HL Deb 23 October 1995 vol 566 cc900-21

(" .—(1) If it appears to the Authority that any persons employed by the Authority, or by any subsidiary of the Authority, are taking steps towards—

  1. (a) the submission of such a tender as is mentioned in Schedule 2 below; or
  2. (b) the making of an offer for any part of the Authority's undertaking or for any shares of any subsidiary of the Authority;

the Authority may provide assistance to those persons for the purpose of defraying, in whole or in part, any expenses incurred or to be incurred by them for the purposes of the submission of the tender or the making of the offer.

(2) The Secretary of State may give the Authority directions with respect to the provision of financial assistance under this section.

(3) Without prejudice to the generality of subsection (2) above, any such direction may, in particular—

  1. (a) specify a limit on the total amount of the financial assistance which may be provided under this section or on the amount, or the total amount, which may be so provided—
    1. (i) in cases of any particular class or description in the direction; or
    2. (ii) during any period or periods so specified; or
  2. (b) require the provision of any such financial assistance by the Authority subject to conditions, including conditions as to repayment.").

The noble Lord said: My Lords, it will be for the convenience of the House if I speak also to Amendments Nos. 23 and 25. I do not intend to speak to Amendment No. 12 which goes much further. I see no point in pursuing that route. In moving the amendment I return essentially to the points that I raised on Second Reading and during the Committee stage of the Bill. I then referred to the fact that at Section 141 of the Railways Act 1993 the Government made specific provision to assist management-employee buy-outs. I hasten to add that I questioned whether that was in conformity with the competition rules of the Treaty of Rome. However, the Government said that I was wrong about that. Therefore I make the assumption that the Government are correct as a matter of law. If that is the case, it seems to me that for the sake of consistency—Ministers have frequently said how much they would welcome management-employee buy-outs in this connection—they should follow a similar route to that provided in the Railways Act. That is what I sought to do in the amendments. They may be deficient in some respect but I think that the Minister will concede that that is the effect of what we seek to provide.

When the matter was before the Committee on 17th July the Minister, after saying that he did not wish to be bound to follow a similar precedent, or to regard the Railways Act as a precedent—or indeed any other privatisation schemes for that matter—said, after I had intervened, I say to the noble Lord—and I hope that this will satisfy him—that I shall be prepared to examine the scope for offering assistance, which is somewhat in the nature of the language to which he made reference".—[Official Report, 17/7/95; col. 91.]

I do not think that that would be sufficient. If the Government found it necessary to make specific provision in relation to the privatisation of the railways for management-employee buy-outs, there seems to me no good reason why it should not be done with regard to this provision. It is not just a matter of giving a general approbation to the idea; it is a case of giving the management-employee buy-out team the wherewithal to go ahead with its submission. These matters are never easy to undertake; they involve some considerable element of cost. I suggest that the Government should have discretion. I do not say that they must act in this way, but that they may do so. They may give the authority directions with respect to the provision of financial assistance under the clause. Subsection (3) of the proposed new clause enables the Government to limit the amount of money that would be available for such assistance. It is desirable that that should be so.

I should have said that I shall not speak to Amendment No. 23. I do not propose to move Amendments Nos. 12 and 23. Amendment No. 25 follows on logically from Amendment No. 6. It follows a similar pattern to Section 141 of the Railways Act. I hope that the Government will respond affirmatively to this provision. I do not believe that it is sufficient simply to say, as they have said on numerous occasions, "We will do our best to encourage management-employee buy-outs". There has to be some substance to that. I have invited the Government to provide that substance in the form of this amendment. I beg to move.

Lord Haskel

My Lords, in supporting my noble friend Lord Clinton-Davis in these amendments I point this out to the Minister. The assistance which my noble friend suggests should be given could be recouped by the Government many times over. That is because the value put by the City on businesses which engage in research and provide technical services is usually low. A management-employee buy-out may well be the best sale route as the sense of partnership among the employees will give financial backers more confidence that the people in this "people business" will not then depart. I suggest to the Minister that the route proposed by my noble friend Lord Clinton-Davis could enable the Government to obtain the most money from the sale.

Lord Clinton-Davis

My Lords, I am obliged to my noble friend for his remarks. I forgot to refer to the amendment which deals with consultation. I do not ask the Government to say more about this issue as a matter of law. However, it is important that the Government give an undertaking that they will talk to the unions about employee participation in AEAT. It is important in terms of preserving the independence and integrity of AEAT. As my noble friend said, that will benefit the Government. I hope that the Minister will say something specific about consultation.

Lord Fraser of Carmyllie

My Lords, I am slightly baffled by the noble Lord's observations. I certainly understood that there was a set of amendments about consultation, beginning with Amendment No. 8. If those were the amendments to which the noble Lord intended to refer, it may be better if I refer to them when we reach that separate group of amendments.

When we considered the matter at Committee stage, the noble Lord and I had a fairly lengthy exchange on the issue of management-employee buy-outs. At that point I hope that I satisfactorily assured the noble Lord that not only would the Government seriously consider any MEBO bid for the business, but that I should also be prepared to examine what scope the Government had to offer assistance to a MEBO. As I indicated at that time, I have considered the case of AEA Technology compared with that of the railways, to which the noble Lord has drawn my attention. While what he had to say about the railways was factually absolutely correct—I make no remark as regards any small defects that there may be in the drafting of his measure—the significant point is that the situation is rather different. I shall explain why I take that view.

Statutory provision was necessary in the case of the Railways Act because of the special circumstances of the BR sale, in particular the fact that BR itself was the vendor and the number of businesses being sold—some 80 to 90, which is in sharp contrast to what is being proposed in the measure we are discussing—meant that it was far easier for BR to offer financial assistance than for the Secretary of State to offer such assistance direct. As I have indicated, in the case of AEA Technology shares in the successor company will be held by the Secretary of State. The sale will therefore be made in the name of the Secretary of State. The relevant model is not therefore rail privatisation but the sale of British Coal's mining operations, where the relevant assistance to MEBOs wishing to bid was given by the Secretary of State. He already has powers to provide assistance to MEBOs. That is why there was no need for provisions in the Coal Industry Act along the lines of Section 141 of the Railways Act and why these amendments are similarly unnecessary. Even if the sale were ultimately undertaken by the authority, the assistance could still be made available by the Secretary of State under his existing powers.

