I beg to move Amendment No. 46, in page 6, line 11 at end insert:
(2) The Secretary of State shall only give such consent where he is satisfied that such subscription for or acquisition of securities of a corporate body satisfies one of the following conditions, that is to say—
The House will recall that on Second Reading hon. Members expressed concern at the widening of the clause, giving the Housing Corporation the power, with the consent of the Secretary of State, to acquire shares in any company quoted on the Stock Exchange. A number of hon. Members felt that this power was far too wide, and in respect to the views expressed on Second Reading an amendment was moved in Committee which proposed to limit the power of the Secretary of State to give consent to such cases
where he was satisfied that the need to acquire the company was to facilitate the acquisition of land or buildings by the corporation in order to provide residential accommodation.
In our minds at the time was the knowledge that frequently companies holding land or buildings find it more convenient to sell the shares of their company rather than sell off the land and keep the company in being in the hands of the original shareholders. This is because one of the quirks of our tax law, whereby the sale of the property and the retention of the shares by the shareholders incurs a great deal more tax for the ultimate beneficiaries to pay than where the shares of the company itself are sold off entirely to someone wishing to acquire the land which is the property of that company.
Therefore, it seemed to us to make good sense to leave the Secretary of State with the power to give his consent to the Housing Corporation to acquire shares in companies where that situation existed. During the course of the debate, the Minister said that he felt that possibly the misgivings were unnecessary because subsection (2) gave an indication of the work that a subsidiary of a company bought up in that way could do. He went on to say, however, that he would be prepared to look at the text of the Bill in order to meet the real anxieties that he had heard expressed to him. But he made one qualification. He said that the amendment as moved in Committee was possibly a little too restrictive because it
could prevent the corporation from joining with the work of any corporate body which had the task of raising finance for housing associations, or a body which might be involved in the management of properties, or which existed to promote housing associations."—[OFFICIAL REPORT, Standing Committee B, 16th May 1974; c. 85.]
It is to meet the objections which the Minister raised to the amendment in Committee that we have now widened it so that it now falls into two parts. The first part—paragraph (a)—repeats the previous amendment's provision that the powers should be used to acquire shares in a company where it is a convenient way of acquiring land or buildings. To that is added paragraph (b), which deals with the points mentioned by the Minister and which I have just quoted.
Therefore, having met the objections of the Minister to the amendment that we proposed previously, I trust that he will now meet and accept our amendment.
The purpose of the amendment is plainly to circumscribe very closely the corporation's powers to acquire securities so as to prevent the power becoming a general vehicle for State control of a wider group of companies and possibly for the nationalisation of the building industry. That is a very brief summary of the kind of fears that were expressed in Committee.
As the hon. Member for Hornsey (Mr. Rossi) has said, I undertook in Committee to look again at the clause to see whether there was any reality to the fears that were being expressed as to the wide-ranging nature of the powers being given to the corporation. I have done that very carefully, and I must state again that there is no foundation for such fears. Indeed, the Bill as drafted already would prevent such fears becoming a reality, as I hope to explain.
The clause is intentionally fairly wide in its application, but it certainly is not so wide as to provide a suitable vehicle for the nationalisation of the building industry—to take that point for a start—quite apart from the fact that were any such policy to be embarked upon, this would certainly not be a suitable vehicle for it.
As I stated in Committee when we last discussed this matter, the clause already provides that the Secretary of State's consent is required to any exercise of the corporation's powers to acquire securities. Second, expenditure by the corporation on share acquisition would count towards its borrowing limits in Clause 7(5) and would, therefore, have to compete for funds with the corporation's primary function, laid down in the Bill and the Act of 1964, to support the housing association movement.
Even with the fullest use of every penny the corporation can borrow under the Bill—and it must be remembered that a substantial part of that sum has already been raised and lent to housing associations under the corporation's present powers—the money available would not go very far, to put it mildly, to nationalise the building industry.
The terms of subsection (2) effectively limit the range of corporate bodies in which the corporation may take a controlling interest since subsidiaries of the corporation cannot engage in activities which the corporation is not itself empowered to carry on. I sought to make this clear in Committee and I will elaborate further on the point. Bodies in which the corporation takes less than a controlling interest—that is, less than half the nominal value of the equity—would no be subsidiaries of the corporation. Such bodies are referred to in the Bill simply as bodies in which the corporation holds an interest. For such holdings the specific restrictions placed on subsidiaries under subsection (2) cannot apply since the corporation cannot dictate the policy and the conduct of such bodies because it is not a major shareholder.
