HC Deb 30 November 1983 vol 49 cc901-33 4.38 pm
Mr. Bryan Gould (Dagenham)

I beg to move amendment No. 1, in page 1, line 5, at end insert 'for the time being'.

The Chairman

With this we are to take new clause 2 entitled "Duration": `This Act shall cease to have effect on the first day of January 1987 unless resolutions to the contrary are approved by both Houses of Parliament during the three months prior to the first day of January 1987.'.

Mr. Gould

As we discovered on Second Reading last week, clause 1, which is the substance of the Bill, does, principally, two things. First, it puts an end to litigation currently before the Restrictive Practices Court, so that the restrictive trade practices practised by the stock exchange remain in force, and the court is not allowed to consider whether they are in the public interest. As we decided last week, it is exceptional for a Bill to do that. However, it is principally the second proposal to which the amendment and new clause are directed.

Clause 1 not only puts an end to current litigation and requires the Director General of Fair Trading to expunge from his register all the entries currently made in respect of the stock exchange; it removes from the ambit of the Restrictive Trade Practices Act 1976 any practices, current or future, of the stock exchange.

The amendment and the new clause are designed to ensure that the stock exchange does not entirely escape the legislative grasp of the Restrictive Trade Practices Act 1976 which has been supported in principle, and in detail, until recently by successive Governments. The amendment is designed to give the House the opportunity to maintain, and to revive when necessary, an element of control and review.

It will become clear in our debates this afternoon that without such an amendment the stock exchange would be free from the current court action, free from the provisions in the Restrictive Trade Practices Act and bound only by an extremely limited and totally unenforceable voluntary agreement, the terms of which appear to expire at the end of 1986.

By the end of 1986, when the main substance of the agreement will have been implemented, we must assume that one of two situations will have arisen. The right hon. Member for Hertsmere (Mr. Parkinson), the progenitor of the arrangement, seemed in some doubt when he spoke on Second Reading about which of the two possibilities would occur. He did not seem to know whether the situation that he intended would arise or that which is now widely expected.

The first of the possibilities is that by 1986 the stock exchange will have carried out to the letter the agreement that it made with the right hon. Gentleman. It will have brought lay members on to the stock exchange council and, perhaps most important, it will have put an end to the minimum commissions system. Nothing else will have changed. The purpose of the agreement was to delay, defer of stagger change so that the single capacity rule and the maximum permitted holdings rule would remain in place.

If those admittedly restrictive practices remain in force without the amendment, no legislative mechanism will exist to deal with the continuing restrictive practices. The stock exchange could argue that it had done everything required of it under the voluntary agreement with the former Secretary of State. Without danger of contradiction the stock exchange could argue that the matter was at an end and that the Restrictive Trade Practices Act was no longer relevant to its operations.

Mr Anthony Beaumont-Dark (Birmingham, Selly Oak)

Is the hon. Member for Dagenham (Mr. Gould) right? He is assuming that the changes are minor and have been agreed by the stock exchange as a "pay-off to the Tory paymasters", as someone once said. The changes already taking place before the settlement are enormous. How does the hon. Gentleman answer the argument that the investing public will receive a four-year betterment much earlier than if we had waited for the court to rule?

Mr. Gould

It is not for me to speculate about the Government's motives in reaching the agreement. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) does not seem to have understood my argument that one of two outcomes are possible by the end of 1986. My view is that the outcome desired by the right hon. Member for Hertsmere is unlikely. The hon. Member for Selly Oak must ask his Government to explain, and resolve, the problem because they have argued from time to time that one of the merits of their provision is that important matters such as the single capacity rule and the maximum permitted holdings rule would remain in place and not be threatened or jeopardised.

If by a remote chance that were the position by 1986 the stock exchange would be subject to no spur to make further changes. The legislation would no longer apply to the stock exchange and it would have no further obligation to make changes. No mechanism for further control over the stock exchange's operations would exist.

A second possibility is more likely, although the right hon. Member for Hertsmere was anxious to avoid such an outcome to the agreement. It is that the announcement of the stock exchange agreement, to do away with the minimum commissions system, even over a period, will lead to such a breaking down of the dyke wall that the water will rush through. We see evidence of that every day. It is happening before our very eyes, within weeks of the agreement. Even in the last couple of days pension funds and investment companies have made submissions to the stock exchange calling for the early abolition of the minimum commission rule. They see the inevitability of what will happen. In many cases they welcome it, and rightly, providing that relevant changes are made.

If by the end 1986, as we expect, the rules, structures and institutions connected with the stock exchange have been swept away so that, as was said in the Second Reading debate, the stock exchange is quite different, we shall have to resolve severe problems—for example, conflicting interests in firms which can do both jobs once the single capacity rule has gone. We shall no longer be able to rely on the cosy trust and confidence that has helped the stock exchange to resolve its problems. By then we shall need guidelines and signposts about what is to happen.

In the Second Reading debate I sensed a growing consensus that it was not good enough to leave the stock exchange to spin off into the wide blue yonder, and a totally unpredictable future where all the old conventions, principles and assumptions no longer apply. Hon. Members on both sides agreed that we need a clear statement from the Government that they intend to grasp the nettle and to introduce a statutory framework which, as I emphasised on Second Reading, need not and should not delve into the detailed self-regulatory matters currently undertaken by the stock exchange, but which at least should provide some guiding principle. We heard nothing from the Government. We heard no suggestion that such thoughts existed in Ministers' minds.

4.45 pm
Mr. Nicholas Baker (Dorset, North)

Does the hon. Member agree that that might follow if one were setting up a totally supervised system, under a securities and exchange commission, for example? We are trying to erect a framework under which a self-regulatory system operates so we must wait to see how that system works.

Mr. Gould

The hon. Member for Dorset, North (Mr. Baker) may belong to the minority which argues that self-regulation is the total answer to the problems. I believe that there is a growing majority, not least within the stock exchange, that recognises that self-regulation in an unpredictable and new situation is unlikely to be able to bear the restraints put upon it.

Mr. Nicholas Budgen (Wolverhampton, South-West)

The structure proposed in the Bill is modified selfregulation—it is not a statutory structure with an area of self-regulation within it.

Mr. Gould

That is right. The modified system of self-regulation will deal with a changing position, whose main principles and features are quite unpredictable. The agreement bears the seeds of destruction of the current system, which makes it imperative that the Government give some sign of how they intend to resolve such pressing problems as the conflict of interest that may arise within a single financial institution.

It is unsatisfactory to leave matters hanging in the air, which is why the amendment and the new clause have been tabled. They will provide an opportunity for the Government and the House to return to the issue when the current voluntary agreement reaches the end of its natural term. We can then decide whether any remaining restrictive practices need to be brought back within the ambit of legislation.

The amendment will provide a statutory spur to further changes by the stock exchange. The minimal changes agreed with the Government were wrung out of the stock exchange only after some years of preparation for threatened litigation. Without the continued existence of legislation, we shall lose an important element of potential control.

I shall be interested in the Minister's comments on the amendment and the new clause. On the face of it, there appears to be no reason why he should not accept them. They do not purport to do anything violent to the essential structure of the Bill; they leave the voluntary arrangement intact until the end of its natural term in 1986; they allow an end to be put to litigation; and they remove the current entries from the registers. All that is retained is the possibility that the Director General of Fair Trading could require the stock exchange to register restrictive trade practices. They would give the Government and the House the opportunity to pursue that matter if either felt that the position was not satisfactory.

I urge the Minister to look kindly on the amendment and the new clause, which leave intact the major principles of the Bill. It would reassure opinion on both sides of the Committee if he could accept them.

Mr. Budgen

The Committee is grateful to the hon. Member for Dagenham (Mr. Gould) for the careful way in which he presented his arguments.

I cannot agree to new clause 2 because I am not sure whether it would be helpful for the stock exchange, after an interim period, to go before the Restrictive Practices Court once again. However, I agree that the idea that the deal can exist in some static form for the foreseeable future is clearly not supported by anything currently happening in the City.

The extent to which changes occur is uncertain and unknowable. It would be arrogant for me, as one who knows little about the workings of the City, to predict what structures may emerge after the interim period. But it is obvious that, with the ending of the system of minimum commissions, the single capacity structure is very much at risk. I do not want to bore the Committee with a repetition of the points that I made on Second Reading, but it is likely that there will be a move towards either dual capacity or multiple capacity.

The Government's response to that possibility has been inadequate. I accept that it is reasonable for them to say, "It is a fluid position, which we cannot entirely predict, but should it evolve in a certain way, regulations based upon the old club system will be inadequate and we will keep in mind the serious possibility—even probability—of introducing a legislative framework with some element of self-regulation within in it," but to give the impression that they anticipate that single capacity will continue for the foreseeable future and that, therefore, self-regulation can continue—albeit in a modified form—is laying the stock exchange open to real dangers.

Dual capacity at Lloyd's gave rise to conflicts of interest and to activities that must have discouraged people from risking their money in the Lloyd's market. It would be unwise for the stock exchange and the Government to say, "Let it all ride for a bit, and see what happens," but if there is multiple capacity and the conflicts of interest give rise to frauds and scandals, there will be a great deal of public reaction and the following system of statutory regulation will be far more restrictive than had it been introduced to prevent those frauds and scandals rather than to correct them after they had occurred.

I hope that the Government will make a clearer statement of their understanding that while a system of self-regulation works well with a small stock exchange of 1,000 people operating as a club—with self-regulation and all the social and business inhibitions that that brings with it—they also understand that with multiple capacity and large amounts of outside and foreign money coming in there is a need for some form of statutory framework when the market has settled down. We are not asking for a promise to introduce legislation in six months. A little time must pass before the market has settled down, but when it has settled down let there be a legislative framework sooner rather than later.

Mr. Paddy Ashdown (Yeovil)

It is a pleasure to follow the hon. Member for Wolverhampton South-West (Mr. Budgen), whose views and independence of spirit on this legislation—and, indeed, other legislation—are well respected in the House. Many of his points were powerfully made, and accepted by this side of the House.

On Second Reading I expressed forcefully the views of the Liberal and Social Democratic parties about the inadvisability of the proposed action. The spectacle of the Government intervening in or interfering with the process of legislation—not acting as honest broker, but against the wishes of one party—is bad for the standing of the Government, the Office of Fair Trading and the law.

5 pm

It follows that we wish to see the Bill voted down. Nevertheless, the point made by the hon. Member for Dagenham (Mr. Gould) is, in our judgment, a reasonable second best. One may take the view of the Secretary of State and others that this is the first step in a process of reform of the stock exchange to create something which the alliance would wish to see, and is committed to—a competitive stock exchange. This step will produce a continuous series of reforms that will move towards self-regulation. In other words, it will produce a tidal wave of change, to use the words of the hon. Member for Dagenham, of which the instrument will be the abolition of minimum commissions, with the inevitable consequence of the removal of single capacity in favour of dual capacity.

If such a process of change is instituted, as the hon. Member for Dagenham said, in a few years' time we shall not know where we are, or things will be roughly as they are at present. The best interests of the public will have to be reviewed in a few years' time, and the amendment gives us the ability to do that in either of those two cases and is therefore a reasonable second best.

