Previous Section Home Page

Column 301

scale and are widely accepted by many other EEC countries. It remains a matter of surprise and regret to my right hon. and hon. Friends that the Government have not seen fit to legislate in that direction. We shall attempt in Committee to make good--here I answer directly the hon. Member for Harrow, East--these omissions. If the hon. Gentleman is a member of the Committee that considers the Bill, I hope that we can count on his support.

Mr. Dykes : Will the hon. Gentleman give way?

Mr. Gould : No, I shall not give way. The hour is late and I shall press on.

We shall pay especial attention to employees' rights to information in special circumstances such as takeovers and mergers bids. There are other issues of disclosure, such as the important provision in clause 108 that extends the requirement to disclose an interest in shares to holdings as low as 3 per cent. It reduces the time allowed for notification from five to only two days. We believe, however, that that provision is disappointingly inadequate. The proposed changes are welcome so far as they go, but they do not deal effectively with the problems of nominee shareholdings. These are problems that we have seen all too clearly in recent instances, such as in the Guinness and Blue Arrow cases. We believe that the concept of corporate personality is acceptable only so long as those dealing with the company are entitled to know with whom they are dealing. That fundamental principle must surely override the advantage of privacy that is afforded by the use of nominee companies. That principle should apply at all times and not, as the Government's consultative document suggested, only at critical times.

We have similar misgivings about the recently introduced provisions that do away, in effect, with the ultra vires rule. One of the problems with limited liability is that those who claim the privilege are not to be regarded as in the same position as ordinary traders or business men. Under company law, those who deal with people who enjoy limited liability surely need to know what a company has been set up to do. I do not dispute that the ultra vires rule has, in effect, become unworkable in its present form and that something must be done. I put the Minister on notice, however, that we have misgivings about merely sweeping it away. It is not right to put the limited liability company in the same position as the person who enjoys no such privilege.

In the interests of brevity, and in recognition of the lateness of the hour, I shall pass directly to the vexed question of mergers. Part VI deals with mergers, an area in which we believe that the Government have placed themselves in a mess. The current law proceeds on the assumption that mergers and takeovers are likely to be beneficial unless it is shown otherwise. The Government, and especially the Secretary of State for Trade and Industry, have made it clear that in principle at least they will intervene only on competition grounds. That takes no account of the wealth of academic evidence to the effect that mergers are likely to be detrimental both to the parties and the national interest. Even the Department of Trade and Industry, in its 1988 blue paper, recognises that

Column 302

evidence on post-merger performance that has emerged since the 1978 Green Paper supports the earlier findings of disappointing or inconclusive performance.

Furthermore, the emphasis on competition as the sole criterion takes no account of the fact that by comparison with other European Community countries the United Kingdom has a uniquely open market for corporate control. Therefore, our companies need more legislative protection against hostile bids than do their French or German counterparts.

Not surprisingly, the Secretary of State, despite his constant pronouncement, has in practice operated on rather different criteria. Sometimes he thinks that the "foreignness" of a bidder is objectionable ; sometimes he does not. Sometimes he takes account of regional, employment or strategic considerations ; sometimes he does not. Sometimes he objects to highly leveraged bids ; sometimes he does not. It is now impossible to tell in any given case the way that the Secretary of State is likely to jump. The Bill is inadequate for clearing up that confusion.

We gladly support clause 118, which allows for what is called plea bargaining. We believe that the pre-notification procedure is useful--so useful that it ought to be made mandatory. If that requirement were to act as a small disincentive to takeover activity, so much the better. We want those reforms to go further. We want the burden of proof reversed so that mergers or takeovers can proceed only if they are shown to be in the general interest. We should like the public interest criteria in section 84 of the Fair Trading Act 1973, already governing the Monopolies and Mergers Commission, expanded to align it with article 85 of the treaty of Rome and made applicable to the Director of Fair Trading's recommendations and to the Secretary of State's decisions.

We should like new statutory obligations to consult and inform employees about the implications of bids, and particular attention should be paid to the importance of ensuring that conditions laid down by the MMC, and promises made by bidders, are observed. As to the Financial Services Act 1986, part VII of the Bill attempts to deal with some outstanding issues but falls far short of what is required. It is what is not in the Bill that is of particular concern to us, especially when the overall state of City regulation is in such an unsatisfactory condition. All the evidence is that current attempts at regulation are not effective enough and are not taken seriously enough--which makes it all the more surprising that the Bill does not address that issue.

The Department of Trade and Industry is so slack and inefficient in that respect that Cameron-Webb and Dixon--the villains of the PCW scandal at Lloyd's--escaped criminal charges because of lapse of time. The average amount of time taken for inquiries under the Companies Act 1985 is two years and three months--notwithstanding the points that the Minister made earlier. Nineteen such inquiries remain uncompleted, some dating back to 1982. The DTI has been notoriously incompetent in carrying out its supervisory functions in cases such as Barlow Clowes. When it has discovered something wrong, it has been slow to act, as in the case of Blue Arrow--although I believe that there the fault lay with the Bank of England.