If, therefore, the operations of such an associate body were to conflict with the corporation's own objectives or with public policy, the corporation would be expected to divest itself of that shareholding and the Secretary of State could require the corporation to do so by a direction under Section 1(2) of the Housing Act 1964 which set up the Housing Corporation. Alternatively, the corporation might wish to increase its stock to a majority holding so as to control the body corporate concerned, but that body would then become a subsidiary and would thereby become restricted by subsection (2) which sets out the scope of the corporation.
In other words, such bodies could not carry on such activities which were outside the scope of the corporation as specified in the Act and the Bill. The corporation could not use that right to enter the construction industry since it would be outside the scope of its primary function. It is possible to envisage the sort of circumstances in which it would be desirable for the corporation to acquire shares in a corporate body, for example in the development of sites in London for, say, cert. in essential public service workers. That might best be approached by a consortium consisting of the corporation, the public utility, a group of housing associations and a building firm.
I am not suggesting that I have described a technique which will be adopted, but I can inform the House that the corporation is already, under Government sponsorship and guidance, totally involved in consultations with transport undertakings to try to get land, which could be used for housing, brought into use via the housing associations sponsored by the corporation to assist in the housing of transport and other public service workers. This is therefore the kind of area in which the corporation is already getting involved under Government sponsorship and which could well involve a variety of techniques dependent upon the sites and situations that have to be tackled.
While the amendment is somewhat wider than those we discussed in Standing Committee, it is still unduly restrictive. It restricts the scope for the corporation to associate with existing bodies or to arrange its corporate structure in the most convenient way to carry out its activities. It is because of this unnecessarily restrictive approach that we wish to resist the amendment. I hope that I have made explicitly clear that the fears expressed in Committee and briefly restated again today are quite unfounded. It would not be possible for the corporation to use associate bodies or companies in which it had a majority holding to undertake the kind of activities which hon. Members fear.
Clause 4 provides that the corporation can undertake the provision or improvement of dwellings, clear any land, provide streets, roads
open spaces, and the provision of sewerage facilities
and other matters. What is that if it is not the activity of the construction industry?
With respect, I think that the hon. Gentleman is stretching things a bit far. This is not the nationalisation of the construction industry. The Housing Corporation—like any local authority—if given the necessary power by the Bill would be able to undertake such activities in the same way as local authorities. However, it could do so on a much wider basis. That does not involve direct involvement in the building industry, no more than local authorities using direct labour organisations are in any way the major construction agents for the jobs that they put in hand. The authorities employ contractors.
I am not trying to make an ideological point about direct labour. However widely it is used, it still remains true that the majority of activities of this kind are undertaken by contract. The same would be the position with the Housing Corporation and the housing associations with which it was associated. That would be the position if it undertook the work direct. When I say direct, I do not mean that it would be taking over a slice of the construction industry, but it would be undertaking development in the same way as that in which it is undertaken by local authorities. It would do so on behalf of and in co-operation with local authorities or in co-operation with public services which have redundant operational land of any size which is suitable to bring into use for housing and other urban development. That would involve streets, sewers and various services in certain situations.
I hope that satisfactorily explains the position. This is nothing to do with an attempt to take over the construction industry. This is a matter which is directed to a different purpose such as I have just described.
As I understand it, the Minister is saying that there is nothing wrong with the amendment but that basically it is not absolutely necessary. Having said that, I must stress that some real fears have been raised within the building industry. I have yet to hear anything the Minister says that would rule out the amendment.
