House of Commons Hansard Debates for 20 Jan 1989

Mr. Alton : When the Procedure Committee reflects on what has happened today I hope that it will also consider that 20 years ago when the original legislation to create an Abortion Act was passed in the House, 25 hours of Government time were provided. Therefore, this legislation is about procedure--it is not truly private Member's legislation--and it is becoming virtually unamendable. For that reason, people outside this place might say that the procedures were adhered to today, but they could be forgiven for thinking, if they entered our Strangers Gallery, that they had attended some kind of west end farce.

Mr. Brazier : As one of the youngest hon. Members of the House may I state, following my right hon. Friend the Member for Castle Point (Sir. B. Braine), who is the Father of the House, that whether the procedures are adhered to or not, or amended, nearly 20 attempts have been made to put an Abortion Bill through the House and so far as the man in the street is concerned [ Hon. Members :-- "Man?"] each one has fallen not on a vote--but on wrangling of one form or another. The Government must consider bringing forward a measure on a free vote so that the matter can be decided once and for all.

Several Hon. Members rose --

Mr. Speaker : Order. We are getting on to the merits of the Bill to be introduced by the hon. Member for Maidstone (Miss Widdecombe), which is not due to have its Second Reading, if it is reached, until Friday 3 March. It is very important for people outside to appreciate what has happened today and that the motion in the name of the hon. Member for Maidstone was a procedural motion and not about the merits of her Bill.

Several Hon. Members rose --

Mr. Speaker : Order. I must protect the time for the Adjournment. I will call Mrs. Wise.

Mrs. Wise : On a point of order, Mr. Speaker. Will you confirm not only that what has happened today is in order, but that most private Members do not get an opportunity to bring forward a Bill? No particular priority should be attached to the hon. Member for Maidstone (Miss Widdecombe) who has tried to do so through a procedural wrangle as it was described today. It ill-becomes one side of an argument to claim moral rectitude and to claim to represent the whole of the population on this topic when Second Reading would have been defeated if the vote had been held among women Members only, who voted 26 to 11 against it--

Mr. Speaker : Order. We are now getting on to the merits. I think that we have disposed of this matter. We have had a long time on it. I will hear Mr. Madden on another matter.

Mr. Madden : Just over two hours ago, Mr. Viraj Mendis was deported from this country to Sri Lanka to a most uncertain destiny. It must be bad for the reputation of Parliament that that fact was not reported to the House

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before midday today. Nor have Ministers come to this place to explain their actions or decisions, still less to account for or justify them.

Even at this late stage, will the Leader of the House make a statement about the Government's actions in relation to Mr. Mendis? If on Monday the Government have not seen fit to make a statement to the House, in those circumstances would you consider granting a private notice question on the Mendis case and not apply the time limit on matters for consideration for a private notice question because clearly the matter has arisen today? Therefore, Mr. Speaker, will you consider a private notice question if the Government do not make a statement on the Mendis case on Monday, so that the House can call Ministers to account for their activities, to explain why they did not allow proper negotiations to find Mr. Mendis a refuge, and to deal with the questions that many hon. Members wish to put to the Executive about this deplorable case?

Mr. Corbyn : On a point of order, Mr. Speaker.

Mr. Speaker : Is it on the same matter?

Mr. Corbyn : It is on the same matter, Mr. Speaker.

I join my hon. Friend the Member for Bradford, West (Mr. Madden) on this matter. It is important that a Minister should come to the House, or at least understand the feelings of the House about the disgraceful actions that happened today. An innocent man has been thrown out of this country to an uncertain future. At this very moment, he is on a plane bound for Sri Lanka in the company of a priest. It is incumbent on the British Government, who have thrown him out of the country, to do their best to ensure his safety in Sri Lanka. Therefore, it is right that, in addition to hearing from a Home Office Minister on Monday, we should hear from a Foreign Office Minister about what actions have been taken by the British high

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commission in Colombo to ensure that he is in a haven until negotiations on his asylum in another European country are completed. As the Home Office well knew at the penultimate moment this morning, such negotiations were going on with some hope that a more liberal -minded European Government would be prepared to grant him the safety and asylum that have been so callously refused by the British Government.

Mr. Holt : On a point of order, Mr. Speaker. If you are approached by the leaders of the Opposition to change their Supply day next week for a debate on this subject, under pressure from Labour Back Benchers, will you concede that request? They are silent on the matter. We are hearing humbug from the Opposition.