The Secretary of State cannot make up his mind whether serious offences such as insider dealing should be treated seriously. He is happy to allow the MMC to wave through the Minorco bid for ConsGold, notwithstanding

Column 303

substantial evidence of insider dealing. In the case of the House of Fraser, matters serious enough to be referred to the Serious Fraud Office were apparently not regarded as warranting a re- reference of that bid to the MMC.

There lies the mystery of the whole Al-Fayed business. The answer to that mystery can be found in the Secretary of State's determination to prevent publication of the report until any possibility of a re-reference is past. That possibility will lapse when the House of Lords judgment is delivered-- if publication is not enjoined by their Lordships. After then, and however strong may be the case for a re-reference, the Secretary of State will have no legal power to make that decision.

I believe that the Secretary of State well understands that publication of the House of Fraser report now would constitute such an overwhelming case for a re-reference that he would be unable to resist it. That is why he is delaying the matter until he no longer has the power to do anything about it. That is the only sanction that really matters. The prospect of a criminal prosecution in three or four years' time is hardly likely to worry the Al-Fayed brothers. But if the bid could be reopened and they were divested of Harrods, that sanction is one that they would not like.

That raises the question why the Secretary of State is going to such lengths to prevent that possibility from being kept open. The answer must lie either in the source of the Al-Fayeds' money or in the fact that the Al -Fayeds have a relationship with the Government or with the Conservative party which the Conservative party would prefer not to bring to light.

A further problem arises out of the Secretary of State's refusal to publish the report in the even more serious case of Blue Arrow. If he applies the same reasoning, he will be constrained to refuse to publish the Blue Arrow report. Most people who have been following the issue expect that report to disclose serious criminal offences which should certainly be referred to the Serious Fraud Office. If that reasoning is applied, the report will not be published until prosecutions can be brought and therefore there will remain a major cloud hanging over one of our most important financial institutions. The Government will have to face that dilemma and resolve it. I believe that it should be resolved by publication, which is the right answer in the Minorco bid and the Al-Fayed bid.

The Government not only have difficulty in deciding how to apply and enforce the rules, but in this Bill they are deciding to reduce the impact of the rules by amending section 62 of the Financial Services Act 1986. I understand and sympathise with the arguments, but I give the Minister notice that we shall examine that provision with great caution and scepticism. We believe that the threat of civil action for substantial damages is by far the most effective sanction, and the best way to ensure that the rules are observed. We also find it difficult to understand how the dividing line is to be drawn between the professional investor and the private investor. We have not yet been given the definition. We shall watch that dividing line and definition very closely, bearing in mind that it will vary from time to time and from case to case. But ultimately we are left with the following question : why should the direct investor be allowed such a remedy, while the investor whose savings are invested through a pension fund or through a professional investment manager is denied any such remedy?

Column 304

We were interested in what the Minister said about the proposition that the Securities and Investments Board should draw up a list of principles. We are not opposed to a simpler and more acceptable rule book, but I find what the Minister had to say about those principles unacceptable. If the proposition is that those principles are not to have the full force of law and are not to be enforceable in the courts by those aggrieved by their breach, I do not believe that the House should accept it. We shall certainly resist it.

The problems of City regulation arise from one single factor--the belief still current in the City and, it seems, in the DTI that rules which should normally be enforced with full rigour in other walks of life have less force when they apply to the City and financial markets, and that criminal offences committed in the City are not serious. That view was reinforced by the Government's reluctance to provide clear statutory rules and proper enforcement mechanisms. The City will not get the right message until the SIB and the takeover panel are made statutory bodies with full enforcement powers so that no one is in any doubt that they mean business and that the law will be applied.

The Bill is an important provision and a missed opportunity. It demonstrates by virtue of the fact that we are debating it at this time of night, the cavalier attitude with which the Government have approached so many important matters. We shall try to remedy their deficiencies. We shall try to help the Government to produce a Bill which deals effectively and constructively with the pressing problems of City regulation, the regulation of mergers and the true role of the limited liability company. At present the Bill fails to meet those responsibilities. We shall do our best to make sure that it does so.

11.54 pm

Mr. Nicholas Baker (Dorset, North) : I share the regret that we should be discussing such an important measure so late at night. I shall keep my remarks extremely brief as a result, and it is good to have the support of my hon. Friends behind me for that.

I believe that the Chingford guidelines on mergers are correct, and I am glad that they retain support in the provisions of the Bill. I notice with approval that measures are being taken to speed up references to and investigations by the Monopolies and Mergers Commission. I hope that my right hon. Friend the Minister will not regard speed as an absolute essential in dealing with changes in capital structures and capital ownership of companies. It is useful, but it must not be the overriding factor.

I hope that my right hon. Friend will consider further and tell us a little more about the definition of public interest, especially in relation to highly geared acquirers, whether they be from the Antipodes or Britain, whose acquisitions may be against the public interest.

