwhelming objection to this particular amendment, and I hope your Lordships will resist it.
§ Lord Grimond
I hope your Lordships will not be deeply moved by the graveyard argument in relation to this amendment. It may well be that many of the people who were original subscribers to the Trustee Savings Bank, or depositors, are indeed dead, as it has been going for some 150 years. But this is true of any major business. It is certainly true of ICI, or of any other such business, that the people who originally launched it on its way have passed on. But that is not held to be a reason for denying the present owners and shareholders any share in the ownership.
As for the second reason advanced by the noble Lord, Lord Bruce-Gardyne, I, too, hope that the maximum amount of individual shareholding will result from the measures proposed in this Bill. But as is known by anyone who has tried to found cooperatives, or who is interested in co-operatives, management buy-outs, and so forth, there is a case for having some part of the ownership, or some part of the proceeds, held in a trust. There are people who perhaps are unused to the concept of share ownership, or who do not have the money to do it. There is a tendency for many people to subscribe to the initial issue and then dispose of their holdings; and there is a case, which I do not want to go into at length, for holding a certain number of shares in a trust.
I am sure that my noble friend Lord Taylor of Gryfe, who moved this amendment, would not insist upon the exact details in it. It may be that 49 per cent. is a few percentage points too big, or too small, but I believe that it meets two important points. First, throughout our debates there has been a feeling that the depositors are being rather badly done by under this Bill; that they have certain rights, and that they feel a special relationship to this bank. This amendment tries to give effect to that feeling, and it attempts to do more justice to the depositors.
Secondly, so far as I am concerned—and I am sure I carry the Government with me here—I am most 681 anxious to spread wealth, and so, I believe, are the Government. This amendment attempts to spread wealth throughout the employees of the Trustee Savings Bank Group. On both these grounds either the amendment or something like it should appeal to the Committee. I do not believe that the objections raised so far are compelling as against the amendment.
§ Lord Houghton of Sowerby
The nub of the debate on this amendment is going to be the same as that throughout subsequent amendments. Are we going to give the depositors a better deal in this transaction, or are we not? That is the issue. These amendments are all designed to seek some way of breaking the mould of the proposed transfer to shareholders throughout the country clamouring for a bargain on the Stock Exchange.
I hope that the noble Lord, Lord Bruce-Gardyne, will respond to my question: is he in favour of doing something better for the depositors, or is he not? If we know the answer to that, then we shall know the context into which we can put his criticisms of each amendment in turn. There are difficulties about all these amendments because we are not equipped, and we have not had the time, to find the most suitable answer to this dilemma. The Government think they have. The management of the Trustee Savings Bank apparently think they have. Some of us think they have not. This is why we are spending time now in seeking the answer.
§ Lord Bruce-Gardyne
I apologise to the noble Lord for interrupting, but he posed a direct question to me. My answer to his question is: Yes, of course I am desirous of seeing the legitimate interests of depositors being taken care of in the best possible way. My argument is that the depositors themselves would be far better satisfied, and logically satisfied, with a direct equity participation in their own names in the ownership of this business than the notional concept of some trustees holding a notional ownership on their behalf.
§ Lord Houghton of Sowerby
I am grateful to the noble Lord for that answer. It is clearly a criticism of the amendment before the Committee at the present moment, but it is probably not a criticism of what may follow later in trying to give the depositors a better deal on the share transaction. We shall come to that later.
I turn now from the noble Lord, who has fully satisfied my question, to the noble Earl the Minister. The Government have no right to be peddling the interests of the management of the Trustee Savings Banks. They have a duty here which they cannot escape but which they should bear honourably and fairly. That duty is to secure more permanent and satisfactory arrangements for the conduct of the affairs of the Trustee Savings Bank. They do not own a penny of it. They have no right to direct where it shall go. They have a duty to take account of what seems fair, just and equitable.
I do not know whether the word "ethical" has any significance in the money market, but I think it is unethical to be doing what this Bill does. My noble friend Lord Jacques has used strong language, and I am glad that he has. It is about time that somebody 682 called a spade a spade in this debate. If we had called on the conspirators in the great train robbery to draft a Bill, they could not have done it better than this. What word can noble Lords find for a transaction which starts with a proposition that here is a property which belongs to nobody, and we have to dispose of it, not to make money out of it but to establish the ownership of this property? There is really no other cause at the moment for having this Bill at all except to establish the ownership of the property.
The Earl of Gowrie
With respect to the noble Lord, Lord Houghton, that is not the case. It is the case that depositors in Trustee Savings Banks wished to have a far wider variety of banking services available to them than existed before this Bill was proposed, which still exist but which will not exist after this Bill becomes an Act, if it does. That really has been reflected in the pattern of investment into TSBs over the past few years. It is extraordinary to me to talk as though the Government were behaving unethically when the Government, so to speak, in our jargon, were coming out of the closet and saying to people, "Look—we want this to be a proper bank rather than a hidden method of tapping your funds into our pockets down here in Whitehall." Put in the vernacular, that is roughly what the Bill seeks to do.
§ Lord Houghton of Sowerby
I do not see in the comments of the noble Earl anything different from what I said. One cannot do what he says the Government wish to do unless the ownership of this property is put beyond doubt. It cannot become a proper bank unless it has an ownership permanently and firmly established, because this property which belongs to nobody has to go to somebody. That is where we start. The bank is not short of money. It is not having an issue of shares because it wants to enlarge its capital resources. It is not issuing shares because it wants to bring the equity of the company more in line with the capital employed. None of those reasons applies for this issue. This issue is part of and inseparable from their conception of the transfer of ownership. They want it to go to shareholders, and for it to go to shareholders it has to be bought by shareholders. This is the simple transaction of accomplishing that.
The Trustee Savings Bank is not still in the position that it was in 50 years ago. An Act passed in 1981 has extended the variety of the work of the bank and the services that it can render. We only have to look at the aggressive advertising of the Trustee Savings Bank at present. It is hiding its working class origins in the simple initials TSB and it is now forging ahead and claiming its place as the issuing house of more credit cards than any other organisation in the country. It is going into the business of making money out of money. That is the growth industry now in this country. Financial operations are the growth industry in Britain. The basis is borrow and lend. Banks live by lending and they must have borrowers. All the stimulus behind this money-making game is that people should borrow. "You want money? We have it. We charge for it and make a profit out of it, and that is our business. Money is our raw material and we have a product". I saw the other day such a reference by the building societies. They said, "We have a product and we are going to sell it". What were started 683 as services to the common people have now become part of the jargon of the City and the financial houses.
The point is, are we to have any response from the Government on doing something better for the depositors? Do they think this is a fair way of treating them? If they do, there is a serious clash of opinion in this Committee. It astonishes me that more rumpus has not been raised on these proposals than we appear to have seen in the press recently, though there has been much reference to that. I do not want to go on about this now.
We are dealing with an amendment which has its difficulties. It is a different concept of management. It may not fully satisfy all that one might think the depositors should have; but that is beside the point. Are we to have a response, or must we fight every inch of the way? That is what I want to know.
The Earl of Gowrie
I am most grateful to the noble Lord, Lord Houghton, because it saves the time of the Committee if a member of it, in this case the noble Lord, accurately defines what he sees as the central issue and demands a response from the Government on that central issue. The response was made well, not on behalf of the Government but from the Benches behind the Government, by my noble friend Lord Bruce-Gardyne. But what one or two Members of the Committee seem to me not to be taking on board—it may be perfectly ethical—is whether it is a good thing in the widest moral and ethical sense of the word "good" that an organisation, including an organisation using aggressive advertising, best modern commercial practice and so forth, should be pretending, as it were, to depositors to be a bank but in fact be a channel for national savings. That is a fairly clear issue. That was an issue on which the Labour Party in another place—I am interested in the silence during this debate of the noble Lords who support the party of the noble Lord, Lord Houghton—seemed to be in wide agreement with us. The banking unions were in wide agreement with us and the trustees of the TSB were also in wide agreement.
In respect of depositors, the aim is to give people generally, including depositors, the chance of a real share and a real say through wider share participation. In his letter of 6th December to my right honourable friend the Chancellor of the Exchequer, which was published in the White Paper, the chairman of the TSB, Sir John Read, said:We are firmly set on the principle of the wider ownership of our shares, with priority for our customers and staff".Depositors, like anyone else, are able to take a share in this bank. The noble Lord, Lord Houghton, was right in the second part of his intervention when he said that the Government are starting from the principle that one has to find out who owns this outfit and one can find out who owns it only by establishing it, because up to now no one owns it. But that is a retreat from the noble Lord's original position where he seemed to be taking the view that the depositors owned the TSBs. That is not a view which we or the Labour Party, as officially represented, accept.
§ Lord Swinfen
My noble friend said that this Bill allowed depositors in the bank to buy shares in the bank. I should declare an interest because I am myself a depositor. However, if the amendent is accepted—I can see quite a lot in favour of it—surely it would not prevent depositors buying any of the other 51 per cent. of the shares to be offered on the open market.
The Earl of Gowrie
I have other objections to this amendment, but I was not dealing with those. I was dealing with the point put to me by the noble Lord, Lord Houghton, as the central issue of the entire Committee stage of the Bill. I thought that it would expedite proceedings and provide clarification for your Lordships' Committee if I took the noble Lord, Lord Houghton, at his word and gave him the answer.
