§ 4.18 p.m.
§ Second Reading debate resumed.
§ Baroness Elles
My Lords, I thank my noble friend the Minister for having introduced so ably the Second Reading of the Bill. It is technical and complex, but I believe my noble friend was able to set out the main provisions for the legal, financial and commercial future of the Crown Agents.
I thought the spirited visual imagery of the noble Lord, Lord Judd, and his description of the Bill as a fig leaf somewhat exaggerated. It is no fig leaf; it is a very important Bill which sets out the future of a very important part of our activities in this country. It was also extraordinary to hear what I might call the "Pavlovian" link in the reactions of the noble Lords, Lord Judd and Lord Redesdale, for whom the mere word "privatisation" brought together in their minds the Post Office and the Crown Agents. I can only assume that my noble friend's reference to the philately service of the Crown Agents induced that thought in their minds because clearly there is no other link. I wonder whether the Benches opposite sometimes forget British Airways, British Telecom and a whole raft of successful privatisations since 1979 which have been working so successfully for the benefit of the people of this country.
I return to the Bill. The Crown Agents have a very large list of clients which my noble friend listed, including leading European and international organisations. With the effects of the Bill that will be extended to include the private sector. As the ODA's contribution to the work of the Crown Agents now stands at about 27 per cent., which I believe was referred to by the noble Lord, Lord Redesdale, there will be greater opportunities for increasing their commercial opportunities. The list of countries is already impressive. It ranges throughout the world—from Albania to Zimbabwe. The Crown Agents undertake a wide range of services throughout the world. It is truly impressive.
I believe that it will be accepted on all sides that the 1979 Act is out of date and needs to be changed. The noble Lord, Lord Judd, accepted that it is no longer relevant although he did not accept the need for a new Bill. Nevertheless, the noble Lord must accept that the present situation is intolerable for a company such as the Crown Agents which has to act throughout the world. Information given by the Crown Agents shows that the Crown Agents Act 1979 is littered with references to restrictions on their activities and to the fact that they have to get consent from Ministers for some activities. 1429 I understand that something like 102 consents have been required for the Crown Agents to be able to carry out certain financial obligations.
We must accept that this is an era of rapid change in world trading patterns. One need think only of the finalising of the Uruguay Round and the establishment of the World Trading Organisation to realise that there has been an extraordinary change in world trading patterns in recent years. Surely it is the duty of the Government to see that the Crown Agents are in a position to benefit from those changes and to improve their commercial activities.
As has been said, this is an enabling Bill, transferring the Crown Agents to a company. As my noble friend explained, not only are the Crown Agents to be transferred to a company, but, as I understand it, we shall get further details during the passage of the Bill of the later transfer of the company to a foundation. I understand from what my noble friend said that it is a guarantee by the Government that there will be a foundation. As far as I am concerned, it is irrelevant whether or not that is written into the Bill because I take my noble friend's words as coming from the Government and as an undertaking from the Government that that will happen. Frankly, I believe that the suspicions expressed from the Opposition Front Benches are unjustified. I know that the noble Lord, Lord Judd, has the greatest respect for my noble friend Lady Chalker. I think that we can rest assured that, whatever else happens, there will be a foundation. As I understand it, the foundation will act as a guarantee to the Crown Agents' clients that their objectives remain tied to a—I quote from the objectives stated by the Crown Agents themselves—social purpose and developmental character".I also understand that there is a possibility, but no more, of the foundation acquiring charitable status. It may be thought convenient—indeed, in my view it would be more convenient—if the foundation were able to become the equivalent of an association of a type that is found on the continent. I was advised that I should not say that because anything European is probably suspect nowadays. I refer nevertheless to an association such as exists in Belgium where the profits go back into the foundation and are used in accordance with its constitution. That might be a suitable framework for the foundation rather than restricting it under the Charities Act and obliging it to work under the provisions which govern charitable status.
There will no doubt be an opportunity to discuss some of those points in further detail during the later stages of the Bill. But at least we can see possibilities opening up for the Crown Agents which should lead to greater activity in the private sector and an ability to meet the changing needs especially of developing countries which demand and need a service which is both reliable and committed to the highest standards. Surely those who are in favour of helping developing countries, who have seen the very high standards of integrity to which 1430 the Crown Agents work, could wish for no better future than that proposed under the Bill. I am pleased to tell my noble friend that I support the Bill with great pleasure.
§ 4.23 p.m.
The Viscount of Oxfuird
My Lords, I too would like to thank my noble friend Lady Chalker for the manner in which she presented the Bill's Second Reading to the House.
This Second Reading debate enables me to contribute to a subject involving an institution with which I can record some 30 years of association—an association that can fairly be described as from the grass roots level. Almost all of my professional life has been concerned with the marketing of British-manufactured engineering products abroad. This has brought me into close contact with the Crown Agents' multifaceted activities in almost every corner of the globe. I have perceived, and have often been assisted by, a highly professional organisation, but one that has always kept its feet very firmly on the ground.
