HL Deb 17 July 1995 vol 566 cc14-8

3.20 p.m.

Lord Fraser of Carmyllie

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Fraser of Carmyllie.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITIEES in the Chair.]

Clause 1 [Atomic Energy Authority to make schemes for transfer of property, rights and liabilities if so directed]:

Lord Haskel moved Amendment No. 1:

Page 1, line 8, leave out ("or schemes").

The noble Lord said: In moving this amendment, I shall also speak to Amendments Nos. 2, 7 and 8.

The purpose of these amendments is to ensure AEA Technology is sold as a single integrated business. On 14th March in another place, the Minister for Industry and Energy said: The Government agree that AEA Technology should continue to be managed as a single integrated whole".—[Official Report, Commons, 14/3/95; col. 707.]

Since then, there have been signs of backsliding. On 23rd March in another place it was said that if AEA Technology can meet its ambitious targets, its sale as a single independent entity may be achievable. If not, another option will have to be considered.

At Second Reading in this House on 19th May, the noble Earl, Lord Ferrers, said that the form of privatisation must depend on the performance of AEA Technology over, the next few months. He went on to say that the Government must satisfy themselves that the sale of the business as a single whole will best meet the needs and requirements of customers, particularly of government customers.

During the passage of this Bill many Members have spoken of the value of the synergy in this business. The more the business is fragmented, the more the synergy is lost. In this House at Second Reading, the noble Lord, Lord Sheffield, who has spent a lifetime in this industry, told us, In many ways, the enterprise is unique because of the multiplicity and diversity of skills on which it can call, which enable it to deal successfully with complex contracts.… The possibility of drawing on this resource of engineering and scientific skills gives it … synergy of a high order, which enables it to land and execute complex international contracts".—[Official Report, 19/5/95; col. 741.]

It was for that reason that the noble Lord asked that the enterprise should be sold as a whole and not be broken up. Indeed, this was the main point upon which he wished to concentrate.

In the same debate I spoke about how splitting up the business could be to the detriment of our science and technology base. I said that it would be contrary to the advice of the Office of Science and Technology in its Technology Foresight Report. That office is now combined with the noble and learned Lord's own department.

In reply, the Minister said that he wanted a test lasting a few months to see whether the business achieved its objectives. For such an important and complex business, can a test lasting a few months be a proper basis for this decision? AEA Technology announced on 14th June that it had met its sales and profit targets for 1994–95. But they included profits from disposals. Is that fact included in the Government's calculations?

The Government spoke of the importance of maintaining the support of the employees in this privatisation. There is no doubt that, if the company is to be privatised, the employees prefer unitary privatisation. As the noble Lord, Lord Sheffield, told us, customers prefer unitary privatisation, because they will benefit from the synergy. Perhaps the only people who will not benefit from this policy will be those who buy key parts of the business, possibly for short-term gain, and perhaps the financial institutions that handle a multiplicity of sales rather than one sale. At present it is unclear what is to be privatised. All there seems to be is the implication: "Leave it to us. Whitehall knows best". Unitary privatisation should be a matter of clarity, and should be made clear on the face of the Bill. For that purpose, I beg leave to move this amendment.

Lord Fraser of Carmyllie

As the noble Lord indicated, the amendments are designed to remove the Secretary of State's power to make more than one transfer scheme, and to ensure that property, rights and liabilities transferred under it go to a single successor company as defined in the Bill.

I hope that by the time I conclude the Committee will not continue to believe that there is an element of backsliding on the part of the Government. I hope that our position is clear, but perhaps I may take a minute or two to explain where we stand.

The policy decision behind the drafting of this Bill has indeed been to keep sales options open. In our view it is still too early to make irrevocable decisions about the form in which AEA Technology should be privatised. I repeat: if AEA Technology can meet the ambitious targets that it has set itself, then sale as a single independent entity may well be achievable. But if it does not, then other options may have to be examined.

I am encouraged that the noble Lord has such confidence in AEA Technology's ability to succeed as a single entity. He echoed the views of a number of other noble Lords. I am very well aware that the view in this place appears to be that a unitary sale is the preferred approach. My ministerial colleagues have already indicated in another place that this may well be the best way forward. I very much share the hope that AEA Technology will indeed be sold as a unitary authority. Realistically, there may be no other option if the sale is to be achieved within, say, the next 12 to 18 months.

However, at this stage we cannot be certain that unitary privatisation necessarily represents the best way forward, and I hope that the Committee would agree that it would be foolhardy to put all our eggs in one basket. These amendments would close off all options and oblige us to follow a course of action which might not turn out to be in anybody's best interests.

I hope that the noble Lord will agree, on reflection, that it would be imprudent to limit our ability both to act in the best interests of AEA Technology as a business and to secure best value for money for the taxpayer.