§ Lord Stoddart of Swindon
The Opposition do have a view on this. I was about to put that view when the noble Earl, so stung by the remarks of my noble friend Lord Houghton, bounded to his feet before I could get to mine. Now that I have the opportunity I would remind him that at Second Reading the view of the Opposition was plainly put. That view was that we preferred mutuality—or would have preferred it, had it been possible—as a proper option. That was what the Opposition really wished to do and that was what the Page Committee recommended. That is a real and preferred option of Her Majesty's Opposition.
I draw the attention of the noble Earl to the Report stage of the Bill in the House of Commons, when my honourable friend Dr. Oonagh McDonald moved an amendment which provided that the depositors or the holders of deposits in the TSB group should be offered 55 per cent. of the shares of the group. The Opposition's view was made plain in the House of Commons and it was made plain in this House by myself on Second Reading.
But what of this amendment? The noble Earl simply cannot cast aside the argument which was put very forcibly and properly by my noble friend Lord Jacques. He rightly says that here is an organisation, an enterprise, which is owned by nobody at present but which exists because of the loyalty in the past of deposit holders and those who have run those deposits on behalf of the deposit holders. That is what my noble friend has said, and it is absolutely true. Those deposit holders have built up over a period of years an enormous asset—make no mistake about it—in land, buildings and all sorts of other assets; they have built up a huge asset which belongs, as the noble Minister says, to nobody at the present time.
At the same time, as well as those fixed assets there are monies in hand to the tune of£600 million. We are saying that those people who have helped to build up those assets and who, indeed, have been account holders, and therefore loyal to that enterprise, should be given some sort of preferential treatment. They should not suddenly—and that is what it means—be handed over to a group of shareholders or a number of shareholders who, for the time being, have more money than they themselves to purchase the shares when the flotation takes place. That is what we are saying. We are giving people other than those who have been loyal to the Trustee Savings Bank preferential treatment over the existing holders.
685 It seems to me that, under all the circumstances, the deposit holders and the staff, who must, in any event, be deposit holders, are entitled to some special consideration. This amendment provides a vehicle whereby the deposit holders can have a substantial holding in the new company and that holding can be used on their behalf and for their benefit. I would have thought and believed that this Committee and, indeed, the Minister would have seen the sense and justice of that argument. I think it is not good enough for the Government and for the noble Lord, Lord Bruce-Gardyne, simply to say that it is preferable that people should hold individual shares. That is a matter of opinion and philosophy which divides this Committee. We believe that ownership should be more widely distributed, but distributed in such a way that people themselves have control of their affairs.
The other side of the Committee, as far as I can see, believes that ownership should be dispersed only to those who have the money to pay for it. In the case of the Trustee Savings Bank, that will simply not wash. I hope the noble Earl will take this amendment far more seriously and will understand the very strong and cogent arguments that have been put forward by the noble Lord, Lord Taylor of Gryfe, and my two noble friends who also spoke on the issue.
The Earl of Gowrie
I do not think I can be accused of not taking the amendment seriously, as I have not yet replied to it. I was taking very seriously the point put to me forcibly in the form of an interrogation no less than three times by the noble Lord, Lord Houghton of Sowerby, and I think that it was fair for me to do so.
While the point made by the noble Lord, Lord Stoddart of Swindon, is fresh in our minds, perhaps I can answer it before I come to the opening remarks by the noble Lord, Lord Taylor of Gryfe. It seems to me that we should all be giving three cheers (because all of us, even those who work or have worked for Governments, tend to have a streak of our sensibility which is agin the Government) that these huge assets, as the noble Lord eloquently called them, are being returned, as it were, from the Government as principal beneficiary to the people. I would have thought that that would be something which would cheer everybody up no end.
From time to time, of course, Governments have to raise revenue and they are zealous in the pursuit of revenue, just as the public are not undemanding of Governments for that revenue to be spent. Here we have the rather rare and splendid event of the Government not holding on to revenues which for generations they had been very happy to make use of.
§ Lord Jacques
It does not belong to the Government. The Government cannot hold on to it; it does not belong to them.
The Earl of Gowrie
I am coming to one of the points which Lord Jacques has made, the bonanza point, in a moment. But the fact of the matter is that at the moment the Government of the day are the principal beneficiaries of the TSBs. We, the Government of the day, are, I would have thought, 686 rather splendidly proposing that this should no longer be the case. That is a subject on which I would have thought there could be wide and general rejoicing.
Coming to the point specifically put to me by the noble Lord on the Front Bench opposite, it would surely be inequitable to distribute all or even a portion of the proceeds of the sale of the shares among those individuals who happened to hold TSB accounts at a particular, recent date. Noble Lords from all parts of the Committee have said to me that these huge assets, as he describes them, have been built up over generations. I would have thought it would be quite inequitable for a particular generation of depositors to have that edge, that preferential treatment, particularly since, as I understood it, there was agreement between the Front Bench opposite and ourselves that depositors do not, as the noble Lord, Lord Houghton of Sowerby, appeared to imply, own Trustee Savings Banks.
Perhaps I may come to the two other substantive points made to me during the debate on this amendment—the points put to me by the noble Lord, Lord Taylor of Gryfe. It is, I think, difficult to see how a bank could operate satisfactorily as a bank with a bizarre share structure of the kind proposed in his amendment. Experience with the elections of trustees in the TSBs, too, is not promising. The 1976 Act provided for one-quarter of trustees to be elected, but in a recent election not one candidate for election stood in England and Wales. This proposal would not in practice provide a satisfactory mechanism for the accountability of the TSBs to their depositors and/or employees. Presumably that is one of the objectives of the proposal.
Technically, it also seems to me to be difficult to operate. How do the trustees maintain their specified minimum percentage shareholding if, for example, there is a rights issue? What influence would directors appointed by the trustees exercise over the company? In practice they would exercise control. It is also fair, I think, to ask how the new company could hold its own against competitors with such a restrictive provision written into a statute affecting it alone.
There is logical substance, I think, to the argument of the noble Lord, Lord Jacques, and I want to deal with it most seriously, as I have been asked to do. The noble Lord put it very pithily and cogently, I think, in something like ten seconds flat during the Second Reading debate. That ten seconds gave me time to bone up on its substance.
The argument, if I may remind the Committee, was as follows. In a privatisation the Government sell shares to the public, taking the proceeds themselves, and the public then own the company. That does not apply with TSBs, as the TSBs do not belong to anybody; the proceeds of sale are retained in the new TSB companies. For example, suppose one buys a purse for £1, but the £1 is put into the purse, which is then taken away. One ends up with the purse valued at £1 plus the £1 coin which was put in; that is to say, £2.
Applied to the TSB, the argument is that whatever the new shareholders will pay for the bank, they will obtain the value which the bank had before the share issue, they will obtain this free, because they will still own the money that they paid into the bank. It is 687 ingenious, and logically and mathematically I concede its validity, but it misses one important point of this fallen and real world which does not always run along logical or mathematical lines. The point is that the value which the stock market places on banks is less than their net assets. Historically, bank shares have stood at a discount to net asset value; in other words, if the net assets of a bank were, for example, £100 million, the total value on the stock market of the bank's shares might be between, say, £40 million and £60 million, and the discount varies over time.
The significance of the discount for the TSB shares is that it should be possible to set the price so that after the flotation the value of the original net assets, plus the new share capital when discounted by the appropriate discount for TSB shares, will be equal to the amount of the new share capital. Let me take a simple example. If the existing net assets are £1 and the discount is 50 per cent., a price of £1 for the shares means that the new shareholders will acquire an asset worth £1 (the original net asset value) plus £1 of new capital, times the 50 per cent. discount; that is to say, £1. So there is, in fact, no capital gain.
It is the TSB's responsibility, and not, I contend, the Government's to get this right on the day and the Bill does not attempt to specify how this should be done on the ground at the time. But I think that one of the key points was, once again, with his experience, made by my noble friend Lord Bruce-Gardyne. I think that there are two key points, one made by him and one made by me.
§ Lord Stoddart of Swindon
I was trying to follow the noble Earl's arithmetic and the discounting of hank shares. Surely, the real position is this. If, after the flotation, suddenly all the assets of the bank were sold, would the shareholders not receive the value of those assets plus the money which they had invested through the shares; and would they not, therefore, have the £2 rather than the £1 that the noble Earl mentioned?
The Earl of Gowrie
I think that that ignores the discount factor which I mentioned. If the noble Lord will read what I said—and I prepared the answer most carefully—and will get out his pocket calculator, I think he will see that the position is quite fair.
The answer to the conundrum put by the noble Lord, Lord Jacques, is that it does not enormously matter, because what is at the core of the Bill is the changing of a kind of rather buried and concealed form of national savings, which is no longer offering even to its own depositors the wide banking services which increasingly they are showing that they want it to undertake, to a privatisation which, in this one enrapturous case, is not of any great benefit to the Government. That is why I should have thought that the Committee would receive it with more pleasure on the opposite side than it has.
Finally, I wish to deal with the point made by my noble friend Lord Bruce-Gardyne. It is right surely to define the distribution of wealth in terms of wider ownership of wealth. As the noble Lord, Lord 688 Grimond, has said from the Liberal Front Benches—and, as I know, both Liberals and ourselves have always promoted the concept of wider share ownership—here is a great chance for wider share ownership, including ownership by the employees and depositors of TSBs. I do not think that the Committee should be too gloomy about that. I hope that the noble Lord will not press his amendment.