Mr. Speaker : I am sure that what has been said has been heard by the Leader of the House. It is not for me to decide whether a statement is made. As to a private notice question, the hon. Member for Bradford, West (Mr. Madden) knows that I would not pronounce on that, certainly not some days in advance of it. Of course, the Opposition's debate on Tuesday could be changed up until the rising of the House on Monday.

Mr. Nicholas Bennett : On a point of order, Mr. Speaker. Yesterday I asked the Leader of the House whether, if matters today did not proceed as on the Order Paper, the Government would give time to consider them further. As the proceedings on the Order Paper did not take place, I ask the Leader of the House through you, Mr. Speaker, whether the legislation stemming from the Warnock report will have an item on abortion, with a conscience clause. The Government have announced that there will be a conscience clause in the abortion legislation.

Mr. Speaker : That would be a very good question to ask the Leader of the House next Thursday at business questions.

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Plessey plc

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. John M. Taylor.]

2.47 pm

Mr. Neil Thorne (Ilford, South) : Last Easter, my hon. and noble Friend the Secretary of State for Trade and Industry issued an important blue paper on mergers policy. He followed it with a speech at the stock exchange conference at the Queen Elizabeth II conference centre on Thursday, 22 October last year.

Two and a half years ago, the Office of Fair Trading recommended that the hostile bid by the General Electric Company for Plessey should be referred to the Monopolies and Mergers Commission. That advice was accepted by the then Secretary of State, who ultimately accepted the commission's recommendation that the proposal should not proceed. It concerns me that, two and half years later, another hostile bid can be mounted by essentially the same company. As delighted as I am that it has also been referred to the Monopolies and Mergers Commission, I am unhappy, not only at the wastage of management effort of between four and six months infighting the bid instead of going out to win orders, concentrating on ways of improving productivity and becoming more efficient to cope with international competition and preserving jobs, but because the Plessey company cannot dispose of, acquire, or, perhaps most important, enter into joint ventures exceeding 10 per cent. of its assets without referring the matter to its shareholders. It is no wonder that the company, faced with this troublesome adversary, should seek to mount a counter-bid for the predator to get it off its back once and for all.

Following a previous bid the two companies were recommended to co-operate in telecommunications, and a joint venture company, GEC and Plessey Telecommunications plc was created and is working effectively. One of Plessey's great strengths is its ability to co-operate with other countries and it has been doing that since it was founded in a shed in my constituency in 1919. Throughout its history it has been building important bits to go into the products of others, and joint ventures have been a speciality throughout its life.

GEC was in its heyday in the 1960s and 1970s when British industry was lazy and overmanned. It was able to rescue some companies in difficulties by cutting their work force and selling surplus assets, but today we are in a different market. That dated theory involves preying on others, not to improve those companies' performance but to improve itself and survive. GEC looks for companies with a good research and development record, which has been made as an investment in the future, and then uses some of its own vast liquid assets to take over the benefits yet to be harvested and proceeds to strip out everything worth having while running down customers and the research and development investment.

Having failed once in its aim, it now returns under the cover of the Euro- fog to try again. This time it has been joined by another large company in a similar condition. I say Euro-fog because there is nothing to be gained post-1992 by this bid which is not available before. After 1992 it will be possible for both Siemens and Plessey to compete in other countries without having to form an

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alliance with a local company. The only change is in relation to defence matters, as these are excluded from the 1992 arrangements for completely free competition.

Siemens has strong telecommunications in West Germany. Plessey is a strong company in this country and throughout the world. Siemens has nothing to offer to improve on the previous bid, but has a lot to take away. For example, in radar, which is an important field for future collaboration, the Plessey company has a turnover of more than £100 million a year and GEC a turnover approaching £150 million, whereas Siemens has a turnover of only £25 million.

The sharing of management in joint endeavours would be a nightmare because Plessey has engaged in several joint ventures with countries in Europe and North America. If the GEC-Siemens proposal were to take effect, their proposal to divide management 51 : 49 would create further difficulties in these management deals. It is already difficult to negotiate with other companies and if an additional breakdown were superimposed on that, it would be an even greater impediment.

We should not forget that we have noticed in our relationship with North America that it is concerned that Siemens has connections not only with East Germany but with the Soviet Union. That must worry American Congressmen and Senators, who carefully watch the companies doing defence work for them to ensure that their hard-earned secrets, which they are either sharing or paying for through research and development, are not passed to countries behind the Iron Curtain for nothing.