The 13th directive of the EEC threatens to make statutory the provisions of the takeover code. I hope that my right hon. Friend will consider carefully before advancing statutory regulation in that way. The self-regulatory justice provided in the takeover code is efficient, sometimes rough but generally effective, much cheaper and quicker, and preferable to a court of law. It is a good deterrent for the sort of wrongdoing that it is designed to prevent.

Column 305

I hope that my right hon. Friend will not agree to exactly the same regulatory machinery for takeovers throughout the EEC. Surely the test should be that the rules, as they are applied in each EEC country, should have the same practical effect. We should not observe tidiness as a virtue, because it certainly is not.

Takeovers are a part of our system and have improved the performance and competitiveness of our companies, but I wonder whether we rely on them for our competitiveness too much. As a result of takeovers, too many companies have lost their regional and local control and have become too centralised in London. It is argued that company law may have helped a little in this process. There can be no doubt that taxation, especially capital and inheritance tax provision, has accelerated centralisation in London, as have centralisation of Government Departments and civil servants in London. I want more companies to remain locally controlled and to grow and mature where they are born and bred.

Political contributions have been mentioned. There is no direct parallel between trade union political funds and company political contributions-- partly, but not only, because the money belongs not to shareholders but to companies. Subject to the general rule for any expenditure, any payment by a company must be made for the benefit of the company, and the ultra vires rules, albeit varied by the Bill, and directors' ultra vires rules, govern the payment of these sums. The closest parallel is between payments made to political parties and other payments made by companies, such as to local charities or communities.

The change that their noble Lordships have suggested is a fundamental change of principle that all payments by companies should be voted on. That would lead to chaos in companies' accounting affairs if every payment--and this would be a precedent for many more--has to be voted on by shareholders. It is not clear what happens if the payment is voted down. The directors are responsible for their activities to their shareholders and are answerable to them. It is right that those payments should be disclosed.

How do we deal with the great problem behind this matter--the Labour party's concern that companies may give donations to the Conservative party, the Liberal party and SDP and possibly, in the future, the Labour party? That is why the Labour party wants the Bill not to be amended, but it has a remedy at its beck and call, which the hon. Member for Dagenham (Mr. Gould) has mentioned. If it is shown that at last the Labour party has become interested in business and is prepared to acknowledge the important part that limited companies play in our society and economy and the fact is acknowledged that we all depend on their profitability and the jobs that they provide, its worries will disappear.

The hon. Member for Dagenham has told us that he spent some time today twinkling in and out between lunch tables in the City. That is good news for the Labour party. It may remove its worries about political contributions. I welcome the Bill.

12.1 am

Mr. Charles Kennedy (Ross, Cromarty and Skye) : I echo the disappointment and criticism over the manner in which the Government have commenced their dealings on

Column 306

the Bill in this House. On this occasion, I do not blame the Department of Trade and Industry. If a criticism is to be made, it is of the Government Whips Office. However, the DTI is culpable in that it would have preferred a fuller and more sensible hour of debate-- perhaps next week--but I suspect that it was overruled by the Government's business managers.

The Minister delivered a thumbnail sketch--it could be no more than that-- on this wide-ranging, technical and, in parts, deeply political legislation in only 16 minutes at the Dispatch Box. To be fair, the right hon. Gentleman gave way on the few occasions when there were interventions, but I think that he will agree that that was hardly satisfactory for a Second Reading speech. I do not think that he would be happy with it. Many matters, including those on which the right hon. Gentleman touched, will be raised in Committee. I shall confine my remarks to three aspects of the

legislation--mergers policy, company accounts and political donations, and employee share ownership. I echo the remarks of the hon. Member for Dagenham (Mr. Gould), on the continuing unsuitability of the strict definition of competition as the only ground on which the Government will take a view on proposed mergers. The MMC's wider remit in considering the public interest covers competition, consumers, costs and product development, distribution of industry and employment and competitive activity overseas. That remit underscores the deficiency of the existing guidelines as laid down by a former Secretary of State--the Chingford rules --and referred to more recently in a speech by the present Secretary of State for Trade and Industry to the stock exchange on 27 October last year.

The Government are acquiescing--I was going to say "pursuing", but that suggests a degree of activity that does not exist--through a free market mentality, in the concentration of greater economic power in ever fewer hands, which is relevant in terms of large institutional shareholdings, such as pension funds. Many takeovers are purely acquisitive. Predators are looking to boost short-term funds by acquiring companies with existing assets which, all too often, are undervalued. There is a legitimate role, therefore, for far greater Government intervention--if they do not like the word "intervention", we could substitute the concept of healthy political or governmental interest--in some of the merger dealings that take place at the moment. A wider public interest basis for merger policy at the Department of Trade and Industry is long overdue.

Over the past decade, the Government have done much in legislation to encourage an increase in the percentage of the population who fall into the small shareholding category. They trumpet their achievements in that regard, and much of what they have done is to be welcomed. In addition to that, however, we must consider the more significant increase in institutional shareholders. Institutional shareholders do not necessarily have an interest in the fortunes of employees or the local economy. They often switch their money about to a great extent ; consequently, they will not necessarily have a great commitment to the long-term prospects of a company. That is not always the case but it can be, and in being unwilling fully to address those aspects in the Bill, the Government are missing an opportunity.

