§ The Financial Secretary to the Treasury (Mr. John Moore)
With permission, Mr. Speaker, I will make a statement.
As part of their continuing programme of privatisation, the Government are now considering disposal of a further tranche of their shareholding in Cable and Wireless plc during the current financial year.
The Government renounced control over the company in October 1981 following the sale to the public of some 133 million shares. The Government's shareholding has since been diluted to some 45 per cent. of the company's issued equity as a result of an issue of new shares by the company in March 1983.
The Government have in mind a sale of approximately half their present shareholding through an offer for sale to the public. The precise timing and amount will be subject to market conditions. Parliamentary approval for the expenditure will be sought in a new Vote which will be presented to the House in due course. Pending that approval, the necessary costs of preparation for the sale will be met by repayable advances from the Contingencies Fund.
The directors of Cable and Wireless are recommending shareholders to agree to the issue to the Government of a special share which will enable the Government, irrespective of their own shareholding, to ensure the continuance of those provisions of the company's articles of association that limit the shareholdings of individuals and parties acting in concert to not more than 15 per cent. of the issued ordinary share capital. The Government will vote their shareholding in favour of this proposition.
§ Mr. Peter Shore (Bethnal Green and Stepney)
This is yet another sorry episode in the unfolding saga of public asset stripping which the Opposition call privatisation, and the use of the public capital so released solely to meet revenue requirements. A number of questions arise from this brief and inadequate statement.
Just how much money are the Government attempting to raise by the sale of this further tranche of shares? What method of share disposal will the Minister adopt to prevent a repetition of the disgusting profit making that we witnessed the last time the major tranche of shares was sold? Will he tell us what loss of income and profit the Government have already experienced on an annual basis as a result of the disposal already of about 70 per cent. of this remarkably successful and profit-earning public enterprise which they started to demolish about two and a half years ago?
What measures does the Financial Secretary propose to take to prevent this valuable, dynamic and to some extent strategic asset from falling into foreign ownership and control? What percentage of the shares are already in foreign control and how does this special share to which the statement refers guarantee against foreign ownership as distinct from the ownership by a single firm or enterprise of more than 15 per cent.? The last major statement was from the Minister for Information Technology, who is sitting next to the Financial Secretary. The Minister then told us that it was perfectly all right to sell up to half the shares because it would still leave the 434 Government the overwhelmingly major shareholder. That will not be the case now—far from it. The Minister told us:As for foreign shareholdings, there are provisions in the articles of association that are of some value, but I shall consider that matter again."—[Official Report, 9 March 1981; Vol. 1000, c. 624.]What consideration has been given to this matter? What guarantees can the Financial Secretary give that this major British asset will not be lost not only to the public Exchequer but to British national ownership?
§ Mr. Moore
It is unfortunate that the right lion. Gentleman allowed his words to ignore the reality in describing what is an outstandingly successful company before, and more especially since, privatisation. It might have been suitable to have started his remarks with some reference to the employees, to the company and to their success in the market places of the world. The right hon. Gentleman might have wanted to draw the attention of the House to the fact that since the company was privatised its turnover has increased by 38 per cent. and its profits have increased two and a half times. The nation will benefit by the inordinate additional tax revenue from the increase of profits. I shall be pleased to give additional details later. The profits after tax have gone up from £35.5 million in 1979 to £108.3 million in 1983. In the 1983 fiscal year, which ends in March, the Exchequer has gained £48.4 million. In the fiscal year ending in spring 1982 the Exchequer gained £37.5 million. I shall give him the additional figures of the benefits to the nation of this successful company.
I am somewhat bemused by the right hon. Gentleman's question about the capital requirement. He should be reminded of the statement of his right hon. Friend the Member for Leeds, East (Mr. Healey) on 15 December 1976 when, in relation to the sale of BP shares and the usage of the money, he said:There is one further step which we propose to take to reduce the public sector borrowing requirement in 1977–78."—[Official Report, 15 December 1976; Vol. 922, c. 1532.]In the debate on the Budget statement the right hon. Member for Leeds, East said:This sale will go ahead in 1977–78, and in framing my Budget proposals I have made full use of the room for manoeuvre which it will give me."—[Official Report, 29 March 1977; Vol. 929, c. 262.]From where does the right hon. Member for Bethnal Green and Stepney (Mr. Shore) expect the Exchequer to receive money? I assume it is from increased taxes or increased borrowing, as opposed to the actions that his right hon. Friend took when in government.
The right hon. Gentleman also referred to the protections in relation to foreign ownership. It might interest the House to know that already 80 per cent. of the company's employees are foreigners. When the offer for sale originally took place, foreigners purchased shares.
The right hon. Member for Bethnal Green and Stepney asked about control. The controlling mechanisms to which my hon. Friend the Minister for Information Technology referred in September 1981 in relation to the nature of the company's articles of association will be replaced, providing of course the special share is approved. That will give exactly the same protection. If it will be of use to the right hon. Gentleman, I shall be happy to remind him of those protections.
The company has benefited and grown from its opportunities to be free from, as my hon. Friend the 435 Minister for Information Technology somewhat unfelicitously described it, the dead hand of the Treasury. In my present role I am not sure that I can subscribe completely to that remark.