I am aware that there are a number of noble Lords more versed than I am in matters of the law who are speaking this afternoon, so I intend to say nothing at all about the legal framework that supports this enabling Bill. I should like to concentrate entirely on the practical consequences of what is proposed.
It is extremely important to realise that over the years the Crown Agents have built up a wealth of experience and have developed a strong rapport with a wide portfolio of clients. They have earned the confidence of officials, Ministers and governments—most importantly, governments—all over the world and it is vital that we do not just take that for granted.
Supplying goods overseas, particularly capital goods, is not a short-term experience. The initial supply is only the start of a long-term relationship. After the initial sale comes aftersales support: operator training, spare parts supply, maintenance training, expert back-up and technology updates. In fact, over a period of time this ongoing connection often becomes a long-term and enduring relationship.
Many years ago I was involved in a major container handling project in India. This project was the ab initio venture by the Indian authorities into setting up a full containerisation facility within their ports, and a World Bank loan was in place to support the tender. The validity of the tender was 180 days—six months—with the usual performance and bid bond demands. Based on the specification, the supply should have been completed within 18 months, but due to the lack of experience of the new technology within the purchaser's organisation, the eventual supply was not completed for nearly six years.
If Crown Agents had been involved, their experience would have ensured that the original deadlines would have been met and the containerisation systems would have been operational four-and-a-half years earlier, with consequent massive cost savings. It is in that aftersales area—in the area of providing long-term logistical back-up and support for their clients—that the Crown Agents are so strong.
1431 I see it as very much the intention of this Bill to preserve all that is best of the long-term relationships that the Crown Agents have spent years in establishing—which might be described as the Crown Agent's public service ethos, while promoting the freedom to respond to the rapidly changing needs of their overseas clients.
The roots of the Crown Agents stretch back to our Imperial past—a past with which I, for one, have no problems. In the recent past, however, much has quite rightly changed and the enterprise has adapted to becoming a trading entity with a much broader brief, operating in many trading areas, including Europe, the United States, Japan, Africa, South Africa and South-East Asia.
There is nothing wrong with that, I would submit, for two very sound reasons. The first is the concept of trading. Some long-dead Corsican once called us a nation of shopkeepers. I prefer to think of us as a nation of traders—of international or global traders.
In 1901, the Duke of York, who was later to become King George V, said on 5th December in a speech at the Guildhall:I venture to allude to the impression which seemed generally to prevail among our brethren across the seas, that the Old Country must wake up if she intends to maintain her old position of pre-eminence in her Colonial trade against foreign competitors".Those words were spoken in 1901, less than 11 months after the death of the Queen Empress Victoria. They lead me perfectly into my second point, which is the overriding need to adapt—to change—to new situations. That is the whole point of this Bill.
The Crown Agents have many skills built up over more than a century of trading experience. But to utilise those skills to the full benefit of our nation, it is necessary to adapt them into a restructured and reconstituted organisation—an organisation with more commercial freedom but with all of the essential professional qualities which have sustained it over the years.
In a recent interview with the Daily Telegraph, the Foreign Secretary described the purpose of this Bill as "privatisation to preserve". I would go even further and describe it as privatisation to preserve and enhance.
I have tried to outline briefly why I support the Bill. Perhaps I may spend just a little time explaining why I feel that it has taken account of our experiences with the earlier 1979 Act and learned from them.
Almost inevitably, with hindsight, based upon my commercial experience, there are operational details of the 1979 Act which cause me concern. I am worried that the 1979 Act places too great a restriction on the Crown Agents in providing agency services to the private sector. Ironically, it seems that under the 1979 Act, if an aid programme for which the Crown Agents are procurement agents is available to a private sector end user, they can act for him. If, however, he then builds his business, is satisfied with the services of the Crown Agents and would like to continue employing them as agents using his own money, the Crown Agents must turn down the business unless they have gone through the rather cumbersome process of seeking specific ministerial consent via a statutory instrument of 1990. 1432 That is just one example. The 1979 Act seems to me to be overburdened with references to obtaining ministerial consent which are not in the spirit of the greater commercial freedom which this Bill seeks to achieve.
Crown Agents operate with a social and developmental purpose but within a commercial framework and an entirely independent commercial board. They receive no subsidy or grant from Her Majesty's Government, who as a client account for less than 30 per cent. of their business. I know that my noble friend the Minister has borne those points in mind when introducing the Bill.
The Minister has explained that foundation members will wish to consider whether they should seek charitable status, or that of a friendly or provident society, or other suitable structure for companies limited by guarantee. That gives a clear signal to Crown Agents' clients and their many friends and supporters about the way the foundation sees their future development. What is most important is that among those clients, supporters and friends are overseas governments. Those governments need comfort and this is the route for their comfort.
