Crown Agents Bill [H.L.] (Hansard, 24 April 1995)

HL Deb 24 April 1995 vol 563 cc762-80 762

§ 6.45 p.m.

§ Report received.

§ Clause 1 [Vesting of property, &c. of Crown Agents in a successor company]:

§ Lord Judd moved Amendment No. 1:

§ Page 1, line 18, at end insert ("; and thereafter that company, and any other company to which the successor company is subsequently transferred, shall be a company limited by guarantee, in the form of a foundation committed to social and developmental objectives; and the memorandum and articles of association of that company shall contain those objectives, and shall be included in any order by the Secretary of State regarding transfer of the property, rights and liabilities of the Crown Agents or of the successor company.").

§ The noble Lord said: My Lords, the Minister was very keen in Committee to say that there was no need for amendments on the constitution of the future of the Crown Agents. She reiterated that the foundation that she intends to create will own all the shares in the company that will operate the Crown Agents' business. She said that the foundation will not distribute dividends to its members, and that its objectives will encompass the social, ethical and developmental principles on which the Crown Agents' business is based. She said, in fact, that this is not and will not be a trade sale.

§ But we on this side of the House remain deeply concerned about what the Minister did not say. She said only that that the new owner was "likely" to take the form of a company limited by guarantee. She said that the terms of the transfer of the business were not a matter for Parliament but instead the members of the foundation will need to discuss and agree with the Government the terms of transfer of the business once Parliament has agreed to the arrangements set out in the Bill. She said that members of the foundation would not be appointed by Ministers; but she failed to address the question of by whom they would be appointed and what would be the basis of legitimacy for such appointees.

§ In the same breath as asserting once again that what is intended will not amount to a trade sale, the Minister insisted that it was essential to ensure that full confidentiality for Crown Agents is maintained throughout the process of transfer and thereafter. She promised, not for the first time, that the proposed memorandum and articles of association would be made available to Parliament. As I see it, we are still awaiting that momentous day. But whatever information is provided by the Minister today or hereafter will no doubt be limited by the requirements of full confidentiality to which she referred.

§ Therefore, it is hard to know just what Parliament is to be told. So far, we have been told only what the Government intend. We have been told nothing of what they have, in fact, arranged. Frankly, we are alarmed by 763 the continuing failure of the Government to be more forthcoming. When the Minister says that the terms of the transfer will be agreed with the members of the foundation once Parliament has agreed the arrangements set out in the Bill, we have to recognise that what is set out in the Bill is only the removal of accountability to Parliament, giving the power to Ministers to agree whatever terms of transfer should take their fancy. We argue that that is simply not enough.

§ What is the Minister's argument against including the foundation on the face of the Bill? It is only that it is unnecessary and unprecedented and would add nothing of substance to the Government's proposals. Let us just consider those points. The amendment that we propose would not so much add substance to the Government's proposals but would give them substance for the first time. The Minister's speeches on this issue have been entirely without substance, if by "substance" we are to understand firm proposals enshrined in law rather than general intentions dependent on the political priorities of the Minister, her colleagues or successors.

§ Our amendment is far from unnecessary. It is essential for the same reason. I fail entirely to understand why the Minister believes that it is right to stand up in this House and tell us what she intends to do, yet resists any move to confirm her intentions in even the most modest way on the face of the Bill. We have today given her yet a further opportunity to reconsider the logic and consistency of her position by withdrawing the amendment which would require Ministers to appoint members of the foundation. We have done that because we understand that she does not favour such a proposal. We only propose an amendment which contains propositions to which she says she is in any case committed. It is therefore not our amendment which is unnecessary. If the Minister intends to proceed as she said, it is her resistance to the amendment that is unnecessary and, frankly, incomprehensible.

§ Let me say a few words about the Minister's argument that what we propose is unprecedented. We are told that the Bill itself is unprecedented. We understand that this is not any old privatisation. There is to be no sale to the highest bidder. Any idea that this Government are ideologically driven must be the fault of the press releases from other government sources seeking to compensate for the scrapping of real privatisations elsewhere.

§ The foundation that Ministers say that they intend to establish is to be unique—I repeat "unique"—in the history of privatisations over the past 16 years; yet to write the foundation into the Bill designed to enable it to be set up should be at the same time opposed as unprecedented. So "unique" but "unprecedented"—that makes no sense at all.

§ I plead with the Minister. Clearly she still intends to avoid a trade sale and to proceed with a non-profit foundation, if she possibly can do so. I do not doubt her commitment in that respect. We support that intention. Why not accept the support of Parliament and of those of us who believe the Crown Agents too valuable a national asset to put in jeopardy? Will not the Minister 764 even now accept our support in protecting the foundation from predators and write the foundation on the face of the Bill? I beg to move.

§ Lord Redesdale
My Lords, I support the amendment. I know that this is ground that we have covered before and I do not expect the Minister to give any further information. However, on Second Reading the Minister said that, as the Bill progresses, I shall explain more".—[Official Report, 28/2/95; col. 1410.] I am afraid that I do not feel that I gained any knowledge whatever in Committee about what was progressing. Can the Minister give any indication of what progress, if any, has been made since Second Reading? If no further progress has been made, the amendment seems like a worthy safeguard which will give Parliament some indication that the Crown Agents will become a foundation in the form that the Minister described.
In Committee, the Minister used as one of her arguments the fact that it would be unique to include such provisions on the face of the Bill. However, as she said on Second Reading, the route that is taken in the Bill is interesting and unusual. Therefore, could she not go one step further and accept the amendment?