Column 307

Let me deal with company accounts and political donations. The Minister made a short speech--commendably so, given the lateness of the hour. He therefore did not enter into a detailed defence of the Government's thinking. In a sense, that in itself was rather revealing. In my view, the Government's position on political donations is utterly indefensible, and it is indefensible no matter which political party is involved.

It is extremely arrogant of the Government not to have made any concession to the House of Lords. They propose simply to try to delete the change made to the Bill in the other place. They do not propose even to try to meet the spirit of that proposal halfway. That arises from the arrogance of the Secretary of State, who, in our experience, has very little time for or courtesy towards others views--even where his own party is concerned, if we are to believe the criticisms that have been levelled against him. A few weeks ago, the Minister of Trade and Industry had to defend the Government's position on Harrods and looked rather shamefaced about it. He had to do that as a result of the lack of action by the Secretary of State. The Secretary of State should have been willing to meet the spirit, if not the substance, of the amendment passed in another place, yet the Government have announced in a cavalier fashion in this truncated Second Reading debate that they intend to knock out the amendment and go no way towards the principle of equity in company

donations--particularly, although by no means exclusively, in political donations. That is indefensible.

I cannot see how the Government can deny the obvious parallel with the trade union political levy ballots. My hon. Friends and I supported that proposal at the time, but we did so on the basis that such an approach should be even-handed. Any chairman of a sizeable company will confirm that, come an annual general meeting--a great opportunity, we are told, for shareholders to ask to what uses the company's resources have been put--any company chairman worth his salt and his telephone-digit salary can have the meeting in his pocket on such questions. Therefore, the Government are on thin ice in trying to defend their position on political donations.

To end on a happier note, there are some good aspects to the Government's policy on share ownership. Most notably, they have made a major concession in agreeing to introduce an employee share ownership scheme. At the moment, companies are prohibited from giving financial assistance to buying shares. That will be amended so that companies can help their employees to buy shares. That is to be welcomed. If we are to encourage share ownership, as the Government want, it is also extremely important to encourage greater shareowner democracy. It was unfortunate that, in the other place, Lord Monson's amendment was defeated. It read :

"In the case of a company having an issued and fully paid share capital of £2.5 million, every notice calling a meeting of the company issued to those of its members entitled to attend a vote at the meeting whose registered addresses are in the UK shall be accompanied by a reply-paid form of proxy."

That is a sensible suggestion which can be easily tacked on to the Bill. I do not see it resulting in undue bureaucracy or difficulty for the company concerned. It would therefore enhance the concept of share ownership democracy. Of course, some but not all companies already follow such a practice. Surely it is important to make it as easy as

Column 308

possible for small shareholders. Most often, they will be new to the game of having a say in the company that they partly own. I agree with much of the sense of the arguments put forward by the hon. Member for Dagenham that this is a comprehensive, or at least fairly straddled piece of legislation. It touches both technically and politically on a wide range of matters. In this case, the Government have an opportunity to improve matters. However, on the issue on which they were defeated in the other place and in relation to other potential aspects of the Bill, they are certainly not displaying a constructive attitude towards the Committee's proceedings. They certainly have not endgendered a good spirit in choosing to move the Second Reading of the Bill in its present form and at this hour.

12.12 am

Mr. Ian Taylor (Esher) : I welcome this constructive Bill. I will confine my remarks to one subject, the last matter raised by the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy)--employee share ownership. I welcome Government amendments Nos. 105 and 107, moved in the other place, both of which refer to facilitating wider employee share ownership. This forms part of the overall Government strategy to encourage worker participation, as we have already seen in the Finance Bill and the Budget.

In effect, clause 105 facilitates the formation of partnership companies, by enabling the Secretary of State to prescribe regulations under statutory instrument for table G--a model set of articles of association. That is important because, in some circumstances, a decision which is marginal can be influenced by financial considerations, and the availability of those various tables--and this one in particular--will enable much hard legal work to be overcome since the model articles are openly available. Much of the work behind this amendment was done by Lord Onslow in another place, and the Government are to be congratulated on bringing forward their own amendment. Clause 107 also has a major impact on employee share ownership by enabling companies to give financial assistance for the acquisition of their own shares in circumstances related to the formation of an employee benefit trust.

I raised an eyebrow at the remark of the hon. Member for Dagenham (Mr. Gould) that much of the progress made on employee share ownership was the result of Opposition pressure. That is simply untrue. Many of my colleagues and I have been waging a campaign since the last Finance Bill for this initiative, and I know only too well the confusion on this matter, since the Finance Bill debate, amongst Labour Members.

Mr. Gould : Is the hon. Gentleman trying to make the point that this provision was all part of the Government's plan? If that is so, why was no such provision included in the Bill when it was originally published?