As a policy, transferring organisations out of the public sector has proved to be one of the great triumphs of the present Government, and the UK model is now being copied all over the world, even by some seemingly socialist administrations. One lesson that we have learnt is the importance of not saddling the fledgling successor body with an inherited burden of debt imposed by an over-zealous Treasury.
I hope that my noble friend the Minister will bear this point in mind and fight to ensure that the reconstituted Crown Agents, reborn as a result of this Bill, are not born into a state of penury. Overall, this is a very good Bill. I shall be supporting it and I urge your Lordships to do so as well.
§ 4.35 p.m.
§ Lord Ennals
My Lords, on one issue there has been absolute unanimity from the moment at which the Minister introduced the Bill to the completion of the speech by the noble Viscount, Lord Oxfuird, and in particular, in the speech by the noble Baroness, Lady Elles; namely, we all pay tribute to the work of the Crown Agents. There is a feeling across the House that over the years they have done a magnificent job. I have never been a trader but I had some experience of the Crown Agents when I was a Minister. The question I wish to ask first is why there is an urgency to change what is already good.
As my noble friend Lord Judd said, amendments can be made so that the commercialisation of the Crown Agents can be expanded, but I see no reason to change what is already very good. One of my criticisms of this Government is that when something is going well they always seem to step in and reorganise it. There are examples of that in all sorts of fields—the National Health Service, education and local government finance. They are a meddling government. I do not believe that we need to meddle too much with the role which the Crown Agents have so ably fulfilled. It is in no way 1433 obvious to me that the services will necessarily be improved by reorganisation, which is the Government's answer to every situation.
Of course I recognise that there is an element of privatisation dogma here. The noble Lord, Lord Redesdale, put his finger on that in his speech. The timing of the announcement was extremely important. It is my impression —I do not claim to be an expert—that over the years the Crown Agents have performed a very valuable service not just for Britain but also for Britain in its relationship with the rest of the world. As the noble Baroness said in her introduction, in 1993 the Crown Agents managed disbursement arrangements for 150 British bilateral aid agreements worldwide with a total value of £1.8 billion. Other major aid donors for whom Crown Agents do international procurement work include the Japanese Government and the European Community, although some people may not like the idea of the provision of that service to the European Community. The Crown Agents have done work for the World Bank and the UN. I agree with those noble Lords who have said that the Japanese business is particularly important, with Crown Agents managing a purchasing programmes for 13 African countries and the Philippines with a total value to date of 720 million dollars.
In some cases the Crown Agents' role is advisory; in others, they provide legal services, logistical services and specification reports. They undertake direct procurement, including specification, tendering, contract purchase, packing, shipping and insurance payments, and institutional development is of growing importance. I am particularly interested in the work which is being done in the former Soviet republic where the Crown Agents provide advice and technical assistance for procurement under a series of contracts and projects funded mainly by the World Bank. They also provide training in public sector finance, banking and privatisation. In Commonwealth countries in Africa, Crown Agents have been involved in public sector procurement reviews for governments obliged to re-examine their priorities as a result of structural adjustment programmes.
Crown Agents are also involved in the delivery of humanitarian assistance. I believe that the breadth of their service is part of what they have to offer our society. Indeed, it is a very impressive story worldwide. Of course, it is not perfect, and I am not saying that just because the Crown Agents were reorganised, as has been said, in April 1979 by the Labour Government. Those arrangements are certainly by no means sacrosanct. However, I believe that they have stood the pressure of time remarkably well. My only connection in that respect is that I was a member of the Cabinet committee which was responsible for making those changes.
Can the Minister tell us whether she and other Ministers feel that the performance of the Crown Agents is so inadequate as to cry out for change? I know that the noble Baroness will not do so; indeed, she has paid them her own tribute. But, at the same time, and having 1434 paid her tribute, the Minister has brought before us a project which leaves many questions unanswered. It is an enabling provision instead of a substantial provision.
Nevertheless, the Minister told us in December 1992 that the future of the Crown Agents was to be reviewed by Coopers & Lybrand. Has that report been published? If so, I have not seen it. Moreover, if it is available, perhaps the Minister can confirm that there is a copy in the Library or, alternatively, perhaps she will arrange to make copies available. If the report has not been made available, I should like to know why. How much did it cost to prepare and how much did taxpayers pay for that particular piece of advice?
Further, have the Government followed the conclusions of Coopers & Lybrand? Will the Minister confirm that the chosen option was as follows:The Board of the Crown Agents, after consulting with its advisers"—and so on, including consulting the noble Baroness, Lady Chalker of Wallasey, recommended that all interests,would be well served if the organisation were to remain as part of the UK public sector, but with greater freedom of operation than its 1979 Act of Parliament permits"?I believe that that statement sets out exactly what my plea is as to how we should tackle the situation. It does not require a Bill like this to achieve that.