A particular concern to us, and one that we hope will be the subject of the review, is the role of the Bank of England in the proposed agreement through the Bill. The bank acts in a dual capacity, both as the primary customer for the stock exchange and as its regulatory mechanism, in as much as there is one. That will inevitably produce a messy conflict of interest, which will be further complicated because of the Bank of England's special responsibilities towards the Government and the City.

The amendment, imperfect because it is an amendment to a Bill that we wish to see voted down, at least gives the possibility of a review of such circumstance in a few years' time so that the public interest may be best served, and judged to be served, by the operation of the measure and these provisions.

Mr. Anthony Nelson (Chichester)

I agree with the hon. Member for Yeovil (Mr. Ashdown) at least on the matter of Bank of England supervision. Some of us raised this matter during Second Reading, and, for understandable reasons, the Minister did not have the opportunity fully to reply to these points. However, I hope that we shall have an answer, in today's debate, dealing with the Government's attitude towards the role of the Bank of England. Many hon. Members, whether they fully support the Bill or feel concern about some of its aspects, feel concern about the presumption of the Bank of England in, its supervisory capacity.

This is where my agreement with the hon. Member for Yeovil ends, because this is not just a second best amendment but a wrecking amendment. I urge the Committee to support neither the new clause nor the amendment because, essentially, a deal has been struck. A major point of contention has been raised by the Office of Fair Trading and put to the Restrictive Practices Court that has now been conceded by the stock exchange council and the members of the stock exchange. The reforms that have been agreed to and that will be implemented are proper ones while we await a. more radical overall review of the workings of the stock exchange. Many of us look forward to the introduction of a securities Act that will provide the overall statutory framework while allowing a self-regulatory aspect within the framework. Many of my hon. Friends, including my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), have spoken of this and supported it.

This is a wrecking amendment because a deal was struck, with the quid pro quo that the case would be withdrawn and the stock exchange would be given immunity. The amendment would mean reneging on that deal. Furthermore, were we to try to limit the legislation, that would make the stock exchange—for reasons wholly of self-interest I admit, but we have a proper responsibility to consider this prospect—resistant to the introduction of the reforms that we should seek.

Mr. Gould

I find it difficult to accept that either the amendment or the new clause are wrecking, as both would permit the agreement reached between the parties that is the basis of the Bill to be carried out in full. There would be no question of reviving the litigation, because that could be revived only after some years of registration and preparation for litigation and so on.

Mr. Nelson

It would be a wrecking amendment because it would be novel to the extent that, as far I am aware, no exclusions under the Restrictive Trade Practices Act are limited in this way. That novelty does not make it an impossible concept, but as far as possible when the House legislates we should make the laws, keep the laws and intend them to be laws. To try out laws on the country, corporate sectors, or sections of the community is not a desirable objective. It would be far better than having a time-limited legislation, if, after a few years, we as a House believe that in the absence of a securities Act or of necessary reforms by the stock exchange, there is a case for once more bringing this practice under the supervision of the court, we repeal the Act. That is the proper way to proceed. We pass an Act because we believe in our judgment that it is proper at the time and if it is no longer proper and we wish once more to subject the practices to the scrutiny of the court, let us repeal the Act.

Mr. Budgen

There may be something to be said for taking the industrial relations argument of a step-by-step approach. As long as the Government describe this as step one and, not the first and only step, we may be satisfied.

Mr. Nelson

If I understand my hon. Friend's intervention, he is now being a devil's advocate because in his speech he seemed to be, broadly speaking, against the amendment. I am not sure where he stands now.

I do not agree with a step-by-step approach inasmuch as it involves time-limited legislation. My hon. Friend refers to industrial relations, but that is another matter because we have been passing Acts successively over recent years that build on each other. None of that legislation is time-limited, as far as I am aware. This legislation is time-limited and in principle that is a bad thing. It reneges on the deal that most people within the market, and most who take the interests of investors seriously to heart, believe is in the interests of all concerned.

The legislation would restrain the stock exchange from making the necessary reforms or implementing them to the full, and there is a danger that, were we to try to limit the legislation in the suggested way, it would cast a shadow upon, or mean further uncertainty about, the introduction of the securities Act following Professor Gower's report. The Committee would be advised to pass this legislation, and not to time-limit it, but to give serious objective consideration to Professor Gower's report and at that time to try to make sure that we get the structure, the framework and the statutory scrutiny of the stock exchange correct, rather than hang a sword of Damocles over the stock exchange. That is not necessary, given the good will shown and the progress that its members and chairman have made to introduce the necessary changes.

Mr. Hugh Dykes (Harrow, East)

I shall echo the remarks made by my hon. Friend the Member for Chichester (Mr. Nelson) in exhorting the Committee not to pass the amendment. However, it would be right to get on record the fact that the hon. Member for Dagenham (Mr. Gould), representing the Opposition, put his points in a reasonable and restrained way. At first sight, my hon. Friend's description of the amendment as wrecking might seem too harsh. The hon. Member for Dagenham expressed mild anxiety and resentment about that adjective.

However, when one considers the amendment deeply, it is right to follow my hon. Friend's description of it, and not only for the reasons that he competently put about the undesirability per se of having legislation that is intrinsically time-limited for no good reason, or legislation that lapses automatically when there is no rational and tangible reason for that lapse to be superseded by something, or for it to slot into a subsequent development either of a legislative or administrative kind or for Governmental decisions.

It is also right to agree with my hon. Friend because of the way in which the stock exchange will try to respond to the July developments, the agreement in the Bill and all of the subsequent measures and decisions, some of which are extremely difficult and profound. There might be a special political colouration to Opposition amendments and it would be most unfortunate if such amendments interrupted the subtle and delicate process which is of major interest to the whole country. This is not an esoteric matter. I hope that the Committee will reject the amendment and new clause 2 for the reasons that have already been given and a few more.

There is a danger that we shall go over some of the ground that was covered on Second Reading. That is perhaps not too harmful as long as we do not do so at too great length. Professor Gower's report is awaited by observers and others who are trying to improve the stock exchange's service to the public, its competitiveness and its openness. Radical reform is the present tendency. The Gower exercise is important. As was said forcibly on Second Reading, we are waiting for major legislation in some form of securities Bill—many of my right hon. and hon. Friends hope that there will be a securities Act in 1985 or 1986. It would provide in legislative form some of the decisions that are to be made by the stock exchange council and the membership in the difficult process of consultation flowing from developments in July and include some of the Gower recommendations and some EC directives. It might also consider how those directives link or conflict with single capacity or dual capacity.

Textually, intellectually and legislatively, the Bill is extremely limited and modest. It will only apply the Government's exemption of the stock exchange to the processes of the Restrictive Practices Court. It would be ridiculous to tailor-make complications such as time limits, annual reports and the rest. Such grave complications would undermine the central purpose of the Bill and make it much more difficult for the stock exchange to carry out its functions.

Consultation by the stock exchange of its members and implementation of changes to its rules such as to the minimum commissions and single capacity must now be broached by the stock exchange council with its members. That process will be complicated further by a time-limited amendment.

It would be wrong to accept the suggestion by Opposition Members that the stock exchange has not been and will continue not to be extremely effective under its old rules and regulations. It would be wrong to suggest that it has not effectively policed, controlled and monitored its activities, and provided an orderly, correctly regulated and properly administered market. To suggest as much is wrong and clearly unfair. I readily declare again my interest as a member of the stock exchange. Run by its able chairman, the stock exchange council will continue that effective control, subject to the opening of the stock exchange, which an increasing number of people will welcome enthusiastically. The more open it becomes to foreigners the better it will be. The council should be allowed to continue its work unimpeded by Opposition amendments that are probably more damaging than irritating.

Mr. Budgen

Does my hon. Friend approve of the idea that agreement to foreign money coming to the stock exchange should rest on the arbitrary decision of the Bank of England—a bank which, as everyone knows, has several roles in the City?

5.15 pm
Mr. Dykes

My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has just muttered something about that being a different issue. That is not what I was talking about, although that matter is dealt with in the Bill.

I do not assume that the existing exemption provision in the Bill will remain the status quo. There might be all sorts of changes and a new role might be devised for the Bank of England. There might be important legislation such as I have mentioned in a couple of years' time. My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) might be nervous about the Bank of England's surveillance operation. The demise of the Council for the Securities Industry was referred to last week. Although that might be a source of anxiety to some hon. Members, it is not central to this limited and technical Bill. I disagree with my hon. Friend and do not share his anxiety.

It would be wrong to be tempted by the amendment. At first sight it appears to be reasonable and it was presented reasonably. However, it would be an extreme complication and cause no end of trouble for the House when considering artificially an annual report that would not add to the substance of the decisions made. Indeed, it would provide a technical and grave practical problem for the stock exchange when facing difficult and important decisions henceforth.

Mr. John Ryman (Blyth Valley)

I had not intended to speak until I heard the astonishing speech of the hon. Member for Harrow, East (Mr. Dykes). I was utterly appalled by the complacent tone of his speech and by his contempt for many sensible suggestions that have been made in support of the amendment.

As I understand his argument, he maintained that any sanction which is imposed by legislation to ensure that the stock exchange carries out reforms—which it undertakes to carry out as a result of the monstrous arrangement by which the Executive has interfered with the judiciary's functions—should be regarded as wholly unacceptable as it might restrict the freedom of the stock exchange to act as it wishes in the future.

The hon. Member for Harrow, East carried his complacency to an incredible degree when he said that there was a case for legislation dealing with securities, the stock exchange, European regulations and so on. It would be wrong to deal with those matters now. Not having heard the tenor of the recommendations of the Gower report—he could not have done—he said that whatever Gower recommends will be good, and therefore we can introduce his recommendations in legislation. I know that the hon. Gentleman is experienced in these matters, but I say with deference to him that he is being not only complacent but unrealistic. In effect, he is saying that it is bad for Parliament to impose any sanctions or restrictions in this legislation and that Parliament should trust the stock exchange council completely, having secured concessions, and leave it to the discretion of the stock exchange council whether to proceed with these reforms. He believes that Parliament, the Director General of Fair Trading, and the Secretary of State should have no power to supervise and monitor those reforms on which work is being done. It is the credit of the stock exchange that it has made good progress on these reforms since the summer of this year.

I support the amendment because it seems to be very modest. If the stock exchange is sincere in its efforts to reform, it has nothing to fear from the amendments. Of what is the stock exchange frightened? The hon. Member for Harrow, East gave no answer, but only a wealth of platitudes and irrelevancies. He waffled interminably about matters that are outside the Bill's scope. I would gladly give way if he wished to intervene.

The effect of these proposals is to ensure that the stock exchange proceeds with these reforms within a reasonable period. I do not understand the simulated indignation that has been shown or the objections that have been made to these modest proposals. That is my only point, and i do not believe that I can improve upon it by repeating it.

Mr. Peter Tapsell (East Lindsey)

I declare an interest as a member of the London stock exchange, although I speak as an individual Member of this House and in no sense as a spokesman for the stock exchange or even for the stockbroking firm of which I am a partner and a shareholder.