§ Lord Jacques
I must reply to some of the points that have been made by the Minister. First of all, he admits that the argument which I placed before the Committee is a question of fact. He does not deny that. He puts up as a counter-claim the point that there will be a difference between the base value of the shares and the market value and he assumes that the difference will be 50 per cent. In my case there was no assumption; it was a question of fact, to which he agreed. His argument is based entirely upon an assumption of his own that that there will be a 50 per cent. difference between the market value and the base value of the shares.
The Earl of Gowrie
I did not make that assumption. My 50 per cent. was an example. It was simply to illustrate that the discount factor operated and would operate in this case. I cannot tell what the amount would be.
§ Lord Jacques
Whatever is the amount, it applies to the shares of all companies. There is always a difference between the base value and the market value of shares; but, in the long run, it is the base value that matters because that is the real value.
The Minister also said that this Bill was necessary in order to get the bank away from being just an institution for national savings, to make it a real bank. But he is out of date. That was done in 1976. I know about that in detail because I piloted through this House the 1976 Bill. The 1976 Bill laid down an interim period during which the bank would be converted from an institution of national savings to a proper bank, but it would be what was called a "personal bank" as distinct from a bank which had other companies as its customers. That has already been done.
In any case, let us suppose that a further widening of the functions of the bank is required. That is not interfered with by this amendment. To say that 49 per cent. of the shares shall be vested in trustees does not interfere with the widening of the bank's functions. Furthermore, one of the main purposes is to get accountability. If the bank is accountable in part to shareholders but some of the shares are vested in trustees, there is still accountability, and there is no drop of efficiency. The John Lewis Partnership last year distributed to the employees profits equal to 19 per cent. of their salaries and wages. There has been no lack of efficiency there. The trustees were not in the way of efficiency and they would not be in the way of efficiency here. What is suggested in this amendment is a fair and reasonable compromise: 51 per cent., private shareholders; 49 per cent., trustees. And, remember, if your Lordship's are going to continue to call this a Trustee Savings Bank, you must have trustees.
§ Lord Taylor of Gryfe
I wonder whether I may ask the Committee to forbear a little. Some of us have a long way to travel home, journeying on a Thursday night to Scotland. We have had two Statements today and we are having a fairly long debate on the second amendment of this Bill. I was wondering whether I may be permitted, since it is my amendment, to say a word or two about it before the vote which might follow. I do not want to pre-empt the noble Lord, Lord Houghton. If he will permit—
§ Lord Houghton of Sowerby
The noble Lord can make what comment he likes. As soon as he is finished, I shall make what comment I like. It is as simple as that.
§ Lord Taylor of Gryfe
I thank the noble Lord very much. This has been a wide-ranging debate. It has been a deeply philosophical debate on ownership and the nature of share ownership, bank discounts and flotation. It is not my intention to pursue some of the technicalities and intricacies of a flotation of this kind. It is a very big flotation. It may even be a flotation amounting to a billion pounds and therefore will make its appropriate impact on the market.
I do not want to criticise the new powers that the TSB will have under the Bill. The noble Earl, Lord Gowrie, asks, "Is it a good thing?", and makes a moral judgment on the basis that it will cease to be a channel for national savings and will become a real bank. I am all in favour of the TSB becoming an additional force in the banking sector, with the same powers and responsibilities as other banks. There is no division on that: the division is on the structure of this new organisation. I must say I am a little disappointed with the Minister and also with the noble Lord, Lord Bruce-Gardyne, who seemed to believe that the only way you can structure the new organisation is in traditional, if you like, capitalist terms of having share ownership. That shows a certain lack of imagination which I would not have expected from either the noble Earl or the noble Lord, because I think we are moving into a period in which we need to have more experimentation on ownership, including the possibility of employee involvement and a guarantee of wider share ownership.
This amendment is a compromise aimed at that possibility. The noble Earl quoted a letter from Sir John Read saying that the employees will be entitled to take shares. It is obvious, of course, that in a public flotation anybody is entitled to take shares; so that is no privilege at all to employees. Is there going to be any privilege to employees or to existing depositors? Will the Minister make some commitment or gesture in that direction? If so, it might be well received on this side. Or is he simply saying that it is a public flotation and employees and existing depositors will be on the same basis as anyone else who 'phones his stockbroker and buys some shares in the flotation? Will there be any preference? I should have thought that, nowadays, if you simply have a flotation such as is visualised in this Bill, there is no guarantee of wider share ownership. It will be publicly floated, but the large institutions will make appropriate provision, if there is an attractive price, to acquire shares.
690 In the amendment there is a specific commitment to wider share ownership involving the employees and also the existing depositors. I think that is an idea which ought readily to commend itself to the Government. I listened to the Chancellor the other day extolling the virtues of share option schemes as a means of involving staff and employees in ownership of the companies which employ them. This amendment provides that the employees will be shareholders, and I should have thought that was commendable.
However, I simply want to reduce the whole to this simple issue. This is a compromise provision. We are not asking that it should be employee-owned or even, as the Page Report suggested, that it should be a "mutual", in which the depositors would own and control the bank. We are not going that far, although we could argue an excellent case for it. We are simply offering compromise which should not offend the general view and philosophy of the Government and which would at the same time go some way towards satisfying those of us on this side who wish to see employee involvement and wider share ownership. Consequently, I press the amendment.
§ 6.15 p.m.
The Earl of Gowrie
I can say to the noble Lord that of course the Government are not directly involved in the details of the share issue but we do accept—and it is on the record in the White Paper, in my remarks on Second Reading and again in my remarks this afternoon—what Sir John Read has said; namely, that there will be privileges for employees in chances to acquire shares.
§ Lord Houghton of Sowerby
Is there any way of getting Sir John Read a little closer to this Committee? Why should he be at arm's length, writing letters to the Chancellor of the Exchequer telling him what he will do when he gets hold of the company? It seems quite unsatisfactory that we are dealing with this problem at one remove. The Government are the parliamentary agents, as I said on Second Reading, of the Trustee Savings Banks. Although the noble Earl said that this was a matter of public policy, the fact is that Private Bills have dealt with interests as extensive as this in the past. However, this is a matter of procedure, and I sometimes think that we do not always adjust our procedures to the requirements of the situation.
Let me deal with just one or two points that have been raised against what I would call the "reforming movement" on this side of the Committee. First, on wider share ownership, if all the account holders or depositors in the Trustee Savings Bank had shares by right of acquisition or by rights issue, there would be three million shareholders straightaway, which is quite a wide share ownership of any company. It is only just short of half the number of shareholders in the Halifax Building Society.
The other point concerns a cut-off date—"a line of demarcation", I think the noble Lord, Lord Bruce-Gardyne, called it. With all rights issues of all companies, there is a day fixed on which those on the share register at that certain date have the options that the extraordinary general meeting decides shall be 691 open, and those on the register share in what is going. Those who have sold out before that date do not share in it. That is the line that has to be drawn in all transactions of this kind. Many of the depositors have had many years of custom with the bank and would be fully entitled to anything that might be distributed to them.
I have down an amendment of my own which I shall deal with later and which I would respectfully submit to the Committee probably makes as much sense as any of the others, which is quite a lot. I want to deploy my arguments at full length when I come to that amendment, and I do not want to anticipate what I intend to say then. In the meantime, I think we shall just have to plough on. I hope the noble Lord, Lord Bruce-Gardyne, has not got an evening engagement, because the Government are badly in need of him. If he does not get up to defend the Government, it is apparent that nobody else will; and so he is very precious to them. Moreover, I think—
The Earl of Gowrie
The Bill received so much assent from my noble friends at Second Reading, vociferously put, that they do not feel it necessary to try to tamper with this admirable Bill.
§ 6.18 p.m.
§ On Question, Whether the said Amendment (No. 2) shall be agreed to?