We are getting a little confused. On the one hand, we are talking about whether the amendment is desirable or necessary or unnecessary, and on the other hand we are talking about fears about the Bill as it stands. I have sought to explain that those fears are unjustified. I think that I have done so objectively. I have sought to argue, as I did at greater length in Committee, that the amendment, even though altered, is unduly restrictive. It is certainly unnecessary and we must resist it. The fear that is the reason for introducing it is groundless. There is no need for it in any way.
|Division No. 53]||AYES||[9.14 p.m.|
|Allason James (Hemel Hempstead)||Hastings, Stephen||Osborn, John|
|Atkins, Ronald||Hawkins, Paul||Page, Rt. Hn. Graham (Crosby)|
|Banks, Robert||Henderson, J.S.B. (Dunbartonshire,E.)||Parkinson, Cecil (Hertfordshire, S.)|
|Bell, Ronald||Higgins, Terence||Percival, Ian|
|Benyon, W.||Holland, Philip||Prior, Rt. Hn. James|
|Biggs-Oavison, John||Howell, David (Guildford)||Rathbone, Tim|
|Boardman, Tom (Leicester, S.)||Howell, Ralph (Norfolk, North)||Renton, Rt.Hn. Sir David (H't'gd'ns're)|
|Boscawen, Hon. Robert||Hunt, John||Rhys Williams, Sir Brandon|
|Brittan, Leon||Hurd, Douglas||Ridley, Hn. Nicholas|
|Budgen, Nick||Hutchison, Michael Clark||Ritkind, Malcolm|
|Bulmer, Esmond||Iremonger, T. L.||Rossi, Hugh (Hornsey)|
|Butler, Adam (Bosworth)||Jopling, Michael||Sainsbury, Tim|
|Carr, Rt. Hn. Robert||Kaberry, Sir Donald||Scott-Hopkins, James|
|Chalker, Mrs. Lynda||Kershaw, Anthony||Shaw, Giles (Pudsey)|
|Chataway, Rt. Hn. Christopher||Kilfedder, James A.||Shaw, Michael (Scarborough)|
|Clark, A. K. M. (Plymouth, Sutton)||King, Evelyn (Dorset, S.)||Shelton, William (L'mb'th, Streath'm)|
|Clegg, Walter||Knight, Mrs. Jill||Shersby, Michael|
|Cooke, Robert (Bristol, W.)||Knox, David||Silvester, Fred|
|Cope, John||Lamont, Norman||Sims, Roger|
|Cormack, Patrick||Lane, David||Sinclair, Sir George|
|Corrie, John||Latham, Arthur (Melton)||Skeet, T. H. H.|
|Costain, A. P.||Lawrence, Ivan||Spence, John|
|Critchley, Julian||Lawson, Nigel (Blaby)||Spicer, Michael (Worcestershire, S.)|
|Dean, Paul (Somerset, N.)||Lester, Jim (Beeston)||Stanbrook, Ivor|
|Deedes, Rt. Hn. W. F.||Lloyd, Ian (Havant & Waterloo)||Stanley, John|
|Dixon, Piers||Loveridge, John||Steen, Anthony (L'pool, Wavertree)|
|Drayson, Burnaby||Luce, Richard||Stradling Thomas, John|
|Durant, Tony||MacArthur, Ian||Taylor, Edward M. (Glgow, C'cart)|
|Elliott, Sir William||MacGregor, John||Tebbit, Norman|
|Emery, Peter||Macmillan, Rt. Hn. M. (Farnham)||Temple-Morris, Peter|
|Fairgrieve, Russell||McNair-Wilson, Michael (Newbury)||Thatcher, Rt. Hn. Margaret|
|Farr, John||Mather, Carol||Townsend, C. D.|
|Fenner, Mrs. Peggy||Maude, Angus||Tugendhat, Christopher|
|Fidler, Michael||Maxwell-Hyslop, R. J.||van Straubenzee, W. R|
|Fletcher-Cooke, Charles||Mayhew, Patrick (RoyalT'bridgeWells)||Viggers, Peter|
|Fookes, Miss Janet||Meyer, Sir Anthony||Waddington, David|
|Fowler, Norman (Sutton C'Field)||Miller, Hal (B'grove & R'ditch)||Walder, David (Clitheroe)|
|Fox, Marcus||Mills, Peter||Walker-Smith, Rt. Hn. Sir Derek|
|Gardiner,George (Reigate&Banstead)||Miscampbell, Norman||Wall, Patrick|