In August 1993 the Minister announced:Membership of the Foundation would reflect the international character of Crown Agents' activities and its social purpose and would include representatives from the corporate sector. Crown Agents will maintain their traditional standards of probity and impartiality and will continue their business activities on a fully commercial basis, servicing their capital in the normal way and generating surpluses which will be available to the Foundation to finance its developmental objectives".If the purpose is to create a foundation, why are not the terms of such a foundation set out in the Bill? Indeed, the foundation does not seem to be referred to at all in the legislation. I hope that the Minister will explain why there has been such a change. What has happened since that time? Is it that the noble Baroness and her ministerial colleagues were not satisfied with the Coopers & Lybrand study? In fact, as is known, the ODA—indeed, the Minister herself—appointed Peat Marwick Corporate Finance to advise on privatisation. It is not clear that work on the form of privatisation had been completed before the Bill was printed. As I said, what has emerged contains no reference to the key parts of the proposals announced as the preferred option by the noble Baroness.
There is no reference to social purpose, developmental objectives, non-distribution of funds, independence from commercial corporations, or even to the establishment of a foundation. The Bill is only enabling legislation which provides for a company nominated by the Secretary of State to take over the property, rights and liabilities of the Crown Agents in the United Kingdom; in other words, it will create another quango.
I should have thought that the lesson had now been learnt, even by this Government, that the proliferation of quangos with powers given to Secretaries of State to appoint chairmen to such bodies must be questioned. Of 1435 course, we know that the Nolan Committee is now doing so. I have to say—with a twinkle in my eye—that my fear is that the noble Baroness is preparing for her next job and we shall find that she will be appointed as chairman. I hope that she will not be. I want to keep the noble Baroness in this Chamber just as long as she sits on that side of the House. Of course, I should be happy for her to sit on this side, but that is another matter.
I believe that the Bill is unnecessary. However, it is before us and I guess that some legislation will go through. Our job on this side of the House is to try to make it a little more constructive and clearer so that there will be fewer doubts as to whether the reorganisation will produce some of the same unfortunate results of other reorganisations undertaken by the Government of services which have been meeting the needs of the nation well.
§ 4.47 p.m.
§ Baroness Hooper
My Lords, we are certainly all agreed that the Crown Agents do a good job in an exemplary way and that they are well thought of in world circles. Much has been said about the detail of their work, not least by the noble Lord, Lord Ennals. Anyone in doubt should look at last year's annual report and accounts, which makes very satisfactory reading. In my own experience, I have certainly come across Crown Agents at their work in Central and Eastern Europe and a more highly motivated and effective bunch of people I have yet to find.
I believe that we are also all agreed that, however good an organisation may be at any one time, its activities and manner of acting should be subject to review and should, if necessary, change to meet changing times and needs. In that context, we have been made aware—and my noble friend the Minister gave us illustrations—that the Crown Agents themselves are eager to continue to develop their past success story and that they expect more freedom and independence from government constraints in order to do so. So change has to be expected. Indeed, even the noble Lord, Lord Judd, acknowledged that fact.
In those circumstances, and when considering a changed structure, there are several key words which spring to mind; indeed, we have had much experience of decentralisation in a number of areas during my time in your Lordships' House. The first key word that springs to my mind is consultation —consultation about the arrangements and about the way in which changes will be brought about. In that context, I believe that we can refer back to the announcement made by my noble friend the Minister in August 1993, which gave plenty of time to interested parties to make their concerns and wishes known and which also allowed plenty of time to work through proposals for the present Bill.
Another key word is flexibility. There should be flexibility as regards the way that the change should be brought about. The Bill certainly allows for that—clearly, too greatly, in some people's opinions. The third key word in the area is transparency. I refer to transparency both about the way in which changes are brought about and, indeed, about the appointments that may be made as a consequence. I think that it was 1436 unnecessary for the noble Lord, Lord Ennals, to imply and insinuate that my noble friend was motivated by self-interest in this respect.
The fourth word that springs to mind is accountability. I should be grateful to hear from my noble friend, when she winds up, what is to be provided in this respect, as we have a proposal for an organisation which will be subject neither to the customary accountability of a public body nor to the accountability of shareholders in the strictly commercial sense. This is an important area.
The fifth word that springs to mind is regulation. Again the Crown Agents have been quite properly subject to strict and effective government controls in the past. I think it is essential that this should be the case in the future also, while bearing in mind that such regulation should if possible be less cumbersome than that of a public corporation.
