My right hon. and learned Friend the Chief Secretary to the Treasury told the House on 14 March last year that it was the Government's policy to sell minority residual shareholdings in privatised companies as the circumstances of the companies, the prospectus undertakings and market conditions permit. In pursuit of that policy, the Government have now decided to sell our residual shareholding in British Aerospace.
Since 1981, when it became the first nationalised industry to be denationalised, British Aerospace has been operating successfully in the private sector. We intend, subject to satisfactory market conditions, to offer for sale all our shares in British Aerospace—48·43 per cent. of the company's issued share capital—in the spring or early summer of this year.
The company has agreed that, before the sale is made, it will recommend to shareholders a resolution providing for the Government to retain a special share in the company. The purpose of this special share will be to ensure that no change may be made without Government consent to the provisions of the company's articles of association which restrict the foreign ownership of shares in the company and require the directors to be British nationals.
When British Aerospace was privatised, the Government said that we would retain at least 25 per cent. of the shares in the company so as to be able to block any changes to those articles. This Government shareholding will be rendered unnecessary by the issue of the special share which will have the same blocking effect.
We will also have the right to nominate a director to the company.
It is the company's intention to raise new equity capital at the same time as the Government's shares are sold. The British Aerospace chairman, Sir Austin Pearce, is making a statement about this this afternoon.
Subject to the approval, as necessary, of the company's shareholders, it is intended that the offer for sale should take the form of a simultaneous offering of the Government's existing shares and new shares issued by the company.
May I begin by welcoming the right hon. Gentleman back to the Dispatch Box? We are very pleased that his recovery has been so complete as to allow him to resume his duties in full. I am sorry, however, that his return to the House has been to deliver such a miserable and humiliating statement.
Is it not crystal clear that the Government have been pushed and panicked into an early forced sale of these shares in British Aerospace because of their incompetent handling of our financial affairs? Is it not the case that as a result of the yet further postponement of the sale of British Airways shares the books will not balance unless the Government sell something else as fast as they can? Is it not a shabby circumstance that valuable public assets of inestimable long-term significance have to be sold in forced sales circumstances which means that the price to be obtained will be well below the true value?
Is it not now obvious that the whole privatisation process is not a measured and well-considered transfer of assets as between private and public ownership but a scramble to sell off anything valuable that the Government can get their hands on to disguise their financial bungling? Is it not a measure of the Government's desperate straits that they have been forced to break a solemn undertaking that was given to Parliament, presumably in good faith, that they would retain 25 per cent. of the shareholding of the company so as to maintain essential control?
Is the Secretary of State aware that the special share device upon which he places great reliance has not yet been tested in the courts as being effective, especially in cases where the holder of the share has no beneficial interest whatsoever in the company? Does not the Secretary of State realise that if this rather pathetic device fails to achieve its objective the Government will have lost all control of an enterprise which is crucial to the equipment of our armed forces and to our national security? Is it not ironic that if the Government had not failed to obtain the proper value for the shares they sold in British Telecom they might have been spared the ignominy of this forced sale of British Aerospace?
May I first thank the right hon. and learned Gentleman for his kind personal remarks?
The Government have not been pushed unwillingly into selling these shares. It has been my ambition ever since the concept of denationalisation was arrived at that we should sell all of them. Indeed, we want to get back as soon as possible to the position which obtained before the Labour Government's incompetent decision to nationalise the industry in the first place.
When the right hon. and learned Gentleman talked about this being related to the British Airways decision and about its being necessary to balance the Government's books, he seemed not to understand that this will happen in the forthcoming financial year, during which I very much hope that British Airways will also be liberated.
If the right hon. and learned Gentleman thinks that the shares will be undervalued and sold too cheaply, he is at liberty to buy some. He is even at liberty to suggest that the Labour Party should buy some; it might help its financial state.
As to what the right hon. and learned Gentleman said about the retention of 25 per cent. of the shares, it is clear that he is unduly excited about the mechanism by which the objective would be achieved and is completely oblivious to the fact that it is the objective of ensuring that control of British Aerospace remains in Britain that is important. The right hon. and learned Gentleman chooses to cast some doubts upon the legal validity of the mechanism of special shares. That is an idea that he seems to have invented out of the air today because he has no other valid criticism to make.
In welcoming my right hon. Friend back today, may I say how wonderful it is to have him in such cracking good form and delivering a statement so dear to his heart and so dear to his right hon. and hon. Friends who, for many a long month, have espoused a hope in their hearts that the totality of British Aerospace would be sold in this way? This example should be a very good precedent for the sale—in fact, the liberation—of British Airways? Could the employees of British Airways benefit in the same way that the employees of British Aerospace have undoubtedly benefited, those who had the prescience to buy shares in the company when first it was floated?