|Gardner, Edward (S. Fylde)||Mitchell, David (Basingstoke)||Walters, Dennis|
|Gilmour, Sir John (Fife, E.)||Money, Ernie||Weatherill, Bernard|
|Godber, Rt. Hn. Joseph||Moore, J. E. M. (Croydon, C.)||Winterton, Nicholas|
|Gow, Ian (Eastbourne)||Morgan, Geraint||Wood, Rt. Hn. Richard|
|Gower, Sir Raymond (Barry)||Morgan-Giles, Rear-Adm.||Woodhouse, Hn. Christopher|
|Grant, Anthony (Harrow, C.)||Morris, Michael (Northampton, S.J||Worsley, Sir Marcus|
|Gray, Hamish||Morrison, Charles (Devizes)||Young, Sir George (Ealing, Acton)|
|Grieve, Percy||Neubert, Michael|
|Grist, Ian||Newton, Tony (Braintree)||TELLERS FOR THE AYES:|
|Gurden, Harold||Oppenheim, Mrs. Sally||Mr. Spencer le Marchant and|
|Hall, Sir John||Orr, Capt. L. P. S.||Dr. Gerard Vaughan|
|Hampson, Dr. Keith|
|Allaun, Frank||Cocks, Michael||Edge, Geoff|
|Armstrong, Ernest||Coleman, Donald||Evans, Ioan (Aberdare)|
|Ashton, Joe||Concannon, J. D.||Evans, John (Newton)|
|Alkins, Ronald||Cook, Robert F. (Edinburgh, C.)||Ewing, Harry (St'ling.F'klrk&G'm'th)|
|Atkinson, Norman||Cox, Thomas||Fernyhough, Rt. Hn. E.|
|Bagier, Gordon A. T.||Craigen, J. M. (G'gow, Maryhill)||Flannery, Martin|
|Barnett, Guy (Greenwich)||Crawshaw, Richard||Fletcher, Raymond (Ilkeston)|
|Barnett, Joel (Heywood & Royton)||Cronin, John||Fletcher, Ted (Darlington)|
|Bates, Alf||Cryer, G. R.||Forrester, John|
|Beith, A. J.||Cunningham,G.(Isl'ngt'n,S & F'sb'ly)||Freeson, Reginald|
|Benn, Rt. Hn. Anthony Wedgwood||Davidson, Arthur||Freud, Clement|
|Bennett, Andrew F. (Stockport, N.)||Davies, Bryan (Enfield, N.)||Galpern, Sir Myer|
|Bidwell, Sydney||Davies, Ifor (Gower)||Garrett, W. E. (Wallsend)|
|Bishop, E. S.||Davis, Clinton (Hackney, C.)||Ginsburg, David|
|Blenkinsop, Arthur||Dean, Joseph (Leeds, W.)||Golding, John|
|Boardman, H.||Dempsey, James||Graham, Ted|
|Booth, Albert||Doig, Peter||Grant, George (Morpeth)|
|Broughton, Sir Alfred||Dormand, J. D.||Grimond, Rt. Hn. J.|
|Brown, Hugh D. (Glasgow, Provan)||Douglas-Mann, Bruce||Hamilton, William (Fife, C.)|
|Buchan, Norman||Duffy, A. E. P.||Hamling, William|
|Callaghan, Jim (M'dd'ton & Pr'wich)||Dunn, James A.||Hardy, Peter|
|Campbell, Ian||Dunnett, Jack||Harper, Joseph|
|Carmichael, Neil||Dunwoody, Mrs. Gwyneth||Harrison, Walter (Wakefield)|
|Carter-Jones, Lewis||Eadie, Alex||Hatton, Frank|
|Clemitson, Ivor||Edelman, Maurice||Heffer, Eric S.|
|Hooley, Frank||Marks, Kenneth||Skinner, Dennis|
|Hooson, Emlyn||Marquand, David||Small, William|
|Horam, John||Marshall, Dr. Edmund (Goole)||Snape, Peter|
|Howell, Denis (B'ham, Small Heath)||Meacher, Michael||Spearing, Nigel|
|Howells, Geraint (Cardigan)||Mellish, Rt. Hn. Robert||Spriggs, Leslie|
|Hughes, Mark (Durham)||Mikardo, Ian||Stallard, A. W.|
|Hughes, Roy (Newport)||Millan, Bruce||Stoddart, David (Swindon)|
|Irving, Rt. Hn. Sydney (Dartford)||Mitchell, R. C. (S'hampton, Itchen)||Stott, Roger|
|Jannor, Greville||Moonman, Eric||Thomas, D. E. (Merioneth)|
|Jay, Rt. Hn. Douglas||Morris, Alfred (Wythenshawe)||Thomas, Jeffrey (Abertillery)|
|Jeger, Mrs. Lena||Morris, Charles R. (Openshaw)||Thorne, Stan (Preston, S.)|
|John, Brynmor||Newens, Stanley (Harlow)||Tinn, James|