Similarly, I can assure the House that any request for assistance from an AEAT management-employee consortium would be considered and appropriate assistance provided on the same basis as for other privatisations.

I should make it clear, however, that the assistance that is available is limited to the specific purpose of allowing staff to construct a business case before approaching financial institutions for support. It is not available for other purposes. Once bids have been made MEBOs must compete on an equal footing with other bidders.

I hope that with that brief explanation the noble Lord will accept that we are not trying to exclude assistance and that it will be available. I understand entirely the approach he has adopted in respect of the Railways Act, but I hope that he will be satisfied that a parallel with the Coal Industry Act is more apposite in the circumstances and the way in which we intend to proceed to privatisation.

Lord Haskel

My Lords, before the Minister sits down perhaps he can say whether, when he was at Harwell last week, the matter of a management—employee buy-out was discussed.

Lord Fraser of Carmyllie

My Lords, a wide range of matters were discussed, including what the attitude of employees and management might be. We did not sit down and have a discussion on the specific issue of a MEBO. However, I certainly took it from the discussions that I had that what I have said to your Lordships about the availability of assistance was something that should have been well known to the management, and I hope is now also well known to the employees.

Lord Clinton-Davis

My Lords, I am obliged to the Minister for that reply, which was forthcoming. It justified the position that we have taken during the course of these debates. If we had not raised the matter the issue would not have been aired. It is important from the point of view of management and employees who are interested in such a buy-out, which has been much encouraged not only by the Government but also by the Financial Times and others. It will have given them some comfort.

Perhaps the Minister would like to respond to this point. I do not know whether there is complete consistency of approach in relation to other privatisations. I do not know whether they all followed a similar pattern to that which the Minister described today in relation to the Coal Industry Act—which in substance is set out in the amendments—as well as in terms of the nature of the assistance that is to be provided. I hope that the answer will be in the affirmative, although there will obviously be some disparities in each particular instance.

The support that needs to be given relates to the preparation of a scheme of this kind: seeking professional advice, making sure that people understand the perils of engaging in a MEBO—and there are perils—and making sure that people have the right kind of professional advice to enable them to mount a serious competitive offer in relation to other tenders which might be forthcoming. Those are difficult matters. The Minister may wish to intervene on that point.

Lord Fraser of Carmyllie

My Lords, I had better restrict my observations to the coal industry where, as I indicated, the parallel seems to us to be apt, whereas a comparison with the privatisation of the railways is not apt. Over the whole range of privatisations, I cannot tell the noble Lord whether there were other specific provisions. However, my understanding is that in the case of British Rail the situation was unusual, and therefore specific provisions were made. As I said, even in that case it may not have been strictly necessary for special statutory provision to be made. However, I can indicate to your Lordships' House that in this set of circumstances no specific statutory provision is necessary because the Secretary of State already has sufficient powers to offer assistance during the preparatory stages. As the noble Lord indicated, that is the appropriate stage for assistance to be offered.

Lord Clinton-Davis

My Lords, there was no strict necessity to embark on the Railways Act at all, but that is another matter. I am grateful to the Minister. He has set out the position to our reasonable satisfaction. I am satisfied that no specific power is required. My noble friends and I are also satisfied that the Government will give every opportunity and help to any MEBO in this particular regard. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.45 p.m.

Clause 2 [Powers of Secretary of State]:

[Amendment No. 7 not moved.]

Lord Peston moved Amendment No. 8:

Page 2, line 43, at end insert—

("( ) Before—

  1. (a) giving a direction under subsection (1) above; or
  2. (b) approving or declining to approve a transfer scheme; or
  3. (c) modifying or making a transfer scheme;

the Secretary of State shall consult the trade unions and other bodies representing the employees of the Authority.").

The noble Lord said: My Lords, Amendment No. 8 is grouped with Amendments Nos. 13, 21 and 24. They all contain much the same general principle and they relate to some remarks made by my noble friends Lord Clinton-Davis and Lord Haskel with regard to the previous grouping.

It seems to me that in a matter of this kind it would be entirely reasonable for those who are concerned with changing the status of AEA Technology, and therefore changing the position in which the employees find themselves—namely, having been public servants in due course they will no longer be public servants—as a matter of good faith to consult the employees and their representatives.

It is not my view, and I do not believe that it is the view of the trade unions, that a veto power should be given to the employees. That would be most inappropriate. However, on the minimal grounds of fairness, I believe that your Lordships will agree that people who have devoted their lives to the industry—and we all agree that whatever value exists is largely attributable to them—should be asked for their views. I would go further. I believe that many will have an expert opinion on the matter which would be worth taking into account.

My noble friends and I present this matter to your Lordships in the form of an amendment to the Bill, because that is how we proceed. If you want to make a point you put down an amendment to a Bill in this way. However, the fundamental principle has nothing to do with whether or not the Bill is amended but the way in which the matter proceeds. The matter is not unrelated to the question which my noble friend Lord Haskel asked the Minister a few moments ago. I was not clear from his answer whether the Minister spoke to the employees and their representatives when he visited Harwell last week. I consider it appropriate that a member of the Government should talk to these people at some stage. It would also be appropriate for management, as distinct from employees, also to talk to the relevant people.

This is all part of the general question. The lives of a number of public servants are going to be drastically changed. As a minimum, they ought to be asked what they think and, more generally, they might be consulted on the best way to proceed. The purpose of the group of amendments is to allow noble Lords to comment and the Minister to give us his views. I beg to move.

Lord Fraser of Carmyllie

My Lords, when we discussed almost identical amendments at Committee stage I gave an indication that this set of amendments would give trade unions and staff associations a veto. Perhaps I went too far in saying that, but it would give them an automatic right of consultation before the Secretary of State was able to exercise his powers in relation to transfer schemes and before either the Secretary of State or the authority could dispose of any of the securities in a successor company.

At the risk of repeating myself, our position remains that the final decision on the sale has to be made by the Government in the light of market circumstances at the time and in the best interests of AEA Technology as a business, its employees and the taxpayers. We could not accept a clause which might affect the ability to take that final decision. When we debated the amendments in Committee I believe the noble Lord, Lord Haskel, stressed that they were intended to ensure that best employment practices were carried out. He said that that was of particular importance in a "people" business such as AEA Technology and that the staff were carried along with the privatisation proposals. I entirely agree with both his propositions. All the privatisations that have taken place were of "people" businesses, in which that is pre-eminent.