§ The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey)
My Lords, I congratulate the noble Lord, Lord Judd, on his persistence and ingenuity in drafting another amendment designed to put the foundation on the face of the Bill, just as the new clause that was proposed in Committee sought to do.
I understand your Lordships' wish to be fully informed about the Government's plans for the foundation. I can assure your Lordships that progress is being made although, to answer the noble Lord, Lord Redesdale, it is slow and not yet complete. I suppose that it is fair to say that I am somewhat embarrassed that I cannot provide your Lordships tonight with complete answers to your questions. Needless to say, nothing has actually happened since we discussed the Bill in Committee which makes any of the comments that I made on that occasion invalid.
The Government still intend to establish a two-tier structure with the foundation the sole owner of the operating company. The foundation will be a company limited by guarantee. I know that noble Lords would like to see that stated in the Bill. I am told that legally that is not required. I can confirm that the foundation will not distribute dividends to its members. I can confirm that it will have its social and developmental objectives clearly defined in the memorandum and articles of association. It is those that we are working on; I shall let your Lordships have details as soon as possible. It is intended that the operating company should be limited by shares and that it will be able to pass its profits to the foundation for use in pursuit of its objectives. That will in no way impair its ability to continue to uphold the high ethical standards for which the Crown Agents are valued by us all.
765 In moving the amendment, the noble Lord, Lord Judd, said that he thought it was likely that the company would be limited by guarantee. I can reassure him that that will be a certainty. The noble Lord wanted to know more about the terms of transfer. That is not a matter that we can declare at this point simply because the foundation, which will be independent of government, will be the owner of the new body when the Crown Agents are transferred to it, and further work must be done with the Crown Agents before those terms of transfer become clear. I am not seeking to avoid the question which the noble Lord asked me; I am simply saying that more work has to be done before those terms of transfer can become clear.
The noble Lord asked about members of the foundation. I have said many times that the foundation will be independent of the Government, but the permanent members will comprise a core group of enduring institutions, representatives of the corporate sector, and other bodies such as non-governmental organisations concerned with developing countries and overseas aid. It is proposed that in due course a larger number of term members may also be appointed by the permanent members, but the Government will have no hand in that. However, I assure the noble Lord, Lord Judd, that, before transfer, the Government will wish to be satisfied that the founder members possess the requisite competence and integrity. If the Government were not satisfied, the transfer would be held up until they were.
In Committee, I mentioned the names of some institutions interested in becoming members of the foundation and holding shares. Perhaps I may remind your Lordships that they include notable bodies such as the British Consultants Bureau, the British and international chambers of commerce, and chartered institutes, including the Chartered Institute of Building. Once established, agreement must be reached by the Government and the foundation on the terms and conditions of the transfer to the operating company. If the foundation should decide to seek registration as a charity, I see no need for the Government to be a member of the foundation. We have not discussed that aspect tonight, but we can return to it on later amendments if your Lordships wish.
I want to make absolutely clear that the foundation's objectives must be satisfactory because the Crown Agents must be able to continue to give their overseas and, indeed, their UK clients assurances about their structure and that they will continue to operate very much as now. I believe that the membership of the Crown Agents Foundation will give that sort of assurance to clients who have been built up over the years. We must ensure that there is no disruption while the new arrangements bed down.
The noble Lord referred to the need for full confidentiality which I explained at an earlier stage. That is still necessary—even though it will not be a trade sale—to ensure that the financial structure is absolutely right for the transfer.
766 The noble Lord asked about the memorandum and articles of association and when they would come to Parliament. I very much hope that they will come to Parliament early next month —or as soon as they are ready. Their preparation has already started, and I shall make them available to the House at the earliest opportunity. They will clarify the proposals dealing with the foundation's name, social and developmental objectives, the application of income to those objectives, membership provisions and the board of directors. As I indicated some moments ago, the foundation will be made up of institutions which have an enduring membership. Obviously, each institution would need to approve individuals to represent it. I believe that it is perfectly feasible and appropriate that we should write into the memorandum and articles of association of the foundation a requirement for the agreement of, say, two-thirds or even 75 per cent. of the members of the foundation before any change can be made to its memorandum and articles of association. By writing that into the original, we can safeguard the foundation in the future against adverse changes that might be attempted.
Both the noble Lord, Lord Redesdale, and the noble Lord, Lord Judd, understandably asked why, if our plans are so well developed, they are not written into the Bill. I cannot give any explanation other than that I gave in Committee, which is that it would be unprecedented to include such provisions in a Bill of this kind, and it is not necessary to do so. As soon as I have information, I shall continue to provide it to the House. I very much hope that that will happen shortly. The amendment does no more for us than the previous one, which the noble Lord, Lord Judd, knows found no more favour than, I have to tell him, this one finds tonight.

§ 7 p.m.