Over the years the press has been overwhelmingly in favour of the abolition of minimum commissions. I have always taken the view, and still do—I do not 'relieve that any other hon. Member expressed this opinion on Second Reading—that it will be against the national interest if minimum commissions are abolished. There are many reasons for this. It would lead to a good deal of skullduggery and would put the compensation fund, which has protected all investors, at risk. It would increase the cost of purchasing securities on the stock exchange for small individual investors. The abolition of minimum commissions would also produce a series of major strategic changes in the organisation of the stock exchange and in the organisation of the City of London as a whole. I believe that these would be damaging in the long term to the British national interest.

During the discussions that have taken place since 1979, successive Ministers and City editors have not fully thought through the implications of what is being proposed and is so widely supported, as their surprise at recent developments has shown.

The case before the Restrictive Practices Court was launched by the present deputy leader of the Labour party the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who has been consistently hostile in his public remarks during his period in opposition to the interests of the City as a whole, in marked contrast to the recommendations of the Wilson committee on this sector of the City. Successive Conservative Secretaries of State made a serious error of judgment, after the Conservative party came to power in 1979, in not immediately removing this case from the Restrictive Practices Court, which was always an unsuitable forum in which to discuss the matter.

Mr. Gould


Mr. Tapsell

If it had to be referred anywhere, it should have been referred to the Monopolies and Mergers Commission, where the pros and cons could have been fully argued. The Restrictive Practices Court has no expert knowledge in these technical matters. If the court had declared minimum commissions and other arrangements in the rule book of the stock exchange to be illegal or in contravention of the Restrictive Trade Practices Act, it would have had no constructive alternatives to put in their place, and that would have caused a disordered market.

We are told that the abolition of minimum commissions will cause a substantial drop in the income of many stockbroking firms. For 25 years I have operated almost entirely in the international stockbroking market where I have not been much protected by our minimum commissions. However, there are many stockbroking firms, including some of the leading and most reputable and those which have been of most value to successive Governments in helping to fund the national debt, which have perhaps the greatest part of their business in sterling securities and especially in gilt-edged securities so that the fall in their income overnight might be almost catastrophic to them. Therefore, it is expected that the single capacity rule will come under tremendous strain.

During the last Parliament there were scandals allegedly arising in Lloyd's of London because of the operation of dual capacity. The House of Commons in its wisdom rightly imposed single capacity on Lloyd's. It would be most extraordinary if this Parliament in its first Session were to move in exactly the opposite direction for the stock exchange. I predict with certainty that the abolition of minimum commissions will lead to the abolition of single capacity, and that the abolition of single capacity will probably lead the stock exchange into abberations, difficulties and dangers such as those that Lloyd's has experienced in recent years.

Mr. Dykes

Does my hon. Friend agree that the nature of single or dual capacity in Lloyd's is different in character, substance and activity and legal implications from dual or single capacity in the stock exchange?

Mr. Tapsell

I accept that. Nevertheless, I believe that everyone would accept that if a stockbroking firm is also to act as the jobber the client of that firm may be anxious. I agree with those hon. Members who have said that strict rules must be laid down if we are to move from single to dual capacity.

5.30 pm

If many stockbroking firms have to make good their lost commission as a result of the abolition of minimum commissions by becoming jobbers, they will require a great deal more capital than they now need for carrying out their present stockbroking single capacity operations. If they are to raise the amount of capital that they are likely to need, they will ultimately find it almost irresistible in many instances to accept the attractive offers that many of them are no doubt receiving from overseas. It is true that there are some major British institutions that would like to take an interest in stockbroking firms, but Britain, because of the relatively small size of its industrial base when compared with those of the United States or Japan, does not have anything like the financial muscle of the great American and Japanese financial institutions, which will be able to pay a price for a share in British stockbroking firms which British institutions will not often wish to match.

We have been protected from a foreign takeover of the London stock exchange by its rules, which at present prevent a foreign institution or outside shareholder from taking more than 29.9 per cent. of the shares of a stockbroking firm. However, when foreign firms buy into London stockbroking firms to the extent of 29.9 per cent., it is understood that often they buy also a commanding share of their overseas business and an option to secure control of all the shares of the firm if and when the 29.9 per cent. rule is abandoned. I have no doubt that pressure from within the stock exchange to abandon the 29.9 per cent. rule will become irresistible unless there is legislation enacted by this House to stop it. The object is to raise more capital and 29.9 per cent. of a small stockbroking firm will not provide enough capital. Nor will it provide the foreign investor with what he is really looking for, which is total control of the British stockbroking firm.

This means that the House or the Bank of England will have to impose the 29.9 per cent. limit for ever, which will largely defeat the purpose of the entire operation if capital raising is its object, or the limit will go, in which case many of the top stockbroking firms in Britain will eventually fall under foreign control. It is my judgment that many of them are likely to do so. I have some knowledge of these matters, because I have probably visited no fewer than 30 foreign countries a year on business at any time in the past 20 years. I know that all the major foreign financial institutions in the world are following closely events on the London stock exchange. Many of the major institutions in Tokyo and New York will be interested in getting control of a leading British stockbroking firm if they can.

Mr. Ashdown

I have been listening to the hon. Gentleman with some interest. I think that he has made the most powerful case yet for voting in favour of an amendment which provides for a review in a few years' time, on the ground that we are launching into something when we do not have a clue about how it will turn out in the years to come. I hope that the burden of the hon. Gentleman's speech will lead him to vote in favour of the amendment.

Mr. Tapsell

I voted in favour of Second Reading and I support the Bill. I have already deplored the fact that these issues were allowed to drag on until July 1983. I think that the chairman of the stock exchange was right to reach the agreement that he did with my right hon. Friend the then Secretary of State. I have already implied that my right hon. Friend the Member for Hertsmere (Mr. Parkinson), the previous Secretary of State for Trade and Industry, grasped the nettle which should have been clutched by his Tory predecessors. I am entirely in favour of taking this legislation forward and taking the future of the London stock exchange and the City of London out of the hands of the Restrictive Practices Court.

The argument has been advanced in the past that the stock exchange in some way has fallen down on its job of protecting British national interests by not competing sufficiently in international markets. As I have devoted the whole of my adult commercial life precisely to doing that, I find the criticism rather curious. In so far as the stock exchange as an institution has not achieved a larger place in the international world, that has little to do with the stock exchange as such. The main reason for that is a number of factors, which include the excessively high rates of taxation which successive Governments have imposed on businesses of every sort in Britain, the fact that exchange control was not abolished until 1979 and the fact that stamp duty makes it more expensive to deal in London than in New York.

All those disadvantages are the faults of Governments of both complexions. It is no good blaming the stock exchange for the fact that it has always operated in international markets under considerable disadvantages imposed upon it by Governments. In addition to all these burdens, the Government should not further weaken the capacity of the London stock exchange to compete by forcing through the abolition of minimum commissions. If certain commissions are thought to be too high, they can be adjusted downwards. I hope that the Government will give second thoughts to the abolition of minimum commissions, because I believe that in the long run it will be very much against the interests of the stock exchange, the City and Britain for them to be abolished.

Mr. Ian Wrigglesworth (Stpockport, South)

I hope, for the sake of his constituents, that the hon. Member for East Lindsey (Mr. Tapsell) exaggerated the number of visits that he makes abroad in the course of the year, in the same way as he clearly exaggerated his fears about the future of the stock exchange. It is clear that he is opposed to the stock exchange being referred to the Restrictive Practices Court and that he is not in favour of the Bill. That must be so because he is not in favour of the agreement which was reached between the stock exchange and the Government, which is the basis of the Bill. It is good to have the authentic voice of the dinosaurs of the stock exchange in the House. The hon. Gentleman has spoken against the major provisions of the agreement reached between the Government and the stock exchange.

The hon. Gentleman has rehearsed the argument that we have heard over a long period about the threat to the stock exchange if the proposed changes go through and are implemented. It is remarkable to hear a Conservative Member arguing so passionately and strongly against something which in many other circumstances he would claim to support, which is competition. He has condemned the proposed changes in favour of the protective stock exchange and a protected market. It appears that he is not in favour of open competition. I think the House will find that a remarkable state of affairs.

The amendment is a modest attempt to introduce an improvement, but it does not really do what is necessary. If the House were determined to take the right course it would refuse to accept the Bill and allow the proceedings to continue in the Restrictive Practices Court. I do not support the amendment with any enthusiasm, because it is only a stop-gap. I do not know whether the Labour Opposition intend to press it to a Division, but I think that the major business is to defeat the Bill and to rehearse the arguments against it being passed. The removal of minimum commissions will introduce competition. It is a measure which many people in the City, especially in the institutions, think is long overdue.

The hon. Member for East Lindsey says that the small investor will be damaged if minimum commissions go, but I do not accept that view. I have heard the argument in the banking world that the smaller account holders will be damaged if the banks are chasing around in real competition with one another as the banks will look only to the interests of companies and big business. When competition for the institutional investor becomes more intense and fierce, as I hope it will—that would be to the benefit of the investor—stockbrokers will look for new business and for new investors and we shall see the development of marketing and advertising and, I hope, an aggressive attempt to get more people to invest their money on the stock exchange. That would reverse the trend of recent times towards the domination of the stock market by the institutional investor. Only competition will bring that about.

The ordinary investor is now swamped by advertisements from institutions to encourage him to invest in insurance, pensions, unit trusts and various other devices, which are all backed by tax benefits. Perhaps there is a case for examining whether that is a wise way to develop the capital market and whether that is one of the factors that have led to the lack of investment in industry. If industrial investments in this country had the same tax benefits as pension funds, perhaps we would see a long-overdue substantial change in the direction of investment.

The removal of minimum commission will lead to much greater competition. Evidence from the New York stock exchange shows that investors will benefit and that the market will become much more aggressive than hitherto.

Mr. Beaumont-Dark

I should like the benefit of the hon. Gentleman's expert opinion on the small investor and so forth. Is he not aware that, like many institutions, the stock exchange runs on the Robin Hood principle that the large investor may pay a rather larger commission than he needs to, while the small investor gets the benefit? When minimum commissions end, it is likely that the large investor will get a much reduced commission, but that the small investor will pay a considerably higher commission. How will that help the small investor about whom the SDP is always talking so glibly?

Mr. Wrigglesworth

I am not in favour of prices being regulated by the transfer of the pricing of funds from one type of investor to another. It would be much better if those high commissions were lower as a result of competition. There is a need for stockbrokers to seek new markets. Substantial savers in this country do not invest directly on the stock exchange because they are never asked by stockbrokers to do so. I should like to see the position that I see at Grand Central station in New York. When I get off the train there and walk across the forecourt I see the Merrill Lynch stand, where I can talk to the stockbroker who is selling shares. They actually try to sell stocks and shares to the small investor, unlike in this country, where it has all been too secretive, closed and uncompetitive for too long.