I did not engage in the type of negotiation and discussion which the noble Lord, Lord Peston, described—and which he tried to discover—when I was at Harwell last week. However, I spoke to the chief executive and had displayed to me the wide range of consultation material that he and his chairman had undertaken in recent months. I can assure the noble Lord that it is as extensive an exercise in consultation as I have seen. My understanding is that it is by no means at an end and that the management intends to continue to consult with those whom it employs and to take them along with all that is being proposed. That seems to me to be the right way forward. With that reassurance, I hope that the noble Lord will appreciate what is being undertaken and will feel that he can withdraw the amendments.

Lord Peston

My Lords, I thank the Minister for his reply. I reiterate that I do not believe that it would be right, and in particular not constitutionally right, for there to be a veto. I am certain that the amendments do not give the workers, the employees or their representatives a veto. My judgment is not very different from that of the Minister that, to use his words which are better than mine, it would be good sense to carry one's employees along with one. I believe that that is what he said. The way to do that is to consult them and to have a meeting of minds. The Minister says that in his judgment that has been happening and in a way my amendments are unnecessary. Since he said that, and it is on the record, I assume that the people at AEA Technology can read and will read what he said, just as they might consider reading what I have said. I know that every word spoken on this side is read by them at all times!

However, this is a serious matter because, to return to my point on economics and finance, the productivity of the enterprise, and therefore its value in the market place, depends overwhelmingly on the employees believing that what is happening is correct and that they are properly valued. That is the whole point of the amendments and I do not believe that the Minister disagrees with me about that.

I am a little sorry to hear that he did not have a chat with those people and not even a drink with them, but I know how busy one can be. He may well visit Harwell again, but I am sorry that he did not speak to some of the employees. I have elucidated the substance of this group of amendments, as I wished, and, therefore, I have no difficulty in withdrawing the amendment.

Amendment, by leave, withdrawn.

Clause 3 [Supplementary provisions as to the Authority's powers]:

[Amendment No. 9 not moved.]

Lord Clinton-Davis moved Amendment No. 10:

Leave out Clause 3.

The noble Lord said: My Lords, the purpose of Amendment No. 10 is to challenge Clause 3; we say that it should not stand part of the Bill. Clause 3 states: Without prejudice to any powers of the Authority apart from this section, the Authority shall have power to do anything which in their opinion is appropriate for the purpose of facilitating … any transfer effected or proposed to be effected under section 1 of this Act, or … the disposal of securities of a successor company".

I wish to put the matter in the correct context. Since 1954, when the UK Atomic Energy Authority was established, it was specifically given a wide range of powers. That was wholly appropriate because it was a large organisation undertaking research and development in terms of producing and using atomic energy and distributing information about atomic energy. It also later encapsulated in its work scientific research on subjects which were unconnected with atomic energy: for example, the treatment and disposal of waste, and trading in intellectual property.

When the Bill takes effect, the Government Division will remain as the UKAEA. It will employ about 2,000 people. The UKAEA Government Division Forward Plan 1995 to 2005 was agreed by the DTI in March this year. Its purposes were described in that document as: To complete the UKAEA nuclear mission, whilst rapidly reducing the annual cost to the UK taxpayer of Government Division, by: Caring for and, at the appropriate time, safely dismantling active facilities no longer in use. Disposing of radioactive waste in an environmentally acceptable way. Making use of those UKAEA assets which cannot be disposed of, including live active facilities. Always ensuring that the programme is carried out at lowest economic cost consistent with safety and environmental requirements and acceptable financial risks".

Clearly, if the Government are to go down that path then the UKAEA will not require as many powers as are currently enjoyed by that organisation. I wish to know whether the Government have any plans to rescind any such unnecessary powers, following privatisation. The Government would accept that it is unwise—I am not sure that they will accept it but we take the view that quangos should not have greater powers or greater authority than they absolutely need. The UKAEA may be tempted to duplicate some of the work of the AEAT. That would represent unfair competition for the latter, because the UKAEA will be government funded. One also has to ask whether that might represent a potential collision with the provisions of the Treaty of Rome as regards state aids.

I could cite many powers and authorities but I shall merely mention the Acts under which they have been conferred: the Atomic Energy Authority Act 1954, the Science and Technology Act 1965. the Radiological Protection Act 1970, the Control of Pollution Act 1974 and the Atomic Energy Authority Act 1986. I should be happy to pass over to the Minister the specific references which I have just made by implication for his better understanding of the matter, although I am sure he is well briefed on the issues.

I wish to know whether the Government intend to review the powers needed by the UKAEA after privatisation. Will they put forward amendments to the provisions of the Acts to which I referred? Perhaps I may delicately pass to the Minister the specific sections to which I referred, if he needs them. I think they will enable him to see the point that I am making. I do not want to weary the House. If the Minister wants to ask me any questions about it, I am afraid that I shall have to ask him to hand back the document as I could not answer without reference to it. I have all the various enactments before me.

I raise this point by way of interrogation. It is important, so perhaps the Minister will be kind enough to deal with it. I beg to move.

4 p.m.

Lord Fraser of Carmyllie

My Lords, I listened carefully to what the noble Lord said. This provision may be widely drawn, but it is certainly not my understanding that it is intended, as it were, to extend the range of the powers of the authority, other than in relation to, any transfer effected or proposed to be effected under Section 1 of this Act". Clause 3 would enable the authority to prepare a transfer scheme or dispose of securities in a successor company. In that respect it is analogous to the paving powers to be found in earlier privatisations. It merely puts beyond doubt the authority's power to take the necessary steps to organise itself in preparation for the making of a transfer scheme. Removing this clause would complicate and delay the process and lead to unnecessary administrative costs. I cannot see that anyone would consider that to be a desirable objective.

I hope therefore that the noble Lord will be satisfied as to the purpose of the clause. In view of his questions, however, let me go a little further. There are certainly no present plans to change the powers of the UKAEA as set out in the 1954 Act or any other statutory provisions. The clause deals with a scheme under Clause 1. As I am sure the noble Lord is well aware, the provisions of Clause 1(3) indicate the extent of the limitation on what can be transferred as part of the authority's responsibilities.

