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Mr. David Heath (Somerton and Frome): It is a shame that we could not consider this new clause with new clause 2, which was not moved; it would be interesting to judge the effects of incorporation in sub-Saharan Africa on the price of assets on sale.

In the latter part of her speech, the hon. Member for Chesham and Amersham (Mrs. Gillan) addressed some interesting questions about the present functioning of the CDC and its finances. However, the early part of her speech and the main thrust of the new clause deals with the pricing of assets on their disposal. I cannot help but hear the resounding noise of stable doors being firmly closed, several years after some choice horses bolted from the public sector. The structures already exist--through the National Audit Office and the Public Accounts Committee--to provide checks and balances in these matters. Furthermore, I believe that the Secretary of State does have the best interests of that partial flotation in mind, so that it can produce the assets that we hope will enable the corporation to do its job.

The narrowness of the new clause causes me some concern. It proposes that the sole criterion to be used by the Secretary of State is

It is important that we receive the maximum return compatible with the other objectives set by the House and the Government for the change of status of the CDC.

However, there are conflicting pressures; I hope that the Secretary of State will bear them in mind when the sale of the assets takes place. Those pressures will also bear on the board, which will have a duty under the Companies Acts to maintain the best commercial interest, but that will be qualified by the structures to be established under the Bill in respect of business principles and investment policy. The interests will not be purely commercial; there will be a commercial interest tempered by the need to produce effective development in those parts of the world where it would otherwise not occur.

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If the sole criterion were to be the best commercial interests of the corporation, a different picture would emerge. There would be a different distribution of assets within the corporation before flotation; there would undoubtedly be an increasing asset base at the expense of effective investment in many parts of the world. The sole shareholder--the Government with the Secretary of State as their embodiment--should have a range of other interests in mind: development, which we have already discussed; other policies of the British Government, which may or may not be in conflict with the commercial interest; and the diversity of the eventual share holdings, because a diverse ownership of the company will produce that vitality in investment that we want.

The potential buyers of the business will want to consider other factors, such as the exceptional tax status that has been invoked as the main thrust of the Bill. I still have some residual concerns as to that tax status, although I am willing to suspend some of my disbelief in order to see the measure through. However, I am worried about the way in which profits and dividend will be apportioned between the tax-exempt parts of the company and those that are not exempt. I am concerned about the potential for windfall earnings during that seven years of grace, if the golden share is disposed of. Although I pay tribute to the Minister's willingness to provide lucid answers to those points, he did not entirely convince me in Committee. Some matters remain opaque.

All those factors must be borne in mind. That is why I must reject the new clause; it puts too close a straitjacket on the Secretary of State, by asking her to consider only the commercial interests of the corporation in finding a price.

As I said, of course we want to see the maximum return on the investment that the Government and the British people have put into the company over the years, but we also want a successful flotation and continuing interest to ensure that there is investment in developing countries in the future. A basket of criteria is involved, and the amendment will not provide the Secretary of State with the freedom of choice that will allow her to do her duty by the House and the Government.

10.45 pm

Mr. Hogg: I listened carefully to the hon. Member for Somerton and Frome (Mr. Heath). He is wrong because he has failed to focus on the purpose of the new clause. His remarks would have some force if we were discussing the general investment policy of the Commonwealth Development Corporation. There is a distinction to be drawn between the CDC's general investment policy and the price at which one subsequently seeks to dispose of shares. They are not the same. Clearly, the disposal of shares reflects in part the pre-existing investment policy, but the two considerations are different, and it is fair-minded of the hon. Gentleman to acquiesce on that point.

I support the remarks of my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan), who spoke from the Front Bench. Reading the new clause, it seems to me that we are doing little more than asserting in the Bill the obligations that are already those of directors under the Companies Act 1989. I find it difficult to

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understand why Ministers should resist the incorporation of a general statutory obligation into the Bill, unless they have a private agenda.

Mr. Heath: Does not the right hon. and learned Gentleman accept that there is a difference between the obligation on directors and the obligation on the shareholder, who is the Secretary of State? The Secretary of State has other interests that she must consider in determining what is the appropriate disposal price.