§ Lord Judd
My Lords, naturally I thank the Minister for her reply, but I wonder whether she will think over this point again. She has once more advanced the argument that it would be unprecedented to write the information that we request on to the face of a Bill of this kind, as she said again tonight. But as I understand it, she is one of the most emphatic advocates of the principle that there has never before been a Bill of this kind; that this is not a normal privatisation; that this is a Bill to set up a foundation with a unique and special purpose.
It is because we are interested in that idea and not at all hostile to it, and we feel that it is so special and exceptional, that it would be sensible to have what is entailed on the face of the Bill. I think the Minister is well aware that she has good friends in all parts of this side of the House who want to support her and to ensure that this brave, new and exciting adventure upon which she has embarked is there for all to see and not just to hear. I just hope that by the time the Bill comes to be considered in another place the Government will have listened to the arguments put forward tonight and will have taken an opportunity to write on to the face of the Bill some of the information which we have not had available here.
767 Perhaps I may add that it seems to me rather unfortunate that we should be seriously considering an enabling Bill of this kind when the Minister has volunteered that the work on what is to be done is not yet completed. I find that constitutionally worrying. If we are embarking upon an enabling Bill, there should somewhere be something definite which is being enabled, because otherwise what is it in the end that we are enabling? As the reasonable person she is, the Minister will recognise that there is a worrying point here. I hope that it can be addressed again before the Bill goes forward in another place.
I hope that the Minister will recognise that our arguments have been put forward in good faith and constructively, but, in view of all that she has said and the assurances that she has given, we would do better to ask leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ Lord Judd moved Amendment No. 2:

§ Page 2, line 6, at end insert: ("() No order shall be made under this section unless such an order has been laid before and approved by a resolution of both Houses of Parliament.").

§ The noble Lord said: My Lords, the Scrutiny Committee of this House, for which we all have tremendous respect, recommended that orders issued under the Bill should be subject to a greater degree of parliamentary scrutiny than the Government have proposed. In Committee it was rightly pointed out by the noble Lord, Lord Elton, and the Minister that those recommendations applied to matters other than the transfer of ownership to a proposed foundation. That is why in our earlier amendment we on this side of the House sought to extend the principle of parliamentary scrutiny to the actual transfer.

§ We return now to the question of parliamentary scrutiny of the initial transfer from the existing Crown Agents Corporation to the successor company to be nominated by the Secretary of State. The noble and learned Lord, Lord Simon of Glaisdale, has been kind enough to keep me informed of his correspondence with the Minister about the scrutiny of delegated legislation, and the Minister has been equally considerate. The outcome, as noble Lords will no doubt gather, is that the Government have been prepared to concede not a whit more scrutiny and accountability than they proposed initially. I therefore feel that it is right to offer the House the option of a level of scrutiny greater than that recommended by the Scrutiny Committee, since the very moderate proposals of the Scrutiny Committee and the noble and learned Lord, Lord Simon of Glaisdale, have clearly fallen on deaf ears.

§ The appointment of a day for winding up of the Crown Agents and the nomination of a successor company remain the most substantial measures included in the Bill. In the absence of any other substantial proposals, it is entirely appropriate that those steps should not be taken without further examination in Parliament. We have taken the precaution of establishing the practical implications of subjecting those steps to the two forms of scrutiny available to us. The Scrutiny Committee felt that the negative resolution procedure would be sufficient for the terms of transfer 768 of ownership to the successor company. In view of the Government's refusal to make any concessions to the calls for more transparency, that no longer seems to us sufficient.

§ In the parliamentary Session 1993–94, 1,221 statutory instruments, excluding draft statutory instruments subject to annulment, were tabled; 143 were prayed against; but only one was debated on the Floor of the other place. The last time such an order was annulled after debate was on 24th October, 1979. Therefore the negative resolution procedure results in debate on only a tiny fraction of the orders in question which are tabled, and even of the orders which are prayed against. The reality is that the chances of a measure subject to annulment being considered properly are infinitesimally small, whereas, of course, any measure requiring affirmative resolution is guaranteed consideration. I am sure noble Lords will agree that the importance of this matter is great enough even to require ministerial attendance in Parliament on a Friday afternoon.

§ Noble Lords will therefore understand that we on this side would be happy to support changes to the Bill along the lines recommended by the Scrutiny Committee, but we believe that Parliament should go a step further and insist on real accountability in the transfer of ownership of Crown Agents at each important stage. We therefore recommend the amendment to the House.

§ Perhaps I may speak briefly to Amendments Nos. 6 and 7 at the same time. I draw the attention of noble Lords to the fact that in Committee the Minister said that if it were felt necessary to have a golden share, that would be in the foundation, and that the foundation is not covered by the Bill. We have therefore brought forward these amendments in order to help the Minister find a formula for a golden share, which can apply to both the successor company and the ultimate new owner in the proposed foundation. Since the only golden share that appears to work is a majority share, that is what we have suggested in the first instance, with provision for a reduced shareholding with the consent of Parliament.

§ The Minister told the Committee that she would look again at the question of the intended powers to be reserved to the Secretary of State. I hope that she will now be able to tell us more. She has talked of keeping the foundation in line with its declared objectives for a period of perhaps five years. We need to know how that is to be done. We need also to know what would happen if the successor company found itself in commercial difficulty within that time. Would Ministers be prepared to see it go to the wall, or would they intervene? A golden share would allow a fairly straightforward answer to such questions. If the Minister regards such a provision as a deplorable example of the nanny state, I would in all sincerity ask her what she proposes instead.