Complaint has been made during the course of this debate that the Bill does not contain sufficiently detailed provisions and indeed that it is privatisation by the back door. But it seems to me that in the circumstances it is desirable that there should be the greatest flexibility to allow for what will be a unique foundation to be created to carry on the valued work of the Crown Agents.
There is certainly, so far as I can see, no question of a disposal of government assets as the noble Lord, Lord Judd, suggested. Indeed, I shall be very surprised if we do not hear in due course complaints that the Government are not going far enough in what is proposed, and that what should be created is a commercial company which would operate on equal terms with other competitors in the field. However, I understand that this would not be welcome to existing clients, particularly perhaps the Japanese. Therefore the proposals before us, as explained by my noble friend the Minister, seem to me an excellent way forward which will give the Crown Agents greater freedom to develop their business while maintaining their essential characteristics and qualities. As my noble friend said, they will provide a strong and stable structure to enable the Crown Agents to move into the 21st century. I certainly support this Bill.
§ 4.53 p.m.
§ The Earl of Shrewsbury
My Lords, like many of your Lordships I welcome this Bill this afternoon. Through my work in industry, I have been interested for quite a long while in the work that the Crown Agents do, and I am delighted to support their cause today. As we have heard on many occasions this afternoon—I make no apology for repetition—the Crown Agents have an admirable history. Almost wherever there has been strife in the world, Crown Agents have been involved, making things happen, bringing relief to so many, procuring the goods which are so necessary, giving advice to many foreign governments and acting as the catalyst for many aid programmes. Crown Agents are at the forefront of all these matters and they are indeed the world leaders in their field.
Many other countries have tried to emulate the role taken on by Crown Agents, but, in basic terms—I am extremely proud to say it—we in Britain do the job best.
1437 It seems to me to be abundantly clear from this afternoon's debate that your Lordships in general fully support the Crown Agents' excellent work. This Bill, which is basically to enable the privatisation of Crown Agents, is just what has been needed and the time is right for the Government to take such action.
Crown Agents need the extra freedoms provided by privatisation to be able to compete in the global marketplace and to compete effectively. Crown Agents procure many goods from British companies only if the price is right and the circumstances are correct and competitive. They deliver a pretty large amount to the UK Exchequer. Indeed I understand that, since 1979, they have paid in interest and capital to the Treasury somewhere in the region of £20 million. The benefits the Crown Agents produce are excellent.
Crown Agents, through their outstanding reputation of integrity, also act as fine ambassadors for this country and its Government. Crown Agents' clients are attracted to them because of the quality of their service, their reliability and their ethical standards. They are of course also attracted by Crown Agents' worldwide coverage and the ability to purchase goods in markets anywhere. Top of the list has to be the transparency and the integrity—that is a phrase which keeps on being repeated—of their operations. Therefore I warmly welcome this Bill. It will give Crown Agents the freedom to build on their past successes, their excellent reputation of integrity, impartiality and probity and their past achievements, which are many.
But perhaps I should add just a word of caution. In order to be effective and efficient world players, I believe that Crown Agents must not under any circumstances be burdened by government with debt, and must have adequate capital resources. I think the figure that has to be repaid to the Government is some £2 million. I believe it would be much better if it were written off by the Government on the basis of goodwill for the Crown Agents in the future. I wonder whether, when she winds up, my noble friend the Minister will be able to give some sort of indication, or perhaps even an assurance to your Lordships, that this will indeed be the case. I warmly welcome this Bill.
§ 4.56 p.m.
§ Lord Rea
My Lords, as my noble friend Lord Ennals and other noble Lords have said, hardly a single speaker, including those who are critical of this Bill, has had anything but praise and appreciation for the work of the Crown Agents. But it is precisely because it is a valuable national and international asset that we on these Benches are not entirely happy with this Bill. For a relatively small organisation they have a really impressive record. They have an involvement in projects covering 130 countries, as mentioned by the noble Baroness.
The Crown Agents could be described as a typically British institution in the best sense, in that they have quietly and effectively got on with the job without particularly trumpeting their successes. As all noble Lords have said, they have gained international respect and obtained contracts from many national and 1438 international organisations—for example, the World Bank and the European Union—as has been mentioned, diversifying as the volume of work for ODA has decreased during recent years.
The noble Viscount, Lord Oxfuird, gave us some practical examples of the sort of things that Crown Agents are particularly good at doing and one case where they should have been used but were not and where they would have been extremely useful. The Crown Agents wish to continue to expand and diversify their activities. If this Bill allows that to happen we on these Benches would be entirely happy. But I have to say that, speaking personally, I am old-fashioned enough still to believe that small is beautiful. In this case perhaps one should not so much say small but, rather, medium-sized about an organisation that managed to disburse £1.8 billion for ODA last year.