Lord Clinton-Davis

My Lords, with respect, the Minister has not dealt with the point that I raise as a matter of substance; namely, that in the light of the role that is to be undertaken by the UKAEA in the future it would seem to have powers greater than it needs. The Minister may wish to reflect upon that, and I should not complain about that at all. The point has perhaps not been made with sufficient clarity simply as a result of the amendment. I should like to hear from the Minister as to whether he is prepared to consider the issues that I raise before Third Reading, so that we know whether there is substance in my remarks. I feel that there is. We do, of course, have the right to move amendments. I do not say that we would wish to challenge the Government over this point; it would simply be a matter for explanation. In the light of my remarks, perhaps the Minister will indicate whether he is prepared to write to me so that I may consider the position afresh before that stage of the Bill.

Lord Fraser of Carmyllie

My Lords, with the leave of the House, I shall certainly reflect on what the noble Lord said; and I should be grateful if he would in turn reflect on my remarks. I certainly did not wish to convey that there was any other purpose behind this clause. It is not framed to achieve anything other than to ensure that the authority has sufficient powers to take the necessary steps to organise itself in preparation for making the transfer scheme.

In relation to the words in the clause, Without prejudice to any powers of the Authority apart from this section", I sought to indicate that it may he that the authority would have sufficient powers without Clause 3. The process would, however, be far more cumbersome and would almost certainly require greater administrative costs. As I indicated, I do not consider that to be a desirable way to proceed. I shall certainly write to the noble Lord about this matter.

Lord Clinton-Davis

My Lords, I am grateful to the Minister. He will appreciate that this is a probing amendment. It was the only convenient way in which we could tease from the Minister the information that I sought at this stage of the Bill. On the basis that he and I will spend days and nights consuming each other's words to our mutual dissatisfaction, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 [Successor companies]:

[Amendment No. 11 not moved.]

Clause 7 [Disposal by Authority or Secretary of State of shares in successor companies]:

[Amendments Nos. 12 and 13 not moved.]

Clause 10 [Extinguishment of certain liabilities]:

Lord Peston moved Amendment No. 14: Page 5, line 34, leave out ("except with the consent of the Treasury") and insert ("unless a draft of an order approving such an exercise of a power has been laid before both Houses of Parliament and approved by resolution of each House").

The noble Lord said: My Lords, this amendment is grouped with Amendment No. 15. They concern Clause 10, the rubric of which is: Extinguishment of certain liabilities".

I assume—again the noble and learned Lord may educate me on this matter—that the lines that I wish to leave out (page 5, lines 35 to 37) are there for technical reasons. One would always insert such lines. The only reason that I suggest they be taken out is in order to make my points about draft orders being placed before both Houses of Parliament.

I am always concerned when liabilities are "extinguished". It is another way of saying that the assets are being sold but the taxpayer still retains the liabilities. That is what "extinguishment of liabilities" means. Liabilities do not disappear. The Government are not passing an Act of Parliament stating that the liabilities do not exist any more. I take "extinguishment" to mean that the purchaser will not be subject to those liabilities and it is therefore a rather serious matter.

This has happened with other privatisation legislation. In my view, this question has not been sufficiently considered by both Houses of Parliament. I do not comment, now or on any other occasion, about the other place; but I am convinced that we in this place have not sufficiently considered these matters. In particular, in respect of other privatisations we have probably been a little lax in allowing liabilities to be extinguished and placed with the taxpayer when they should not have been. My reason for raising the matter is to place those views on record.

En passant, I have a general point to make about financial prudence which refers not only to this Bill but to all such Bills. If a company is privatised on fundamental grounds of prudent finance it is not, and would not be, right to use the proceeds of privatisation for the purposes of changing taxation. On any grounds of serious analysis of privatisation, the proceeds ought to be used for reducing the national debt. In other words, one merely exchanges one set of assets and liabilities for another.

One of the greatest mistakes of this Government over a good many years is that they have not proceeded with prudent finance in regard to privatisation. That point ought to have been made years ago and accepted. It applies to this privatisation, too, even though it will not yield a great deal of money. The correct approach is to say that this is an asset that should be sold, that it really belongs to the taxpayer, and that what the taxpayer requires is a reduction in the national debt, which is a liability in terms of paying interest, either long term or, in the case of consols, for ever and ever. The fundamental point that we need to consider is the extinguishment of liabilities and whether, when that sort of thing happens, this House ought to have a say. I beg to move.

Lord Ezra

My Lords, when the noble and learned Lord replies to the amendment, would he indicate whether, under Clause 10(2), where a limit is set on the aggregate amount of liabilities extinguished, the effect of that could in theory be that nothing at all is realised from the disposal of those assets and that the liabilities extinguished could equal the amount realised from their sale?

Lord Fraser of Carmyllie

My Lords, as currently drafted, Clause 10 enables debts of the authority to the National Loans Fund to be extinguished up to the value of the proceeds from the sale of AEA Technology, with the consent of Treasury and subject to a negative resolution by either House of Parliament. The clause is effectively drafted in a standard way, as found in other privatisations. The authority's debt is currently serviced largely by income earned from the commercial activities carried out by AEA Technology which are to he transferred by scheme. Some debt may also he transferred to the successor company. In addition, paragraph 11 of Schedule 2 permits the Secretary of State to make loans to a successor company while it remains publicly owned. Successor company debt may also be extinguished by order, again subject to a negative resolution.

Noble Lords may recall—I confess that I was not part of the process at the time—that my noble friend Lord Ferrers stated the Government's policy on the extinguishment of debt when the Bill was read for a second time. Perhaps I may recap. Authority debt extinguished will be matched by sale proceeds and, where successor company debt is extinguished, it will be either converted into debentures, repaid or offset against proceeds.

We have discussed a number of amendments designed to subject the actions of the Secretary of State to parliamentary scrutiny. But since any order extinguishing debt under this clause is already subject to parliamentary scrutiny, I suggest that the amendments have the quality of over-egging the pudding.

The clause only permits the extinguishment of authority loans up to the value of the proceeds. The answer to the question of the noble Lord, Lord Ezra, must, at least in theory, be yes, that could be the position. The proceeds will be paid to the Exchequer. The Exchequer will not be out of pocket because debt is written off rather than repaid from proceeds.

