British Petroleum Shares (Sale)

Part of Order of the Day – in the House of Commons at 7:03 pm on 12th March 1980.

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Photo of Mr Bob Cryer Mr Bob Cryer , Keighley 7:03 pm, 12th March 1980

This is an important debate and it raises a number of issues. I am pleased that Mr. Speaker has indicated that the debate may go wider than the narrow title and that we may refer to principle.

The sale of a national asset to provide tax concessions for the rich—that was the basis of the sale of BP shares when the Chancellor of the Exchequer made his announcement in last year's Budget—did not take place against a background of national insolvency or of national economic difficulties. It was clone to provide tax concessions for the well off and to enable a switch from direct taxation to indirect taxation and the imposition of a 15 per cent. VAT rate. Part of the price of support, and part of the further financial income, was a once-for-all bonanza obtained by selling off a precious national asset.

According to the prospectus issued in the Financial Times on Monday 5 November 1979, BP is not an unprofitable company. It owns partly or in whole many important oil fields, the value of which increases year by year as our finite oil supplies are used and the world's oil crisis escalates. For example, BP owns part of the Forties field—indeed, in part of the group it has a 100 per cent. interest—13 per cent. of the Ninian field, a 54 per cent. interest in the Buchan field, a 15 per cent. interest in the Beatrice field and a 100 per cent. interest in the Magnus field. The prospectus stated that in 1974 the group discovered the Andrews field, approximately half of which lies in the licence area in which the group has a 100 per cent. interest.

These national assets were paraded before the public in an attempt to induce them to buy BP shares. The Government were selling off the people's assets to give them a short-term once-for-all financial income. I am sure that the Financial Secretary will tell me that in 1977 the previous Labour Government reduced the Government holding from 68·3 per cent. to 51 per cent. However, the present Government made a share offer that resulted in Her Majesty's Government's percentage being reduced to about 46 per cent. It was claimed that the Government do not intend to sell any more of their present holding in the company. I, too, shall be interested to have that intention reiterated by the Financial Secretary—namely, that the Government do not intend to reduce still further national assets such as BP.

When the Chancellor of the Exchequer made the original announcement he said that the Government were following a precedent. There were many of us inside and outside the then Labour Government who deeply regretted the decision to make the offer to the public for the purchase of BP shares. We thought that it was wrong. We warn future Labour Governments that they must develop a more democratic system of decision-making within the framework of government that has existed hitherto. In future the 24 or so members of the Cabinet will not be in a position merely to hand out decisions that go against the main thrust of Labour Party policy.

It is clear that the previous Labour Government did not sell the nation's assets to such an extent that the Government became a minority holder. The Government are now in a minority of 46 per cent. The previous Government were careful to maintain a 51 per cent. holding, which made it clear beyond peradventure that the Government were still in control.

Two of my concerns about the Government's reduced shareholding is whether they have sufficient control—they have little legislative provision—and whether the existing directors can alter the memorandum and articles of association in such a way that control may be further diminished. As my hon. Friend the Member for Kettering (Mr. Homewood) said, the sale of those shares cost £14 million, of which £7 million has been spent on stamp duty. That is an extraordinarily high sum. It cost £7 million to raise a relatively paltry sum and at the same time a precious national asset has been sold on a once-for-all basis. One is driven to the conclusion that that sum represents a return for the handsome contributions that the banking and financial community have made to the Tory Party.

For example, in 1978 the banking and finance community donated £76,270 to the Tory Party. British United Industrialists received £20,375. The Economic League Ltd. received £30,625. Aims of Industry received £1,698. Other companies received £1,350. Those sums total £130,228. That represents a handsome donation to the Conservative Party. I do not have any list of the individual concerns that made such contributions. I should be interested to know whether S. G. Warburg & Co. Ltd., Robert Fleming & Co. Ltd., Lazard Bros. & Co. Ltd., Morgan Grenfell & Co. Ltd., Kleinwort, Benson Ltd., J. Henry Schroder Wagg & Co. Ltd., Mullens & Co., J. & A. Scrimgeour Ltd., Hoare Govett & Co. Ltd., Keyser Ullmann and Rowe & Pitman have made any contributions to the Conservative Party during the past few years. Perhaps they have not made any contributions. However, if they made such contributions, they have been handsomely repaid. They have reaped a rich windfall of £7 million from Government funds.

They have received the taxpayers' money.

Even closer links exist. S. G. Warburg & Co. Ltd was the principal bank involved in promoting the offer. It had the benefit of the present Secretary of State for Trade on its board of directors for many years prior to 1972. I do not suggest that there is a direct link. However, if the Government arrange payments that total £7 million to such organisations, they should have no connection with them. The links between Government and private enterprise are so intertwined that one could legitimately argue that the sum of £7 million represents a benefit that was anticipated by those organisations when making payments to the Conservative Party and its front organisations, such as British United Industrialists. Such front organisations pass on money to the Conservative Party year after year.

The sale represents a paper transaction. I accept that it draws revenue. However, machinery is available to the Government for collecting that revenue without paying the extra £7 million. That machinery is called "the tax system" The Government are obsessed with giving tax concessions to the rich. If they were not so obsessed, they could use that system to gain at least £7 million. They could certainly gain more than was achieved by the sale of BP shares. The purpose of selling off that national asset was to provide tax concessions not to the average family man but to the rich. The average family man receives virtually no benefit, and the rate of interest has lessened any benefit that he might have had.

The figures demonstrate beyond peradventure that only those in the higher income brackets receive a benefit that will place them above any erosion caused by the current level of inflation. The Government have paid £7 million in order to gain revenue. They have eroded a national asset. They already employ thousands of people to operate a tax system that gives generous benefits to industrialists and to all those who are able to make various claims in the form of tax allowances. Generally, that does not include PAYE workers.