Mr. Budgen


5.45 pm
Mr. Wrigglesworth

I must get on, because I know that other hon. Members wish to participate. I think it is hoped that the debate will not extend too late into the night.

It has been forecast—I see no reason why this should not be the case—that the removal of minimum commissions will give rise to the ending of single capacity and to the introduction of dual capacity. That is not: to be feared and I do not share the view of the hon. Member for East Lindsey——

Mr. Dykes

indicated assent.

Mr. Wrigglesworth

I see that I have the support on that point of the hon. Member for Harrow, East (Mr. Dykes). It is not analogous to the Lloyd's position. It would be much better if the stockbroker were able to hold stock and sell to the investor. I see no reason why that should give rise to the type of malpractice in Lloyd's to which the hon. Member for East Lindsey referred.

It may be—we tabled amendments to take account of this—that, as the hon. Member for Chichester (Mr. Nelson) said on Second Reading, what we need to ensure that such action does not take place is a statutory base for the Council for the Securities Industry. My hon. Friends and I would like to see that. The investor must be protected against malpractice. The proposal put forward on Second Reading, which had been put forward before by the hon. Member for Chichester, should be considered carefully by the Government, because it combines a statutory base with a voluntaryism that would appeal to many hon. Members on both sides of the House.

The Council for the Securities Industry is too much a part of the City itself and is not representative enough of the investing public. It does not have the power to issue subpoenas to bring witnesses before it and to take action against people who are abusing the system. It would restore public confidence, which has been shaken at times, and ensure that the investor is protected if we had a statutory base for the Council for the Securities Industry. I do not wish to see a Federal Exchange Commission in this country, but the proposal of the hon. Member for Chichester warrants attention.

The hon. Member for East Lindsey also mentioned restriction of entry. The hon. Gentleman wants to protect members of the stock exchange from the introduction to the exchange of investors not only from overseas but from this country. When I see the way in which our City institutions in some instances—not in all, thank goodness—have been outstripped, outmatched and outperformed by some of the major investment houses in other countries, I feel that I would welcome those investors as members of the stock exchange and the stimulus that that would give to competition, to the introduction of new technology and to the adoption of much more aggressive methods than have been used on the stock exchange so far.

There has been pressure for development in those countries, but it has been stymied by the restrictions on the stock exchange. I do not fear that the stock exchange will be taken over by foreign interests, as the hon. Member for East Lindsey emotively described it. I do not see anything wrong with foreign interests coming on to the stock exchange. After all, no one thinks that names in the City, such as Rothschild and Warburg, came straight from the sound of Bow bells.

The City has benefited from its international character, over hundreds of years. I shall not go back to Lombard street and to the institutions which have played their part in the international financial affairs of the City, but they have benefited the City enormously—no more so than in the banking sphere with the development over recent years of the Eurobond market. The foreign banks have played an enormous role in developing the market, to the benefit of London as a financial centre and to the benefit of the country.

I do not fear the thought that foreign institutions will buy into stockbroking firms. I am sure that the major financial institutions of this country will feel the same. If they become comprehensive financial service institutions, that will be to the benefit of this country. That is the way in which these institutions are developing in other countries. The pressure is exactly the same for that type of development here and I do not think that we need fear it.

If the Government are confident that the agreement they have reached with the stock exchange can survive the test of time and the test of public scrutiny, I see no reason why they should not agree, when the Bill is on the statute book, or even during the passage of the Bill through the House, to refer the stock exchange for scrutiny by the Monopolies and Mergers Commission, which is what the chairman of the stock exchange said recently he would not mind taking place.

It is regrettable that the matter has been decided in private, without great public discussion. That is one of the principal reasons why we oppose the Bill. Many people would be relieved of anxieties and misunderstandings if the stock exchange was referred to the Monopolies and Mergers Commission and demonstrated to us and to the public that it was not operating against the interest of the public and investors. I hope that during the debate the Minister will make clear his attitude towards that suggestion, taking into account the fact that the chairman of the stock exchange has said that he himself would not resist such a reference.

I hope that the Bill will not remain unamended tonight. The moderate amendment proposed by the Opposition is a step in the right direction. It would ameliorate the position. I hope that the Minister will accept it in good faith and demonstrate that he is harbouring no second thoughts or inhibitions about the deal that has been done with the stock exchange.

Mr. Nicholas Baker

The hon. Member for Stockton, South (Mr. Wrigglesworth) has evinced a strong dislike of the stock exchange and a considerable dislike of stockbrokers. However, I welcome the contribution that stockbrokers have made to the debate. In asking them how they think that the Bill will affect the stock exchange, as in asking eminent legal experts such as the hon. Member for Blyth Valley (Mr. Ryman) and my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), one gets different views.

A reference to the Monopolies and Mergers Commission might in principle be more relevant than the use of the Restrictive Practices Court legislation. However, to suggest that now, as the hon. Gentleman has done, would be effectively to administer the kiss of death.

I believe that the amendment is wrong, and I am sorry that the hon. Member for Blyth Valley is not in his place to hear my argument. It may be argued that the amendment is a mere amplification of an arrangement, but it goes much further than that. It certainly does not amount to the suggestion of a review. In practice, the amendment would not mean a review at the end of three years of the position of the stock exchange.

Mr. Ashdown


Mr. Baker

I apologise to the hon. Gentleman, but time is short.

The amendment would put the House of Commons in the position of a supervisor of the stock exchange. That would be bad for the House and damaging for the stock exchange. It would substitute the uncertainty of a suspended sentence for the uncertainty of court proceedings. It was agreed on Second Reading that the uncertainty about the court proceedings had caused some damage to the effectiveness of the stock exchange, and I do not doubt but that considerable damage would be caused as the process of law and the activities of lawyers proceeded over a long period of years. Uncertainty would be a major cause of damage to the stock exchange.

There is a curious disagreement about the effect of the abolition of the minimum commission on single capacity. The hon. Member for Yeovil (Mr. Ashdown) was very firm about it. He is convinced that single capacity will go. Like some other hon. Members, I see no such certainty about the effect on single capacity. The stock exchange is capable of laying down rules that effectively protect the investor, and that is what we should be aiming at, even in changed circumstances.

I do not regard the Bill as the last word of the House of Commons on this subject. It is an important step, as my hon. Friend the Member for Wolverhampton, South has said. If we were to accept the amendment, the Bill would stand on two steps at once. That would make it damaging and ineffective and would damage the value that has been obtained from the arrangement that has been made.

Mr. Ashdown

The hon. Gentleman talks about breaking an arrangement. By their intervention, the Government have broken the arrangement set up to put the stock exchange before the Office of Fair Trading and the Restrictive Practices Court.

Mr. Baker

An arrangement has been arrived at and the amendment would breach it. It is true that the Government intervened. What the Government are proposing, and what this Bill is effecting, is not a compromise involving litigation between one party and another. The circumstances are unusual. It is because I believe that the Monopolies and Mergers Commission would have been a much more appropriate forum that I believe that this arrangement is worth supporting.

Sooner or later, we will find ourselves discussing a securities Bill, and we will have to look at principles of self-regulation. When we do, I am sure that we will compare the workings of self-regulation in the stock exchange with its workings in other respects in the City. I am disturbed about how self-regulation will work in investment management.

Yesterday, my hon. Friend the Under-Secretary of State for Trade and Industry rightly decided to recognise the National Association of Security Dealers and Investment Managers, but he declined to recognise the Association of Independent Investment Managers on the grounds that that body was small and unrepresentative. I urge him to reconsider those grounds for non-recognition. I urge him to consider the rules that govern self-regulation. What rules does a body lay down, how does it administer its rules and how does it apply them when its members break them? I hope that my hon. Friend will think about that, and I am sure that after the Bill has been enacted he and the House will continue to consider how the stock exchange manages its affairs.

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

It is with trepidation that I speak on this subject. My constituency is contiguous with the City of London, and it is less than a 10-minute jog from my home to the stock exchange, but most people in Hackney are worried that the performance of the stock exchange does not benefit them as much as it might. They fear that the stock exchange does not divert enough of the nation's savings into industry, and that it does not allocate resources efficiently between one company and another. They would want me to support the amendment. One Conservative Member rightly said that the amendment was a wrecking amendment. It would be a good idea to consider the stock exchange again more widely in two years.

On Second Reading, the Secretary of State for Trade and Industry said that a principal role of the stock exchange is to raise finance for commerce and industry. That suggests that, like those Parkinsonian figures of old, he has been promoted above the level of his ability. The stock exchange provides remarkably little finance for industry. Today I spent my lunchtime looking at the figures for commercial and industrial companies in recent years. Indeed, I have studied them for the past 30 years and they have not changed much. Those for recent years will be of interest to the Committee.

6 pm

In 1978, shares and debentures provided 3 per cent. of the investment capital needed by industrial and commercial companies. In that year, 77 per cent. of capital came from retained profits., 4 per cent. from capital transfers, 12.5 per cent. from bank lending and 3 per cent. from foreign borrowing. In 1979, shares and debentures produced only 2.5 per cent. of the money needed by industrial and commercial companies. In 1980, the figure was 5 per cent., in 1981, 7 per cent., and in 1982, 4.5 per cent. By no stretch of the imagination does that suggest that the stock exchange as an institution is providing a lot of the capital needed by industrial and commercial companies.

Mr. Peter Lilley (St. Albans)

Is not the hon. Gentleman aware that as a proportion of net new capital invested by industrial companies the amount raised on the stock exchange varies between a quarter and a third?

Mr. Sedgemore

If the hon. Gentleman looks at the financial tables, he will find that his figures are not correct. If he cares to put a note on the board, we can discuss the matter futher, but, having looked at this over a number of years, I am sure that his figures are incorrect. I shall even sit down to allow the hon. Gentleman to give me the source of his figures.

Mr. Lilley

They were contained in a study produced by the National Institute. I forget who the author was—I think that it was Prais—but I shall pass a note to the hon. Gentleman later.

Mr. Sedgemore

The hon. Gentleman must know that the figures are published on an annual basis in the financial statistics. He must say either that the statistics are wrong or that there has been a fundamental misinterpretation of them.

The residents of Hackney are also concerned because the stock exchange is not a good forum for allocating investment resources between one company and another. To allocate resources efficiently and according to the principles of Adam Smith and liberal economists——

Mr. Beaumont-Dark

And Karl Marx.

Mr. Sedgemore

And Ricardo and Karl Marx—they were all in it together, as the hon. Gentleman knows—three assumptions would have to be present. The first is that the effect of speculation is to stabilise the market price of shares. If that were not the case, prices and yields would be a false guide to earnings' prospects, and companies would borrow money at the wrong price. It is difficult to argue that speculation stabilises the price of stocks and shares.

The second assumption is that jobbers are always willing to quote a price, but there have been some periods in the history of the stock exchange—1974 comes to mind—when there was so much uncertainty that jobbers were unwilling to do so.

The third assumption is that one can forecast with reasonable reliability likely future earnings. There is not much evidence either way. A study by I.M.D. Little called "Higgledy-Piggledy Growth", published in the Oxford Bulletin of Statistics, showed that the growth of profits per share of different companies was largely random and that it was virtually impossible to predict future earnings from past earnings.