§ Their Lordships divided: Contents, 57; Not-Contents, 103.692
|DIVISION NO. 2|
|Airedale, L.||Howie of Troon, L.|
|Amherst, E.||Jacques, L.|
|Ardwick, L.||Jeger, B.|
|Attlee, E.||Jenkins of Putney, L.|
|Aylestone, L.||John-Mackie, L.|
|Beaumont of Whitley, L.||Kagan, L.|
|Beswick, L.||Kilbracken, L.|
|Birk, B.||Kilmarnock, L.|
|Bottomley, L.||Lloyd of Kilgerran, L.|
|Brockway, L.||Longford, E.|
|Bruce of Donington, L.||Lovell-Davis, L.|
|Campbell of Eskan, L.||Mackie of Benshie, L.|
|Carmichael of Kelvingrove, L.||Meston, L.|
|Collison, L.||Mishcon, L.|
|David, B.||Mulley, L.|
|Dean of Beswick, L.||Nicol, B.|
|Diamond, L.||Ponsonby of Shulbrede, L|
|Elwyn-Jones, L.||Rochester, L.|
|Elystan-Morgan, L.||Seear, B.|
|Falkender, B.||Shinwell, L.|
|Fisher of Rednal, B.||Stewart of Fulham, L.|
|Gaitskell, B.||Stoddart of Swindon, L.|
|Gallacher, L.||Strabolgi, L.|
|Gladwyn, L.||Swinfen, L.|
|Graham of Edmonton, L. [Teller.]||Taylor of Blackburn, L.|
|Taylor of Gryfe, L.|
|Hanworth, V.||Tordoff, L. [Teller.]|
|Harris of Greenwich, L.||Wallace of Coslany, L.|
|Houghton of Sowerby, L.||Winterbottom, L.|
|Abinger, L.||Ironside, L.|
|Airey of Abingdon, B.||Lane-Fox, B.|
|Ampthill, L.||Lauderdale, E.|
|Belhaven and Stenton, L.||Lawrence, L.|
|Beloff, L.||Long, V.|
|Birdwood, L.||Lucas of Chilworth, L.|
|Boardman, L.||Lyell, L.|
|Boyd-Carpenter, L.||Macleod of Borve, B.|
|Brabazon of Tara, L.||Mancroft, L.|
|Bruce-Gardyne, L.||Margadale, L.|
|Buckinghamshire, E.||Marley, L.|
|Caithness, E.||Maude of Stratford-upon-Avon, L.|
|Cameron of Lochbroom, L.|
|Campbell of Alloway, L.||Merrivale, L.|
|Carnegy of Lour, B.||Mersey, V.|
|Cathcart, E.||Montgomery of Alamein, V|
|Colville of Culross, V.||Morris, L.|
|Colwyn, L.||Mottistone, L.|
|Cork and Orrery, E.||Mountevans, L.|
|Craigavon, V.||Mowbray and Stourton, L.|
|Cross, V.||Noel-Buxton, L.|
|Cullen of Ashbourne, L.||Norfolk, D.|
|Dacre of Glanton, L.||Nugent of Guildford, L.|
|Davidson, V.||O'Brien of Lothbury, L.|
|Denham, L. [Teller.]||Orkney, E.|
|Denning, L.||Penrhyn, L.|
|Digby, L.||Peyton of Yeovil, L.|
|Dilhorne, V.||Plummer of St. Marylebone, L.|
|Ellenborough, L.||Portland, D.|
|Elliot of Harwood, B.||Rankeillour, L.|
|Elton, L.||Reay, L.|
|Faithfull, B.||Renton, L.|
|Ferrers, E.||Rochdale, V.|
|Ferrier, L.||Rodney, L.|
|Fraser of Kilmorack, L.||St. Aldwyn, E.|
|Gardner of Parkes, B.||St. Davids, V.|
|Gisborough, L.||Saltoun, Ly.|
|Glanusk, L.||Selkirk, E.|
|Glenarthur, L.||Sempill, Ly.|
|Gowrie, E.||Shannon, E.|
|Gray of Contin, L.||Skelmersdale, L.|
|Greenway, L.||Somers, L.|
|Hailsham of Saint Marylebone, L.||Strathcarron, L.|
|Halsbury, E.||Swansea, L.|
|Henley, L.||Swinton, E. [Teller.]|
|Hives, L.||Terrington, L.|
|Holdemess, L.||Teynham, L.|
|Hornsby-Smith, B.||Trumpington, B.|
|Hylton-Foster, B.||Vivian, L.|
|Iddesleigh, E.||Ward of Witley, V.|
|Inglewood, L.||Whitelaw, V.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 6.25 p.m.
Lord Stoddart of Swindon moved Amendment No. 3:
After Clause 1, insert the following new clause:
.—(1) On the vesting day employees and holders of deposits in the TSB Group as at 17th December 1984 shall be allotted 51 per cent. of the shares on offer.
(2) The balance of such shares not taken up by eligible employees and holders of deposits in the TSB Group by the closing date for applications shall be held available for purchase by them for a period of two years at the original offer price after which time the shares may be released for sale to the general public at the current stockmarket price if the TSB Board so determines.
(3) During the first five years following vesting day no one person may own more than 5 per cent. of the Group's ordinary shares nor, after a five year period has elapsed may any one person own more than 15 per cent. of these shares and the total
shareholding of any group of persons engaged in similar business to the TSB Group shall be limited to 15 per cent.
(4) The total holding of ordinary shares by non-United Kingdom shareholders shall not exceed 30 per cent. at any time.")
§ The noble Lord said: Had the last amendment been carried, I would not, of course, have moved this new clause, but I now beg to move the new clause standing in my name and in the name of my noble friend Lord Barnett. As I made clear on Second Reading, and indeed in the debate that we have just had, I regret very much that we are not proceeding along the lines of mutuality. Were we doing so, the problem of proper representation of employees and deposit holders would not arise, since there would be mutual ownership and the TSB would be run for and by the holders of deposits alone and not for any remote body of shareholders.
§ But mutuality is not an available option. Therefore, I am seeking in subsection (1) of the new clause to give deposit holders and employees a reasonable chance to obtain a majority shareholding by fixing an original allotment of shares of 51 per cent. and allowing a reasonable period of time for those to be taken up. The proposition that I am making is an entirely reasonable one. Indeed, it tries to help meet the Government's own position because they have, at least in words, shown support for the greatest possible shareholding by deposit holders and staff of the TSB. Therefore, I believe that the new clause is of assistance to the Government's own case.
§ I am not seeking to set aside a proportion of shares for holders of deposits and employees for all time. All that the new clause calls for is that the original offer should remain open for a period of two years, after which period the TSB board would be free to dispose of remaining shares to the general public; in other words, a sort of share option scheme.
§ As I noted during Second Reading, the TSB's chairman, Sir John Read, has indicated that he would feel encouraged if 10 per cent. of depositors became shareholders in the new company, but I remain of the view that 10 per cent. is a very modest target which, I, and I imagine Sir John, should like to see greatly exceeded. Subsection (1) of the new clause offers a means of achieving a higher percentage of depositor take-up, since it offers depositors and employees a longer period in which to make up their minds and accumulate the funds to purchase shares.
It seems, too, that the Government are in agreement with us in wishing to see depositors and employees owning the greatest number of shares possible. Mr. Ian Stewart, the Economic Secretary to the Treasury, said during the Committee stage of the Bill in another place at col. 91 of the fourth sitting:
I want the number of shares owned by depositors to be as great as possible".
Later in the same column, he said:
I hope that the small battalions will be marching with their deposits and their pink forms in the TSBs and I hope they will become shareholders on a substantial scale".—[Official Report, Commons.]
What resounding words those were from Mr. Ian Stewart. Here is an opportunity for those words to be brought to fruition. So we are as one in wishing to
encourage the most substantial shareholding possible by depositors and staff.
§ 6.30 p.m.
§ Subsections (1) and (2) of the new clause therefore seek to be helpful to the Government in achieving their aim and ours by offering a way through which will be helpful to depositors but not unduly obstructive to the board in the long-term. There may of course be defects in the drafting of these subsections and perhaps other safeguards which could be written in; but the principle is one which I hope the noble Earl the Minister could accept and agree to in due course.
§ I turn now to subsection (3) of the new clause which seeks to write into the Bill proper safeguards against takeovers by any person or any group of persons engaged in a similar business. I said at Second Reading that the Opposition, while recognising the safeguards which Sir John Read intends shall be written into the articles of association go some way towards meeting our legitimate fears, feel that they do not go far enough. We believe that the safeguards will be stronger if they are written into legislation rather than contained in articles of association.
§ I understand perfectly well that articles of association cannot be altered at the drop of a hat. To alter them would require an extraordinary general meeting and probably 75 per cent. of shareholders voting in favour of any amendment of the articles. However, given an offer attractive enough, such a vote is possible and it is unlikely that Parliament could intervene. It would be a far different matter to amend an Act of Parliament, as noble Lords well know, and in any event it would be less likely that any takeover group would seek to overturn a safeguard enshrined in an Act of Parliament.
§ Subsection (3) of the new clause seeks also to safeguard the TSB PLC against takeover by a group of persons engaged in a similar business. In this connection I referred at Second Reading to the big four clearing banks which could in theory, at any rate, gang up and take over the TSB PLC by purchasing between them up to 60 per cent. of the total shareholding. At Second Reading, the noble Lord, Lord Bruce-Gardyne, quite fairly pointed out that there already existed safeguards against such a takeover in the form of the takeover panel and possible reference to the Monopolies and Mergers Commission. I have certainly taken account of what the noble Lord said, but while the takeover panel may very well take note of such a bid, they may not necessarily want to act.
§ Then there is the Monopolies and Mergers Commission; but of course there would have to be a referral by a Minister. Bearing in mind recent events, one cannot rely absolutely on the Minister doing so. All in all it would be very much safer to write the safeguards into the Bill, and again although the wording may be imperfect, I hope that the essence of the proposal will be acceptable to your Lordships' Committee.
§ I come finally to subsection (4) of the new clause which seeks to prevent TSB PLC being taken over by foreigners. For this purpose a limit of 30 per cent. is proposed for foreign shareholdings. In reply to the point at Second Reading, the noble Earl, Lord Gowrie, 695 said it was unlikely that the TSB would offer shares abroad. "Unlikely" perhaps, but not certain; and in any event once the shares were traded, the TSB would be powerless to limit foreign holdings. The noble Earl also mentioned the safeguard of the Monopolies and Mergers Commission. But the Monopolies and Mergers Commission were unable to prevent Harrods, one of Britain's great institutions, I should think, being taken over by the Egyptian brothers Mohamed, Ali and Salah A1-Fayed.