The sale has not produced any more oil. It has not produced any more cars or machines. It has not improved our exports. It has done nothing. It has provided a once-for-all revenue to the Government. The Government talk about the need to increase productivity. They are prepared to hand over £7 million for the sale of those shares. That has not been criticised by the press. The press usually fastens on to steel workers or car workers. It fastens on to those who turn out the goods and machines that are used by people every day. There has been little criticism of the amount of money that has gone into the pockets of those who raised the share issue on behalf of the Government.

The Department of Employment produced an earnings survey for 1979. It is an annual publication. It may provide a clue as to where part of that money has gone. Normally emphasis is given to the high earnings of people such as steel workers. My hon. Friend the Member for Kettering knows that the Government attempt to emphasise the enormous earnings of steel workers and car workers. When mine workers put in a claim, it is said that they earn enormous sums of money.

After medical practitioners and top managers in trading organisations, the survey lists finance, insurance and tax specialists. No doubt that includes S. G. Warburg & Co. Ltd., Lazard Bros. & Co. Ltd. and the other merchant banks. Such people apparently earn £162·70 a week. I understand that that figure represents the average figure and that it is subject to variation. However, it is an under-estimate not an over-estimate. Among the top 30, only three types of manual workers are included.

When the Government sell shares they should bear in mind that those who benefit are among the top earners in the country. The Government could argue that other workers should improve their rates of productivity and thereby increase their earnings. Why not encourage the steel workers to reach that level of earnings by settling the steel dispute? Out of that top 30, only coal-mining deputies, face-trained coal miners, stevedores and dockers find a place. The Government show concern for wage levels and for productivity. It is strange that they have not investigated the rate of productivity of some of those who have received part of that £7 million.

Many executives and managers are no doubt well paid in such companies as S. G. Warburg & Co. Ltd., Lazard Bros. & Co. Ltd., Robert Fleming & Co. Ltd., Morgan Grenfell & Co. Ltd. and others. A survey carried out by the Inbucon management consultants estimated the average basic salary of managing directors to be £19,321 per annum. Those are the people whom we are discussing. There are, of course, perquisites on top of that. The Government clearly did not take any precaution in assessing the position when they started selling shares at that enormous cost. Local authority expenditure is constantly being cut. We should consider what local authorities could do with £7 million.

The House will be interested to know what investigation the Government made into the productivity and efficiency of the organisations that promoted the sale of BP shares? Was there any investigation? For £7 million the Government could have employed a fair number of management consultants and made a proper assessment.

These people whom the Government have paid so lavishly are not involved in wealth creation. They are mere paper pushers. Many Government Members criticise paper pushers and administrators in local government. The constant theme is more social services and fewer people in offices. I have never heard the Government say the same about merchant bankers and stockbrokers.

It is extraordinary to pay £7 million for a share issue. Most local authorities and Government Departments would not have needed half that sum to undertake the same exercise. I should be interested to know whether a comparison has been made. The people in these exalted organisations who receive these enormous sums of money are beyond the ken of ordinary people, who do not buy and sell shares, have stockbrokers, or ever come into contact with merchant banks.

The Government claim that they want to promote ordinary jobs, such as engineering, and improve the status of engineers. Perhaps they should raise their status to that of merchant bankers or stockbrokers. The terms and conditions of employment of the engineer on the shop floor are frequently inferior to those of the typist and clerical worker in the same firm. Workers will wonder what is the point of putting on overalls and getting their hands dirty when they hear of these enormous sums being paid. They will want to get into administration. There are good windfalls in merchant banking and stockbroking.

It is not by chance that the lusher pastures in Surrey are known as the stockbroker belt. We now know where the detached houses with Rolls-Royces and Bentleys parked outside come from. They come from handling such share issues, passed on to these people by the Conservative Government, who are grateful for their lavish donations.

The Government fixed a price for the shares, but they made a loss. They must equate supply and demand if they wish to play the market and put a price on a share. I do not know whether the merchant banks and stockbrokers gave the Government advice, for which the Government paid handsomely, or whether the Government did it themselves. Did the Government, with their obsession for supply and demand and monetarist economics, fix the share price, bearing in mind the market? According to The Daily Telegraph on 10 November the shares sold for more than the price put on them. They sold for 364p as opposed to 362p, which is only 1 p difference, it is true. [Interruption.] The Financial Secretary may laugh. As he knows, they were oversubscribed one and a half times, and the Government fixed their price badly. I believe that the principle is bad in any case, but they did not maximise the revenue that they could have earned.

I am also concerned that the list of directors in the share issue which was announced in the Financial Times on Monday, 5 November 1979, contained some seemingly eminent people—Sir David Steel, DSO, MC, TD, the chairman, and others such as Dr. J. Birks, CBE. This little group of people are operating in a remote clique, away from the ordinary shop floor, where the goods and services come from. The people there have to keep their wages down, be good and not organise into trade unions. They have legislation on their back to try to stop them organising into trade unions. They bear the burden of this Government. Then there are the people at the top—those who connived at this share issue.

On behalf of the "law and order Government," the Attorney-General told us that new criteria would apply to that little group of people, who are advertised by the Government as being respectable. They headed the share issue prospectus and were there to enhance the prospects of selling shares. The prospectus notes that there was a little difficulty about BP, and that it was partly concerned in the Bingham report.

They are a law and order Government for the trade unionists on the picket lines. The Attorney-General said at the Dispatch Box that, if the fraud was big enough and if those involved were retired, the Government would not take action. This Government have one rule for those in the board rooms of Shell and BP and another—