There is an unfortunate lack of evidence that the stock market, in conjunction with the new issues market, allocates resources efficiently.

For those two reason, I invite the Committee to support the amendment so that in a couple of years we can look more generally at the performance of the stock exchange. We are anxious that the nation's savings should go into industrial and commercial enterprise and that they should be used efficiently. As that is not being done at present, any opportunity to return to the wider subject will be welcomed by the residents of Hackney and those in the rest of Britain.

Mr. Beaumont-Dark

I intervene briefly as I took part in the debate on Second Reading. It is quite obvious that only lawyers will be free from change, simply because there are so many lawyers who are Members of the House.

Those of us in the City realise that there will be change and that the Bill makes the best of a bad job. It is not a good Bill, but it is the best that could be done in the circumstances.

It has been suggested that overseas interests are a good thing, and one hon. Member talked about Rothschilds. One could mention the Rothschilds, the Warburgs and even the Samuels. However, they came here to take root, not to transplant that growth overseas. Britain needs to encourage all the talent that it can. Much talent has come here and will continue to come here. That should be welcomed.

It is not that the City worries about competition. In the end the Government will have to make a decision as to how they wish the City to be controlled. It is no good saying that the Bank of England can do it by winks and nods and around corners. It will have to be done on the basis of the Government and the House of Commons making up their minds.

This goes much wider than the stockbrokers and the insurance companies, a line which the Germans are now taking. In the Eagle Star takeover, we are talking not just about Eagle Star but about £3 billion of investment that Eagle Star controls. Therefore, gently over the years the control of the assets of this country may pass quietly into foreign hands. When major bids are made, the Government will have to say what is in the country's best interests. The view that people do not have to sell out unless they want to suggests that individuals should always decide what is best for the country. Therefore, we must be cautious about how much control—be it stockbrokers, insurances or banks—will pass into foreign hands.

In due course, when we come to the Securities Act and Gower, we shall have to discuss from where the country is controlled and where it is going financially.

Mr. Wrigglesworth

Surely in this sphere more than in any other we are dealing increasingly in international markets. That market operates 24 hours a day in New York, Hong Kong and every other part of the world. To talk about the City as though it were a little island that operated irrespective of what happens in the world is living in cloud-cuckoo-land. Surely we want British institutions that are international and dominating world markets.

Mr. Beaumont-Dark

If the hon. Gentleman and his party do not understand the difference between switching between investments in one world centre and another and control of the City of London resting in overseas hands, the SDP has a great deal to learn about the City, just as it has about everything else.

Where one's funds are controlled is important. It is important for the Government and the City to have a say over who controls them and in whose interests they do so. It is not insular to say that we do not want the City to be controlled by American, Japanese or Saudi Arabian interests. It should be controlled for the good of this country, and the House of Commons and the Government will have to judge when that situation arises.

The Under-Secretary of State for Trade and Industry (Mr. Alexander Fletcher)

My hon. Friend the Member for Harrow, East (Mr. Dykes) said that this was a mild amendment, mildly presented by the hon. Member for Dagenham (Mr. Gould). It is a seemingly mild amendment. I do not think that it exposes disagreements across the Floor of the Committee, rather misunderstandings that I shall try to discuss.

The hon. Member for Dagenham remarked about the purposes of the agreement. The agreement was made not to delay or defer change in the stock exchange and in the City but to expedite change, which is happening now. There has been more change in the past four months in the affairs of the City and the stock exchange than in the previous four years and, in effect, going back much longer than that. The press is literally bursting with news every day of changes that are taking place in the City as a direct result of the decision made by Ministers in July this year.

The point had been reached where the Restrictive Practices Court action was impeding change and progress in the City. No hon. Member has objected to the need for change and greater competition in the City. It is something of a contradiction to suggest that the purpose of the agreement was to delay or defer change. The stock exchange is not being left to spin off into the wide blue yonder, either, as the hon. Member for Dagenham suggested.

The monitoring arrangements provide the link between the Government and the stock exchange and give both parties the opportunity to ensure the maintenance of a liquid central market and investor protection during this period of transition.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and my hon. Friend the Member for Harrow, East recognised the present dynamic position. We are not moving from one fixed position to another in the City and the stock exchange.

My hon. Friend the Member for Wolverhampton, South-West mentioned self-regulation. He gave me the impression that he felt that self-regulation was for smallish institutions and not for larger ones. I believe he is mistaken. Some of the larger stock exchanges in the world such as those in the United States operate a very effective and strong self-regulatory system.

A number of hon. Members have spoken about self-regulation and the changes that may be necessary to ensure investor protection which the Government view as the most important aspect. While I would welcome exchanging ideas about what might happen in this respect in the future, this is not the occasion, not least because of the present state of dynamism and change.

Only this afternoon I received a copy of Professor Gower's report which I shall read with great interest. I shall try to expedite the release of the report to hon. Members and others outside so that they can give us the benefit of their advice and opinions.

My hon. Friend the Member for Wolverhampton, South-West asked about the future of single capacity. Single capacity will stay until it becomes necessary to replace it. Although that may sound a little Irish, the statement of my right hon. Friend the former Secretary of State in July was that single capacity would stay for the time being but that that could not be a fixed position.

If the needs of the users of the market and members of the exchange require a different system, the Government should not impose a delay. The duty of the Government, as was said on Second Reading, is to be satisfied that the system of investor protection is adequate and appropriate.

Mr. Budgen

Do not the Government believe that self-regulation will be appropriate if the securities industry is formed into multipurpose institutions?

6.15 pm
Mr. Fletcher

Yes. The Government believe that self-regulation can be adapted from the present system and is the best way to protect the public in respect of financial institutions. The argument is: what is the frontier between the public interest for which the Government have a responsibility and the system of self-regulation? There is a point where these must meet. The Government must have some interest in the structure. Even in the United States, where there is an abundance of structures and legislation, the institutions have very strong self-regulatory systems. I hope that we can continue broadly as we are at present.

In considering Professor Gower's report we must examine what frontier there should be between the self-regulatory system and the Government, in this case the Department of Trade and Industry which fulfils the regulatory functions of the Government in the stock exchange.

I am glad that the hon. Member for Yeovil (Mr. Ashdown) favours the reforms that are taking place, despite the fact that he finds the Government's action disagreeable. I suggest that there is some contradiction in his arguments today and on Second Reading.

My hon. Friend the Member for Harrow, East rightly paid tribute to the effectiveness of the stock exchange in maintaining a central market and investor protection. In view of the current healthy discussion, we should never lose sight of the splendid record of the stock exchange in looking after the interests of investors and users of the exchange.

I remind my hon. Friend the Member for East Lindsey (Mr. Tapsell) that the agreement between the Government and the stock exchange says that single capacity will remain at least for the present. That was the difference I found between Ministers and the Director General of Fair Trading in discussion after the general election.

As my hon. Friend may remember, one of the conditions of the director general was to abolish single capacity, together with other changes he recommended. I do not criticise the director general for his point of view. I wish merely to illustrate to my hon. Friend that Ministers viewed the single capacity system as important during a period of transition. That system will remain, as will the 29.9 per cent. for outside investors and member firms, as long as the members of the stock exchange wish that to be the case. It is still managed by the council, which is responsible to the membership. My hon. Freiend may remember the overwhelming vote in the stock exchange council in favour of the Government's agreement.

Mr. Tapsell

The crux of the case is whether it is realistic for Ministers to think that they can abolish minimum commissions and retain single capacity.

Mr. Fletcher

That is not the view Ministers take In making an agreement with the stock exchange Ministers took the view that at least for the present single capacity should remain. We do not take a view on what system of investor protection should operate. We want to be satisfied that it is workable. If single capacity goes, it must be replaced by a system at least as effective as the present system.

Mr. Tapsell

I understand why the Minister says, as he did on Second Reading, that it is not the Government's responsibility to take these decisions. However, if the Government support a course of action such as the abolition of minimum commissions, with the inevitable consequence of putting the single capacity system under great strain, they cannot wash their hands of the inevitable consequence of a course of action for which they have taken responsibility.

Mr. Fletcher

I understand what my hon. Friend says. The Government believe that the abolition of these commissions is good and healthy for the competitiveness of the stock exchange, and we wish to see that. I believe it is not beyond the wit of man to have an investor protection system with minimum commissions abolished which is at least as satisfactory as the present single capacity system.

I travelled in North America to look at the systems there. I know a little about information technology and computers from the time when I used to work for a living. I was impressed by the systems used in the stock exchanges in North America.

The hon. Member for Stockton, South (Mr. Wrigglesworth) agreed that the spur of competition will expand the numbers of individual investors throughout the country. I formally endorse his view. The hon. Gentleman also suggested a new role for British Rail's redundant stations which I should love to see taken up. Never mind dull stockbrokers: let us have smart young ladies selling stocks and shares at Waterloo and Victoria stations. That will be much more attractive.

I was asked about the possibility of a reference to the Monopolies and Mergers Commission. It is not for me to speculate whether that can happen at some time in the future. However, to suggest this is to miss an important point. We have just released the stock exchange to become more competitive. Fundamental changes are taking place in the City. If we imposed an MMC reference on the stock exchange, that would again delay just the changes that most hon. Members wish to see. Whether it should happen in the future, I do not believe that this is the time for such a reference to be made.

My hon. Friend the Member for Dorset, South (Viscount Cranborne) also spoke of self-regulation, which is much favoured by the Government. Clearly new circumstances require the adaptation of the present self-regulatory systems, and this is a matter that the monitoring process—the arrangements between my Department, the Bank of England and the stock exchange—has very much in mind.

I also understand my hon. Friend's disappointment at my decision on the Association of Independent Investment Managers. I assure him that I gave the matter very careful consideration, right up to the last appeal that was made to me just the other day, before having reluctantly to make the decision that I considered to be necessary.

My hon. Friend the Member for Chichester (Mr. Nelson) mentioned the role of the Bank of England. I remind him that the agreement was made between the stock exchange and the Government, and the primary responsibility for monitoring implementation falls to the Government. However, we invited the Bank of England to work with the Department in monitoring the implementation and consequences of the reforms. It is essential for us to be fully informed of developments not only in the stock exchange but in securities activities generally in the City. Given the bank's close involvement with the stock exchange and wider concerns with City institutions, I believe that it is uniquely well placed to assist us.

Mr. Nelson

I do not wish to prolong the debate, but I have to put to my hon. Friend the point that I tried to make on Second Reading. Wither the Council for the Securities Industry? Many hon. Members on both sides of the Committee have questioned whether the Bank of England has a conflict of interests in this matter. Even if it does not, many of us question whether it is ideally suited to decide the criteria for the selection of people to go on to the stock exchange council and its appeal committee and be involved pro tern in the supervision of these markets. Even if we conceded all those points, what, then, is the rationale for the CSI, whose chairman and much of whose membership are appointed directly by the governor?