I hope that the Crown Agents in their new clothes will still be able to supply the cost-effective, individually-tailored and ethically sound services for which they are so well known and respected. My noble friend Lord Judd has pointed out our view, and that of the chairman of the Crown Agents, that this expanded role could have been achieved in the public sector by relaxing certain Treasury and other rules—for example, not having to get permission from the Government for various transactions with the private sector. But that was not to be and we have this Bill in front of us which we hope to improve somewhat in Committee.
Clause 1(1) of the Bill is of course the operative part, allowing the vesting of Crown Agents by order of the Secretary of State in a successor company,nominated … by the Secretary of State".Subsection (4) of that clause states:An order … under subsection (1) … may be varied or revoked by a subsequent order at any time before any property, rights or liabilities of the Crown Agents vest in a company by virtue of this section".In my view that gives the Secretary of State virtual carte blanche to do what he or she wishes with Crown Agents, as my noble friend and the noble Lord, Lord Redesdale, pointed out. For instance, they could be floated on the Stock Exchange, sold directly to a multinational organisation or closed down.
We very much hope that the Government will bring forward by the Committee stage a form of words for the memorandum and articles of association of the final successor company, preferably the independent charitable (or otherwise) foundation which was mentioned so frequently by the noble Baroness.
If for technical or legal reasons that is not possible—and I still do not understand why it should not be possible—then a requirement could be inserted into the Bill that the nature of the final successor company must first be approved by an affirmative resolution of both Houses of Parliament. As it stands, there is no safeguard in the Bill to stop the Secretary of State from selling off Crown Agents to the highest bidder or closing them down.
Finally, I ask the noble Baroness to consider inserting into the Bill a more specific provision than merely a promise to protect the pension fund built up for the staff of Crown Agents over the years. I gather that the 1439 pension fund has been so well managed—as was mentioned by the noble Baroness—that over the past few years the Crown Agents and their staff have enjoyed a pensions holiday and have not had to make the normal contributions. Such a prosperous fund would be an attractive morsel for predators. As the final successor company is not known, the Bill should include safeguards to protect the pension fund. As the noble Baroness pointed out, that would be in line with the provisions of the Pensions Bill, which increases the role of staff representatives as trustees of pension funds. The reasons behind that are familiar to all of us.
Those are just two of the areas in which we feel the Bill could be improved. It would speed up the Committee stage greatly if the noble Baroness herself were to bring forward amendments along the lines I have suggested.
We on these Benches wish the Crown Agents every success and will do our best to see that they continue to provide the first class services which are so valuable to the developing world. The changes to the Bill that I have suggested are offered in that spirit.
§ 5.3 p.m.
§ Baroness Chalker of Wallasey
My Lords, this has been a striking Second Reading debate. It is rarely that we hear such all round support for an organisation. I am proud that that body is the Crown Agents. As my noble friend Lord Shrewsbury said, they have had great past successes and achievements. As my noble friend Lady Elles said, we want to build on those past achievements.
I listened to your Lordships' comments with the keenest interest. A few were not totally supportive of the Government's actions. It is clear that the whole House shares a common concern to give Crown Agents the best possible future. I shall give careful thought to all the suggestions that have been made. However, noble Lords will understand if I do not respond immediately to the many and varied ideas that have been put forward. I wish, however, to say a few words in response to specific questions that have been posed.
Ever since 1984 the Government have considered that the Crown Agents' business could be carried out in the private sector. We want to strengthen the Crown Agents' ability to meet the demands and needs of their customers. We also believe it right to end the requirement for the Government to be involved in the details of the business. As my noble friend Lord Oxfuird said, we need to reflect the circumstances of today. The Act to which the noble Lord, Lord Judd, and the noble Lord, Lord Rea, are so attached is too prescriptive and limiting for the 1990s and the future.
Crown Agents cannot carry out own right activities beyond those set out in the Act. We know why that provision was included in the 1979 Act. During the 1970s it was the own right activities which caused a problem. But there must be ways of making sure that the activities that my noble friend Lord Oxfuird mentioned can be carried out without the prescriptive intervention of government on each occasion.
1440 The other prescriptive and limiting aspect of the current Act is that it requires me to consent to what are properly business decisions for Crown Agents. I do not believe that it is right for any Minister to be so involved in the business of Crown Agents, which is essentially one of providing procurement for as many clients as possible in the most cost effective way.
We heard a number of comments from the noble Lords, Lord Judd, Lord Rea, Lord Redesdale, and others about parliamentary approval for the transfer. I recognise the interest in the subject. I have sought to spell out some of the ideas, and I shall provide as much information as possible about our plans as the Bill progresses. But I shall also ensure that full information is provided to Parliament before the transfer is carried out. I am obviously willing to look at what is necessary and how best that should be done.