Mr. Taylor : That is precisely the point. Several of us, with the co -operation, for example, of Lord Onslow, persuaded the Government of the rectitude of this proposal. The hon. Gentleman should also be aware that it is important to see this measure in tandem with the Finance Bill because the two interrelate closely. For the hon. Gentleman to claim credit for this proposal when he

Column 309

has been forced to admit, in an issue of Marxism Today, that when one mentions the word "shares" in the Labour party one is regarded as a raging capitalist, is intriguing indeed. It is also revealing that he only identifies the possibility of having a benefit for workers if they also have control. That means that in nine cases out of 10 he will deny the workers the benefits they might receive from some equity holding in a company simply because of some dogmatic structure that requires that they should have over 51 per cent.

Mr. Gould : The hon. Gentleman has totally misinterpreted and misquoted me and misrepresented my position. We have no view on whether there should be employee share ownership schemes. If people want them, that is fine. However, without taking any view against such schemes that do not bring control, our objective is to have schemes that do bring control. I am sure that the hon. Gentleman will see that, logically, it does not follow from that that we are in any sense opposed to other forms of scheme.

Mr. Taylor : The continued emphasis on the fact of control is important and gives a clue to the Opposition's principal interest in employee share ownership schemes. The reality is that workers, through employee ownership, can get the fruits of capital from their own labour. The percentage of control is a totally misleading guideline.

Small companies can often benefit from very small amounts of capital put into the hands of their workers, and that gives them a commitment to the future success of the company. That is the way in which the Government want to see the scheme work. It is also significant that there is a criticism inherent in the amendment in the name of the Leader of the Opposition and others that calls for greater participation by employees. Greater participation by employees is already enshrined in this Bill in clauses 105 and 107. Therefore, the true meaning is that the hon. Member for Dagenham and his colleagues want to see worker participation in the form of mitbestimmung and other such measures to which many Conservative Members are rigorously opposed.

12.18 am

Mr. David Winnick (Walsall, North) : I agree with the many valid points made by my hon. Friend the Member for Dagenham (Mr. Gould). I view, as he and my other hon. Friends do, with considerable concern the vast concentration of economic power in giant private monopolies and multinationals, and this Bill will do little or nothing to change that.

The only aspect of the Bill I will deal with at this late hour is political donations. It comes as no surprise that the Minister announced that the amendment passed in another place would not be accepted by the Government. I refer to the provision in the Bill as it stands that requires specific approval of shareholders for political donations. I have raised several times the matter of company donations for political purposes, mainly on ten -minute Bills.

When I asked, on a point of order, for some guidance from you, Mr. Deputy Speaker, a number of Conservative Members shouted, "What about your financial support?", so I had better declare an interest now. Although I have not heard many declarations of interest from Conservative Members, I shall declare my interest. I receive directly no

Column 310

money whatsoever from my union, which is APEX--the Association of Professional, Executive, Clerical and Computer Staff, which is now part of GMB.

As I have explained--we all fill in our own register--I am not sponsored by my union, although if I was I would make no apology, but over a period my union has made contributions to my election campaign. It pays £100 per year to the constituency party, and £50 for secretarial expenses, which is sent to me and which I pass on to the constituency party. I hope that that explains my position. I shall come in a moment to the way in which trade unions make political donations-- [Interruption.] No, there is no doubt in my mind that the provision now in the Bill should remain as it is. Some of the ways in which company donations are made to the Tory party are undesirable. They may be within the law, but they are only just within it. They are underhand, secretive and murky. Sometimes it reminds one of how the Mafia organisation launders money to be used for legitimate purposes.

More light has been thrown on this murky subject by some excellent material that has appeared recently in The Independent. The articles in question brought to light what are known as the river companies. I must confess that I did not know about the river companies on the occasions when I raised these issues in ten-minute Bills and the like, and I doubt whether any other Opposition Member was aware that the river companies existed. The river companies were set up to get round certain legal technicalities that prevented gifts being made to the Conservative party which, not being a commercial company, had certain problems in receiving those gifts. After the war it was decided to set up the river companies. Most of the money received by the river companies was received from large companies and was used by the Conservative party.

Substantial donations were sent to a front organisation that I had certainly heard of and the existence of which I had been aware of for many years--British United Industrialists. The money was first given by companies to British United Industrialists and was passed to the river companies and finally reached Tory Central Office. That is what I mean when I talk about "laundered" money. It is underhand and murky. Why could not the donation be made directly by the companies to the Conservative party?

Mr. Tim Smith (Beaconsfield) : I am surprised that the hon. Gentleman did not know about that because it was the Labour Government's Companies Act 1967 that required companies to disclose such contributions in their accounts. If the hon. Gentleman had taken the trouble to look at the accounts of individual companies, he would have seen contributions to British United Industrialists, among others.

Mr. Winnick : I am aware of what has passed in 1967 because I was here and supported that Act at the time. Up to that time there was no way in which companies could be shown to have donated money, and even with the introduction of that provision in 1967 the fact remains that many of the contributions made by companies are underhand. I have already made it clear that I was aware of the existence of British United Industrialists. Today that organisation passes its donations to another organisation, Drummond bank, free enterprise account. However, that

Column 311

Conservative party account is not mentioned in the figures that are published by Conservative Central Office. The hon. Member for Beaconsfield (Mr. Smith) may wish to tell us about that organisation.