Mr. Fletcher

I understand my hon. Friend's point but, as I said a moment ago, the agreement was between the Government and the stock exchange. The Government could hardly delegate their responsibilities in this regard to a non-statutory body such as the CSI. That is why we have been working with and getting the assistance of the bank in wider matters affecting the City as a whole. But we have had advice from the CSI. There have been meetings between my Department and the CSI. Like almost everyone else, the CSI has not hesitated to comment on the changes taking place. We greatly welcome its advice.

The basic philosophy underlying the Bill is that it is not appropriate for the stock exchange to be subject to the Restrictive Trade Practices Act. If that premise is accepted, although I appreciate that not all hon. Members agree with it, it is totally inconsistent to say that on a specified date the exchange should revert to being subject to the Restrictive Trade Practices Act. What is more, if it is inappropriate now, it would be inappropriate in 1987, and that is my fundamental objection to the amendment.

The result of the amendment would be a damaging period of uncertainty. We have come out of that, and naturally we wish to avoid that. The exchange would be in much the same position as it was in the period before 27 July of this year. The exchange would have to operate in the knowledge that at some time in the last quarter of 1986 the question of the exemption would be reopened and possibly reversed. This would not help it to plan for the future with any great confidence. It is bound to be a damper on change, and I am sure that that is not what hon. Members wish to see.

Mr. Beaumont-Dark

Before the Minister moves to a conclusion, I am rather anxious that he should deal with the question about the control of the City. Have the Government a view and a policy, or will they simply say that anything goes and that anyone can buy it if anyone will sell it? Are the Government concerned that the City and its interests could be controlled from overseas, and would that please them?

Mr. Fletcher

Rather than try to look into the crystal ball, I suggest that if my hon. Friend studies the events and the changes which have taken place so far in the City he will discover that a couple of foreign bids and a couple of domestic bids have been made. We take the view that the City and our financial institutions are capable of looking after their own interests.

Mr. Beaumont-Dark

If my hon. Friend believes that, he will believe anything.

Mr. Fletcher

Obviously I have greater confidence in our financial institutions than my hon. Friend has. The only powers available to the Government, as to previous Governments, are those under the Fair Trading Act 1973 to intervene where a monopoly position has been created or where it it believed that the public interest would be affected.

I do not believe that there is any question of the City being taken over. The future of the City is very much in the hands of those who work and are shareholders in our City institutions. They will be bought out only if they sell out. They are able to choose between foreign investors and British investors if they decide that they want to take part in or form a larger financial conglomerate or some institution of that kind.

It is simply not realistic to think, as the amendment suggests, that we can switch on and off complex and expensive litigation of this kind like a tap. That is what the amendment would do. It would bring us to a point in 1987 where we found ourselves back very much in the position of the period up to July of this year.

The exemption of the stock exchange from the Restrictive Trade Practices Act simply puts it in the same position as—no better and no worse than—all the other bodies that have received an exemption. That being so, I invite my right hon. and hon. Friends to oppose the amendment.

Mr. Gould

We have had an interesting, though in some senses, a very long debate. It has taken up about 80 per cent. of the time available for the remaining stages of the Bill. I fear that the lengthy contributions to the debate, especially from Government supporters, have made it inevitable that we shall have to come back at 10 o'clock to complete the Bill's remaining stages.

I was puzzled by the apparently conflicting statements of the Minister. He assured me that the purpose of the agreement reached by his right hon. Friend and the stock exchange was to expedite change. Within a few minutes of saying that he was assuring the hon. Member for East Lindsey (Mr. Tapsell) that the purpose of the agreement was to keep in place the single capacity and the maximum permitted holdings rules. This has been a conflict in objective that has never been resolved by the Under-Secretary of State, his right hon. Friend the present Secretary of State or the right hon. Member for Hertsmere (Mr. Parkinson).

Nevertheless, I am encouraged by the response to my amendment if only because it has elicited, as did the Second Reading debate, a wide range of disparate views from Government supporters on the merits or demerits of this legislation. The most encouraging feature was that from almost every quarter, whatever the attitude taken to the Bill or to the agreement, there was support for the idea that some form of legislative framework was required. Almost every hon. Member who spoke in the debate agreed with that, save the Under-Secretary of State. While his opaque remarks sorely tempt me, simply as a measure of my disquiet, to press the amendment to a Division, I am more mindful than Conservative Members of the limited time available to the Committee and its interests.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.30 pm
Mr. Wrigglesworth

I beg to move amendment No. 3, in page 1, line 14, at end insert 'provided always that any such agreements under (a) and (b) above be made public'.

The First Deputy Chairman (Mr. Ernest Armstrong)

With this, it will be convenient to take amendment No. 8, in page 1, line 19, after 'above', insert 'and shall at the same time publish any such particulars, together with any documents relating to such particulars which he has filed with the Restrictive Practices Court;'.

Mr. Wrigglesworth

The Prime Minister in 1960 moved a private Members' Bill entitled the Public Bodies (Admissions to Meetings) Bill. Introducing the Bill, she said: Publicity is the greatest and most effective check against any arbitrary action."—[Official Report, 5 February 1960; Vol. 616, c. 1351.] I agree wholeheartedly with that principle. The fact that a deal was struck with the stock exchange behind closed doors has caused great offence. If the Minister will accept the amendments, thereby enabling the issue to be aired openly, and ensure that in future such matters are kept in the open and under the public gaze, those who have expressed their reservations about the Government's action will be greatly reassured.

Mr. Gould

I wish to speak to amendment No. 8. I endorse the remarks of the hon. Member for Stockton, South (Mr. Wrigglesworth), as the two amendments have almost the same objective. We are worried that the Bill is the product of a secret agreement. Not even the director general of Fair Trading was privy to the negotiations. The documents have never been published and we do not know what precisely is at stake. We are not able to judge the issues, we do not know how restrictive the practices are, how much they are against the public interest or the strength of the case prepared by the director general. It is important for us not to lose sight of these issues and to have some idea of the size of the concession made to the stock exchange in the Bill and by the agreement on which it rests. Not surprisingly, I marginally prefer the amendment tabled by my hon. Friends and mysef, if only because it strikes at one important class of documents. Although the statement of case by the stock exchange is widely available and was laid before the Restrictive Practices Court, the director general quite properly considers that the statement of case by the Office of Fair Trading should not be made public while litigation is in progress. As a result, we have not had the opportunity of a full and proper debate on the issues arising from the Bill because one-half of the case has not been available to hon. Members.

A notable factor was that the right hon. Member for Hertsmere (Mr. Parkinson) referred on Second Reading to the views of and documents prepared by the director general. Other hon. Members were unable to make such a reference since they had not seen the documents. The true purpose of the amendment is that we wish to see not only publication of the entries in the register but the documents filed before the court.

The object of the Bill is to expunge any record of the restrictive practices currently operated by the stock exchange. As all hon. Members agree that the practices might remain for the foreseeable future, or alter as a result of unpredictable forces and become even more dangerous, it is important that we have a clear picture of the present position. I hope that, when I move amendment No. 8, support is forthcoming from the Committee in that spirit and in the interests of open Government.

Mr. Ashdown

I shall try to keep my remarks as brief as possible in the interests of making progress. The Liberal party will support amendment No. 8 in the name of the hon. Member for Dagenham (Mr. Gould) should a Division take place. I echo the comments of my hon. Friend the Member for Stockton, South (Mr. Wrigglesworth) about the necessity of bringing matters into the open. As was said on Second Reading, there is the smell of the smoke-filled room about this agreement. Whatever Conservative Members may think as a result of the smell of the smoke-filled room and the secrecy of this matter, many suspicions remain in the minds of many hon. Members and many people outside. Anxiety has rightly been expressed about the fact that a Government w ho oppose restrictive practices now appear to be trying to preserve them.

The Government are in favour of market forces but now seem anxious to restrict their effect. The Government rightly complain about law breaking—for example, the disgraceful incident in Warrington last night—but in this instance they seem somewhat reluctant to follow the due processes that they have established. When the beneficiary in each case is a group of people who are regarded widely as friends of the Government and who contributed £350,000 to Conservative party funds, and when the person who made the agreement was not only the Secretary of State for Trade and Industry but also the chairman of the Conservative party—I do not make any accusations against the probity of the Conservative party or of any person—it is regrettable but natural that suspicions arise. It is important for the Government to be above such suspicion. I suspect, and I suggest to Conservative Members, that it is doubly important for the Government to be moving to a position analogous to that of Caesar's wife—above suspicion.

The present Attorney-General said on 15 June 1978: But the public interest also requires that there is no misuse of secrecy to cover up errors or bungling or to avoid criticism."—[Official Report, 15 June 1978; Vol. 951, c. 1258.] It is in that spirit that we wish to see details of the agreement brought into the open. We wish to know how many of the 173 stock exchange rules referred to the Office of Fair Trading were abolished by the Department of Trade and Industry's agreement with the stock exchange. My hon. Friend the Member for Stockton, South (Mr. Wrigglesworth) referred to the fact that Sir Nicholas Goodison is in favour of an open debate. We believe that the great weight of evidence that has accumulated and been placed before the Restrictive Practices Court will be lost.

We believe that it is important to have the open debate. Only by supporting amendment No. 8 can we ensure that an open debate will take place, establish what happened in those smoke-filled rooms and enable us to have access to and sight of such important evidence.

Mr. Alexander Fletcher

On amendment No. 8, the documents filed by the director general with the court consist of his answer to the stock exchange's statement of case and his further rejoinder. Proofs of evidence have not yet been exchanged. The documents filed by the director general would be meaningless without being read alongside the stock exchange's statement of case and its reply to the director general's answer. The documents were supplied by the stock exchange on the basis that they would be used for the court proceedings only.

Section 41 of the Restrictive Trade Practices Act 1976 provides criminal sanctions against the disclosure of such documents. For Parliament now to change the law to compel disclosure of information supplied on that basis would be the type of retrospective legislation that would affect and interfere with the rights of private individuals and about which hon. Members might justifiably complain.

Mr. Gould

Does the hon. Gentleman agree that the statement of case by the stock exchange is widely available and has been read by many hon. Members who have contributed to the debate and that some parity is desirable?

Mr. Fletcher

That is a matter for the stock exchange. It is not a Government document and we would not wish to legislate to make it compulsory to distribute the document.

On amendment No. 3, the internal rules of the stock exchange are publicly available, so there is no need to press for that. The Committee knows that as soon as there was a significant agreement between the Government and the stock exchange, the House was informed. I am confident that if there were any other agreement the House would again be informed, subject to the need to preserve commercial confidentiality for a time.

Mr. Wrigglesworth

I listened to the Minister's reply with interest. As my hon. Friend the Member for Yeovil (Mr. Ashdown) said, we accept the argument of the hon. Member for Dagenham (Mr. Gould) that amendment No. 8 pinpoints the documents and representations at the court. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed, No. 8, in page 1, line 19, after 'above', insert' 'and shall at the same time publish any such particulars, together with any documents relating to such particulars which he has filed with the Restrictive Practices Court;'.—[Mr. Gould.]

Question put, That the amendment be made:—

The Committee divided: Ayes 139, Noes 192.