§ Lord Redesdale
My Lords, I support the amendments. We covered them exhaustively in Committee. It is sad that the noble and learned Lord, Lord Simon of Glaisdale, is not here to debate them once again. It is always an interesting exchange. I realise that the affirmative and negative resolution proposals in the Bill go no further than the transfer. However, as the Minister said on Second Reading, the Secretary of State has reserved powers to enable him to ensure that no 769 change can be made to the fundamental purpose. Would it not be appropriate that Parliament too should be given that power, as we have not yet had a clear indication of the detailed form of the foundation, so that we could object to the foundation once it is set up?

§ Baroness Elles
My Lords, I wish to comment on the contributions of the noble Lords, Lord Judd and Lord Redesdale, in trying to improve this difficult Bill. The third report of the Delegated Powers Scrutiny Committee stated that it could be possible to subject to negative rather than affirmative procedure matters that have not been spelt out in the Bill.
The Minister made it clear that there will be a foundation and named a considerable number of the considerations that will be attached to it. However, she also made it clear that not all the considerations that will attach to the foundation and to a successor company have been crystallised. I understand that she is not in a position to make the matter crystal clear on all counts, including charitable status.
I support the Minister and express my gratitude for what she has said about the foundation. I suggest that if when the Bill goes to another place certain issues have still not been covered it might be appropriate to table an amendment proposing a negative procedure because some powers may be allotted to the Secretary of State that will not have been referred to during the course of the Bill. I hope that the noble Lord, Lord Judd, will withdraw the amendment and leave the matter to a later stage of the Bill when perhaps more information will be produced by the Government.

§ 7.15 p.m.

§ Baroness Chalker of Wallasey
My Lords, it is important to understand that the purpose and effect of Amendment No. 2 is to subject to the affirmative resolution procedure the orders appointing a day for the vesting of Crown Agents in the successor company under Clause 1(1) and nominating the successor company under Clause 1(2). I make that point because the matter discussed by the noble and learned Lord, Lord Simon of Glaisdale, and I and the point made in the correspondence which we both copied to the noble Lords, Lord Judd and Lord Redesdale, dealt with the order-making power in Clause 13(3). They are slightly different. I do not wish to muddle your Lordships, or to get into a muddle myself, by dealing with the matter at this moment because Amendment No. 2 does not apply in the same way. I shall concentrate on the general remarks made by the noble Lords, Lord Judd and Lord Redesdale, and by my noble friend Lady Elles. There is a difference, however legally subtle it may be.
I understand the desire to allow Parliament to look at the details of the proposals for transfer. That is what the noble Lord's amendment is all about. In Committee, I explained why an affirmative resolution procedure would be inappropriate. I know that the noble Lord, Lord Judd, does not agree with me on this matter but we considered the issue in some detail during that debate. I said—and I repeat it as a matter of consistency—that it would be unprecedented to act in this way. Enabling 770 legislation is the normal way of proceeding, accepted by your Lordships' House and another place on every previous occasion, of which there have now been many, when there is a transfer from the public sector to the private sector.
In this short debate I have heard no convincing explanation of why an exception should be made in the case of Crown Agents. I am more concerned that the practical effect of introducing the affirmative resolution procedure could be damaging to the commercial interests of Crown Agents. During previous stages of the Bill I have made it abundantly clear—and I do so again now—that I will have nothing to do with anything that will damage the commercial interest or the future of Crown Agents.
We are dealing with the privatisation of a public corporation. Such things always involve complex and commercially confidential negotiations. That is why I repeat that details could not be disclosed in the way that the noble Lord has suggested. I also believe that the inevitable delay caused by the need to obtain parliamentary approval could sow seeds of doubt and uncertainty about the Government's plans or the timing of the transfer, which would adversely affect Crown Agents.
When talking about the negative procedure, which is now before us in Amendment No. 2, the noble Lord, Lord Judd, spoke of the few occasions when in another place an order is debated on the Floor of the House. He gave that as his reasoning for opting for an affirmative order. I too am well aware of the delays that take place in another place, even to debate affirmative orders. That underlines the anxiety I would have were the House to agree to the noble Lord's Amendment No. 2; that is, the delays that would be built in.
The Government's intentions should not be in doubt. On many occasions we have announced that we intend to transfer Crown Agents to an independent foundation and that that is the way forward. We have also said that we will provide as much information as possible, as soon as possible and before the transfer is completed. That is why I am determined to get on with the work that has already started on the memorandum and articles of the foundation and will make them available to Parliament. An information memorandum will be prepared for prospective foundation members and that will be made available to your Lordships and to Members of another place.
The noble Lord, Lord Judd, also asked me what would happen if the Crown Agents' business should fail. Perish the thought—it is not going to fail! He asked me whether the Government would bail it out. Perhaps I may say, first, that the Crown Agents has some 150 international clients, including my department, and provides a wide range of services. I see no reason why we should not have every confidence that the Crown Agents' foundation will have a bright future. But, as we all know, there is no guarantee of success in life in anything. That is why the management of the foundation will be the responsibility of its members and the board, who will be chosen for their experience and expertise.
771 I believe that the noble Lord is wrong to talk about bailing out a privatised Crown Agents. The members of the board of the Crown Agents' foundation have to be fully responsible for ensuring the viability of the business after transfer. It would be quite wrong to expect taxpayers to bail out something which was mismanaged. I do not see that there is any risk but it is worth saying that I do not believe that it should be a responsibility for the Government and thereby for the taxpayers.
When the noble Lord proposed the amendment he talked about obtaining a clearer picture of the details of the proposed transfer. I give him an undertaking that I will prepare a paper for your Lordships and for presentation to the House of Commons Select Committee on Foreign Affairs so that there will be an opportunity to have a clear view of the proposals before the proposed transfer takes place. But beyond that I cannot go. The arguments that were used in Committee still stand and I can see no reason for proceeding with this amendment. I hope that the noble Lord will withdraw it.