It seems that literally millions of pounds have been channelled to the Tory party from British United Industrialists. That organisation also supports actively and fnancially the Economic League. It could be argued that we are talking about relatively small sums that do not really make much difference because they amount to only £100 or £200, but that is not so. The figures published show that some £4.5 million was donated by large companies to the Conservative party just for the 1987 election campaign. Hartley Investment Trust gave the Tories £167,000, George Weston Holdings gave £150,000, British and Commonwealth Holdings gave £137,000, Hanson gave £102,000, Taylor Woodrow gave £78,000, United Biscuits, one of the firmest commercial supporters of the Conservative party, gave £100,000, P and O gave £100,000 and Allied Lyons gave £97,000. That money was given for just one general election campaign.

Surely it is not too much to ask that, before such large donations are made by companies, the approval of shareholders should be acquired. Before the law was changed a few years ago by this same Government, my union had a political fund, which, I admit, had been established many years previously. That fund could always have been modified or ended at the annual conference of my union, which would have been perfectly democratic. Anyone could opt out and many did because they did not want to pay into the political fund. Along came this Government, however, and said that that was not good enough. They said that all trade unions had to have a political fund ballot every 10 years.

In 1985 I took part in the political fund ballot of my union, then APEX. I tried to persuade members that they should continue to have a political fund. I must confess that during that campaign I spoke about the money that was donated to the Tory party by big business. I am glad that, at the end of the campaign, all the unions with political funds succeeded in their ballots--we had a majority of more than 70 per cent. The irony was that a couple of trade unions that had never had political funds had a ballot and decided to establish them. I was pleased about that.

The unions' behaviour is in stark contrast to that of the Government. The Government told the trade unions that they had to have political fund ballots every 10 years before such funds could be maintained to make contributions to, as we all know, the Labour party. A modest proposal passed in the other place would simply mean that shareholders would be able to decide whether contributions of a political nature should be made. That would affect the Conservative party, and the Minister has said that such a proposal is out of the question and that it will be changed in Committee. That is the height of hypocrisy. Surely no one can deny the contrast in behaviour. I accept, of course, that I am politically biased--as is everyone in this House. We want to ensure that our argument is the best, but surely we should be concerned about standards in political and public life. If a trade union acts corruptly, that is indefensible. I would not wish to argue in favour of such a union, which would bring discredit to the trade union movement. I have no wish to defend indefensible practices. Conservative Members seem

Column 312

to be unanimous, however, that the present practice whereby companies donate large sums of money to their organisation is all right. They believe that the law should not be changed and that everything is in order, however murky, underhand and secretive it is, as shown by the articles in The Independent on the river companies, British United Industrialists and all the rest. Undoubtedly the time will come when another Government will be in office and they will make changes which are perhaps more substantial than the modest proposals carried in the other place.

I know that there are people inside the Conservative party, if not inside the House, who share our views. They are, of course, as anti-Labour as Conservative Members ; otherwise they would not be active members of the Conservative party. I know of the Charter movement and of Mr. Eric Chalker and others who are looked upon almost in the same way as dissidents in the Soviet Union. They take a different view from the Minister and Conservative Members. The Charter movement inside the Conservative party argues that the Tory party should be far more open about its finances and that Conservative Central Office should publish full, audited accounts. It is remarkable in this day and age that anyone should have to campaign for what should be taken for granted in a political organisation. The Labour party has always published full, audited accounts. It would be odd if it did not do so.

I have no wish to personally attack or smear any Conservative Member--I am concerned with the politics of the matter--but when I look at the Register of Members' Interests I see that in some cases Conservative Members have several directorships. For instance, the hon. Member for Dover (Mr. Shaw) has 12 directorships. Other hon. Members, present or absent, have a substantial number of directorships. A number of the companies mentioned donate large sums of money to the Conservative party. Those hon. Members are firmly opposed to any change of the law, yet four years ago they were only too keen to change the law regarding the political funds of trade unions. Those individuals, like the Government, are acting in a hypocritical manner. I beg Conservative Members to understand that there is a need to retain the amendment carried in another place. If there is a change, as undoubtedly there will be arising from what the Minister has said, when another Government come to office there will be substantial changes in party finances.

12.31 am

Mr. Anthony Nelson (Chichester) : The hon. Member for Walsall, North (Mr. Winnick) spoke principally on one issue. I make no complaint about it, but the Bill affects thousands of companies, hundreds of thousands of shareholders, investors, creditors and debtors, and millions of employees and customers. Perhaps they were entitled in the breadth of the debate to a little more comment on the issues than the navel-studying issue of political contributions, although I do not under-estimate the depth of feeling of hon. Members in both Houses, and on both sides, about the matter.

In observance of the conventions of the House, I wish to declare my personal interests as a director of, and a consultant to, a number of companies--one plc, two private companies and two charitable companies. The plc

Column 313

is the General Electric Company, which is relevant in that it has recently been involved in a takeover bid, although that is not relevant to what I wish to say now.