Provided that the calculations are done in present value terms—as stated at Second Reading, that is our firm intention—the net overall effect to the Exchequer will be the same. No one would suggest that the debt should not be repaid or written off against proceeds in that way. The Government's view is that Clause 10 provides the most effective mechanism for achieving that.

The debt transferred to, or incurred by, a successor company cannot be privatised. It will therefore either be converted into securities or extinguished. To the extent that the debt is not converted, there is no statutory restriction as to the amount which may be extinguished (as applies to authority debt) but an order to extinguish can only be made with Treasury consent. That consent will only be forthcoming in so far as proceeds cover the present value of the debt to be written off.

On more than one occasion I have indicated that we have no intention of privatising AEA Technology at any cost. But in the event that there was any reason to think otherwise, the control mechanisms placed on the Secretary of State by this clause already provide Parliament with the opportunity to bring him to task.

The noble Lord included in his remarks a set of more general observations about how these matters have been handled in previous privatisations. All I can say to him is that what has been done here is much the same as was done in previous cases. But this is not an appropriate moment for me to re-open that broader policy approach contained in earlier privatizations.

Lord Peston

My Lords, I thank the noble and learned Lord. I was being rather mischievous in discussing the general question of public finance at this stage but I have to take my chances when I spot them. I thought that the point of the noble Lord, Lord Ezra, was central. In due course we should like to know—the point he made—what actually happens. There is the theoretical point that the net sum could be zero. It turns out that it cannot be negative at least. However, one hopes that we shall not be anywhere near the zero end of the spectrum and that there will be a considerable net benefit to the Exchequer whatever else happens.

I am grateful for the noble and learned Lord's reassurance that there is still room for parliamentary scrutiny on some of these matters. In particular, subject to that reassurance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

4.15 p.m.

Schedule 1 [Transfer schemes: supplementary provisions]:

Lord Haskel moved Amendment No. 16.

Page 7, leave out lines 9 to 12.

The noble Lord said: My Lords, in moving this amendment I shall speak at the same time to Amendment No. 17. The purpose is to make sure that the Minister does not undervalue the assets of AEA Technology. My noble friend Lord Peston spoke earlier about that matter.

The main asset of AEA Technology is intellectual, and valuing intellectual property is very difficult and complicated. In fact, the intellectual properties are state assets and represent a considerable state investment in R&D. Therefore, it would seem sensible that before they are sold, some effort should be made to find out how much state money has gone into creating that intellectual property.

There is a widespread belief that the nation has been sold short on some privatisations by undervaluing the businesses. This amendment is designed to stop the Minister adding to that impression by assessing the cost. The Minister may not want to divulge the valuations but I am sure that he would want to know the costs of building up that intellectual property so that he has an approximate idea of the cost of what he is selling. I beg to move.

Lord Clinton-Davis

My Lords, before the Minister responds to the point made so effectively by my noble friend, I want to stress that we are dealing with an industry which is in a way sui generis. It has been conceded over and over again during our debates and in discussions elsewhere that the essential asset of this industry lies in the skills and expertise of the employees. That being the case, whatever reservations the Government may have about the concept of worker-directors, or the whole argument in that respect, they do not bear analysis in relation to this particular industry.

That, I believe, is the essence of the case that we seek to make with this amendment. I hope that the Minister will give us not just comforting words but some substance in response to the point that was made by my noble friend when he moved the amendment.

Lord Fraser of Carmyllie

My Lords, the noble Lord said a little about the first amendment and the wording of lines 9 to 12 of Schedule 1. It follows that used in previous privatisation legislation where provision for a transfer scheme has been made. It removes any possible doubt that the property, rights and liabilities which are to be transferred can be defined generically as well as, or instead of, being itemised.

However, the noble Lord's more substantial point is to be found in relation to Amendment No. 17, which would require the Comptroller and Auditor General to examine and certify a valuation of the property, rights and liabilities to be transferred under the scheme and to lay a copy of that valuation before Parliament before a transfer scheme could come into force. I hope that at the time that the noble Lord tabled the amendment, he did not know that I would make my announcement in relation to the first amendment and that the transfer scheme is to a single successor company of all the shares owned by the Secretary of State. I hope he will appreciate that in some respects it will be an odd exercise for the Secretary of State to undertake that task when that is what he is doing. More broadly, I commend the noble Lord for his concern to ensure that the taxpayer is not shortchanged.

I hope that I have now made clear that as one of their main objectives in selling AEA Technology the Government have to secure value for money for the taxpayer. That is why we are not yet prepared to close off any sales options. It would seem inconsistent to ask us, as was being asked at one time, to do just that while at the same time taking the approach that the noble Lord takes in this amendment.

Perhaps I can offer three points to the noble Lord which may be of assistance in understanding our approach. First, as part of its ongoing responsibility for the audit of UKAEA, the Office of the Comptroller and Auditor General will wish to satisfy itself that the assets owned by UKAEA at the point the scheme was made are properly accounted for, either by remaining in UKAEA or being placed with the successor company. In that way nothing will fall between the cracks: assets will go with either the authority or the successor company.

Secondly, as I have already indicated, the making of a transfer scheme will not involve any assets leaving the public sector. The successor company will be owned by the Secretary of State. Thirdly, when it comes to the sale, the value of the assets in AEA Technology's balance sheet will be only one of the elements involved in determining the level of proceeds and gauging whether it represents best value for money for the business. Certainly no useful purpose will be served by a special valuation exercise carried out several months in advance of the sale. The only result of that would be to introduce a further hurdle in the scheme-making and sale process and generate needless complexity, uncertainty and delay. AEA Technology will be valued primarily by reference to its current financial performance and also its future profitability. That valuation will reflect the current value of its IPR.

I hope that explains fully the position to the noble Lord and that he will appreciate that in a sense things have moved on from the time when he tabled the amendment, given the announcement I made as regards the first group of amendments.

Lord Haskel

My Lords, I thank the Minister for that response. I welcome the undertaking he gave at the beginning of the debate that there will be a unitary privatisation. However, I felt it would be useful to raise this point because when one is selling intellectual property it is often useful to know what the cost of it is. It is a difficult item to value and the major element in the sale is intellectual property. Having made that point, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 17 not moved.]