§ Lord Stoddart of Swindon
That is right; the Minister did not refer it; so there is no guarantee that he would refer it in the case of an attempt by foreigners to take over the TSB. The Minister could, and in my own view should, have referred this takeover to the Monopolies and Mergers Commission, but he did not do so. The TSB PLC is of course—and I recognise this—a kind of animal different from Harrods; but the only sure way of preventing it from being taken over by foreigners is to include a limiting provision in the Bill and that is what I am seeking to do in this new clause. Time is getting on. I commend the new clause to the Committee and I shall certainly be very interested to learn what other noble Lords have to say, in particular the Minister himself. I beg to move.
The Earl of Gowrie
It is always of particular interest at Committee stages to have a whole new clause so I congratulate the noble Lord on the ingenuity of his new clause and also on the way in which he has argued it. But I am afraid that it will not come as a bitter disappointment to the noble Lord, Lord Stoddart of Swindon, to learn that that is where my enchantment stops.
In respect of subsection (1), as Sir John Read's letter, which I have cited before and which is quoted in the White Paper, says, TSB depositors, which includes staff, will be offered priority in purchasing shares. We have been over that in the previous debate. There is no disagreement therefore in substance between ourselves and the Opposition there; but it would be wrong in our judgment to attempt to set out in detail how the TSB Central Board shall conduct the flotation. This has to depend on circumstances at the time. Certainly the Government hope that very many depositors will come forward; and as the noble Lord indicated, the Economic Secretary said in the other place that he understood that the TSBs had it in mind to offer a proportion of shares of roughly this magnitude to depositors. I am sure that TSBs will wish to take account of the Committee's views as well. Even if TSB depositors took up the whole of their priority tranche—say for the sake of argument 50 per cent., though it is too early to talk figures—they would still be able to apply on equal terms with everybody else for the remaining shares so they might in theory end up with more than 50 per cent. But it would be wrong to try to put this in statute.
Subsection (2) of the new clause is on the face of it an ingenious solution to meet the possibiity that the TSB depositors do not come forward in numbers sufficient to buy half the shares. However, it would not 696 be practical and would be extremely undesirable to prevent an unforeseeable and possibly large proportion of the authorised share capital from being issued to other prospective shareholders for such an substantial period. Also, it is not reasonable to tell TSB depositors that they can wait and see what happens to TSB shares before exercising their option. There would be no incentive to apply for shares immediately, and there would be uncertainty about who owned the TSBs until the two year period was up. The effect would therefore be to reduce, perhaps drastically, the number of depositors who applied for shares immediately and so to damage the flotation—and to damage it. I would contend, quite artificially.
In respect of subsection (3), I fully accept that some measure of protection against takeover is necessary especially in the early years. The 5 per cent.-15 per cent. provision in the memorandum and articles of association achieve that. But it would not be right to put these provisions into statute so that whatever circumstances may apply at any point in the future this particular company would have to come back to Parliament for authority to do something which any other company can do under the normal provisions of company law—that is to say, change its articles of association if the necessary majority of shareholders wish.
The whole objective of the reorganisation is to place the new TSB companies on precisely the same basis as their competitors; in short, to make them into ordinary companies. It would be wrong to set up a halfway house in which the TSBs were subjected to statutory requirements which did not apply to other banks. Also, the provisions in the memorandum and articles of association which limit shareholdings are very lengthy and complex, and a simple amendment such as that suggested by the noble Lord simply would not work. But that is not my objection to the amendment; my objection is one of principle.
Finally, in respect of subsection (4), TSBs have said that they have no plans to issue part of their shares abroad. Thereafter, the 5 per cent. or 15 per cent. rule will protect against foreign takeover as much as against domestic takeover. Again, it is not appropriate to place indefinite specific statutory requirements of this kind on a public company. If that was so, this country would not have the great number of holdings around the world that it does, to its great benefit.
The suggestion is also impracticable. What is the definition of "non-United Kingdom shareholders"? Does somebody who bought shares in the United Kingdom and who subsequently moved abroad lose the right to hold those shares? Who is to enforce that provision and how can the company be sure at any one time where its shareholders live? Again, those are impracticable issues; but my objection is one of principle. I hope that the noble Lord, having listened to what I have to say, will come to share my objections.
§ Lord Stoddart of Swindon
I thank the Minister for dealing in detail with the proposed new clause. It is a pity that he cannot provide more details about the priority that existing deposit holders will be offered by the board. We believe, as we argued at length this afternoon, that they should be given substantial 697 priority and should be placed—if I may put it this way—in a privileged position.
I understand what the noble Earl has had to say about the two-year waiting period, but one can get over these things. For example, deposit holders taking up their shares by the closing date for the original flotation might be offered a discount which would be an encouragement to them not to wait the full two years. There are all kinds of things we can do, if we have the will to do them.
I hope that the chairman of the board will take note of the sentiments which have been expressed not only in relation to this amendment but also earlier this afternoon, as well add the fears which have been expressed as to what will be the future for the TSBs unless additional consideration is given to deposit holders and to employees who, as the noble Earl said, have to be deposit holders as well.
With regard to takeovers, I remain unhappy about the possibility that other banks could contrive themselves to take over and decide the policy of the TSBs. I should like the noble Earl to give some further thought to this matter. I am not entirely satisfied with the reply he has given this afternoon. It is a serious objection and a serious matter. I hope that the noble Earl will have taken another look at this question by Report stage and perhaps we may have a further discussion then.
With regard to the possible takeover by foreigners, I understand the difficulties which the noble Earl has set out. I do not mind confessing that I have no solutions to offer at this stage. However, I shall apply my mind to this problem before Report stage and will try to find some solutions to offer the Minister which he might find acceptable. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
Clause 2 [The Central Board and the reorganization]:
§ 6.45 p.m.
Lord Houghton of Sowerby moved Amendment No. 4:
Page 3, line 8, after ("power") insert ("with the approval of the Treasury").
The noble Lord said: I believe that it would be convenient to take Amendments Nos. 4 and 5 together.
Amendment No. 5: Page 3, line 15, at end insert—
("( ) Any determination of the Central Board under subsection (2) above shall include provision for rights to shares or share options, free, or discounted to less than the full consideration for depositors holding credit balances on 6 December 1984.").
Amendment No. 4 is merely a paving amendment to provide for the conditions in Amendment No. 5. This is the testing time for the noble Lord, Lord Bruce-Gardyne, because this amendment will probably come closer to his understanding of the position then was the case with the earlier amendment.
I am in some doubt as to what Clause 2 really means. I have tried to find out by keeping track of the briefs on the meaning of clauses which have come to some noble Lords from the Treasury. The latest brief I have received, through the Library, states:
Revised March. The Central Board's powers extend to determining whether the consideration due on the transfer of any shares or rights to shares in connection with the reorganisation is to be for full consideration or discounted or whether that consideration is to be paid or left unpaid for any period".
There was nothing about that in the explanatory notes on the Bill originally and I am not aware that the Bill was amended in another place. I refer to this matter because it may be said that Clause 2 will enable the central board to do what Amendment No. 5 proposes that they should do. Anyway, I await the Minister's comments on that point.
Even assuming that Clause 2 means that the central board can do what Amendment No. 5 proposes should be done, I wish to make it obligatory on the central board to produce a scheme to meet the requirements of Amendment No. 5. What does Amendment No. 5 say? It states:
Any determination of the central board under subsection (2) above shall include provision for rights to shares or share otions, free, or discounted to less than the full consideration for depositors holding credit balances on 6 December 1984".
As regards the cut off date, I note that in another amendment a different date in December 1984 was taken. Clearly there must be fixed some date that will be the cut off date.
§ I hope noble Lords are not going to say that those who were depositors on a certain date cannot be given some benefit from the share issue because they might have become depositors only the day before that date. When rights issues are in the offing, many a shareholder buys shares to get on the share register so that he can share in the rights issue when it comes out. There are other opportunities for buying shares preferentially for which being on the share register at a given date is the qualification.
§ We cannot help those who draw out before the given date and I do not believe that we should penalise those who put in before the given date. There are bound to be movements across the line in any date that is taken. By and large, these are banks in which depositors stay put. I am one of them. I have been a member of a trustee savings bank for 40 years. As I said on Second Reading, many depositors in the trustee savings banks put money into them as a matter of habit. It is an allegiance that one builds up. Some kind of sentiment is involved. I know that it is very unwise of working people to have allegiances to financial institutions, because they are bound to be cheated in the end. Those who had allegiance to the co-operative societies, the friendly societies and the building societies—I do not say they had any particular allegiance to the Post Office Savings Bank—were all cheated because none of them received a hedge against inflation. They all finished with their savings, in real terms, worth less than when they were put in—including me.
§ Noble Lords may say, "What an idiot you were! You should have known better than that. You are a sophisticated investor. Surely you knew there were better things to do with your money than keep it stuck in a trustee savings bank". I probably did, but I kept it stuck there nevertheless, and I do not see that I should be exploited by the new tycoonery of the banking world who come along and say, "We can make something of this bank, Goodness, why has it not been done before?" As a matter of fact, the operations at the 699 banks have been widened considerably in past years, and they have taken the opportunity with both hands. So do not let us have any argument about the cut off date.