I also want to take the opportunity to register a protest. The Government do the House no service in bringing forward such legislation late at night. First, we should blame the hon. Member for Glasgow, Govan (Mr. Sillars). I understand the Government's point of view, that they should not have to alter the legislative programme for major Bills because of the irresponsibility and the publicity stunt of the hon. Member for Govan. I think that he will get his come-uppance in due course. That example shows yet again that we as a House should exercise more of a self-denying ordinance about messing up the business of the House and of the Government of the day. The first responsibility lies with the House. As an ordinary Back-Bench Member I say that we should exercise more responsibility. Secondly, Mr. Deputy Speaker, you and Mr. Speaker speak for the House. You are our representatives to the outside world. We respect you. In you is the repository of the heritage, the good order, the respect and the procedure of the House. While it is not for me to put words in your mouth or to raise a point of order, I believe that the House should be concerned--with the concern reflected through the Chair--about such procedures and the fact that Ministers are detained here late at night. I have just met the Minister for Roads and Traffic, who may be making important decisions about roads in our constituencies tomorrow. What nonsense it is that he should have to be here at this time of night because of the irresponsibility of the hon. Member for Govan. Finally, there is the responsibility of business managers and the Ministers because it is their Bill and it is within their bailiwick to decide whether to bring forward the Bill.

The House knows, and it should be said in the House, that this business could, and should, have taken place tomorrow. Why was it not conducted tomorrow? We should not continue to put up with cursorily discussing so late at night important Bills that affect so many people and lay down legislation for a decade ahead. I have said my piece at too great a length on that matter.

The first two parts of this important Bill implement two European Community directives, both of which are necessary and overdue. The Bill is an important step towards improving the standards of auditing and accountancy in this country, and the education, supervision and control of the accounting profession. As the Opposition motion--subsequent to Second Reading--suggests, the proceedings of the Bill would be more adequately dealt with by a special Standing Committee. The Bill is ideally suited to that procedure.

The special Standing Committee procedure allows for only four mornings on which the Committee sits, with the Chairman of the relevant Select Committee, to take evidence from relevant organisations. When discussing a Bill of this magnitude, technicality and importance, in which legislation is framed that will affect major professions in this country, we should want to hear what those professions have to say. We, as a House and as a Committee, should take evidence from them.

I am told that the problem is time, and that if those extra days were allocated, it would not necessarily reduce

Column 314

the amount of time that the Bill was in Standing Committee. However, parliamentary procedures should be pursued not for the convenience of the Government, but for the good government of the country. They should be enshrined in good, entrenched and workable law. The special Standing Committee procedure would allow that to happen and would be well suited to do so.

When implementing the European standards of accountancy in this country, the European countries will have a great deal to learn from us, and we shall have little to learn from them. I would like Ministers to assure me that just as we will implement--no doubt to the letter--the requirements of the directives in this country, we shall press hard for those directives to be fully implemented in other European countries. The single Europe, the degree of competition, the prosperity and prospects of British companies, will rely as much on the comparable standards of accountancy and disclosure --which certainly do not exist at the moment--in the European Community, as they will on the implementation of the high standards of probity in this country.

I welcome the moves that the Government are making in relation to part VI and the competition policy, as elsewhere in the Bill, to streamline and speed up the process of supervision and

decision-making on takeovers and mergers. Increasingly in recent years, successive Ministers of Governments of different political colours have been placed in an increasingly difficult position. Not only have their utterances and decisions been increasingly subject to litigation and legal challenge, but they have to withdraw and be much more circumspect about what they can say, in the House and elsewhere, about important matters of public policy, industries and competition because of pending Monopolies and Mergers Commission inquiries and litigation. That is not necessarily good.

Part of the answer to this problem might be to shift out of the Department the process of supervision, as I and others have sought to do with regard to the supervision of the investment and financial markets. In this case it would involve moving the supervision towards some of the accountancy and other professions and, particularly, to give powers to those other than the Secretary of State for the supervision of monopolies and mergers. In my view, however, that would not be desirable. Every merger is individual, and inevitably--certainly in the case of major mergers--contains a range of political and regional factors that should be taken into account. Ultimately, the need for a political decision cannot be ignored or circumvented, although it is right for us to construct procedures to ensure that the Secretary of State receives the best possible objective--informed advice.

In deciding to speed up the process the Government have chosen a course that has been welcomed on both sides of the House, and I look forward to discussion in Committee. It is, effectively, plea bargaining. I should like an assurance, however, that it is not a charter for leveraged buy-outs, for I fear that speeding up or making easier the process whereby applicants to the Department of Trade and Industry can be told, "Yes, you will be given permission for a takeover without a reference if you agree beforehand to undertake to divest yourself of certain subsidiaries afterwards" will lead to many companies trying it on. They will try various formulae for the hiving off of various subsidiaries. The leveraged buy-out phenomenon has not yet swept this country, but it has swept the United States.