Lord Haskel moved Amendment No. 18:

Page 7, line 34, at end insert— ("( ) A transfer scheme shall not provide for the transfer of the employer's rights or liabilities in any contract of employment to any person unless that person is a company whose articles of association require one or more of its directors to be a person appointed by the Secretary of State from amongst person appearing to the Secretary of State to have had wide experience in, and shown capacity in, the organisation of workers.").

The noble Lord said: My Lords, in moving Amendment No. 18, with the leave of the House I shall speak also to Amendment No. 19. As we have said before, this is a people business. The maintenance of good morale and employee relations is vital to its success, otherwise technical staff will leave or lose their creativity.

In other privatisations that aspect of managing the business has been rather poor. Because it is a people business we are particularly anxious that that should not be repeated in the privatisation of AEA Technology. The amendment goes back to the Atomic Energy Authority Act 1954, which gives the right to employees to have a representative on the board, and should help to maintain morale. At the same time, it is in keeping with the European directive on consultation. By including the amendment in the Bill, the Minister can demonstrate his European Union credentials. I beg to move.

Lord Fraser of Carmyllie

My Lords, I am sure noble Lords will agree with me that real worker involvement in, and commitment to, a business is desirable for any company. Companies should be encouraged to engage in a dialogue between management and employees. Indeed, many companies currently engage voluntarily in such activities. But the operative word in that sentence is "voluntarily".

The Government's general view is that the right people to manage the business are the management. While we welcome and encourage genuine, voluntary worker participation, we do not try to dictate to firms how they should run their affairs. Each has to develop the form of employee involvement best suited to it. We oppose the imposition of prescriptive, rigid structures which do not reflect the needs of the business and are not in the interests of either employers or employees.

That is a general proposition, but let me reiterate. The present management of AEA Technology is committed to a full programme of consultation and explanation to all employees through a range of mechanisms. AEA Technology is a people business and its people are its greatest asset. The present management fully recognises that; and so do we.

The Government believe that privatisation represents the best way forward for the business and its staff. I want AEA Technology to succeed in the private sector and I believe it will do so only if it has the freedom and flexibility to take advantage of the enormous opportunities in the market.

The board of a privatised AEA Technology will need to reflect the mix of skills and expertise necessary to manage a dynamic and forward looking company. It will want to involve its staff more directly in the development of the business. But how it does so is something best left to the company. It is not a matter for the Government, less still for statute.

While I appreciate the sentiments behind the tabling of these amendments, I believe that they can be dealt with on a voluntary, rather than a legislative, basis. That answer may not come entirely unexpectedly to the noble Lord, but I can assure him that the present management understands the real need and desirability of consultation.

Lord Haskel

My Lords, I thank the Minister for that reply and for putting on the record that support for employee involvement is complete. I accept that he is satisfied that the management is committed to employee involvement. This is perhaps not the place to discuss styles of management. The Minister did not reply to the point in relation to the European directive and that, too, may be a topic for another occasion. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 19 to 21 not moved.]

Baroness Turner of Camden moved Amendment No. 22:

Page 15, line 25, at end insert—

("Redundancy

.—(1) If any employee of the Authority is transferred to a new employer by a transfer scheme or otherwise and is declared redundant—

  1. (a) the Authority's redundancy rules and benefits applicable to that employee at the date of the transfer shall apply unless the trade unions or other bodies representing the employees transferred by the transfer scheme have agreed to their modification for such employees; and
  2. (b) the redundancy rules shall apply as if the Authority were the employer and all employees transferred from the Authority's employment by transfer schemes were employees of the Authority.

(2) This paragraph shall have effect for employees transferred on or after 1 March 1995.").

The noble Baroness said: My Lords, before moving Amendment No. 22 I should like to make a short statement, bearing in mind that this is the first opportunity I have had to do so. In view of a report which appeared in a Sunday newspaper I should like to assure the House that when I speak from this Dispatch Box I do so on behalf of the Labour Opposition and for nobody else. I am sure that that is well understood by the Minister and his colleagues.

Reverting to Amendment No. 22, at Committee stage I moved an amendment in rather similar terms to this. However, there is a slight extension to the wording here. I said at the time that I would look very carefully at what the Minister said and would consult with the unions of those most concerned. I welcome the assurances that the Minister then gave about the application of the TUPE regulations, but there are still some major concerns. It is for that reason that I am returning to the matter on Report.

The present amendment seeks to protect the redundancy rights of those transferred out, first, by preserving the UKAEA redundancy rules and, secondly, by dealing with redundancy across the whole current UKAEA and making the authority liable to employees for the payments. Backdating the matter to March 1995, as the new wording suggests, protects the 950 ex-Facilities Service Division employees and the seven sold to EMS Medical on 31st March. Therefore, there is an extension of the last amendment.

Many employees fear that there will be more redundancies after privatisation and that a new employer will force them to accept worse redundancy terms. Since privatisation of the authority's Facilities Service Division on 31st March, the new owners have already declared 150 redundancies of the 950 staff concerned. AEA Technology is, I am informed, making more than 400 redundant in order to meet a profit target of £21 million in 1995–96. As is now unfortunately so usual, private employers seek to make profits by cutting staff and making those who remain work harder and sometimes longer hours. A substantial proportion (25 out of 60) unresolved surplus staff at 10th August are scientists and engineers and the rest are administrators, mostly accountants. UKAEA is failing to apply its redundancy agreement by not reducing overtime, using contractors and recruiting.

The Minister may well repeat his assurance today about the application of TUPE. But the problem here is that TUPE regulations only protect at the point of transfer. The unions are worried about subsequent changes to terms. Even without changing the terms, the scope for redundancy is much greater with smaller, private firms because obviously there is less scope for redeployment. I am sure that the Minister recognises that there are deep and genuine concerns here. Even highly qualified people now often have difficulty, particularly after a certain age, in getting alternative employment. It may be quite a time before such people can be employed elsewhere. If their redundancy arises, it will do so directly from the plans of the Government and their privatisation intentions. It seems to me that such staff are entitled to much greater assurances as to their future than might otherwise have been the case. I beg to move.

4.30 p.m.

Lord Fraser of Carmyllie

My Lords, when we discussed this issue in Committee, I assured the noble Baroness that AEA Technology employees will have all the protections in respect of redundancy provided by the TUPE regulations and that modifications to contractual redundancy rights will require the consent of the employees. As I understood her remarks, she accepts that that was a correct statement of the law. I am happy to repeat those assurances anyway.