Division No. 82] [6.40 pm
Alton, David Kennedy, Charles
Ashdown, Paddy Kirkwood, Archibald
Atkinson, N. (Tottenham) Lamond, James
Bagier, Gordon A. T. Leadbitter, Ted
Banks, Tony (Newham NW) Leighton, Ronald
Barron, Kevin Lewis, Ron (Carlisle)
Beckett, Mrs Margaret Lewis, Terence (Worsley)
Beggs, Roy Litherland, Robert
Bennett, A. (Dent'n & Red'sh) Lloyd, Tony (Stretford)
Bidwell, Sydney Lofthouse, Geoffrey
Blair, Anthony McCartney, Hugh
Boyes, Roland McDonald, Dr Oonagh
Bray, Dr Jeremy McKay, Allen (Penistone)
Brown, N. (N'c'tle-u-Tyne E) McKelvey, William
Brown, R. (N'c'tle-u-Tyne N) Maclennan, Robert
Bruce, Malcolm McWilliam, John
Caborn, Richard Madden, Max
Callaghan, Jim (Heyw'd & M) Maginnis, Ken
Campbell, Ian Marek, Dr John
Canavan, Dennis Marshall, David (Shettleston)
Carter-Jones, Lewis Martin, Michael
Cartwright, John Maxton, John
Clark, Dr David (S Shields) Meacher, Michael
Clay, Robert Meadowcroft, Michael
Cocks, Rt Hon M. (Bristol S.) Michie, William
Cohen, Harry Millan, Rt Hon Bruce
Coleman, Donald Mitchell, Austin (G't Grimsby)
Cook, Robin F. (Livingston) Molyneaux, Rt Hon James
Corbett, Robin Morris, Rt Hon A. (W'shawe)
Cowans, Harry Oakes, Rt Hon Gordon
Cunningham, Dr John O'Brien, William
Davies, Ronald (Caerphilly) O'Neill, Martin
Davis, Terry (B'ham, H'ge H'l) Orme, Rt Hon Stanley
Deakins, Eric Park, George
Dormand, Jack Parry, Robert
Douglas, Dick Patchett, Terry
Dubs, Alfred Penhaligon, David
Duffy, A. E. P. Powell, Rt Hon J. E. (S Down)
Dunwoody, Hon Mrs G. Powell, Raymond (Ogmore)
Eadie, Alex Prescott, John
Eastham, Ken Redmond, M.
Ellis, Raymond Richardson, Ms Jo
Evans, loan (Cynon Valley) Roberts, Ernest (Hackney N)
Evans, John (St. Helens N) Ross, Stephen (Isle of Wight)
Fatchett, Derek Ross, Wm. (Londonderry)
Faulds, Andrew Rowlands, Ted
Field, Frank (Birkenhead) Sheldon, Rt Hon R.
Fisher, Mark Shore, Rt Hon Peter
Flannery, Martin Silkin, Rt Hon J.
Foot, Rt Hon Michael Skinner, Dennis
Foster, Derek Smith, C. (Isl'ton S & F'bury)
Foulkes, George Smith, Rt Hon J. (M'kl'ds E)
Freud, Clement Smyth, Rev W. M. (Belfast S)
George, Bruce Snape, Peter
Godman, Dr Norman Spearing, Nigel
Gould, Bryan Steel, Rt Hon David
Hamilton, James (M'well N) Thomas, Dr R. (Carmarthen)
Hamilton, W. W. (Central Fife) Thompson, J. (Wansbeck)
Harrison, Rt Hon Walter Tinn, James
Healey, Rt Hon Denis Wallace, James
Heffer, Eric S. Wardell, Gareth (Gower)
Hogg, N. (C'nauld & Kilsyth) White, James
Holland, Stuart (Vauxhall) Wigley, Dafydd
Home Robertson, John Wilson, Gordon
Hughes, Mark (Durham) Winnick, David
Hughes, Roy (Newport East) Woodall, Alec
Hughes, Sean (Knowsley S) Wrigglesworth, Ian
Hughes, Simon (Southwark)
Jenkins, Rt Hon Roy (Hillh'd) Tellers for the Ayes:
Johnston, Russell Mr. Don Dixon and Mr. Frank Haynes.
Jones, Barry (Alyn & Deeside)
Kaufman, Rt Hon Gerald
Adley, Robert Harris, David
Alexander, Richard Harvey, Robert
Amess, David Hawksley, Warren
Arnold, Tom Hayes, J.
Ashby, David Heathcoat-Amory, David
Aspinwall, Jack Heddle, John
Baker, Nicholas (N Dorset) Henderson, Barry
Baldry, Anthony Hickmet, Richard
Beaumont-Dark, Anthony Hicks, Robert
Bellingham, Henry Hind, Kenneth
Benyon, William Hirst, Michael
Berry, Sir Anthony Hogg, Hon Douglas (Gr'th'm)
Best, Keith Holland, Sir Philip (Gedling)
Body, Richard Holt, Richard
Boscawen, Hon Robert Hooson, Tom
Bowden, A. (Brighton K'to'n) Hordern, Peter
Bowden, Gerald (Dulwich) Howarth, Alan (Stratf'd-on-A)
Brandon-Bravo, Martin Howarth, Gerald (Cannock)
Bright, Graham Hubbard-Miles, Peter
Brinton, Tim Hunt, David (Wirral)
Brown, M. (Brigg & Cl'thpes) Hunt, John (Ravensbourne)
Bruinvels, Peter Hunter, Andrew
Bryan, Sir Paul Jackson, Robert
Bulmer, Esmond Jones, Gwilym (Cardiff N)
Burt, Alistair Jones, Robert (W Herts)
Butterfill, John Kellett-Bowman, Mrs Elaine
Carlisle, John (N Luton) Key, Robert
Carttiss, Michael King, Roger (B'ham N'field)
Chapman, Sydney Knight, Gregory (Derby N)
Chope, Christopher Knowles, Michael
Clark, Hon A. (Plym'th S'n) Lang, Ian
Clark, Dr Michael (Rochford) Lawler, Geoffrey
Clark, Sir W. (Croydon S) Leigh, Edward (Gainsbor'gh)
Clarke Kenneth (Rushcliffe) Lennox-Boyd, Hon Mark
Cockeram, Eric Lester, Jim
Colvin, Michael Lightbown, David
Conway, Derek Lilley, Peter
Coombs, Simon Lloyd, Peter, (Fareham)
Cope, John Lord, Michael
Couchman, James Lyell, Nicholas
Crouch, David McCurley, Mrs Anna
Currie, Mrs Edwina MacKay, Andrew (Berkshire)
Dickens, Geoffrey MacKay, John (Argyll & Bute)
Dicks, T. Maclean, David John.
Dover, Denshore McNair-Wilson, M. (N'bury)
Durant, Tony McQuarrie, Albert
Dykes, Hugh Major, John
Edwards, Rt Hon N. (P'broke) Malins, Humfrey
Evennett, David Malone, Gerald
Eyre, Reginald Maples, John
Fallon, Michael Marlow, Antony
Favell, Anthony Mather, Carol
Fenner, Mrs Peggy Mawhinney, Dr Brian
Finsberg, Geoffrey Maxwell-Hyslop, Robin
Fletcher, Alexander Mayhew, Sir Patrick
Fookes, Miss Janet Mellor, David
Forsyth, Michael (Stirling) Merchant, Piers
Fowler, Rt Hon Norman Miller, Hal (B'grove)
Fox, Marcus Mills, Iain (Meriden)
Franks, Cecil Mills, Sir Peter (West Devon)
Freeman, Roger Miscampbell, Norman
Fry, Peter Mitchell, David (NW Hants)
Gale, Roger Monro, Sir Hector
Galley, Roy Montgomery, Fergus
Gardner, Sir Edward (Fylde) Moore, John
Glyn, Dr Alan Morrison, Hon P. (Chester)
Goodhart, Sir Philip Moynihan, Hon C.
Goodlad, Alastair Neale, Gerrard
Gower, Sir Raymond Needham, Richard
Greenway, Harry Nelson, Anthony
Gregory, Conal Newton, Tony
Griffiths, E. (B'y St Edm'ds) Nicholls, Patrick
Griffiths, Peter (Portsm'th N) Normanton, Tom
Grist, Ian Norris, Steven
Ground, Patrick Ottaway, Richard
Hamilton, Hon A. (Epsom) Page, Richard (Herts SW)
Hanley, Jeremy Parris, Matthew
Hannam, John Patten, Christopher (Bath)
Hargreaves, Kenneth Pawsey, James
Peacock, Mrs Elizabeth Stewart, Allan (Eastwood)
Powell, William (Corby) Stewart, Andrew (Sherwood)
Powley, John Tebbit, Rt Hon Norman
Price, Sir David Thomas, Rt Hon Peter
Prior, Rt Hon James Thompson, Donald (Calder V)
Raffan, Keith Thorne, Neil (Ilford S)
Renton, Tim Tracey, Richard
Rhodes James, Robert Twinn, Dr Ian
Ridsdale, Sir Julian Viggers, Peter
Sackville, Hon Thomas Wakeham, Rt Hon John
Sainsbury, Hon Timothy Walden, George
Sayeed, Jonathan Warren, Kenneth
Silvester, Fred Wells, John (Maidstone)
Sims, Roger Wheeler, John
Skeet, T. H. H. Winterton, Nicholas
Soames, Hon Nicholas
Spence, John Tellers for the Noes:
Spicer, Michael (S Worcs) Mr. Tristan Garel-Jones and Mr. Michael Neubert.
Stevens, Lewis (Nuneaton)

Question accordingly negatived.

Clauses 1 and 2 ordered to stand part of the Bill.

Bill reported, without amendment.

Motion made, and Question proposed, That the Bill be now read the Third time.


Mr. Wrigglesworth

It has been said during the proceedings on the Bill that the reference to the Restrictive Practices Court was restricting the stock exchange from making the changes that were necessary to bring it within the requirements of the Director General of Fair Trading. I and my right hon. and hon. Friends dispute that suggestion. There is no reason why the stock exchange should not have amended its rules and moved in the direction that it has now done before the court case came up.

We are not satisfied with the provisions in the Bill for the supervision of the operations of the stock exchange. We tabled an amendment to introduce a statutory council for the securities industry. In the interests of promoting competition and protecting investors, we believe that there should be a statutory body to supervise the stock exchange. The Bank of England is the biggest customer of the stock exchange, yet it is responsible for supervising the stock exchange. That cannot be right, and it is not in the interests of other investors that the biggest customer of the stock exchange should also be responsible for its supervision.

We want gilts to be sold by auction, so that the Government can save money on selling their debt much more efficiently and much more cheaply than they have done in the past, and probably will do under the future system.

Our principal objection to the Bill, and the reason why we shall vote against its Third Reading, is that the Government have done a deal behind closed doors. There are grave suspicions of political skulduggery because of contributions by the Conservative party. As I said on Second Reading, this is a dreadful action by the Government in intervening in a legal process. For those reasons, we shall oppose the Bill's Third Reading this evening.