Column 315

Moreover, I do not consider the process itself helpful or beneficial to the development of British industry or to the confidence of other investors who are by no means in such a powerful position as major shareholders, and certainly the institutions. I am a little concerned about the restraints, controls and conditions that will be attached to such procedures to ensure that this is not a charter for takeovers which will result in virtualy no references being made to the Monopolies and Mergers Commission. I believe that there is a role for the commission, which has done outstanding work and which, under Mr. Sydney Lipworth has not only proved very good value for money in public expenditure but, over the past year, has considered an increasing number of cases with great diligence and impartiality.

While I welcome much that is in the Bill, I believe that we should consider other measures that are increasingly necessary in company law. Let me mention, in general terms--I think that this relates partly to the initial dissertation by the hon. Member for Dagenham (Mr. Gould) about the changing roles and obligations of limited companies--my increasing concern about the way in which public limited companies are using shareholders' funds for some rather questionable purposes. The House should be very concerned about the personal vendettas, highly questionable loans and activities apparently wholly unconnected with companies' articles of association that we have seen in recent years.

My own view, as I think is well known, is broadly in line with that of the late Sir Brandon Rhys Williams. I believe that there is a pressing need for us to consider ways of supporting and empowering non-executive directors-- or at least some elements on the board--to require, through separate responsibilities and abilities, certain financial information. I am not yet persuaded of the need to adopt the supervisory board system employed elsewhere in the European Community ; I believe that we can accommodate such arrangements within our unitary board tradition. Nevertheless, in many companies it simply is not working out.

It is not good enough that companies are making substantial loans, grants and disbursements for people and activities wholly unassociated with what shareholders believe to be taking place. That is not good for investment, for the City, for probity or for the recognition of company law in this country. If it is getting out of hand, as I believe it is, we should strengthen and bolster the role of non-executive directors. We have done that in banking. Partly by coercion and partly voluntarily, new standards of probity have been established in the banking community. It is difficult to achieve unanimity and a perfect performance elsewhere, and much remains to be done. I predict that the problems will get worse unless the House does something about the problem.

In many of its measures, particularly the disclosure measures in part I and II, the Bill does much to rectify the problems. I hope that in the later stages Ministers will be able to reassure us that the comprehensive nature of the proposals answers many of the fears that I have expressed and which I know are abroad elsewhere in the House.

12.45 am

Mr. Bob Cryer (Bradford, South) : I shall be relatively brief because of the late hour at which we are debating this Bill. We have been forced to debate it because the

Column 316

Government insisted that it should be debated at this late hour. The Bill is long, complicated and technical. It is wrong that we should be debating it now. I do not know why the Government have insisted on this, unless they want to diminish the long, boring intervention made earlier by the hon. Member for Glasgow, Govan (Mr. Sillars). I must point out that he is no longer in the Chamber. He spoke at length and pushed our proceedings into the early hours, but he has now disappeared. None of the SNP Members is interested in this legislation, which will affect Scotland and will have equally grave importance for Scottish Members. [ Hon. Members :-- "Hear, hear."] Having received that support, I suspect that my next remarks will not receive such universal commendation.

The Minister referred to clause 19, which tightens the definitions of parent undertaking and subsidiary undertaking. That is pleasing. A lot of siphoning off of companies has occurred to defeat legitimate industrial disputes involving the trade union movement. If clause 19 stops that abuse- -I suspect that that is not the reason why the Minister included it in the Bill--it will help to encourage decent industrial relations. However, the Minister has included the clause to stop abuse and, as he said, to make consolidated accounts more meaningful and to avoid evasions caused by the siphoning off of companies. Evasions also occur in the responsibilities of allowing trade unionists the proper rights to undertake legitimate industrial action against companies.

Part III is entitled :

"Investigations and powers to obtain information."

That section of the Bill refers to stronger investigative powers. That is good, but those powers do not go far enough. They do not go as far as the comprehensive investigative powers of the Department of Social Security. I cannot find any clause in the Bill which allows inspectors to stand outside a company office to spy on the activities of people inside. Inspectors in the Department of Social Security have such powers in respect of disputes about relatively paltry sums.

While I welcome the increased powers to obtain information and the investigations, I would argue, as my hon. Friend the Member for Dagenham (Mr. Gould) argued, that they do not go far enough. The Government have a great deal of experience of pursuing recipients of relatively tiny sums in the form of social security benefits. I should have thought that they could invoke some of that experience against the massive sums which are being defrauded in the City. I have a few comments to make about the provision from the other place to give some meaning to shareholder democracy. I do not have much sympathy for that concept, because there is not much of it about. The Government are not prepared to extend it, because the House of Lords is not a very radical place. It moves very mild amendments, and that is what it has done in this case. It is not all that radical to permit shareholders who provide the money to make the decision about political donations. The Government are denying shareholders that opportunity. They are giving a kick in the teeth to the people they are supposed to be encouraging.

What are the Government afraid of? Are they afraid that shareholders might say, "We don't want to give money to the Conservative party that produced this wretched Government"? The Government should put the matter to the test. They have insisted on ballots for trade unionists and trade unions. Clearly, they have double

Next Section

  Home Page