|Johnson, James (K'ston uponHull, W.)||Ogden, Eric||Tomlinson, John|
|Johnston, Russell (Inverness)||O'Halloran, Michael||Torney, Tom|
|Jones, Barry (Flint, E.)||O'Malley, Brian||Tyler, Paul|
|Jones, Dan (Burnley)||Pardoe, John||Wainwright, Edwin (Dearne Valley)|
|Jones, Gwynoro (Carmarthen)||Park, George (Coventry, N.E.)||Walker, Harold (Doncaster)|
|Jones, Alec (Rhondda)||Parker, John (Dagenham)||Walker, Terry (Kingswood)|
|Kaufman, Gerald||Parry, Robert||Watkins, David|
|Kelley, Richard||Pavitt, Laurie||Watt, Hamish|
|Kerr, Russell||Peart, Rt. Hn. Fred||Weitzman, David|
|Lamborn, Harry||Phipps, Dr. Colin||White, James|
|Lamond, James||Price, William (Rugby)||Whitlock, William|
|Latham, Arthur(CityofW'minsterP'ton)||Roberts, Albert (Normanton)||Williams, Alan Lee (Hvrng, Hchurch)|
|Lawson,George (Motherwell&Wishaw)||Roderick, Caerwyn E.||Wilson, Alexander (Hamilton)|
|Loughlin, Charles||Rodgers, George (Chorley)||Wilson, William (Coventry, S.E.)|
|Loyden, Eddie||Ross, Stephen (Isle of Wight)||Winstanley, Dr. Michael|
|Lyons, Edward (Bradford, W.)||Ross, Rt. Hn. William (Kilmarnock)||Wise, Mrs. Audrey|
|Mabon, Dr. J. Dickson||Rowlands, Edward||Woodall, Alec|
|McCartney, Hugh||Selby, Harry||Woof, Robert|
|McElhone, Frank||Shaw, Arnold (Redbridge, Ilford, S.)||Wrigglesworth, Ian|
|MacFarquhar, Roderick||Sheldon, Robert (Ashton-under-Lyne)|
|McGuire, Michael||Short, Mrs. Renée (W'hamp'n, N.E.)||TELLERS FOR THE NOES:|
|McNamara, Kevin||Silkin,Rt.Hn.S.C.(S'hwark,Dulwich)||Mr. James Hamilton and|
|Madden, M. O. F.||Sillars, James||Mr. Walter Johnson.|
|Magee, Bryan||Silverman, Julius|
I beg to move Amendment No. 71, in page 6, line 11, insert:
'(2) The Corporation shall only acquire a controlling interest of any private company within the meaning of section 28 of the Companies Act 1948 if three quarters of the directors of that company have agreed in writing thereto.
(3) The Corporation shall not purchase or acquire more than ten per cent. of the issued share capital of any public company within the meaning of section 1(1) of the Companies Act unless a simple majority of the shareholders (including proxies) at a specially convened Extraordinary General Meeting have given consent thereto; and the Corporation shall not acquire more than 49 per cent. of the issued share capital unless the majority at the aforesaid meeting (including proxies) exceeds sixty-six and two-thirds per cent. of those eligible to vote and voting excluding any voting rights that the company may itself be able to exercise by virtue of the acquisition of securities'.
The amendment is intended to act as a safeguard for a company against an unwelcome take-over. The amendment proposes that there should be the consent of at least 75 per cent. of the directors to the take-over of a private company. If more than 10 per cent. of the shareholding in a public company is to be acquired, the amendment proposes that there shall be the consent of a simple
majority of the shareholders. Where more than 49 per cent. of the shareholding is acquired by the Housing Corporation, that is a take-over and the amendment proposes that there shall be the consent of two-thirds of the shareholders.