It is quite usual for legislation on such transfers to be enabling. It is not appropriate to be tied down to the crossing of the last "t" and the dotting of the last "i". I suggest that there is nothing unusual or unprecedented in this Bill. However, the situation is unusual in that we believe that it is right to create a foundation with the specific social and developmental objectives that I outlined in introducing the Bill.
A number of noble Lords on the Benches opposite, particularly the noble Lord, Lord Ennals, asked why we did not retain Crown Agents in the public sector with greater freedom. That is the wrong question to ask. The right question is surely: why should Crown Agents continue to be owned by government? They have always been the agents of what are now independent governments and, increasingly, aid agencies. In my discussions with other governments it has been clear that that is how it should be. Governments of all parties have also been careful not to interfere with the work that Crown Agents do for other independent governments.
There is a real opportunity here for Crown Agents. We should like to be able to stand back from detailed control. We would not be able to do that if we continued to bear the ultimate financial responsibility. Government ownership requires the Government to take an interest. I fear that in terms of the development of Crown Agents' business that has meant not merely that we take an interest—which we willingly do—but, because they have to come to the Minister for consent, that Ministers interfere. That is why I am certain that, although we shall always take a keen interest as a customer of Crown Agents, we do not need to own Crown Agents.
There was some debate about the view of the Crown Agents board. I know that it is clearly printed for all to see in their last annual report that Crown Agents would be happy to remain in the public sector. But we have had a long discussion and their remaining happy to be in the public sector would only be achieved if they had far greater freedom of operation than is possible under the 1979 Act. I can assure your Lordships that in making plans for the foundation we have consulted closely with Crown Agents and shall continue to do so because the foundation will give the Crown Agents the freedom they require to meet the changing needs of their clients.
1441 The noble Lord, Lord Judd, hinted that government might be considering a trade sale. We have concluded that a trade sale is not appropriate. Crown Agents make a particular contribution to development. That is what we and other international clients of Crown Agents feel is important to maintain; and that is why we have ruled out a trade sale. I can say without fear of contradiction that I believe that the foundation route is the right route, and it is the route down which we shall go.
The noble Lord, Lord Ennals, wanted to know about the Coopers and Lybrand report. In fact, there were two reports. As advice to Ministers they were not published. They will not be published. However, the decision that I took following the report was published in my letter of 13th August 1993 to the chairman of the Foreign Affairs Committee. The Bill enables the Government to implement the decision taken on the basis of those reports.
The noble Lord, Lord Redesdale, and my noble friend Lord Shrewsbury mentioned the debt and the financial structure of the successor company. It is true that the Bill provides for the repayment of the debt of £2 million to the National Loans Fund. The National Loans Fund debt is not being repaid at a low interest rate because it is fixed at 10.875 per cent. But the Bill allows the Secretary of State to determine an appropriate capital structure for the successor company. The Bill contains enabling provisions for deemed debt and for the purchase of securities as appropriate. Our aim is to strike the right balance to ensure the viability of new Crown Agents while obtaining good value for money for the taxpayer, as I said in my opening remarks. I assure my noble friend that we shall take full account of the views of Crown Agents on future viability. We shall look with the greatest of care at their future capital structure. I have noted my noble friend's comments. I certainly cannot promise to write off another £2 million. I note that in 1988 we made a grant of £16 million to redeem most of the outstanding debt plus the premium due to the NLF for early repayment. I rather doubt whether I can do something more now that this is to be transferred. However, I shall examine in detail what my noble friend said.
My noble friend Lady Hooper and a number of your Lordships were interested in the foundation, so allow me to expand on what I said at the beginning. The proposed foundation will be a company limited by guarantee in the private sector. Its memorandum and articles of association commit the company to a clear social and developmental purpose. The foundation may wish to seek registration as a charity, and, as I said earlier, other possibilities will be open to them. We are examining those at present. But the main thing is that the future structure of the foundation must be fully satisfactory before the transfer of the business. That is a matter on which we are working together with Crown Agents.
The foundation will be the sole shareholder of the limited company which will carry on the business of Crown Agents on a commercial basis but maintain those famous traditional standards of transparency and integrity for which Crown Agents are so well known worldwide. Any trading surpluses of the business would 1442 go to the foundation. Its constitution would ensure that they could not be distributed to foundation members but would be used to support the objectives of the foundation.
The idea is for a two-tier structure which would ensure a clear division of responsibilities and rights. The operating company runs the business. The top company ensures stable ownership committed to maintaining those standards, and it uses the profits in accordance with the objectives.
There will be concerns—we can go into them in detail during the Committee stage of the Bill—about accountability. Perhaps I may say this. With the memorandum and articles of association which are intended for the foundation and without which the foundation would not have the business transferred to it, I do not see any way in which the anxieties expressed by some noble Lords have any basis.