One of the most important matters with which we must be concerned is employment. Plessey has nearly 15,000 employees in this country. If there were a takeover by GEC-Siemens, we could confidently expect that figure to fall to about 10,000. Five thousand high-tech jobs would be lost. GEC has a poor reputation in high-tech and we would not want chairman-management control added to the difficulties. The Ministry of Defence requirements have been completely met. The Department requires pan-service collaboration. From its inception, Plessey has been good at that. The process provides the ingredients that others need. Plessey has carried out research and development so that it has a separate base on which to formulate this kind of enterprise. In doing so, Plessey can make a unique contribution to keeping British industry in the forefront of technology. Reserving a centre of excellence as a base in the United Kingdom is vital to our future, especially in defence. We must ensure that we preserve the leading United Kingdom semi-conductor manufacturer under United Kingdom management control. We can do that only if Plessey remains an independent company.

One of the most worrying aspects is GEC's reputation. A noble Lord told me earlier in the week that he had been a member of a company that had been taken over by GEC some time ago. The experiences of the actions of senior and middle management were disastrous. The ethos was to strip out anything worth having, to reduce employment as far as possible and to sell off assets to build up liquid resources which could be used to prey on yet another company. That could not by any stretch of the imagination be considered to be to the advantage of the British taxpayer. Such actions do not lead automatically to a keener price mechanism and certainly do not lead to a more stable and secure defence industry.

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It is bad enough when this kind of attack is mounted on a company. If a company has to devote its entire managment resources for so long to fight off another bid so soon, we must consider whether there should be a limit on the frequency with which bids can be redrafted and resubmitted. If we do not do that, companies subject to predators are likely to suffer from decreased efficiency and ultimately to be taken over because they cannot maintain those high standards that they spent so long building up.

I hope that my hon. Friend the Minister can give some comfort by saying that this type of behaviour, which may have been well and good in the 1960s and 1970s, is inappropriate for the 1980s and beyond and that we can look for a more reasonable and rational approach. 2.58 pm

The Minister for Trade (Mr. Alan Clark) : My hon. Friend the Member for Ilford, South (Mr. Thorne) has put his case with the succinctness and clarity that the House has come to expect of him, and has made some interesting points. Mergers and takeovers raise wide-ranging issues, and those relating to the GEC Siemens bid for Plessey are now being investigated thoroughly by the Monopolies and Mergers Commission. My right hon. and noble Friend the Secretary of State announced his decision to refer the bid, in accordance with the advice of the Director-General of Fair Trading, on 12 January. The MMC has thus only just started its inquiries, and will report within three months. It is for the commission to decide whether the merger would be against the public interest, in accordance with the provisions of the Fair Trading Act 1973.

It would, as the House will understand, be entirely inappropriate to comment on the case while it is in the commission's hands, as any such comment could prejudice the conduct of its inquiries. If my hon. Friend-- or, indeed, any other interested person or body--wishes to take any further issues specific to the case he should put his views to the MMC, which has a duty to take all relevant matters into account when preparing its report.

My hon. Friend referred to the plight of the companies that are subject to repeated bids, claiming that that would inhibit their efficient functioning. He asked why there was not a statutory limit governing the intervals between which they would be inviolate from a predator. In fact there is such a provision. Under the takeover code, if an offer has lapsed a re-bid may not be made within 12 months, and under the same code a bid lapses automatically on reference to the MMC. The 12-month rule does not apply to a bid that has lapsed on reference to the MMC and is subsequently cleared.

I am sure that my hon. Friend would admit that to remove the threat of a take-over for any longer period would not be in the interests of either the economy as a whole or indeed the company itself. The threat of a take-over often has a salutary effect on the incumbent management. Management should be placed under the discipline of having to demonstrate to its shareholders that it is running the company as efficiently as possible. That, if it did nothing else, would raise the value of the shares to a level that would probably deter a predator. Any Government action that places obstacles in the way of take-overs weakens that discipline.

I should also point out that the courts have already determined that this is a different bid from the earlier one in respect of which GEC gave certain undertakings. The

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courts have ruled that the involvement of Siemens brings a new dimension to the position that was not foreseen either at the time of the MMC report or when the undertakings were being negotiated. Let me now deal with the implications of the bid for the Government's mergers policy. In announcing his decision to refer the bid to the MMC my right hon. and noble Friend considered

"that there are possible effects on competition, particularly in the areas of defence electronics and traffic control equipment, which deserve investigation by the Commission."