§ Lord Judd
My Lords, again I thank the Minister for her courteous reply. It would be remiss of me not to underline the fact that what she has said on this amendment again raises an unsatisfactory constitutional question. One can only commend the Minister's candour but that candour only underlines our anxiety. She confesses that we do not yet know exactly what it is that we are being asked to enable. That is why we suggest that safeguards must exist to ensure that Parliament has the final say before the deed is done. Otherwise, by this Bill, we are enabling something to happen and we do not know what that something will be. We have the Minister's good will. I repeat almost ad nauseam—although it is not ad nauseam because I have so much regard for the Minister—that we do not doubt her intentions. But, in a democracy, it is not responsible to legislate by intention. We must legislate by substantial proposition. The point is that we do not know what is the substantial proposition. That is the first point.
I was even more troubled, as I listened to the Minister, because I would have held her out as a shining example of an exception to the arrogance of government which, in so many other realms of the current Administration, begins to disturb us all. Yet she has told the House that safeguards would lead to delay and we must not envisage that those safeguards should be insisted upon because of that delay.
We are not talking about delay or lack of delay. We wish to get right the legislation which we are enabling and we wish to fulfil our responsibilities as trustees of the nation's assets. If our arrangements in this place or the other place lead to delays, that is unfortunate but is no reason for not taking seriously our responsibilities.
I listened carefully to what the noble Baroness, Lady Elles, suggested. She is a person of so much standing and experience that what she says cannot be lightly cast aside. I am not happy about the situation, but the Bill will be considered in another place and I just hope that the Minister, for whom I have such a high regard, will live up to her high reputation for taking seriously not just the letter but the spirit of ministerial responsibility. I hope that she will ensure safeguards for the public 772 interest and that before the matter reaches the other place she will find ways in which to ensure that we no longer continue with this unsavoury business of being asked to buy a pig in a poke. I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ Clause 2 [Provisions with respect to capital structure]:

§ The Viscount of Oxfuird moved Amendment No. 3:

§ Page 2, line 10, leave out from ("be") to end of line 12 and insert ("converted into equity").

§ The noble Viscount said: My Lords, the fact that the Bill has progressed to this point warrants the support of us all. My noble friend has nurtured it through her department and the Treasury. It is to be hoped that we are not that far from a situation in which we can pass to the Crown Agents the organisation which they seek: a foundation which will enable them to continue to overcome the vicissitudes which inevitably lie in wait for them. Theirs is a world which cannot but have directed at it the spotlight of national and international attention. As such, they must not face the burden of penury.

§ This amendment again draws to your Lordships' attention the fact that this new body, created under the Bill, will not be the property of private shareholders. It will not be a British Telecom of a British Airways with the freedom to go out into the market and seek additional equity or funding. For one moment we must put ourselves into the shoes of the directors of a company. We must ask ourselves what corporate management would accept a debt of £2 million on its balance sheet under such terms and report with confidence to the shareholders that all is well. Indeed, what auditor would not seek to raise more than an eyebrow over such a situation?

§ With the limitations attaching to the structure of its potential foundation, the management would have every right to seek comfort in legislation, particularly in relation to the conversion of debt into equity. There is a commercial wisdom in that action and the will must somehow be found to make it a reality. I beg to move.

§ Lord Rea
My Lords, this amendment is grouped with Amendments Nos. 4 and 5. I shall speak to all three amendments but shall direct my remarks in particular to Amendment No. 5.
On Second Reading, the noble Viscount, Lord Oxfuird, and other noble Lords on all sides made clear their anxieties about the initial burden of debt which the successor company would be expected to carry. The amendments in the name of the noble Viscount, Lord Oxfuird, suggest one safeguard, and my Amendment No. 5 proposes another. Both have the same aim.
A month ago the Minister said that it was premature to take a decision on what should be the balance between the interests of the Crown Agents and the taxpayer. Perhaps she will now be more forthcoming. It will certainly be interesting to hear whether she agrees that a debt of no greater than 10 per cent. of the value of the Crown Agents group is in the same general area that she is considering.
773 The noble Baroness said that she did not want the debt and capital structure of the new company enshrined in legislation. It is quite difficult to see what the Minister does want enshrined in legislation. I am sure that the Minister will listen to the advice of the current board of Crown Agents as to the appropriate levels to set. The board may advise and the Minister may accept that the level we propose is too high or perhaps too low. But Parliament is entitled to be concerned that we are being asked to approve whatever level of debt Ministers choose to impose.
Amendment No. 5 proposes a level of no more than 10 per cent. of current value in order to probe the Government's intentions. We wish to signal clearly our view that the initial debt imposed on the successor company should be in reasonable proportion to its assets. We must avoid a situation in which the successor company quickly founders, as we discussed on the last amendment, in the private sector because its capital structure is too weak from the beginning. Therefore, we have tabled the amendment in order to offer some protection to the successor company at the vulnerable point of privatisation. I hope that the Minister's reply will offer an assurance in regard to such protection.