I had best not be tempted into discussing the basis on which British Airways shares will be sold, but it is right that I should say to my hon. Friend that on this occasion, on the sale of British Aerospace shares, the existing employees will have priority rights of application with regard to the Government shareholding, but at present I do not envisage that there will be any special incentives beyond that for them to buy.
May I press the point that has been made, that this is like selling off the family silver to pay for the grocery bills? Does not the Secretary of State accept that selling off capital assets in this way would be more acceptable if the funds raised by the Government were not just lost to the Exchequer and the Government's capital investment record were better than it was? Does the right hon. Gentleman agree that an increase in capital investment in the Budget would be widely welcomed using the revenues that have been received from the British Telecom sale, this sale and other sales of State assets?
I thank the hon. Gentleman for his kind remarks, particularly those concerning my wife, which I shall convey to her.
The hon. Gentleman referred to capital investment. I must confess that my memory may be at fault, but I thought that the hon. Gentleman was present in the House last Thursday when my right hon. Friend the Prime Minister sought to set his mind at rest over the Government's record on capital expenditure, which is very good—and so is the present record of the private sector of industry.
May I also say how great a pleasure it is to welcome my right hon. Friend back to the House? He has given us good news in his first statement. Can he define for the House and those outside who are partners with the British Aerospace company in international agreements such as Panavia in Germany and Italy and Airbus Industrie in France and Germany what relationships they will have with the new company when it is entirely in private enterprise? Will my right hon. Friend assure them that there will be no change in those relationships and that the Government will continue to back those relationships?
I welcome my right hon. Friend's statement and am delighted to see him back. Is he aware that those of us who have been involved with this denationalisation process will be most interested in the special share arrangement that he has announced and that, on the face of it, it appears to be a most useful way in which to provide additional opportunities for putting shares on the market? Will he take this opportunity to say how far he hopes that share ownership will be spread as widely as possible, as with small investors for British Telecom? Does he further recall that when British Aerospace was floated 90 per cent. of the employees took their free issue but that 40 per cent. spent money to buy shares? Is that not a promising augury?
I hope that the share ownership of British Aerospace will be spread widely. I especially hope that many of that company's employees will take advantage of the priority that they will have to apply for shares in the company in which they work and in the success of which they have an enormous interest.
Is it not an interesting insight into the morality of the Secretary of State and those Members behind him who cheered that, when he attempted to meet the criticism of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) about shares once again being sold at far too low a price, he suggested that the criticism might be stifled by my right hon. and learned Friend trying to make money out of the shares himself? Is that the sort of morality that we now have in the House?
I am not sure that I am too keen on taking lessons in morality from the hon. Member, but I suggest that he has misunderstood the import of my question. Were he and his hon. Friends and others who believe that something is undervalued to come forward with a better bid, the price would be raised, the taxpayer would benefit, and, as I have suggested, even the right hon. and learned Member for Monklands, East and his colleagues might benefit. When such benefits can be spread widely, it is an unhappy thing that the hon. Member should be so carping. Why does he not celebrate a little?
Might I also welcome my right hon. Friend's return to the Dispatch Box? Although he sounded fine on television, he sounded even better this afternoon, giving a message that I know will be warmly welcomed by all of us who have British Aerospace divisions in our constituencies? The announcement will be welcomed as giving new and increased hope for the future of this most important, if not vital, industry.
I am grateful to my hon. and learned Friend. It is worth remembering that British Aerospace's constituent companies were prosperous and well run before denationalisation. Their success since denationalisation has been quite remarkable—there has been a continued growth in turnover, exports and profitability. We can all hope that that will continue.
How long will it take the Secretary of State to learn that privatisation does not spread share ownership more widely? If he takes the time to investigate the circumstances of British Telecom plc now, he will find that 30 per cent. of its employees who bought shares have already sold them.
Does the right hon. Gentleman remember that, in the middle of 1984, General Electric Company attempted to gain control of British Aerospace? For one reason or another, the attempt did not materialise. Will he assure us that his announcement is not a back-door method of giving control of an extremely important industry to GEC? If that happened, it would be an utter disaster for the British Aerospace industry.
The hon. Gentleman has forgotten that, should there be an attempt at a takeover of a company such as British Aerospace, it would fall within the criteria that apply under the Fair Trading Act 1973 and therefore might well be investigated by the Monopolies and Mergers Commission. A conclusion would then be reached by the MMC and the Government on whether such a bid should be allowed to go ahead. There is no question of this sale of shares changing matters in that respect.
I welcome the principle of what my right hon. Friend has announced, but is he satisfied that the arrangements that he has outlined will give the Government reasonable certainty that, in its future ownership, the company will retain primacy in matters of aerospace?
The standing of British Aerospace will be governed by the skill of the work force from the chairman down to the last man and woman on the shop floor. The Government will continue to give British Aerospace the support which they give to all British companies in their efforts to export and prosper.