§ The question, then, is: should the depositors be given some preference beyond the reservation of parcels of shares that may be made available to them at the list price? That has been done before. Instead of allowing the general public to scramble for the lot, some shares are held back and issued preferentially to certain classes of people, mostly employees. I think that in view of the nature of this particular operation the depositors are entitled to something better than is envisaged in the Bill or, as I surmise, the letter from Sir John Read to the Chancellor of the Exchequer. I want to establish some ethical claim of the depositors to a preferential share in the accumulated resources of the bank which are now to be put on sale on terms which every commentator in the financial columns says will be very attractive indeed. This will be the biggest thing. Indeed, the New Statesman said that this will be the most audacious coup of the City of London for many a year when it comes off.
§ We shall see whether the public applying for the shares think that the value of their shares is discounted on the theoretical basis which the noble Earl explained a little earlier.They will know better than that. They will be able to see that not only has the bank got £628 million of reserves but that it has a hidden nest egg. That is what the noble Earl referred to when he said that it is to some extent a disadvantage to the Treasury that this transaction is about to be undertaken. Clearly it is, because the National Debt Office holds £666 million on deposit from the Trustee Savings Banks which will be returned in due season to where it came from. That will give a more exciting estimate of what the company is going to be worth.
§ I do not think that there is any moral support whatever for the terse, legalistic announcement in the White Paper that having deposits at the bank implies no claim to a share in the profits or in the equity of the Trustee Savings Banks. It is legalistic, but it is not ethical and it is not fair—and it is fairness that I am after. I declared my interest, and I feel more indignant because I have an interest than I would otherwise. I do not like being cheated. I do not like it being taken out of my hands, anyway, but that is what is going to happen.
§ If the depositors are to have no claim, who is? It is not the board. What the board is after is the fulfilment of the ambitions of modern management. This is the money-making game, and it wants to be in it. It is very lucrative indeed, and pays some very high salaries to the operators. However, it is not the board. The board will be the management. It is not the Treasury. If the Treasury is affected it is on the debit side, because it will probably have to refund money held under the arrangements of antiquity that savings in the Trustee Savings Banks have to be lent to the Government. It has been one of the sources of cheap money for the Government over the years.
§ Then what about the public? What is the claim of the public? Is it wider share ownership? I referred to that a few moments ago. If all the account holders in 700 the Trustee Savings Banks held shares in the banks, there would indeed be a very big redistribution of the share equity. It seems to me that the public may have a claim to be in at any transaction of this magnitude, but I do no know what justification can be used to defend that. However, if the non-depositing public are to have rights of acquisition in a very desirable property and share in the Trustee Savings Banks, I suggest that the depositors and the staff have a better claim. That claim is not going to be satisfied by merely reserving a parcel of shares which they can have, if they want them, at the market price.
§ I was thinking of this matter in relation to the right to buy council houses. That is an interesting study in comparisons. I would say that the terse, legalistic answer to the tenant who says that he wants to buy his house is that the payment of rent carries no implication of the right to buy the house he lives in because the tenant-landlord relationship makes no provision for the right to buy except in certain cases of leasehold properties. But the Government decided that they should have a right to buy and they decided that the landlords in all these cases should be forced to sell. Not only were they forced to sell, but they were forced to sell at discount values with the stipulated condition of the length of the occupation of the house. All these conditions were laid down by the Government. They were establishing the rights of the tenants in the equity of the houses they lived in and for which they paid rent.
§ What about this lot? Where is the depositor involved in this Government policy which applied to council houses? I will tell your Lordships the difference. The difference is that the council house tenant's right to buy was a political decision, whereas the issue concerning depositors is not. That is the difference. Council house tenants are voters and the depositors are so scattered that they are not in communities which can nurse their grievances and combine their activities to put pressure on candidates, and so on. One sees how easily the mass of people in a small dimension of the field of finance can be completely ignored, swept aside and diddled. In all the years I have been a member of a Trustee Savings Bank nobody has at any time asked me what I think of this. I know of no consultation that has taken place worthy of the name.
§ Who are these trustees who have the right to give it away? On the whole, they do not come from the people who paid in the money. If people say that the banks belong to nobody, and therefore ownership must be established, then I would say that if they belong to anybody it is the depositors who have the strongest moral claim. But I am not proposing that they should have an exclusive claim. I am proposing that they should have something better than what is in this Bill.
§ 7 P.m.
§ I do not think that it is a wild idea to ask the board to make provision in any determination that it makes under Clause 2 for something to be done along the lines I suggest in the amendment. It does not lay down anything except that the board should make the attempt to give some consideration to depositors in this form.701
§ I said earlier that the main purpose of the Bill was to establish ownership, and I hold to that. It was not to get money. One comment I saw was that at the end of this transaction the Trustee Savings Bank will be the highest capitalised bank in the world in proportion to deposits. That is how rich it will be. Indeed, Sir John Read, when he was questioned as to what he would do with it all, said that it was much too early to talk about what the bank was going to do with it, but he indicatd that probably £300 million would go towards opening more branches in the South. It wants to spread to the South.
§ The Trustee Savings Bank wants to add its shop to the streets of building society offices in Brighton, Eastbourne, Dover, Folkestone, and so on. Wherever one goes, there they are, all in a row. If one asks people in Eastbourne what has happened to the shops in such and such a street, the answer is that the building societies have the lot. The traders cannot afford to pay the rents. Here is another one: they are all after the people's savings in order to lend them to other people who have not saved.
§ As I said earlier, this is the great new growth industry. It is based on technology, efficiency, manipulation of money and the study of the markets. These bodies do not handle goods; they handle books. The more people who can be got into this racket, the better off will be those who run the bodies. Noble Lords will judge that I take a poor view of all this from where I stand as a depositor in the Trustee Savings Bank.
§ Even if the board has the powers in Clause 2 that might enable it to do what my amendment seeks, I do not think that it should be left to its unfettered judgment to decide whether to do it. That is why in my amendment I require the board to produce a practical scheme which the Treasury should scrutinise. If it approves, one hopes that it will hold the balance fairly between depositors and other interests.
§ This Bill has received no commendation from any quarter within my knowledge. I have all the cuttings here, such as "Capitalism and the Poor Man's Bank". In The Times it is, "Capitalism and the Workers' Bank". It is, "Lost Opportunity in Retail Banking", in the Financial Times; and, predictably, "Sell-out of the People's Bank", in the New Statesman. Nobody is saying that this is a good and fair idea for the depositors, that it will bring benefits to them, and that they will be much better off under the new scheme than under the old—nobody.
§ All that people are paying regard to is how big the issue will be, whether it will bring in £1 billion or £11/2 billion and what sort of scramble there will be for the shares. One can be pretty sure that no bank will hold surplus reserves and liquid cash without translating them into capital expansion and fresh pickings for the shareholders. This will be the biggest of the issues since Telecom and it will probably be bigger than anything we are likely to have in the foreseeable future. I hope to get a response on this.
§ I make one further inquiry which I think is important from the point of view of the money. I presume that if shareholders want to buy shares, whether on market or preferential terms, many will wish to convert into shares the money that they 702 already hold on deposit. That of course will mean just a paper transaction for the bank. It will not bring it in any money. It will merely capitalise the deposits and remove them from on demand refund to the depositor. He will have to sell shares in the market if he wants to realise liquid cash. But, as I said earlier, I do not think that the main purpose of this flotation is for the bank to get a lot more money.
§ As a matter of fact, this is one of those extraordinary situations where it is bound to get a lot more money if it has the flotation at all. Since the flotation seems to be necessary in order to establish ownership and to get the whole thing on a more conventional banking footing, the additional money will come in on that account. I do not think the fact that depositors are given the opportunity to buy shares at a discount, or are even given a free issue, and they then convert deposits into shares, will be any inconvenience to the flotation at all. It will not be on that scale. Even if it were, it would not embarrass the company through its having a lot more money than it apparently knows quite what to do with.
§ That is my case. I am now looking to the noble Lord, Lord Bruce-Gardyne, to say whether this now comes closer to his declaration that he is, of course, in favour of giving the depositors a better deal. Here is the opportunity. It is flexible, it is not unreasonable and it allows the company to produce a scheme for Treasury approval. I think that this is just about as moderate an approach to justice for the depositor as can possibly be made. I sincerely hope that I shall get some sort of response from the Government, urged on and supported to go along those lines by the noble Lord, Lord Bruce-Gardyne. Otherwise, I am afraid the battle continues. I am sorry to say that, but I am not prepared to let this go without a struggle, whether it is now or later. I beg to move.
It is always fascinating to hear the noble Lord, Lord Houghton. I think that I should declare an interest, as I did on Second Reading. I was connected with the Trustee Savings Bank as chairman of one of the banks and also as a director of Trustcard and the central Trustee Savings Bank. I am not now, but like the noble Lord, Lord Houghton, I am a depositor.
The noble Lord contended that, for reasons which he explained, it is right that depositors should have access to the capital of the bank. I fail to see the logic of that. He said that the proposals were unfair. I think that it is equally unfair that somebody who has put his money into the bank should have the benefit of the capital which is accrued by the operation of the bank previously. I accept the difficulty as to where the money strictly belongs in ownership, but to follow the noble Lord's arguments, in fairness, the bank's money has been built up as a result of the management or the manipulation of funds deposited over the past 150 years. He may say that the depositors were at the time—diddled, was the word he used. But the fact is that that is where the money has come from.
But I find it astonishing for it to be said that therefore anyone who now has a deposit ipso facto has a right to some other person's deposits—a person who has probably been dead for 100 years.