§ Lord Redesdale
My Lords, I support the spirit of the amendments. I agree with other noble Lords when they speak of their confidence in the Minister. I have every confidence in the Minster. However, I have absolutely no confidence in the Treasury, and I am sure that it will try to get as much as it possibly can from this proposal.
I have two brief questions to ask the Minister. These amendments deal with the financial status of the Crown Agents after transfer. Is it envisaged that the £2 million debt which must be paid back to the loan fund will be paid by the Crown Agents from their employer pension contributions, because at present that fund is on a pensions holiday? Would that be used to finance the debt as opposed to being used to restructure the company? Secondly, will the Crown Agents in the future be left, after the transfer, with sufficient capital equity to carry on their work without being burdened too heavily with debt?

§ 7.30 p.m.

§ Baroness Chalker of Wallasey
My Lords, we now have a most interesting group of amendments before us. I am grateful to my noble friend Lord Oxfuird for tabling Amendments Nos. 3 and 4 and to the noble Lord, Lord Rea, for tabling Amendment No. 5. I understand why the amendments have been put forward. Certainly, decisions can only be taken on the appropriate financial structure of the company when a full corporate plan has been put to us by the Crown Agents. Of course, that must be based on the needs of the business. We want to take full account of the views of the Crown Agents' board as well as the views of the Government's own financial advisers. That is why I believe that it would be premature to take a decision of such a nature at present.
774 My noble friend Lord Oxfuird wants the Crown Agents to start off with a sound balance sheet; so do we. But, if his amendment were to be accepted by your Lordships, we would then find that the new Crown Agents would be launched with 100 per cent. equity capital. I regard—as, probably, does the noble Lord, Lord Judd—the setting up of the Crown Agents back in 1979 with 100 per cent. debt financing as a mistake. However, I do not believe that that means that we should go from one end of the spectrum to the other; in other words, that we should go for 100 per cent. equity. It is not a matter that we should be determining at present. I take full note of my noble friend's concerns, which I share. But I hope that he also shares my concern to ensure that the taxpayer receives value for money when the Crown Agents transfer to the private sector.
The noble Lord, Lord Rea, spoke to Amendment No. 5. I should stress that I cannot alter the response that I gave in Committee. We are all agreed that the Crown Agents should not begin their life overburdened with debt. We are determined to give them a good start. We want to give them the means to have a strong and stable structure within which to carry forward their business into the 21st century on a viable and sustainable basis.
I have explained—and I shall repeat it again—that the Government have no plans to make some great raid on the pension fund as the noble Lord, Lord Judd, seemed to think at an earlier stage. However, as a government, we have a duty to consider value for the taxpayer when we transfer assets to the private sector. That is why I maintain that it would be premature to take decisions now.
The noble Lord, Lord Redesdale, asked me about the pension fund surplus. Obviously, the surplus which allows a holiday on contributions at present is of great value to the business of the Crown Agents. However, I should underline the fact that it is certainly not directly relevant to the pensioners. As I believe the noble Lord knows, the surplus in the pension fund is the amount, as declared every three years by the actuary, not currently needed to contribute to paying the pensioners. Therefore, if there is a surplus, it does not in any way affect what it has already been decided is needed for the pensioners themselves.
There are other ways of sorting out the capital structure, but that cannot be decided until closer to the day when the transfer of the Crown Agents takes place. That is why I also believe that it would be wrong to accept Amendment No. 4 tabled in the name of my noble friend Lord Oxfuird. It could rule out one or other of a range of options for which the Bill allows. My noble friend's amendment would certainly provide for further borrowing from the NLF, but I must tell him that that power already exists under the current Act. However, it is not considered appropriate for private sector bodies to borrow from the NLF. That is why there is a provision in Clause 2 for the current debt to be repaid. Then there are the provisions in Clause 4 which would allow the Secretary of State to lend to the new Crown Agents.
Therefore, within the structure of the Bill, there is a range of options. It is not the time to rule out any options; nor is it the time to rule them in. That is why I 775 know I am appearing to noble Lords tonight to be less helpful than they would wish me to be. However, it really does not help the Crown Agents to prejudge such issues. That is what we would be doing if we were to accept any of the amendments in this group. I hope, therefore, that they will be withdrawn.

The Viscount of Oxfuird
My Lords, I thank my noble friend the Minister for all that she has said on the subject. I should be most grateful if the comfort of her words could be carried from this Chamber. The first principle of total quality management is prevention and not detection. My amendments seek to prevent the Crown Agents being burdened with something which would stop them fulfilling their role as providers of a service. Let us have nothing but praise for them from Members of your Lordships' House. Having said that, I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ [Amendment No. 4 not moved.]

§ Lord Rea had given notice of his intention to move Amendment No. 5:

§ Page 2, line 15, at end insert (", such amount not to exceed ten per cent. of the value of the closing capital and reserves of the Crown Agents Group at the end of the last financial year ending before the appointed day.").

§ The noble Lord said: My Lords, I, too, am grateful to the Minister for her response, in which she said that she did not feel that the size of the debt should be specified, presumably because, as I understand from what she said and from the contents of the Bill, all the current debt is to be repaid. In fact, we do not know quite what that will be; indeed, it may actually be onerous.

§ My amendment would relate the debt that the new foundation or successor company would have to the size of its assets. Therefore, in a sense, it is more flexible than the Government's proposal. However, I believe and hope that the members of the Crown Agents will read the Minister's reply and that they will, as the noble Viscount, Lord Oxfuird, said, draw a little comfort from it.

§ [Amendment No. 5 not moved.]