§ Mr. Shore
Will the Financial Secretary answer my first and most important question? How much money is he seeking to raise in the further asset-stripping of this important enterprise? Secondly, will he make plain what is precisely the protection against foreign domination and ownership as a result of the further disposal of so large a number of shares?
§ Mr. Moore
On the amount of money, I cannot of course be specific even about the target because it would depend on the price of the sale at the time.
I also neglected to answer the right hon. Gentleman's question about the method of sale. The method of sale has not been decided at the moment. I remind the right hon. Gentleman of the recent success of the tender method in the BP sale. I remind him of what the existing articles provide:Apart from Her Majesty's Government, no individual shareholder or group acting in concert may own or control more than 15 per cent. of the votes exercisable at general meetings of the company. The directors have power to require the owners' holdings that contravene the Article to sell the excess shares, or to sell such shares themselves on behalf of the owners.Should the special meeting approve the recommendations of the shareholders including the shares of the Government, the special share, if then approved, will confer, irrespective of the Government's shareholdings, precisely the powers that protect from foreign control and changes in the articles of association.
§ Mr. Tim Renton (Mid-Sussex)
Is it not only since privatisation that Cable and Wireless has changed from a slightly sleepy giant into just the type of dynamic enterprise about which the right hon. Member for Bethnal Green and Stepney (Mr. Shore) waxes so eloquent? Should not the success of the National Freight Corporation and Cable and Wireless since privatisation encourage employees in other nationalised industries such as British Telecom to seek similar freedoms for their own enterprises?
§ Mr. Moore
I could not endorse more my hon. Friend's remarks. It is especially interesting that since privatisation there has been no indication from the trade unions representing the employees of this now successful privatised company that they find relationships difficult. That is not surprising because most of the employees, happily, are now shareholders.
§ Mr. Richard Wainwright (Colne Valley)
Is it not a failure of stewardship by the Government that they should become committed to this sale of a public asset before the end of the year regardless of what may happen to values in a rather volatile market? Will the Financial Secretary explain why this sale should be precipitated by unexpected delays in privatising entirely different corporations?
§ Mr. Moore
The hon. Gentleman is drawing a series of completely incorrect conclusions. I am sorry that he cannot endorse the opportunities for people in the wider market place. I am sorry that he cannot see the opportunities within privatisation for the employees, let alone for consumers. No indication was given that this was 436 a precipitate sale. It is part of the Government's programme of privatisation. It is part of the process that is producing successful companies such as Cable and Wireless. I would not deny its previous success, but it might have been useful for the Opposition to mention its ability to grow even faster when privatised and to secure orders for its suppliers—critical suppliers such as STC, GEC, Racal, Plessey and Taylor Woodrow, companies which revel in the orders that a more successful British company can produce.
§ Mr. Michael Grylls (Surrey, North-West)
As experience shows that generally—indeed, almost without exception—the Government ownership of industries has done those industries nothing but harm, should that not encourage us to speed up allowing many of the remaining nationalised industries to have the advantage of private capital, rather than depending on the Government?
§ Mr. Moore
I look forward to the continued support of my hon. Friend and all my hon. Friends in the opportunities that can be given to growing British industries when they are able to tap the private market place and unleash the talents of all managements and employees through our privatisation programme.
§ Mrs. M. Beckett (Derby, South)
In view of the housewifely exhortations to which the Prime Minister regularly treats the House and the country, will the Minister, despite his previous remarks, tell us in all candour what he would think of a housewife who continually, over a period of years, sold the family assets to finance the housekeeping budget? Will he reassure the House that the Treasury has some idea of how it will keep the finances of the country going when it has ceased having anything left to sell?
§ Mr. Moore
I do not share the hon. Lady's deprecating attitude towards housewives in our country, and I find it peculiarly sexist. I should have thought that a nation which had shown, by the unleashing of the energies of employees—not simply in companies like Cable and Wireless but, for example, in the National Freight Corporation—that increased opportunities for wealth can be so created, that would be welcomed by all. It would be extremely pleasant to hear somebody from the Opposition Benches suggest that the employees in this company who have benefited from the success are to be commended.
§ Mr. Barry Henderson (Fife, North-East)
As my hon. Friend does not like the expression "dead hand of the Treasury", will he confirm that Cable and Wireless will now be released from the constraints of the public sector borrowing requirement, which might have resulted in the company not being able to invest as much as it could, and perhaps should, in its role as a major company exporting British products?
§ Mr. Moore
I should have said that I was not so much concerned with the dead hand of the Treasury; I was being somewhat particular and personal. I meant the dead hand of the nature of bureaucracy on the private enterprise spirit of a corporation. The company has been freed from that control since privatisation in September 1981. That, we believe, is a significant feature of the way in which it has exploded in terms of its turnover and profit.
§ Mr. Harry Ewing (Falkirk, East)
Will the Minister accept that, although he quoted the articles, they refer only 437 to groups acting in concert and that it is entirely possible for the control of Cable and Wireless to pass into foreign hands? Will he explain why, if Cable and Wireless is now so profitable, to use his words, and is providing an increasing and continuing income to the Treasury, he should be so insistent on selling off an asset that is providing such a continuing income to the Treasury?