703 One can go one stage further and say that because the banks have built up a reserve, that has enabled the current depositors to benefit in ways better than they would have done had the banks not built up those reserves. With great respect to the noble Lord, I find it illogical for it then to be said that now the depositors, because they have some money in the bank, be it only £100, at a certain date, should have the right to part of the capital of the bank at a discount. I certainly go along with him in the use of his words that that would be very unfair.
§ Lord Jacques
In his argument the noble Lord overlooked one point. That is that at the present time the reserves can be used to the advantage of the depositors. However, in the future if there is ownership by shareholders they can decide who receives the benefit of the reserves, the shareholders or the depositors. The depositors will have no say whatever. The shareholders will have the first word and the last.
I am not sure that the noble Lord is wholly right about that. But of course he is perfectly right if he says that the current deposit holders have the benefit of the deposit. What the noble Lord, Lord Houghton, is saying is that they not only have the benefit of the deposits but they should also have the benefit of the capital of the banks, so that they will benefit twice round.
§ Lord Bruce-Gardyne
In view of the challenge laid down to me by the noble Lord, Lord Houghton, I think I should intervene. I shall do so very briefly because we have covered this ground fairly extensively on earlier amendments. I entirely stand by the response that I gave to the challenge that the noble Lord threw to me on an earlier amendment. I believe that the appropriate interests of the depositors and staff of the TSB are appropriately covered by the terms of the letter, as to the intentions of the TSB at the time of flotation, which Sir John Read addressed to the Chancellor of the Exchequer. I do not want to go over that ground again. My noble friend Lord Gowrie has already quoted this to your Lordships.
However, it is made absolutely clear that the depositors will have priority in the flotation and furthermore that the staff will have priority if, by any chance, there should be an over-demand for the shares, which meant that otherwise some members of the staff could not obtain them. What Sir John Read wrote is,So that even if there is more demand from customers for shares than can be satisfied, no member of staff who wishes to buy shares will be excluded".That seems to me to be a perfectly reasonable resolution of the appropriate priorities. It seems to me that fundamentally, throughout the arguments that the noble Lord has been advancing, there is this inherent distaste for the notion of wide share ownership and direct share ownership by individuals in businesses. To my mind, that is the great advantage of this flotation.
For the reasons which my noble friend Lord Ferrers has pointed out, as I see it, there is no logic, no equity, in the proposition put forward by the noble Lord, Lord 704 Houghton. Behind it all it seems to me that there is this resistance to the notion of wider direct share ownership.
The noble Lord is also appalled by the prospect that the TSB should provide more competition for people's savings. I happen to believe that more competition for people's savings will be advantageous to the savers themselves. There again it seems to me that that is the line that we should be pursuing. I am hound to say that I see no case for the amendment which the noble Lord has put before the Committee this evening.
§ 7.15 p.m.
The Earl of Gowrie
Fortunate is the Front Bench spokesman who has the architect of the Bill on his Back Benches. I have really very little to add to what my noble friend Lord Bruce-Gardyne has said or to the very cogent objections to the case of the noble Lord, Lord Houghton, which have also been put by my noble friend Lord Ferrers.
Therefore, I think I can be reasonably concise and brief about these two amendments. The objective of the first amendment is to make the Government, through the Treasury, approve the details of the flotation. Details of the flotation and the complex mechanics of vesting are for the TSB central board. It would be wrong for the Treasury to intervene in this process since, as I have said on many occasions in this Chamber, this is not a conventional privatisation. It is not a privatisation of government assets. Therefore, the TSB central board and the professional advisers they employ are best placed to take the decisions.
In respect of Amendment No. 5 the objective of the noble Lord is to require the central board to sell shares to depositors at a cheaper price than to others. He has made it quite clear why, in his view, regardless of the legal position, depositors have a superior moral position to others. However, as I have also said on other occasions, it would be inequitable in our judgment—and this was the point made very cogently by my noble friend Lord Ferrers—to distribute the proceeds of sale among those individuals who happen to hold TSB accounts, especially at a particularly recent date.
Because, as the Committee knows, I have a tendency to enjoy macro-economic argument, I must say that I am tempted to follow the noble Lord, Lord Houghton, on some of the things he says. How sensible of savers to lend money to those who do not save‡ What an encouragment to become a saver‡ That is precisely how savers throughout history have added to their savings. In the case of the TSBs the savers have been somewhat restricted to the Government in terms of those to whom they can lend. I should have thought it would be admirably in the interests of depositors, whether or not they decided to take up shares, that TSB branches should be all over Brighton, Eastbourne, or wherever was sugested by the noble Lord.
However, with that parenthetical aside I propose to resist following him down the fascinating byways of macro-economic argument and theory and simply to say this in respect of his Amendment No. 5. As the Bill stands, TSBs have the power to offer depositors cheaper shares if they want to do so. But that is a 705 matter for them to decide. We should have no objection if they decided to do so. As I have said, Sir John Read has already given an undertaking that depositors will he offered priority, but there is no basis on which Government or Parliament should require TSBs to offer cheaper shares to depositors.
As explained at Second Reading, we are satisfied that TSBs do not belong to depositors and so there is no right whatsoever to cheaper shares. In short, the Bill already gives the TSBs the power to offer cheaper shares but we cannot accept the suggestion of the noble Lord that this should become a duty. I therefore urge the Committee to resist the amendments.
§ Lord Stoddart of Swindon
Before my noble friend replies, may I say a few words? I feel quite sure that my noble friend Lord Houghton will be most disappointed at the rejection of his amendment by the noble Earl. In my view, it is an ingenious, rational, flexible, wholly workable and desirable proposition for Parliament to say to the TSB board that they ought to make some sort of provision for the deposit-holders and indeed for the staff, to give them not only some priority but perhaps some little additional benefit.
The noble Earl asks why they should have any additional benefit. The noble Lord, Lord Bruce-Gardyne, cannot see why they should have any special benefit. The noble Earl, Lord Ferrers, asks why they should be treated any differently—they are mere account holders, mere depositors in a business. So why is it that these people should be treated any differently from anybody else in any other business? I think there is one very good reason, and it is this. In the normal business, usually the venture capital is provided either by an individual or by a group of people who may be called shareholders. With that money they set up the business, the enterprise. Therefore they are entitled to the profits and they are entitled to do exactly what they like.
In this case, here we have a business which is already set up. Indeed, the business would not exist unless you had the deposit-holders, who are in fact the customers. The very existence of the business depends on their being depositors. It is for this reason that I think this particular flotation is different from anything we have ever had in this country'. It is different from British Telecom; I acknowledge that: the Government are not getting anything out of it. I do not know of any other case of this kind. This is something different; it is something entirely new. The flotation would not be on unless there was a group of people who actually constitute the existing business. They are the deposit-holders. That is why I believe that they' ought to have some sort of preferential treatment to encourage them to be more involved in a new organisation which they have not themselves particularly sought. They have not even been consulted. I believe that my noble friend Lord Houghton has offered a way through.
In regard to staff, bearing in mind the extra special position of the Trustee Savings Bank and also bearing in mind that when BT was privatised—to give just one example—staff were allocated a given number of shares free of charge, it seems to me that this is a reasonable amendment. It seems to me that you can make some sort of comparison between the staff of TSBs and industries which have been denationalised. 706 My noble friend mentioned council houses. He was really very modest. He said that the tenants have no actual right to buy. No private tenant has the right to buy his house. He stated also that council tenants were buying at a discount. He did not mention that council tenants have been subsidised over a very long period of time and that therefore there was a great benefit to people who owned nothing and were merely transient occupiers, if you like, of a piece of land.
There are similarities that one can draw and some precedents that can be used to justify some preferential treatment being given to deposit-holders, and particularly employees of the TSBs. I believe that my noble friend has been very' modest in the amendment he has put down. I hope that in the light of what has been said and in the light of the dispute, if I may say so, and the unsureness of the position of deposit-holders, the noble Earl will look at this point very carefully. I believe it deserves great consideration and that it should be written into the Bill.
Without wishing to prolong this debate too long, may I draw the attention of the noble Lord, Lord Stoddart, to one matter on which I think he labours under a considerable misapprehension. He quite reasonably said that any organisation operates under venture capital, that that venture capital is the part which takes the risk and that therefore those who provide it should take part in any benefits which that risk produces. He said that in the case of the Trustee Savings Bank those people are the depositors. With respect to the noble Lord, he is at fault. Those depositors have put their money in. Those depositors can remove all their money, and you are left with a rump. That rump does not belong to the depositors who have removed their money, and it is what to do with the rump which remains that is the problem. With respect to the noble Lord, that does not belong to the depositors.
§ Lord Houghton of Sowerby
The comments which the noble Earl, Lord Ferrers, has just made are an enlightening piece of information about how the Conservative mind works. The divide here is partly political and partly ideological. I can quite see why people make money and why the banks and everybody else who has to do with money can make money. It is because they make no concessions. They say, "Have you the right? We will honour it", or, "Have you no right? Don't come to us". This is the line that is drawn.
