§ 2.55 p.m.
§ Lord Belhaven and Stenton asked Her Majesty's Government:
§ Why they ordered Kuwait substantially to reduce its shareholding in BP within a set time-limit of one year, and what effect they expect their decision will have on British people who invested in BP when it was privatised last year and on British relations with friendly Arab countries in the Middle East.
§ Lord StrathclydeMy Lords, the report of the Monopolies and Mergers Commission recommended that the Government of Kuwait should be required to reduce their shareholding in BP over a period of some 12 months. However, in order to promote an orderly disposal of the shareholding, the report also recommended that this period should be subject to some flexibility in the light of market conditions. My noble friend the Secretary of State accordingly asked the Director General of Fair Trading to consult the Kuwait Investment Office on this basis with a view to obtaining undertakings to reduce the shareholding in BP to not more than 9.9 per cent. and to advise him further on the appropriate timescale for divestment.
Lord Belhaven and StentonMy Lords, I thank my noble friend for that Answer. Perhaps I may also add my congratulations to him, this being the first time that he has answered Questions at the Dispatch Box. I very much hope that it will not he the last and that he has a very happy time there.
Before I ask any supplementary questions I must declare an interest in this matter in that I am one of those who bought BP shares a year ago. Can my noble friend tell me whether Her Majesty's Government advised Kuwait, through diplomatic channels just a year ago, that they could see no objection to a Kuwaiti shareholding in BP of up to 20 per cent.? If that is so, can he explain why 20 per cent. was all right a year ago but 9.9 per cent. is considered to be the absolute maximum today?
1362 Returning to the interest that I declared, does my noble friend consider that Her Majesty's Government have a duty of care to those who bought shares in BP a year ago? What does he think——
Lord Belhaven and Stenton—will be the result on the value of the shares following upon the actions of Her Majesty's Government?
§ Lord StrathclydeMy Lords, I shall try to answer all those points. I thank my noble friend for congratulating me. I fear that the decision will not be mine, whether or not I shall be at the Dispatch Box again.
Ministers have made it quite clear to the Kuwaiti authorities over the past 12 months that the KIO stake was getting too high. They explained that the Office of Fair Trading was investigating the shareholding and that a reference to the independent MMC might result. Therefore it appears that the Kuwaiti authorities were quite aware of the position.
I have no knowledge of Ministers telling the Kuwait Investment Office that it would be allowed to buy shares up to 20 per cent., but I shall make further inquiries and write to my noble friend. As regards his buying shares this time last year, he bought them after the October 1987 crash. Therefore he would be well aware that the price of shares could fall as well as rise. The future price of BP shares is in the hands of the market.
§ Lord Williams of ElvelMy Lords, does the noble Lord not agree that the Kuwait Investment Office rescued the Bank of England from its obligations as buyers of last resort in last year's fiasco? Does he not further agree that the sensible and elegant solution, which he might wish to pass on to his noble friend the Secretary of State and which might perhaps solve the problem of the noble Lord, Lord Belhaven and Stenton, who I understand has been financially damaged by what has happened since, is for the Bank of England now to live up to its obligations and acquire the KIO holding at the price it was then prepared to offer? Would not that solution prevent a false market in BP shares, protect the interests of BP shareholders and show that Her Majesty's Government are prepared to put their money where their mouth is?
§ Lord StrathclydeMy Lords, I am always delighted to pass on the advice of the noble Lord, Lord Williams of Elvel, to my noble friend the Secretary of State. The Kuwait Investment Office did not help out the Government in any way when it bought the shares. It was entirely a commercial decision taken at that time. It must be remembered that the Kuwait Investment Office has been investing in this country for a considerable time and is well experienced in it.