May I press the hon. Gentleman about the Department of Industry team of civil servants who have been in Japan of late? We have an internal document to prove that a team from that Department has been in Japan trawling the Japanese money markets to encourage them to buy British Telecom when BT is privatised in October of next year. May we have an assurance that that team has not been trawling the Japanese money markets in order to buy the shares in Cable and Wireless which the Minister is about to float?
§ Mr. Moore
The Minister for Information and Technology is present and does not signify that he understood the hon. Gentleman's last remarks, but I shall try to pursue the matter. The first point he raised related to the control powers under the special share. That has not changed the nature of the protection that is already in existence; the proposal would maintain the same powers, which are regarded as sufficient by the Government.
On the question about the sale of further shares, I should have thought that it was up to the Opposition to show why the state should continue to own a minority percentage in a company of this kind without needing additional control powers. I should have thought that the Opposition would like to see the money released so that, for example, we might be better able to pay for services such as the National Health Service.
§ Mr. Tim Smith (Beaconsfield)
Is it not the case that all those associated with Cable and Wireless—not just the shareholders but the employees, creditors and customers—have benefited from the excellent performance to which my hon. Friend referred, so making his further statement very welcome indeed?
§ Mr. Ian Wrigglesworth (Stockton, South)
As one who saw the operation of Cable and Wireless from inside the Post Office and subsequently since privatisation, I join the Minister in paying tribute to the work which that company and its staff have done.
Will the hon. Gentleman explain the Government's motives more fully? As it is clear that the measure which he has announced today will not increase competiton in the telecommunications industry and as it will not any further remove the dead hand of the Treasury—because privatisation has already taken place—what is the true motive of the Government in selling more of the excellent investment in this stock? Is it not selling the silver to pay the household bills, as the hon. Member for Derby, South (Mrs. Beckett) said? If this money is to be raised by the Government, will the Minister give an assurance that it will be further invested in capital assets of the sort that are now being employed in Cable and Wireless?
§ Mr. Moore
I will endeavour to answer the question if those slouching below the Gangway on the Opposition Benches will be patient.
The hon. Member for Stockton, South (Mr. Wrigglesworth) may then want to consider that, while Government must spend money, they must also raise it, and the inevitable choices are between printing, borrowing and taxing. I should have thought that he would want to see a successful and free society, as opposed to the right hon. Member for Plymouth, Devonport (Dr. Owen), who mouths nonsensical phrases he learnt as a Socialist, such as "asset stripping". In creating for the employees and customers a vibrant and exciting new company. the hon. Gentleman should want us to give the public an opportunity to own even more shares in such an institution. I would have hoped that in his new-found freedom from Socialism, if that is what it was, the right hon. Member for Devonport might have joined us in this, but obviously he has not.
§ Mr. John Carlisle (Luton, North)
In the past in such sales the Government have always attached great importance to the wish of employees to own shares in their company. What provision is the Minister making in this sale for that to happen?
§ Mr. Tim Rathbone (Lewes)
Will my hon. Friend explain, in view of the protections to which he referred, why the Government are not planning to sell all their holding?
§ Mr. Moore
The Government must concern themselves, when it comes to the time, with the market place, the necessary needs of other aspects of the market place, the needs of their overall funding programme, the needs of the company and the position of the company. The Government will be taking all those aspects into account when it comes to the precise amount of the sale.
§ Mr. Tim Eggar (Enfield, North)
In view of the obvious success of the denationalisation programmes of the previous and present Government, will my hon. Friend confirm once and for all and categorically that the Government will give top and overriding priority to further denationalisation measures of companies that at present are wholly owned by the State and will give top priority to selling off minority stakes in existing companies?
§ Mr. Moore
I can absolutely and unequivocally confirm to my hon. Friend that we shall continue to identify and prepare other potential candidates for privatisation, as this is clearly a key plank in the Government's programme of allowing competition to flow in our country and giving opportunities to the consumer. Obviously we shall continue to follow that programme.
§ Mr. Shore
This company has obviously been a major success as a public enterprise and it continues to be successful under its present private arrangement.
439 Surely the Minister can answer two specific points. First, he attaches great importance to employee involvement. What percentage of the present private ownership of Cable and Wireless is owned by the employees? Secondly, he must be able to give, if only for public sector borrowing requirement purposes, a broad order of magnitude of the sum of money which he intends to raise. If he cannot give that, there is no possible means by which the House can judge whether this is a sensible arrangement, even in the Government's own terms.
§ Mr. Moore
I cannot answer the right hon. Gentleman's first question specifically because the share position changes regularly, but I shall ensure that he has the figure. I could, of course, give a figure. I assumed that those who participate in these debates would be aware of the current price per share, which is 260p. If the Government were looking to sell up to half of their current 45 per cent. holding, and if we were to assume that there would be about 100 million shares, we would be talking about £260 million in gross proceeds. I reiterate that the specific size and the timing of the operation will depend on market conditions.