This amendment not only has a wider, but also a retrospective effect. It would apply to all authority employees transferred to a new employer from 1st March 1995. In our view that is entirely inappropriate. The Bill is intended to deal with the privatisation of AEA Technology, and not with any other divestment that the authority may carry out under its existing powers. As regards the other divestments, the authority is in the same position as any other public enterprise. While we have stressed that this is "a people's business", I have heard no argument to justify treating authority staff differently from other public servants and indeed it would be inequitable to do so.

I am a little concerned that the noble Baroness, notwithstanding the assurance I gave her that TUPE would apply, should think that that might not be sufficient protection. TUPE ensures that employees join their new employer on the same terms and conditions as they left their old employer. The new employer has just the same rights as the old one; they can change an employee's terms and conditions of service with the employee's consent. That consent can either be given by each employee or, where there is a collective agreement, by the union on their behalf.

It is true that AEA Technology has already announced that some slimming down is likely to be necessary. The means by which it achieves that is a matter for the company. I know that it, intends to redeploy staff and also to use voluntary means to reduce numbers where that is considered appropriate. To provide for exception arrangements, as the noble Baroness's amendment would do, does not seem justified, particularly against the background of the very real security which is in any event provided for employees in law.

Baroness Turner of Camden

My Lords, I thank the Minister for that response. As I expected, he has referred again to the TUPE regulations. As I said in moving the amendment, the problem is that I understand the employees concerned and their unions still feel that those regulations, in the particular circumstances of the privatisation, do not really give them as much security as they would like. Therefore, they want the amendment that I have put before your Lordships this afternoon and the retrospective element included in subsection (2) of the amendment.

As I indicated, although it is true that the TUPE regulations apply at the point of transfer, so that the individuals concerned have at that time the full protection of their existing contracts of employment, there is not that protection thereafter. Therefore, people who joined the service originally expecting a considerable degree of security of employment may very well lose it as a result of privatisation. It is for that reason that it was felt necessary to bring these amendments once more before your Lordships' House. However, I do not expect that any further assurances can be obtained from the Minister today. We have done our best to ensure that people are protected in the future. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 [Successor companies]:

[Amendments Nos. 23 to 25 not moved].

Schedule 4 [Pensions]:

Baroness Turner of Camden moved Amendment No. 26:

Page 29, line 3, leave out ("sub-paragraphs (2) and (4)") and insert ("sub-paragraph (2)").

The noble Baroness said: My Lords, I am returning to these amendments again, as I did with the previous amendments, in the light of the discussion we had in Committee. The group of amendments with which we are concerned here is to do with pension entitlement. The amendments provide for the rights of people to stay in a UKAEA scheme who are divested by that company other than under the transfer scheme provisions of the Bill. They make that arrangement retrospective.

We had a detailed discussion in Committee when the Minister strongly put the Government's view that in the event of privatisation people could not opt to remain in a Civil Service scheme but that TUPE required comparable—that is to say, not less favourable provisions—to be made in respect of pensions. On our side we strongly pressed the point that that did not automatically mean that pensions in payment, for example, would be index-linked. Indeed, the Minister confirmed that that might well not be so.

He stressed that a different mix of benefits might be provided. I have to say that, from the soundings we have taken, index-linking remains a very strong concern on the part of those not directly involved. I understand that it is envisaged that index-linking up to 5 per cent. per annum is likely to be offered in line with recent pension regulations. However, that does not protect pensions in times of high inflation, which we may hope we shall not see again but about which no one can be sure.

I have received details of the present arrangements from the unions concerned. As with public service schemes generally, they are good. In particular, the index-linking of pensions in payment is guaranteed. As I said at Committee, people often enter public service with the idea that such employment is likely to be steady and secure, with good pension arrangements including indexation. In return for that they will often sell their services more cheaply than they would otherwise do in the private sector. They are prepared, in a sense, to barter away immediate gain in return for added security. However, now in middle age when they may not find it so easy to secure a reasonably good alternative job, they discover that the security of their pension provision has been put at risk through no fault of their own, but simply because of government policies in relation to privatisation.

I take the view that in those circumstances it is not appropriate for the Government simply to rely on the argument about what is usual in the private sector. There is an obligation to look after the long-term interests of the people who have been displaced from the public sector in which they had expected to spend their working lives. Unlike the Government, I do not despise those who seek security for themselves and their families as distinct from taking their chances in an increasingly uncertain private market. It seems to me that that is a responsible attitude to life rather than the reverse. If the Government rob people of that certainty, there is an obligation to compensate them in some way by taking appropriate steps to continue the safeguards as far as possible.

In Committee my noble friend Lord Clinton-Davis suggested to the Minister that he should look at what was done in relation to railway pensioners at the time of the Railways Act. I was involved in discussion of that legislation to some degree and my recollection is that in the end the Government made substantial concessions to railway pensioners, including the guarantee that the Government would stand behind the pensioners' entitlement. There is a section in that Act specifically to protect employees. I do not know whether the Minister has been able to think again about what was said in Committee, but I can assure him that the unions representing the workforce still feel strongly about the situation and it is in the light of that that we have tabled this series of amendments. I speak not only to Amendment No. 26, but to the other amendments in the group. I beg to move.

Lord Fraser of Carmyllie

My Lords, as is often the case when dealing with groups of amendments, the most interesting amendments may well be the last to be considered, such as Amendments Nos. 37 and 39. In advance of our consideration of those amendments, perhaps I may take this opportunity to explain how matters have moved on over the summer. It might be useful if I do so now rather than at a later stage.

It must clearly be wrong to suggest that a scheme without full index-linking cannot provide benefits comparable to the benefits currently received. There have been numerous occasions on which new schemes have been adjudged to be of comparable value to the old scheme although the new scheme does not guarantee full index-linking. I recognise the strength of feeling among employees about index-linked pensions. It was bearing that in mind and in the light of the further consideration given to the issue since the Bill was last before your Lordships that I am now able to go a little further than previously. The House may recall that in Committee I said that a fully index-linked scheme was not ruled out by the terms of the Bill. I can now say that not only is it not ruled out; it is one of the options that is being actively considered by AEA Technology as forming the basis of a new scheme for existing employees.