Mr. Hogg: I am grateful to the hon. Gentleman for making that point because he reinforces my concern. We must remember that when the CDC has been privatised, there will be many private investors who will hold up to 75 per cent. of the equity. They have a right to expect that their equity price will be protected against the depredations of a Secretary of State who may be minded to dispose of equity for a price other than a commercial one. That is the point that the hon. Gentleman is making.

Mr. Foulkes indicated dissent.

Mr. Hogg: The Under-Secretary shakes his head, but he is a little premature because he has not yet heard my argument. If he wants to intervene, I will of course give way. If not, perhaps he would be well advised not to interrupt.

The point is that we are discussing the equity in the CDC, in which there will be many private investors. If we are to encourage private investment in the CDC, it is essential that prospective investors feel confident that their investment will be treated in a proper commercial way. The new clause would do no more than assert that in the Bill. Prospective investors will be entitled to be concerned about the security of their investment if there is no statutory protection.

The hon. Member for Somerton and Frome observed that there might be other, proper considerations that the Secretary of State could take into account. If I were an investor, I would not want the value of my shares to be determined at the discretion of the Secretary of State, however well intentioned she might be. I should want the value of my shares to be determined by straightforward commercial criteria.

Mr. Foulkes: Well, we know that.

Mr. Hogg: Of course I should want that. If the hon. Gentleman wants to get investment into the CDC, he would be well advised to ensure that the investment is safe. [Interruption.] The hon. Member for Hove (Mr. Caplin) is right to gesture to the Under-Secretary that if he wants to keep the debate short, he should keep quiet. I praise the hon. Member for Hove. After the 19 or so years in which the Under-Secretary has been a Member of the House, I should have thought that silence would have been commended to him by experience and practice.

Mr. Crispin Blunt (Reigate): He is a well-known control freak.

Mr. Hogg: The Labour party is full of control freaks.

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I may be enjoying myself, but there is a serious point to be made about the protection of investors.

Mr. Heath: I am listening carefully to the right hon. and learned Gentleman's argument which might have some force if it were envisaged that the sale of shares should take place in a series of tranches--a sequential sale--so that the Secretary of State would be affecting the price of shares that were already held by members of the public. However, that would not and could not apply if the shares were sold in a single block.

Mr. Hogg: I am grateful to the hon. Gentleman for coming some way towards my position. He should come the whole way, however, as giving the Secretary of State the ability to crystallise the value of an equity holding--as that is what happens when there is a disposal for value--also determines the value of the residual equity. Giving the Secretary of State the right to dispose of shares other than at their commercial value also crystallises the value of shares held by the other equity holders. The price might be less than the commercial value so that would be wrong.

This is not idle speculation. Anyone who is aware of the Government's policy on realising the gold reserve will recognise that they are not to be trusted with the realisation of assets. Not only have they managed to sell the gold reserve at a low value, but they have had a permanently diminishing effect on the gold reserve held by others; and, incidentally, they have diminished the employment in South African and other gold mines for which the Secretary of State for International Development and the Commonwealth Development Corporation have some responsibility. So we are absolutely justified in being very cautious.

Moreover, new clause 3 has another great benefit. When one sets out a duty, as new clause 3 does, one also prescribes a remedy. If the Bill states that the Secretary of State has a duty to realise at commercial value and it then appears that the Secretary of State is not doing that and there is some private agenda or other motive such as the hon. Member for Somerton and Frome alluded to, it is possible for a private investor to go to the court, first for an injunction--I hope that we are all in favour of the rights of the citizen--and, secondly, alleging loss arising from misfeasance on the part of the Secretary of State.

The proposal set out by my hon. Friend the Member for Chesham and Amersham is very desirable. It crystallises within the Commonwealth Development Corporation an obligation which is extraordinarily similar to that imposed on a board of directors. It provides a protection to prospective investors that means that there will be more prospective investors and it provides them with a remedy. The House should seek to assert and protect all those measures--[Interruption.] I am awfully glad to see that on this matter I have the support of the Deputy Chief Whip.

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