I cannot therefore give the noble Lord the absolute commitment that he seeks, or indeed accept these amendments. As I said, the effect would be to close off all other options, no matter how much we might prefer the single entity option. It would oblige the Government to follow a course of action that might not turn out to be in the best interests of either AEA Technology or the taxpayer.

However, when the House returns to the Bill in the autumn—clearly it cannot do so at any earlier stage—for the Report stage, the position may well be clearer. We shall certainly have a much better idea as to how AEA Technology is performing, and how far other options might satisfy the Government's stated objectives for the sale. I hope with that proposal the noble Lord will agree to withdraw his amendment. He should certainly not take it that in any sense at this stage we seek in any way to exclude the single entity option for which he argued so vigorously.

Lord Thomson of Monifieth

Before the Opposition Front Bench responds to the Minister's remarks, perhaps I may say a word from these Benches. First, we strongly support the case that was made by the noble Lord, Lord Haskel. Our preferred option is to maintain AEA Technology as a unitary body. We believe that the best way to do that, in the British interest, by way of preserving this very valuable national asset, would be by flotation. The case was made, and I shall not repeat it, for the advantages of synergy. This is a high-tech industry, in which the real capital is the brilliant people who work for it. By "synergy" we mean the kind of professional camaraderie that comes from that sort of body. It takes a long time for it to be built up and it can very easily be destroyed.

For those reasons, we on these Benches strongly support the case for maintaining the unitary character of the organisation and for flotation. The Minister very reasonably put his case to us and said that these matters will be considered further. In due course we shall come to further amendments on the Marshalled List to which we shall seek the Government's agreement not merely to reconsider the matter in the autumn but, if options are to be kept open, to have them reconsidered by Parliament at a much later stage before final decisions are taken.

In the meantime, I welcome the fact that the Minister is ready to look again at this matter in the autumn. However, we very strongly press the view that this is a national asset of great value to us and ought to be maintained as a single entity.

3.30 p.m.

Lord Peston

In joining the debate, I should first like to welcome the Minister's comments. Certainly, we look forward in the autumn to what one might call more and better particulars on this matter.

It has puzzled a number of noble Lords, and me in particular, that there is this very large, successful organisation—large in terms of capacity to carry out research and development—which is certainly very important. I find it very difficult to understand why its value would be maximised by not selling it off as a whole. In other words, separate from all other considerations, it seems to me obvious that, as an integrated whole, the organisation is worth more than it would be by selling it off in its separate parts. Without going ahead quite so strongly, the Minister seems to be saying much the same. Certainly, his honourable friend in the other place got very close to saying that.

Let me ask the Minister whether on that matter he is saying that the Secretary of State wants flexibility but he knows not what. Until one gets around to selling the body, it is best to have some flexibility just to be on the safe side. Is that the main part of the Minister's answer? Perhaps he could fill us in on that point in the autumn.

There was a separate question to which the noble Lord, Lord Thomson of Monifieth, alluded. It arises from the nature of the Bill. We did not fully appreciate a similar set of considerations with regard to the electricity privatisation Bill as has now arisen in terms of selling off the nuclear power side; namely, that having passed the Bill, the Government are under no obligation to come back to your Lordships with any of that matter. As I understand the situation, and the Minister will almost certainly confirm it, if this Bill is passed into law and then for one reason or another it turned out that AEA Technology was sold off in two parts, the Minister would simply say, "Well, that is in the Bill. We have the powers to do that and it is no longer your Lordships' business to query it". We can ask a Question or something of that nature. But in terms of a serious investigation of such a matter, this is our only chance to press the point.

I entirely accept the Minister's good faith in this matter but I hope that he understands that one of the reasons why we have pressed the point is that it is our only chance to do so. One day we shall simply be told, "Well, we have sold it off and thank you very much".

When governments bring forward skeleton Bills of this kind, one has to table amendments simply to clarify the matter. However, let me repeat my main reason for speaking, which is to thank the Minister for saying that he may have more to tell us in the autumn. We shall certainly have a chance, at least briefly, to exchange views on it at that time.

Lord Haskel

I entirely agree with my noble friend Lord Peston that this Committee stage will be our only opportunity to find out exactly what the Government intend to do. This is virtually an enabling Bill and we need to discover the Government's intentions.

I also draw to the attention of the Minister the fact that in virtually every other privatisation the restructuring of the company has taken place before the Bill has come before your Lordships. In this case, the company has not been restructured and we do not know what will be privatised. That is why we must probe these matters.

One is left with the feeling that the Government will keep their options open and they believe that Whitehall knows best. From what the Minister said, I imagine that he will leave it to the City to decide what is best. Perhaps I may remind him that the City does not have a very good record on high technology companies. I hope that he will give these matters consideration. Obviously at Report stage we shall come back to this point. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 2 not moved.]

The Earl of Courtown

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.