I believe that the House will understand why it would not be possible for me to give a commitment now that a fully index-linked scheme will be introduced. It is not within my gift. It will be for the employer company to make proposals—whether that is AEAT or a purchaser—on the form of the new scheme. The scheme would also be the subject of discussion and negotiation with the unions, taking into account the interests of employees and the welfare of the company. What is in the interests of the company must be in the interests of its employees as it is only with a fully competitive company that their jobs will be secured.

In addition, statutory consultation will be required under the terms of the Bill. It would not be right for me to prejudge the outcome of those consultations. I have given a commitment that they will be meaningful and I shall stick by it. I appreciate that those comments are slightly out of order, but as this is an important matter on which there has been some movement, and as I think that that is an important statement which the trade unions would like to hear, I have taken this opportunity to raise the matter now.

Returning to Amendments Nos. 26 to 32, we had a full discussion in Committee. We have no desire to do anything other than to ensure that employees who are transferred under the provisions of the Bill have their pension rights protected. That is why we have written on the face of the Bill statutory protection for employees to have a pension scheme which gives the same overall level of benefits as they currently enjoy. When employees are transferred from the public service (whether in privatisations or arising from contracting out) standard practice has been to end their membership of a public service scheme. Although I recognise that Amersham was an exception many years ago, I have to say that the practice of not being allowed to remain in a public service pension scheme is now consistently followed. We all want AEA Technology to compete effectively in the private sector. Ultimately, that is the only way in which jobs can be secured and their terms and conditions maintained.

We do not believe that it would he right for private sector employees to remain as members of a pension scheme which reflects the different circumstances of the public sector. That is no different from the practice in the private sector where schemes reflect the different circumstances of individual employers. The authority, as an employer, has devised its public service scheme to provide what it considers to he appropriate pensions for its employees. It is for the private sector employer to develop arrangements which are appropriate for its employees and the operation of its business. We see no reason why there should be an exception here.

The particular circumstances about which I was previously invited to comment—the invitation has been repeated today—relates to rail. Having considered the matter, it would appear that there is no parallel with the situation of AEA Technology. The rail industry already had a pension scheme in the private sector mould. That scheme could therefore be replicated in the private sector. That whole industry is moving to the private sector and the nature of the work means that there is likely to be movement between the new companies. In that case, it was not unreasonable that the protection was given so that pension rights could accrue on the same basis while employees remain in the industry. The situation with AEA Technology is very different. The authority's pension scheme cannot be replicated in the private sector because it contains features which mean that the Inland Revenue would not grant it tax-exempt status; nor, as I have revealed, is it intended that there should be a plethora of companies between which employees can switch.

I apologise for taking a moment or two longer than usual to reply to a group of amendments, but I hope that what I have said sets the scene relating to the pension provisions which are the subject of the next group of amendments. I hope that with that explanation the noble Baroness will feel able to withdraw the amendment.

4.45 p.m.

Baroness Turner of Camden

My Lords, I thank the Minister very much for that statement which makes a considerable difference to the amendments that we have tabled. The Minister was right to say that the employees are very concerned about index-linking, a point that we have repeatedly made from this side of the House. I am very glad to have heard that statement from the Minister this afternoon. I am sure that employees in the industry will be glad to have had a statement to the effect that index-linking will be one of the options available under the new provisions. In those circumstances, it is certainly not my intention to proceed with the amendments this afternoon. To some extent what the Minister said deals with many of the issues that we had intended to cover under the heading "Pensions".

Lord Fraser of Carmyllie

My Lords, before the noble Baroness sits down, perhaps I may intervene. This is such an important matter that I cannot have any employees misunderstanding the position. Perhaps I may repeat what I said. I said in Committee that a fully index-linked scheme was not ruled out by the terms of the Bill. That was understood. What I am saying is that not only is that not ruled out now, but it is one of the options which is being actively considered by AEA Technology as forming the basis of a new scheme for existing employees. I cannot give a commitment because it is not within my gift to do so.

Baroness Turner of Camden

My Lords, we understand that the Minister cannot go further this afternoon. We are very grateful for that assurance. In the light of it, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 27 to 35 not moved.]

Baroness Turner of Camden moved Amendment No. 36:

Page 30, line 16, at end insert ("except that, where any person consulted under the provisions of sub-paragraph (3) above is not satisfied with any proposals made by the Secretary of State in the course of such consultations, the Secretary of State shall not make a direction under this paragraph until that person is so satisfied unless that person has unreasonably withheld his satisfaction.").

The noble Baroness said: My Lords, I beg to move Amendment No. 36. The amendment refers to consultations and makes provision for anyone who is not satisfied to have arrangements withheld until he is satisfied. The amendment says that the person shall not unreasonably withhold satisfaction. The other amendments in the same grouping refer to consultation with the unions. This matter was discussed in Committee. Although I am very pleased with the statement that has already been made this afternoon, there is an issue about consultation and what is meant by "relevant unions". Last time round the Minister said that there would be consultation with the relevant unions. The concern is as to precisely what that means, who decides who are the relevant unions and matters of that kind. Those issues arise under the set of amendments which deal with consultation. Perhaps the Minister would be kind enough to respond.

Lord Fraser of Carmyllie

My Lords, I am happy to respond briefly to this important point. I hope that during Committee I gave a clear commitment that trade unions, or persons who under the provisions of the Bill represented employees, would be consulted. I am happy to repeat that commitment today. It may be helpful if I say that, in the light of the announcement on vesting that I made in relation to the first group of amendments, the department has already given some consideration to the drafting of a consultative document on the issue of a direction under paragraph 3 of the schedule. The noble Baroness may be interested to know that that draft document includes in the list of consultees all of the relevant trade unions.

Baroness Turner of Camden

My Lords, in the light of that statement I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 37 to 50 not moved.]

Lord Fraser of Carmyllie

My Lords, the progress of business has been highly satisfactory. I am delighted that we have been able to achieve such a measure of agreement. In the circumstances, we appear to have made greater progress than that anticipated by some who are otherwise very familiar with the workings of your Lordships' House. I fear that it has rather taken them by surprise. Unless I keep talking for an unnecessary and inelegant period of time, I believe I have no option but to beg to move that the House do adjourn during pleasure until five o'clock.

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

[The Sitting was suspended from 4.53 to 5 p.m.]