As my hon. Friend will be aware, the Government have already entered into an agreement with British Aerospace about launch aid for the A320 airbus. That agreement is completely unaffected by the sale. It may also be of some comfort to Opposition Members if I say that we intend to impose a limit of 10 per cent. of the proportion of the shares offered that will be allocated to any single applicant or group of applicants acting in concert.
When answering a supplementary question the Secretary of State said that it has always been his intention to sell all the shares in British Aerospace and yet in the statement he said that the Government intended to retain 25 per cent. of the shares. Can he reconcile the difference between those two statements?
In welcoming back my right hon. Friend, may I ask whether he agrees that his statement is an indication of the strength of the company, the commitment of the work force, the excellence of its products and the success of privatisation? Does he agree that that is nothing but good news for the company's employees, at whatever level, and for our constituents?
I agree with my hon. Friend. I am sure that he would wish to look back on the company's record of profitability since it has been privatised, its success with export orders and many other matters, and take comfort from that. I am sure that the staff of British Aerospace will feel the same about it. I think that they will be glad to be entirely free from Government.
Does the Secretary of State agree that this further act of denationalisation owes less to the idea of the spreading of a company's share ownership, because it reduces public involvement in that company and concentrates it in a few hands, and more to his and the Government's idea of rewarding their political mentors and supporters from before the election with the profits from the privatisation of industry?
Does my right hon. Friend accept that most of us on the Conservative Benches accept the logic that there is no need for any Government to own shares in British Aerospace? However, bearing in mind the fact that at one time Thorn-EMI wished to bid for British Aerospace and that GEC is now widely rumoured to wish also to bid and has a huge mountain of cash so that it could do so if his Department allowed it, would it not be sensible to clear this matter out of the way first to save any embarrassment from selling shares at a relatively low price, with a bid being made within a short time, when that profit could accrue to the State instead of to other outside shareholders?
Now that the Secretary of State is back, and aided in his recovery by the non-privatised section of the National Health Service—[Interruption.] It is a fact—and taking into account the fact that there have been several statements from the Government about privatising sections of the economy and that with each of those statements, like today, there is talk of liberating industry and assisting the economy, why after five years of privatisation measures is the pound in the geriatric ward?
Oh, dear, Mr. Speaker; the hon. Gentleman must, as usual, have spent more time with his mouth open than with his ears open during the exchanges at Prime Minister's Question Time today. As to what has really helped me back to my present state of what I understand is called rude health, above all else I have been encouraged by the splendid return of miners to work in the hon. Gentleman's constituency.
Would not my right hon. Friend agree that it was extraordinarily interesting that the right hon. and learned Member for Monklands, East (Mr. Smith), who spoke this afternoon on behalf of the Opposition, made no reference to the possibility of his party renationalising British Aerospace in the unlikely event of its being returned to power? Could that be because he has become an apostate of the theory of nationalisation, or is it more likely that the right hon. and learned Gentleman recognises—
Thank you, Mr. Speaker. Will my right hon. Friend therefore agree with me that the reason why the right hon. and learned Member for Monklands, East was reluctant to refer to this previous undertaking was that it would be a vote loser and that the people recognise that it would cause extreme damage to the British economy?
I am sure that my hon. Friend does not really expect me to take responsibility for the state of mind of the right hon. and learned Member for Monklands, East (Mr. Smith) and his colleagues. I do not think that I am quite well enough just yet to take that on. I am quite sure, however, that there will be no question of denationalisation because there is no possibility of a Government committed to that sort of policy ever again being returned to office in this country.
As the Secretary of State has returned to the House with all his former "bottle" intact, will he tell the House how much he expects the net gain to the Exchequer to be as a result of this sale? Is it not fair to say that the proceeds of the sale will be used next year to cut the taxes of the better-off in our society?
One could equally say that the proceeds of the sale will be used by the Government to maintain the value of pensions and other benefits. One cannot distinguish between what one section of money does as it goes into the Exchequer and another.
As to the amount of money which will be raised, at the time when dealings were suspended the valuation of the Government's holding was about £350 million or £360 million. What the valuation will be at the time of the sale depends, as the hon. Gentleman knows, upon many factors.
I welcome both the return and the statement of my right hon. Friend. Does not he agree that, so far from this being a forced sale at a disadvantageous moment, as the Prime Minister pointed out earlier this afternoon, the stock exchange has risen very substantially and therefore this may seem to be a highly opportune moment for disposing of the rest of the Government's stake?
Is my right hon. Friend aware that his most welcome and boisterous return to the Dispatch Box will give particular pleasure to those of my constituents who work for British Aerospace? His statement is a sign, first, that in the private sector it is now commercially vibrant and, secondly, that it will lead to the final shackles of nationalisation being removed from their workplace.
It is important to understand—I do not believe that the Opposition have yet quite grasped this —that the denationalisation of these enterprises results in wider share ownership and in a more dispersed control of the company. For who, really, has been controlling the company while it has been nationalised? One sometimes wonders. Certainly it is not a very widespread group of people.