All I can say is that I do not believe that had there been a Labour Government at the present time this Bill would have come to Parliament in its present form; I cannot believe that it would. That shows that there is a political and ideological divide on this issue. It is very difficult to know how one can overcome it; probably one cannot. I feel, however, that Parliament has a responsibility here, because it becomes the arbiter in considering the public interest, the sense of fairness in our community, and people being treated properly. Parliament is the custodian of all the good qualities of our life in that regard, so I think that Parliament can take, if you like, a sentimental view, an emotional view or a generous view when its responsibilities require it to reach a decision.
707 The decision here is that the Trustee Savings Bank cannot become what it wants to be unless Parliament agrees. It has to pass an Act to enable it to be done. In those circumstances, I think that Parliament has the right to say, "If we're asked to hand this bank over to you then there are certain conditions which we think should be satisfied before we could face the public, the depositors and all concerned and say, 'We have done the just and the fair thing' ".
Noble Lords opposite who have spoken do not see it in this light, and there is not much one can argue about. It is a case of different points of view. I looked at all the proceedings on this Bill in the House of Commons. What a one-sided affair it all was‡ It was not a debate. We have now reached a stage when the Government feel that the best thing for Conservatives to do is to keep their mouths shut because if they open their mouths it will only keep the debate going and there is not any time or patience to keep the debate going.
§ Lord Houghton of Sowerby
Oh, yes. You can see it running right through the proceedings in another place, and the result is slovenly legislation and inadequate debate. Otherwise this would have received far more attention in another place than it did receive. I am considering what to do that might possibly help carry the matter a little further. Since the Government take the view that it is not for them—and by implication it is not for us, as Parliament—to tell the board what to do, I think I am disposed to leave the matter open until we come to the Report stage so that the board can, if it so wishes, say a little more about what it would propose to do. After all, there is great reliance on the letter from Sir John Read. Whether it was written spontaneously by him, or by arrangement, or by agreement with the Chancellor of the Exchequer, I do not know. However, quite obviously he felt that he had to say something that had been put to him by the Treasury.
I presume that Sir John Read will be interested enough in this matter to read the report of the debate here as well as in another place. I think that he should be given an opportunity to consider whether he can help overcome the feeling of disquiet on this side of the Committee. From his own point of view, he cannot feel very happy about the fact that there were Divisions on the Second and Third Reading of this Bill in the House of Commons as well as Divisions on amendments, and that in this Chamber we are faced with the situation that the matter will go to the vote and that will be an end of it.
Will he feel very convinced that this great transaction, which will involve responsibility being taken for all the depositors in the Trustee Savings Bank, has been completed happily if Parliament is divided upon the matter? Is there nothing more to be said? Is he going to stick on the rights of the board? I do not know. Anyway, I should like to give him the opportunity to consider the matter, and in those circumstances I shall withdraw the amendment so that 708 I can keep my options open at a later stage in our proceedings. For the moment that is where I am prepared to leave the matter. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 5 not moved.]
§ Clause 2 agreed to.
§ Clause 3 agreed to.
Lord Stoddart of Swindon moved Amendment No. 6:
After Clause 3, insert the following new clause:
. The Trustee Savings Bank Group Board and each of the Boards of the subsidiary companies shall contain three worker directors the qualifications of whom and the method of appointment to the Boards shall be on a basis agreed with the employees themselves and their trade union representatives.").
§ The noble Lord said: I beg to move Amendment No. 6, which stands in my own name and that of my noble friend Lord Barnett. As the Committee will see, the new clause is self-explanatory and seeks to ensure that employees have representation on the TSB group board and on each of the boards of the subsidiary companies.
§ The Labour Party believes strongly that working people should become more involved in the firms which employ them and should have a significant voice at the highest level. That, in our view, is an important point of policy not only because we believe that people who invest their lives in an enterprise are just as entitled to influence decisions as are shareholders who simply invest their money, but also because we believe it essential for the future wellbeing of our country that employees and management should work closely together for the good of the enterprise which sustains them all and makes a contribution to the general good.
§ That was a statement of our general philosophy. However, more specifically in relation to this Bill, we believe that far-reaching decisions will have to be made by the TSB boards after TSB PLC has been formed. These decisions will have serious consequences for employees, affecting their working lives, their working environment and, indeed, their future jobs and prospects with the new organisation.
§ In the past, of course, there have been trustees, and the staff have felt comfortable in the knowledge that there were people of independent mind and voice, having no financial axe to grind, who could be relied upon to keep a kindly and understanding eye on the interests of the employees who served the banks.
§ However, the advent of TSB PLC will be a whole new ball game. The old ethos will die away and a new era of hard-nosed market place management will dawn. In those new circumstances employees will need new forms to protect their interests and to make their contribution to the success of their enterprise. That is why we are suggesting in this new clause that worker directors be appointed to the boards. Of course, worker directors do not constitute the only route to industrial democracy; there are other forms which I shall not go into now. We believe, and the main trade union in the TSB believes, that the worker director route is the right one for TSB PLC.709
§ The new clause proposes that there shall be three worker dirctors on the group board and each of the subsidiary boards. Noble Lords may ask: why three? In the first place, we believe that a single worker director on any board is simply not good enough, since he or she could not be effective. Such a single director would be lonely and isolated, presenting a lone voice likely to be drowned by the voices of those with an entirely different experience and perspective. However, with three worker directors there would be a cogent and coherent group, able to put a different point of view with force and effect. Such a body of people actively engaged in the day to day business of the bank, meeting with and working for customers at the point of contact, would add rich knowledge and experience to the boards and endow decisions with greater wisdom and authority which comes from such experience.
§ The Government themselves claim that they wish to see greater involvement of employees in the running of their firms. Unless they are merely paying lip service to a popular ideal, they should welcome the serious attempts to make progress in this area such as the one which is contained in the new clause. If the ideal is ever to become a reality, leadership will be required and there is no better place from which that lead should come than the Government and Parliament itself.
§ Before I conclude my remarks, I think that I should explain why I have stated in the new clause that the qualifications of the worker directors and the method of their appointment to the boards should be on a basis agreed with the employees themselves and their trade union representatives. That cautious approach—and it is a cautious approach—comes from a long experience of trade union activity and negotiation in industry and from my recognition that while Parliament must lay down the principle, the details of its application are best left to those who have to carry the principle into effect.
§ For example, on the question of qualifications, it may well be felt that an employee should not be eligible to become a worker director if he or she occupies a post above a certain grade. Let us take another example. It may be that a length of service qualification should be introduced or that there should be disbarment of a worker director who had already served one term of office, or perhaps two, or that there should be a given length of time between leaving office and standing again.
§ On the question of the method of appointment, direct election seems the most obvious method to select, but again it could well be that the employees may find other methods more suitable to their needs. To give just one example, worker directors could be felt to be more accountable if they were appointed by a workers' council rather than by a widely scattered electorate to which they could never report or by which they could not be influenced.
§ I hope that I have said enough to convince your Lordships' Committee that this new clause is a reasonable and sensible one which, if agreed, would not only instil confidence into the employees of the TSB, but would also provide progress towards making the ideal of industrial democracy a living reality. I commend the new clause to the Committee. I beg to move.710
The Earl of Gowrie
I share most of the sentiments expressed by the noble Lord on the principle of employee involvement generally. Employee directors, as he said, are an option, and there are indeed, again as he said, other options. But in our view—and we hold this very profoundly and passionately—it is for each individual company to take its own decisions in this area. I am sure that if the TSB PLC comes into being and workers, or worker organisations, within the company wish to make proposals for employee involvement in this way, they will be sympathetically treated and listened to. But, also, if, as one hopes, large numbers of employees become shareholders with an active interest in the company, then that is another way of making views felt.
However, there is no reason, in our judgment, to pick out this particular new company as though it were any different from other new companies and prescribe special statutory duties to it in perpetuity when similar requirements do not apply to other companies. Of course, companies up and down the land are hedged round with various protections in company law. All we say is that this TSB PLC, if it comes into being, should be no differently treated. In the light of that, I hope that the noble Lord will not press his amendment.
§ Lord Stoddart of Swindon
The noble Earl will expect me to be very disappointed with his reaction to my new clause. Indeed, I am very disappointed. If we are to make progress in industrial democracy the lead has to be given from somewhere. This appeared to me to be a great opportunity for Parliament to say "Yes, we do mean to go ahead with giving people a real say in the enterprise for which they work". Here was an enterprise, as we have said ad nauseam, owned by nobody, setting up an entirely new organisation. Here was the opportunity to say to the organisation, "Take your workers into your confidence by taking them on to the boards", because we believe that employees in industry have this wide wealth of experience which they want to give to the organisation but so often cannot find the means and the avenue by which to do it.
I can say this, as I do, with feeling. In industry I have felt the frustration of wanting to give something to the industry for which I work but of not having the machinery to do so and not having the trust of management to be able to do so. There is no monopoly of wisdom among management, and we need a thrust forward. This is what I am trying to provide in this new clause.
Looking around the Committee tonight it would be madness to press this to a vote, and I do not intend to do so. This is not because I do not believe in the new clause—I do very much—but because I do not believe that I shall carry it. Under those circumstances, I shall withdraw the new clause tonight, but I can assure the noble Earl that it will come forward at Report stage and I hope it will be voted upon then and carried by this noble House, which is often in so many cases a leader in matters of this sort.
§ Amendment, by leave, withdrawn.
§ Clause 4 agreed to.711
§ [Amendment No. 7 not moved.]
§ Remaining clauses and schedules agreed to.
§ House resumed: Bill reported without amendment.