Mr. Gould

The debate takes place at the very time when the Government are insisting in a different sphere, for doctrinaire political reasons, that statutory intervention is the only way in which to regulate the affairs of voluntary organisations, and are insisting, too, that litigation is the most appropriate way to resolve complex and difficult issues in industrial relations.

Today we see the consequences of that rigid reliance on legislation and litigation. That is the painful irony at the very time when the Government, in the securities market, are intent on passing the Bill which covers activities which would be much more appropriately dealt with by statute and which have been dealt with by an Act which has been supported by successive Governments for many years. The Bill removes from the Restrictive Practices Court, where there is a body of expertise, the litigation that should be put to that court.

I do not wish to repeat my Second Reading speech, but it is hard to reconcile the Government's argument that the Restrictive Practices Court is not competent to deal with the stock exchange with their argument that the ordinary courts are the only proper means of resolving delicate industrial relations issues.

The Bill leaves a sense of unease, even among Government supporters and on the stock exchange. Do the Government not have a view about the proper regulation of such an important element in financial policy? Do they have no view about single capacity, foreign ownership, and the avoidance of a conflict of interests? We are unhappy with the Bill and with the proceedings today, because no amendment has been accepted by the Government. We believe that it is unsatisfactory to leave the situation unresolved, with the stock exchange in limbo, at the mercy of unpredictable forces for change. It is a dereliction of duty by the Government, and it leaves the suspicion that they have been motivated more by political interests than by a proper concern for one of our country's major institutions.

Mr. Alexander Fletcher

The Government have views on all the matters which the hon. Member for Dagenham (Mr. Gould) has mentioned, but they sense that the House now wishes to reach a conclusion on the Bill. I therefore commend the Bill to the House.

Question put, That the Bill be now read the Third time:

The House divided: Ayes 190, Noes 130.

Division No. 83] [6.53 pm
Adley, Robert Carttiss, Michael
Alexander, Richard Chapman, Sydney
Amess, David Chope, Christopher
Arnold, Tom Clark, Hon A. (Plym'th S'n)
Aspinwall, Jack Clark, Dr Michael (Rochford)
Baker, Nicholas (N Dorset) Clark, Sir W. (Croydon S)
Baldry, Anthony Clarke Kenneth (Rushcliffe)
Beaumont-Dark, Anthony Cockeram, Eric
Bellingham, Henry Colvin, Michael
Benyon, William Conway, Derek
Berry, Sir Anthony Coombs, Simon
Best, Keith Cope, John
Body, Richard Couchman, James
Boscawen, Hon Robert Crouch, David
Bowden, A. (Brighton K'to'n) Currie, Mrs Edwina
Bowden, Gerald (Dulwich) Dickens, Geoffrey
Brandon-Bravo, Martin Dicks, T.
Bright, Graham Dorrell, Stephen
Brinton, Tim Dover, Denshore
Brown, M. (Brigg & Cl'thpes) Durant, Tony
Bruinvels, Peter Dykes, Hugh
Bryan, Sir Paul Edwards, Rt Hon N. (P'broke)
Bulmer, Esmond Evennett, David
Burt, Alistair Eyre, Reginald
Butcher, John Fallon, Michael
Butterfill, John Favell, Anthony
Carlisle, John (N Luton) Fenner, Mrs Peggy
Finsberg, Geoffrey McNair-Wilson, M. (N'bury)
Fletcher, Alexander McQuarrie, Albert
Fookes, Miss Janet Major, John
Forsyth, Michael (Stirling) Malins, Humfrey
Fowler, Rt Hon Norman Malone, Gerald
Fox, Marcus Maples, John
Franks, Cecil Marlow, Antony
Freeman, Roger Mawhinney, Dr Brian
Fry, Peter Maxwell-Hyslop, Robin
Gale, Roger Mayhew, Sir Patrick
Galley, Roy Merchant, Piers
Gardner, Sir Edward (Fylde) Miller, Hal (B'grove)
Garel-Jones, Tristan Mills, Iain (Meriden)
Glyn, Dr Alan Mills, Sir Peter (West Devon)
Goodlad, Alastair Miscampbell, Norman
Gower, Sir Raymond Mitchell, David (NW Hants)
Greenway, Harry Monro, Sir Hector
Gregory, Conal Montgomery, Fergus
Griffiths, E. (B'y St Edm'ds) Moore, John
Griffiths, Peter (Portsm'th N) Morrison, Hon P. (Chester)
Grist, Ian Moynihan, Hon C.
Ground, Patrick Neale, Gerrard
Hamilton, Hon A. (Epsom) Needham, Richard
Hanley, Jeremy Nelson, Anthony
Hannam, John Neubert, Michael
Hargreaves, Kenneth Newton, Tony
Harris, David Nicholls, Patrick
Harvey, Robert Normanton, Tom
Hawksley, Warren Norris, Steven
Hayes, J. Ottaway, Richard
Heathcoat-Amory, David Page, Richard (Herts SW)
Heddle, John Parris, Matthew
Henderson, Barry Patten, Christopher (Bath)
Hickmet, Richard Pawsey, James
Hicks, Robert Peacock, Mrs Elizabeth
Hind, Kenneth Powell, William (Corby)
Hirst, Michael Powley, John
Holland, Sir Philip (Gedling) Price, Sir David
Holt, Richard Prior, Rt Hon James
Hooson, Tom Proctor, K. Harvey
Hordern, Peter Raffan, Keith
Howarth, Alan (Stratf'd-on-A) Renton, Tim
Howarth, Gerald (Cannock) Rhodes James, Robert
Hubbard-Miles, Peter Ridsdale, Sir Julian
Hunt, David (Wirral) Sackville, Hon Thomas
Hunt, John (Ravensbourne) Sayeed, Jonathan
Hunter, Andrew Silvester, Fred
Jackson, Robert Skeet, T. H. H.
Jones, Gwilym (Cardiff N) Soames, Hon Nicholas
Jones, Robert (W Herts) Spence, John
Kellett-Bowman, Mrs Elaine Spicer, Michael (S Worcs)
Key, Robert Stevens, Lewis (Nuneaton)
King, Roger (B'ham N'field) Stewart, Allan (Eastwood)
Knight, Gregory (Derby N) Stewart, Andrew (Sherwood)
Knowles, Michael Tebbit, Rt Hon Norman
Lang, Ian Thomas, Rt Hon Peter
Lawler, Geoffrey Thompson, Donald (Calder V)
Leadbitter, Ted Thorne, Neil (Ilford S)
Leigh, Edward (Gainsbor'gh) Tracey, Richard
Lennox-Boyd, Hon Mark Twinn, Dr Ian
Lester, Jim Viggers, Peter
Lightbown, David Wakeham, Rt Hon John
Lilley, Peter Walden, George
Lloyd, Peter, (Fareham) Warren, Kenneth
Lord, Michael Wells, John (Maidstone)
Lyell, Nicholas Winterton, Nicholas
McCurley, Mrs Anna
MacKay, Andrew (Berkshire) Tellers for the Ayes:
MacKay, John (Argyll & Bute) Mr. Douglas Hogg and Mr. Tim Sainsbury.
Maclean, David John.
Alton, David Bennett, A. (Dent'n & Red'sh)
Ashdown, Paddy Bidwell, Sydney
Atkinson, N. (Tottenham) Blair, Anthony
Bagier, Gordon A. T. Boyes, Roland
Banks, Tony (Newham NW) Bray, Dr Jeremy
Barron, Kevin Brown, N. (N'c'tle-u-Tyne E)
Beckett, Mrs Margaret Brown, R. (N'c'tle-u-Tyne N)
Beggs, Roy Bruce, Malcolm
Caborn, Richard Lloyd, Tony (Stretford)
Callaghan, Jim (Heyw'd & M) Lofthouse, Geoffrey
Campbell, Ian McCartney, Hugh
Canavan, Dennis McDonald, Dr Oonagh
Carter-Jones, Lewis McKay, Allen (Penistone)
Cartwright, John McKelvey, William
Clark, Dr David (S Shields) Maclennan, Robert
Clay, Robert McWilliam, John
Cocks, Rt Hon M. (Bristol S.) Madden, Max
Cohen, Harry Maginnis, Ken
Coleman, Donald Marek, Dr John
Cook, Robin F. (Livingston) Marshall, David (Shettleston)
Corbett, Robin Martin, Michael
Cowans, Harry Maxton, John
Cunningham, Dr John Meacher, Michael
Davies, Ronald (Caerphilly) Meadowcroft, Michael
Davis, Terry (B'ham, H'ge H'l) Michie, William
Deakins, Eric Millan, Rt Hon Bruce
Dormand, Jack Mitchell, Austin (G't Grimsby)
Douglas, Dick Molyneaux, Rt Hon James
Dubs, Alfred Morris, Rt Hon A. (W'shawe)
Duffy, A. E. P. Oakes, Rt Hon Gordon
Dunwoody, Hon Mrs G. Orme, Rt Hon Stanley
Eastham, Ken Park, George
Ellis, Raymond Parry, Robert
Evans, loan (Cynon Valley) Patchett, Terry
Fatchett, Derek Penhaligon, David
Faulds, Andrew Powell, Rt Hon J. E. (S Down)
Field, Frank (Birkenhead) Powell, Raymond (Ogmore)
Fisher, Mark Prescott, John
Flannery, Martin Redmond, M.
Foot, Rt Hon Michael Richardson, Ms Jo
Foulkes, George Roberts, Ernest (Hackney N)
Freud, Clement Ross, Stephen (Isle of Wight)
George, Bruce Ross, Wm. (Londonderry)
Godman, Dr Norman Rowlands, Ted
Gould, Bryan Sheldon, Rt Hon R.
Hamilton, James (M'well N) Shore, Rt Hon Peter
Hamilton, W. W. (Central Fife) Silkin, Rt Hon J.
Harrison, Rt Hon Walter Skinner, Dennis
Heffer, Eric S. Smith, C. (Isl'ton S & F'bury)
Hogg, N. (C'nauld & Kilsyth) Smyth, Rev W. M. (Belfast S)
Holland, Stuart (Vauxhall) Snape, Peter
Home Robertson, John Spearing, Nigel
Hughes, Mark (Durham) Steel, Rt Hon David
Hughes, Roy (Newport East) Stewart, Rt Hon D. (W Isles)
Hughes, Sean (Knowsley S) Thomas, Dr R. (Carmarthen)
Hughes, Simon (Southwark) Thompson, J. (Wansbeck)
Jenkins, Rt Hon Roy (Hillh'd) Tinn, James
Johnston, Russell Wallace, James
Jones, Barry (Alyn & Deeside) Wardell, Gareth (Gower)
Kennedy, Charles White, James
Kirkwood, Archibald Wilson, Gordon
Lamond, James Winnick, David
Leadbitter, Ted Wrigglesworth, Ian
Leighton, Ronald
Lewis, Ron (Carlisle) Tellers for the Noes:
Lewis, Terence (Worsley) Mr. Frank Haynes and Mr. Don Dixon.
Litherland, Robert

Question accordingly agreed to.

Bill read the Third time and passed.

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