Certainly the Government would intend to be a member of the foundation with power, for a limited time, to ensure that no substantial changes could be made in the objectives of the foundation without prior government agreement. The operating principles of the foundation would mean that the developmental role stipulated by the memorandum and articles would continue. This power would simply be retained by government for a limited period because it would ensure that those objectives were firmly established.
My noble friend Lord Oxfuird raised the question, as did a number of noble Lords, including my noble friend Lady Elles, of charitable status. I am very open minded about the matter. I know that the foundation may wish to seek registration as a charity or, as my noble friend Lady Hooper said, perhaps as a provident institution. Other possibilities may also be open. My only concern in deciding the issue will be to find a future structure which is fully satisfactory in line with the objectives which all have endorsed during the debate.
I was saddened by the comments of the noble Lord, Lord Ennals, when he spoke about the membership of the foundation. About half way through my opening speech I made it clear that members of the foundation will not be appointed by Ministers. When the noble Lord talks about quangos, it shows that he did not hear what I said. I shall take his later remarks about my future as a joke. I hope that that is how he meant them. I hope that any other implication he might have sought to make was not there.
§ Lord Ennals
My Lords, I am most grateful to the noble Baroness for allowing me to intervene. I hope that Hansard will show, because I said it, that it was with a twinkle in my eye that I said that I think the noble Baroness knows my admiration for her. I followed it with an assurance that my fear was that we might lose her from her present post.
§ Baroness Chalker of Wallasey
My Lords, I am very happy to continue in my present post. But, as some people say, you cannot go on and on. So we shall have to see what the future holds. I am a mortal being.
The important matter is that the foundation, as Crown Agents will become, should reflect the international character of the Crown Agents' activities and their 1443 social purpose and provide an enduring basis on which Crown Agents can expand their business. When one has something as good as Crown Agents, as noble Lords have said in the debate, it deserves to be applied to more countries and to more clients. That is why I have made clear that the foundation membership will consist of organisations active in international development to endorse the Crown Agents' purpose and principles. I mentioned the charities, private sector companies, professional trade organisations, other aid organisations and enduring institutions. That will bring together business ability with wide experience of aid and development which will benefit the Crown Agents of the future. But it is obviously too soon to announce names. Before vesting Crown Agents in the foundation, Ministers will wish to be satisfied that the initial members are appropriate. I sincerely hope that the initial members will have the benefit of the experience of many members of the existing Crown Agents board who have done so much to put this public sector company where it is at present—well and truly on the international map as one of the outstanding providers of goods.
Many comments made in the debate cannot be given a specific answer today, but there is one subject I must mention. Pensions were raised by the noble Lords, Lord Judd and Lord Redesdale.
§ Lord Redesdale
My Lords, I thank the Minister for giving way. She pointed out that Ministers would not appoint the board members. Can she indicate who will appoint the board members?
§ Baroness Chalker of Wallasey
My Lords, on the transfer to the foundation the board's membership will be decided by those who take shares in the foundation. It is a technical matter which I shall go into in greater detail in Committee. It is too early to give details now. I am determined that all the bodies I mentioned earlier and just now should be properly represented in the foundation, as well as the Crown Agents themselves, in order to carry on the business.
I was about to turn to pensions which the noble Lord, Lord Redesdale, said were not included in the Bill. He will notice that Schedule 1 to the Bill provides for employment rights to transfer unchanged—an important point—and for the continuity of rights in the pension scheme. I sought to explain at the start of the debate what that would mean in practice for the staff. That is also a matter for detailed exchanges in Committee. Above all, however, it is a matter of the continuity of treatment of employment for pensions purposes and the safeguarding of the value of pensions for Crown Agents' staff. I am certain that that can be achieved without difficulty.
I believe that the noble Lord, Lord Judd, mentioned redundancies; if not, I misunderstood him. I mentioned, but let me repeat, that there are no plans for redundancies as a result of the change of status. The Crown Agents have undergone successful major restructuring in recent years and have cut their costs. They have a workforce suitable for their business. The programme is essential for the viability of their business and for the future foundation. They have a good plan to 1444 implement that; they run a tight business and have never received a subsidy. They know full well that their current and future prosperity depends on satisfying the markets they serve. It is that ability to satisfy their clients at an acceptable margin that has put them so far ahead of all other procurement companies. Through the foundation's status they will be enabled to take advantage of the new opportunities and of the wider breadth of clients in the private sector.
We have had a short but important debate. I am glad that so much that is positive has been said about the Crown Agents. The Bill allows us to put in place a sound and sensible new structure for Crown Agents. It will be appropriate for the continuation of their traditional activities in which they have been engaged for 162 years and which they are keen to develop on behalf of their international clients in the future. I look forward to a constructive discussion on the provisions of the Bill in Committee. I am confident that we will give Crown Agents the new freedoms they require while retaining the high standards for which they are so widely respected. I commend the Bill to the House.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.