§ Clause 3 [Initial Government holding in the successor company]:

§ [Amendment No. 6 not moved.]

§ Clause 4 [Government investment in securities of the successor company]:

§ [Amendment No. 7 not moved.]

§ Clause 6 [Use of "Crown Agents" as part of company name]:

§ Lord Rea moved Amendment No. 8:

§ Page 4, line 11, at end insert (", but only so long as any such company shall be a company limited by guarantee, in the form of a foundation committed to social and developmental objectives.").

§ The noble Lord said: My Lords, noble Lords may recollect that at the Committee stage we discussed the question of the title "Crown Agents". This amendment returns to that issue although the words "Crown Agents" do not as such appear in the amendment. In Committee the noble Baroness did not have a lot to say about the use of the name "Crown Agents", and the Government's reasons for including in the Bill permission for this 776 name to be used by the new owners. It is not that we object to that provision being included; it is rather that we fail to see why it is possible to include this provision as to the future new owners, but it is not possible to include anything else.

§ The noble Baroness said that the name "Crown Agents" embodies the traditional virtues of probity, impartiality and integrity, and is recognised worldwide. However, in fact it means something more to Crown Agents' international clientele. It implies the even-handed and public spirited approach which is associated with the best traditions of British public service, and in this case it certainly implies the good will and approval of the British Crown and Government. Was retention of the name one of the issues which has been discussed with overseas governments or other clients in the negotiations which took place before the bringing forward of the Bill?

§ According to the noble Baroness, it is right that the name can be used by the ultimate owner of the successor company. We agree, but only if the ultimate owner is as she has outlined. Why is she not prepared to accept this point? If it is right to include the use of the title on the face of the Bill, then it must surely be right to include also the other desirable characteristics of the new owner which the noble Baroness has described. The amendment states, a company limited by guarantee, in the form of a foundation committed to social and developmental objectives". Surely it must be right to be able to include on the face of the Bill those desirable characteristics. I beg to move.

§ 7.45 p.m.

§ Baroness Chalker of Wallasey
My Lords, I well understand why the amendment was put down but I believe that we rather covered this point at the Committee stage. I agreed then that the Crown Agents' name is a valuable asset. It is of course recognised worldwide as the embodiment of the company's traditional virtues, as the noble Lord, Lord Rea, quoted back at me. He asked me whether the maintenance of the name was discussed with any of the overseas clients during the preparatory stages for this Bill. Because the name was never in question and because of the whole concept of having a foundation with a memorandum and articles of association, as we have described in our debates, neither of the overseas clients which we have discussed in this House had any doubt that we would continue to use the name "Crown Agents", and therefore I presume that is the reason that they did not raise it with me at any stage. What they were concerned to do was to maintain the integrity of the business and the manner of running it which we have determined should be embodied in the memorandum and articles of association for the foundation.
The virtues that we talk about with the Crown Agents will survive only if the business flourishes. It is by this Bill that we are giving Crown Agents the chance to flourish in the private sector. It is right that the name should be preserved for use by the ultimate owner of the successor company in the private sector therefore, but any name is only preserved to the extent possible under the current Companies House rules. The ultimate owner 777 will be the independent foundation and it will continue to have that clear commitment to a developmental purpose. I have already made quite clear that I hope to make the detail of this available to Members of this House and another place in a few weeks' time.
Throughout this Bill—although I know that I have not yet been able to satisfy your Lordships on all the questions that have been asked—we have been willing to make as much information available to Parliament as has been decided. However, what I am not prepared to do is to indulge in speculation about what might or might not happen. That is why I do not see any virtue in attaching such an amendment to the Bill. Certainly I believe that the name is important. Certainly we believe that the whole concept of the work that Crown Agents do through a foundation for developmental purposes is fundamental to the future foundation. That is why I feel quite confident that we can manage without Amendment No. 8 and I hope that the noble Lord will feel able to withdraw it.

§ Lord Rea
My Lords, before the noble Baroness sits down and before I respond finally to her reply to the amendment, I hope she can answer a question. Would she anticipate, or even promise, that in the articles of association of the new foundation it will be spelt out that the foundation is committed to social and developmental objectives?

§ Baroness Chalker of Wallasey
My Lords, I can give an affirmative answer to that straight away. The whole purpose of the memorandum and articles of association for the foundation is to spell out those very social and developmental objectives. Therefore I do not think that there is any question of answering other than by saying "yes".

§ Lord Rea
My Lords, I thank the noble Baroness for that response because the statement that she has just made has confirmed what I think was not absolutely certain. It has made the putting down of this amendment worthwhile because we can now read what she has said and that will give much relief to some people who might not have been clear that that was what her intention was. I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.

§ Schedule 1 [Supplementary provisions as to vesting of property, etc.]:

§ Lord Judd moved Amendment No. 9:

§ Page 9, line 38, at end insert: ("() Nothing in this Act affects the right of members of staff of the successor company or a subsidiary of that company to be members of a trade union of their choice, which subject to the provision of primary legislation on employment and industrial relations currently in force shall be recognised by the successor company or (as the case may be) its subsidiary for the purposes of—

(a) the settlement by negotiation of terms and conditions of employment of persons employed by such a company;
(b) the resolution of trade disputes;
(c) the promotion and encouragement of measures to improve efficiency, in any respect, in the carrying on of the activities of such a company; and
(d) the discussion of other matters of mutual interest to such a company and a trade union representing its employees.").