My hon. Friend the Member for Hornsey (Mr. Rossi) has already described the concern felt over the powers provided in Clause 6. The Minister said that we need not be too worried, because under subsection (2)(a) a subsidiary would not engage in any activity which the corporation would not be empowered to carry out. It was to clarify this matter that I sought to intervene in the Minister's remarks in an earlier discussion. The Minister said that a subsidiary would not be a threat to the construction industry, and I pointed out that Clause 4 appeared to cover a subsidiary indulging in all the activities of a building firm. It would appear that there could be an unwelcome take-over of a building firm—in other words, a take-over resisted by the directors in a private company or by the shareholders in a public company. I believe that an unfair situation could arise if the Housing Corporation were determined to take over the firm.
My hon. Friend the Member for Hornsey said that it would be possible for a company which held land to find that its share quotation amounted to a lower figure than the value of the land it owned. If the company agreed to sell to the corporation as a means of parting with land, that would be all well and good, and the provisions of the amendment would not apply; but if a company resisted a move by the corporation and said that such action was unfair, why should a situation arise where the company would virtually be wound up by transferring its building organisation to the corporation? This is what the Bill, as drafted, amounts to. We believe that the amendment would provide a necessary safeguard and that it should be included in the Bill.
I do not wish to be provocative, but one or two Conservatives are beginning to sound a little paranoiac in terms of their ideology. We are dealing with an organisation which, within a matter of years, would not be sponsoring more than a small proportion of the total house building effort of the nation, even at our present nationally low level.
If we are able to get the house building programme up again in the next two or three years to near its level of a few years ago, the number of houses sponsored by the Housing Corporation directly or via housing associations will go up and it is likely that the relative proportion will go down.
Why there should be this fear that the corporation will move in and do some kind of massive take-over of the building industry, threatening the industry with nationalisation and the rest of it, I find it difficult to understand. If we want to establish public ownership of some of the companies concerned, there are other much more effective ways of undertaking such a policy. I have said that already, and I say it again. The Opposition are becoming unduly sensitive about matters when they put forward this view in a somewhat bogylike style.
The object of the amendment, being to prevent the corporation from taking over private or public companies or even taking significant stakes in public com panies, against the wishes of directors and shareholders respectively, is framed in a way which goes further than any requirements relating to take-overs in the private sector as we know them. The amendment would place more onerous conditions on the corporation than those already placed on organisations much larger in scope and intention in the private sector. I do not consider that that would be the right approach to adopt with regard to an organisation which we all wish to see expand its activities.
The proposed subsection (2) relates to private companies whose shares are not generally marketed. In such cases it follows that the corporation would not be in a position to acquire a controlling interest in a private company other than with the consent of the private shareholders who will normally comprise the directors. The private company can be acquired only by consent, and the effect of the amendment is only to increase from a half to three-quarters of the equity the proportion necessary to secure control.
As regards public companies, which are not defined in Section 1 of the Companies Act—and, therefore, this amendment is probably defective technically—anyone acquiring 10 per cent. or more of the shares in a listed public company is required to give notice that his holding has exceeded 10 per cent., but not to secure the consent of the shareholders, while any offer to acquire a controlling interest must be put to the shareholders and must secure a simple majority of their support. There is no requirement as to an extraordinary general meeting or to two-thirds majorities of those present and voting. That is broadly the position of the private sector.
The amendment is therefore deliberately onerous in an area where it is quite unnecessary in view of what we want the corporation to do, and, as I have said, it is probably technically deficient.
Although I understand the point of view underlying these arguments, I believe that they are being presented with unduly doctrinaire fears in mind. It is not necessary to incorporate an amendment of this kind. The Government must resist it.
Although I want to do everything possible to make progress, I must say that it does not help to describe the views of my hon. Friend the Member for Hemel Hempstead (Mr. Allason) as paranoiac or doctrinaire.
The Minister has put forward one argument about the private sector, Section 1 of the Companies Act and the 10 per cent. position, at which the Opposition wish to look again. However, we want the Government to understand that in another place we may wish to return to some of the fears expressed by my hon. Friend. If that is understood, I shall urge my hon. Friend to ask leave to withdraw his amendment, although we are not entirely satisfied with the Minister's reply.