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6.15 pm
Mr. Tam Dalyell (Linlithgow): On the golden share, what additional powers is the hon. Gentleman seeking? What is he saying ought to be there that is not? The golden share operation is very complicated and can be subject to all sorts of interpretations--as we know from experience over the years--but what exactly is the hon. Gentleman asking for?
Mr. Streeter: That is a very fair question; the answer is this. I am asking, first, that we get the investment policy right in the first place, because that is the thing that is being entrenched; and secondly, that we incorporate into the Bill new clause 1, which at least will place on the company an obligation to report to the House, so that, annually, we who have superintended this company for 50 years might see the extent to which the investment policy is being complied with. Who knows, the Minister may spring to his feet in a second and agree.
We say that the first five safeguards are utterly irrelevant and worthless and have no value in themselves, so we turn to the investment policy. The question that we ask is, does that policy prevent a future CDC moving away from its developmental objectives? I accept that the Secretary of State and the Minister genuinely believe that they have entrenched the developmental objectives in this way, but I do not think that they have succeeded. I remind them that I am talking about a future CDC, under pressure to perform--to move from an 8 to an 18 per cent. return--whose shareholders put pressure on the board to invest in high-yielding, high-performance companies. That is the context in which such a change might happen.
I said in Committee that the investment policy, the text of which I now hold in my hand, would allow a future CDC to agree to invest in listed companies only--perhaps one, two or three of the top listed companies in one, two or three places, such as India, Zimbabwe, Kenya or sub-Saharan Africa. If the CDC invested in only one or two companies in one or two of those places--I accept that sub-Saharan Africa must feature--it would be complying with the wording of the investment policy.
The Secretary of State did not disagree with that proposition. She said that Zimbabwe, India and Kenya have problems. We know that, but in each of those countries there are blue-chip companies--copper-bottomed companies. Would the letter of the investment policy prevent a future CDC board investing in one or two listed companies in South Africa only, where some of the world's most successful and wealth-creating companies are based? It certainly would not. I stand to be corrected by the Minister or the Secretary of State, but I can see nothing in the investment policy that would prevent a new CDC from investing on the South African stock exchange only.
Nothing in the investment policy says how many companies the CDC must invest in, or what type of company it can invest in. Two or three minor provisions prohibit it from investing in certain types of company, but it can invest in any type of high-performance, high-yield company that it wishes, irrespective of the fact that it is not a spread or a mix or a portfolio mix that contains job-creating companies and is benefiting the local economy. We know that 70 per cent. of investment must be in the list of countries attached to the investment policy, but the list includes almost all the world. The list includes many poor countries, but it includes also many countries in which there are thriving businesses and stock exchanges.
There is also a provision that 50 per cent. of the investment must be in sub-Saharan Africa. As I say, South Africa, Zimbabwe and Kenya all have copper-bottomed companies that the CDC could invest in. I do not think that the investment policy is watertight. It does not do what the Secretary of State told us it would do, which is to entrench the developmental objectives. I do not take great pleasure in saying that--I just think that we could drive a coach and horses through the policy. The test is not the likelihood of a future board investing in the way in which I have suggested, but whether it has the legal ability to do so. It is clear to me that it does.
It is no good me bleating about this unless I make a specific suggestion as to what to do. The new clause suggests that the company should report to the Secretary of State on its investments and policy each year, and that that report should be tabled in the House of Commons. That does not close the loophole. It would be after the event, but it would at least give the House an opportunity, at an early stage, to debate such a breach of the investment policy and to do something about it.
In Committee, the Secretary of State referred to an obligation to produce an annual report, and the Department produces an annual report. However, the report is not debated as a matter of course in the House of Commons. The annual report deals with everything that the Department is doing in that year. How much space
will there be to analyse in detail the investment policy of the new CDC? We want a specific report, dealing with the extent to which the new CDC has complied with its investment policy. Let the House decide whether the 50 years of investment by the British taxpayer is being honoured and safeguarded by the new CDC.
In Committee, the Secretary of State said that the Select Committee could look into the matter from time to time. The distinguished Chairman of the Select Committee, my hon. Friend the Member for Hertford and Stortford (Mr. Wells), is here this evening. I wonder whether the Committee would have the right to investigate decisions made by a company in the private sector--a company with 75 per cent. of its shareholding owned by private investors. Would the Select Committee have the right to call for the directors to attend the Committee? Would it have the right to investigate as it needs to?
I do not think that the safeguards are adequate, and the Minister and the Secretary of State should consider agreeing to the new clause, saving us all the bother of a division. If they accept it, an annual report will be presented to Parliament, so that we can scrutinise what the company is up to. We must be in a position to monitor the company and to act quickly.
My second helpful suggestion is to change the investment strategy now, before the Bill goes through. We have five paragraphs on the first two pages of the investment policy which deal with general principles and provisions. However, the investment policy lacks a catch-all provision that is designed to express the spirit that lies behind the past 50 years of the CDC, as well as the future, in terms of the mixed portfolio and its investment in companies which generate jobs and benefit the local economy.
When those expressions are found in the policy statement, there is a caveat about the opinion of the directors or the profitability of the company. Let us have a clear statement in the investment policy, setting out the spirit of the developmental objectives pursued by the CDC prior to this Bill becoming law.
In future, the measure would give an aggrieved shareholder the right to go to law to claim that the company was breaching its investment policy. At the moment, we can drive a coach and horses through the policy. However, a paragraph setting out the spirit of the CDC past and future would give an ethical investor--who may be worried that the company is moving away from its developmental objectives--a chance to go to law and seek redress. There would be something for a court to hang an order on. At the moment, that is not there.
Mr. Dalyell:
The imputation is that the CDC has invested, if not improperly, at least in grey areas. Is there any evidence of investment that is unsatisfactory? The hon. Gentleman ought to produce it if he is saying that.
Mr. Streeter:
The hon. Gentleman--whom I deeply respect--has missed the point. Previously, the CDC has not been under pressure to produce a financial return. Once the Bill goes through--when the hon. Gentleman will be voting for privatisation--the CDC will move from a return on capital invested of about 7 per cent. to one of 18 per cent.
My argument is that there will be shareholder pressure on the board of directors to deliver a new level of profit. Increasingly, the board will move away from investing in
the beneficial, long-term, job-creating local economies of which the company has been so proud in the past towards high-yield, fast-return, high-tech companies. There is nothing wrong with such companies, but the CDC was designed to open a new niche in development overseas, on behalf of the British taxpayer, in pre-emerging markets and countries. Our fear, that the CDC will move away from that special niche, caused us to table the new clause.
There are concerns that the Government are trying to do something that they cannot do--find a third way for the CDC. Of course, there is a case for the sale of the CDC, and we all want private sector investment. There is a case for fully privatising the company to attract a large sum of money which we can invest in the developing world. There is a case also for retaining the CDC in the public sector and for finding other ways of opening the windows and attracting private sector investment while the company remains publicly accountable and under public control.
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