§ The noble Lord said: My Lords, we have tabled this amendment in recognition of the excellent provision in the Crown Agents Act which this Bill is intended to repeal. The 1979 Act provides for full participation by Crown Agents' staff and their trade union representatives. I am confident that both management and staff would agree that industrial relations have generally benefited from a positive legislative framework and a willingness to consult on both sides. It is this that we are anxious to maintain.

§ The Bill contains assurances about pension rights and regarding the Transfer of Undertakings (Protection of Employment) Regulations 1981, which we welcome. It is important that staff should know that both their terms of employment and their future pension benefits will be protected on the appointed day. We are, however, concerned that they should enjoy the same assurances about their future terms and conditions while they are in the employ of the new owners of the successor company. It is those provisions which this amendment is designed to underwrite. Once again the need for such protection of free collective bargaining does not arise from any express, or indeed feared, ill intention on the part of either the present Minister or the present management of the Crown Agents. It arises from the uncertainty, which remains after the exchanges this evening, about the future constitution and direction of the ultimate owners of the successor company, which the Government continue to refuse to include on the face of the Bill.

§ Therefore, we are anxious to know what discussions the Minister has had with prospective members of the proposed foundation, including current members of the Crown Agents board, about future trade union rights and intentions with regard to recognition. It would be good to have her observations on exactly what consultations had taken place. As a matter of principle, those who have taken up employment as public servants should continue to have the right to be represented by a union of their choice. There should be no question of any change being imposed as part of the privatisation process. We very much look forward to hearing what the Minister has to say in this regard. I beg to move.

§ Baroness Chalker of Wallasey
My Lords, I have always shared the opinion of the noble Lord, Lord Judd, that the staff of the Crown Agents are one of their most important assets. The staff of the Crown Agents both at home—in Sutton and central London—and across the world share the organisation's commitment to development. The continuity of experience is vital to their future. Only last week I saw the benefits of some of their work in Ghana. They continue to do the most remarkable jobs in all sorts of different circumstances across the world to assist with development.
There is nothing in the Bill that affects the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981, often called TUPE. By virtue of Regulation 9 of TUPE, the continued recognition of trade unions already recognised by Crown Agents at the moment of transfer to the successor company will be secured, for the same 779 matters with which they now deal. The noble Lord, Lord Judd, quite understandably, asked me about consultation with the trade unions. This is a matter for the directors of Crown Agents, not Ministers or the Government. The plans for Crown Agents have been explained to the trade unions. There is nothing to concern the noble Lord, Lord Judd, in the way he described just now. Indeed, I am slightly puzzled by his amendment. It goes much further than TUPE. His amendment would entrench recognition in perpetuity because it would require the new company to recognise any union to which any employee chose to belong, whether or not it had any significant membership among staff. The amendment would put the new Crown Agents under a much more onerous obligation than that of any other employer under general employment and industrial relations law. I do not believe that that was the noble Lord's intention. Because Crown Agents already have sensible and practical procedures for staff consultation which have served them very well over the years, I see no reason to change them. Just as senior management meet the recognised trade unions to discuss these plans, so they also discuss the whole spectrum of issues that concern conditions of service. I know from comments made to me by staff that they go to great lengths to involve staff, not simply on the bread and butter issues of recruitment, hours of work, tenure, remuneration and superannuation, but, much more importantly, in using the ideas and experience of staff and to involve them in the responsibility of running an efficient and successful modern business.
That this particular amendment has been tabled comes as some surprise to me. I do not believe that it is sensible, necessary or indeed practical. It may require the successor company to recognise an indefinite number of trade unions. As in the case of other employers, I believe that Crown Agents management must have the discretion to make the arrangements most appropriate to their business, including matters such as staff representation and consultation.
I also see no reason why Crown Agents will not use that discretion in the best interests of both the business and staff. To have staff who work positively is good for business, and the business of Crown Agents has enjoyed very good industrial relations for many years. I 780 understand that there are no proposals to alter the current arrangements for staff representation, and certainly the Government do not even envisage that Crown Agents will want to make such changes.
I hope that, with those assurances, the noble Lord, Lord Judd, will see fit to seek leave to withdraw his amendment.

§ Lord Judd
My Lords, I hope your Lordships will forgive me if I say the the tenor of the reply was anticipated. The Minister has said, with all sincerity, that one of the greatest assets of the Crown Agents is their staff. She has emphasised their outstanding record of commitment and loyalty. The Government have also told us that the arrangements that are to be made are intended to ensure that that national asset continues to serve the interests of the nation to greatest possible effect. Part of the framework within which that asset has developed is a very far-sighted and clearly spelt out provision for industrial relations within the organisation. It has been demonstrated that this is not just a formal legalistic provision but one that has worked in an exemplary fashion in spirit as well as letter.
What we sought to do by this amendment was to ensure that what had been central to the success and spirit of the Crown Agents, as we saw it, should be preserved in future. It would be a great shame if those who had served the Crown Agents so well and built that reputation were in any sense put into a position of anxiety.
I respect the Minister's personal goodwill. I hope that she will look carefully at this matter before the Bill goes to another place. I also hope that she will be able to demonstrate that she understands the significance of the argument I have just put forward, and that provision will be made on the face of the Bill to cover the point. In the meantime, I beg leave to withdraw the amendment.

§ Amendment, by leave, withdrawn.