The reference of the bid to the MMC thus falls squarely within the usual policy of my right hon. and noble Friend on mergers : that the main criterion for deciding whether to refer a bid or merger should be the effect on competition in the United Kingdom. That policy was clearly stated in a blue paper entitled "Mergers Policy", issued by my Department in March 1988. It was reiterated in a speech, referred to by my hon. Friend, made by my right hon. and noble Friend to the stock exchange conference for industry last October.

I should stress that a decision to refer a bid is not a final judgment about the proposed merger. It means only that there are issues that merit further investigations. It certainly does not follow that the bid will be blocked ; that can be done only if the MMC finds it to be against the public interest. Of 47 references to the commission since 1983, only 11 have been blocked. If the MMC finds that a merger is not against the public interest, my right hon. and noble Friend has no powers to take any action.

The assumption underlying the Government's mergers policy is that the market should be allowed to get on with it. Government interference is justified only when there is a clear expectation that the outcome will not be in the best interests of the economy as a whole--and in the vast majority of cases, such adverse effects are manifested by a potential effect on competition in the United Kingdom. Underlying that is the judgment that, in general, market forces will be more likely to be right than the deliberations of politicians or bureaucrats.

While competition is the main consideration in deciding whether to refer a bid or merger to the MMC, My right hon. and noble Friend retains the power to make a reference on other public interest grounds. "Other public interest grounds" are often claimed to be the effect of a merger on employment or on research and development. However, it is for the parties themselves to take a view on those matters.

I appreciate that the uncertainty associated with a merger may be disconcerting for the work force concerned, particularly that of the target factory. My hon. Friend has already referred to his own constituents who are employed by Plessey, and it is true that the instinctive reaction of companies at the receiving end--particularly of unwelcome bids--is to resist mergers. However, it should not go unnoticed that that reaction is fostered, and often felt more strongly by, the management, whose own conduct may, for various reasons, have made the company vulnerable--more so than by the work force, which might in certain circumstances, and possibly in the majority of circumstances, benefit from a merger.

A merger may or may not lead to effects on local employment. They may be positive or negative, and similar changes could take place even if the incumbent management stays put. Patterns of production are subject to constant change, whether or not they are the result of a

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merger, and to seize on the possible adverse effects of a business decision as a reason for preventing them, is turning intervention into outright interference in business management--which is not an area, I am sure my hon. Friend agrees, where politicians have a record of excellence.

The GEC-Siemens bid has been seen by some commentators as an example of the industrial restructuring necessary in the run-up to 1992. Critics argue that greater weight should be given to the prospective benefits of a merger in deciding whether to make a reference. It is suggested that a reduction in competition in the United Kingdom should be accepted in order to enable large United Kingdom groups to be formed, to compete more effectively in world markets.

Arguments about the prospective gains to efficiency and to international competitiveness are considered in appropriate cases, but it would be wrong for the Government and competition authorities to take on trust the claims often made by the proposers of a merger about the benefits that will follow it. When a merger appears to pose a significant threat to competition in the United Kingdom market, the Government believe there should be a strong presumption in favour of a reference to the MMC. It is then for the commission to conduct a full examination.

The European Commission is also examining the bid. On 12 January, it announced that it considered relevant

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the competition provisions of article 85 of the treaty of Rome. Article 85 deals with agreements between firms which may restrict or distort competition in the EC. The joint purchase and subsequent joint operation by competitors of Plessey activities might be said to diminish competition--but the Commission has yet to take a view. Article 85(3) provides that agreements or decisions between enterprises which improve the production or distribution of goods, or promote technical or economic progress, be exempted, if the consumer secures a fair share of the resulting benefit. It is for the European Commission to determine whether such a derogation is appropriate. It requires more information from the companies concerned to determine that. The commission has said it will conclude its inquiries as soon as possible. Naturally there has been contact between my Department and the EC Commission and, as in previous cases, that will continue. The MMC is looking at the GEC-Siemens bid for Plessey, and will submit its report to my right hon. and noble Friend in mid-April. My hon. Friend the Member for Ilford, South has ample time to put his point to the commission. The reference of this bid is fully in accordance with the Government's mergers policy, which has been clearly stated. That policy provides industry and commerce with a clear and predictable framework within which to conduct the merger and takeover activity that is such an important part of the operation of the market.

Question put and agreed to.

Adjourned accordingly at ten minutes past Three o'clock.

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