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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Ian Lucas): I am grateful to my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) for introducing the debate. I understand her concerns about the proposed takeover of Cadbury by Kraft, which she has set out eloquently this evening. I understand the concerns across the Chamber, evidenced by the attendance at the debate this evening, and the national concerns about the matter.
Mr. David Winnick (Walsall, North) (Lab): Obviously, what is happening regarding Cadbury concerns Birmingham, and rightly so, but will the Minister accept that there is deep concern and anxiety in the black country and Coventry, too?
Ian Lucas: Indeed. I was going on to say that Cadbury employs 5,700 people at eight manufacturing locations across Britain and Ireland. It has plants in Bourneville in Birmingham, the Marlbrook centre at Leominster in Herefordshire and the Somerdale plant in Keynsham just outside Bristol, represented by the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Wansdyke (Dan Norris).
John Mann (Bassetlaw) (Lab): Does the Minister recognise the importance of the fight of the workers in Keynsham, backed by their local MP, to preserve their jobs, which were under threat in advance of the takeover bid?
Ian Lucas: Indeed. We should reflect on that and recognise that there were concerns about jobs before the proposal and, of course, there are concerns now. There is also a Cadbury factory just outside Wrexham in Chirk, very close to my constituency. This is an issue that concerns not just the midlands but elsewhere across the country. More than that, we all know that Cadbury is not just a British brand but a British institution.
Mr. Jim Cunningham (Coventry, South) (Lab): Cadbury is an institution in this country. We have people in Coventry who work for Cadbury. More importantly, is there not a case for having another look at corporation law regarding this matter?
Cadbury is a multimillion pound company and its annual revenue growth has been 6.3 per cent. per year. We know of course that the company has a long and distinguished history. It has enormous civic achievements that have transformed lives and communities, and we recognise that the Cadbury family were social as well as chocolate pioneers. George Cadbury's decision to buy the 120 acres of land close to his works in Birmingham led to the creation of the model village with its own social security programme. George was always very explicit about his purpose there-to "ameliorate the condition of the working class and labouring population by the provision of improved dwellings with gardens and open space to be enjoyed therewith."
Dr. Tony Wright (Cannock Chase) (Lab):
As someone who has lived in Bourneville for the past 35 years-within inhaling distance of the chocolate factory-may I say that this is not any old company? As the Minister says,
this is a company with a sense of belief and commitment to its own community. It is a model company. The sense of anger and betrayal in the area about what has happened cannot be underestimated and we want a response that is appropriate to that.
I want to turn to the takeover itself. It is important to set out the facts relating to it. The Cadbury board has now recommended acceptance of the final takeover from Kraft Foods, which values Cadbury at £11.9 billion. That takeover would create the world's largest confectioner. Kraft must secure more than 50 per cent. of shareholder votes by 2 February for its bid to succeed. That is where we are.
As I have said, we are acutely aware of the strength of feeling generated by the takeover, which we have seen in the wider media, the debate this evening and in the House over the past few weeks. Cadbury is a long-established company with a committed work force that are performing well. It is a significant business with an extraordinary heritage and many stakeholders, both in this country and around the world.
As Members have said, it is very early to discuss what might happen after the merger process is complete. Kraft needs to make its plans clearer. Kraft has made encouraging noises about its respect for Cadbury's brands, heritage and people. In a conference call with investors on 19 January, Kraft's chief executive, Irene Rosenfeld, said:
"We will continue with a significant presence in the UK and reiterate our previous statements of safeguarding the operations in both Bourneville and Somerdale. We will be a net importer of UK jobs and will continue to have a strong presence here."
It now has to be very clear about what it will put into Cadbury to build its capacity for growth. I know that my noble Friend the Secretary of State for Business, Innovation and Skills will be having an early meeting with Kraft senior management. He will be looking to hear how Kraft will fulfil the commitment it has made to the Cadbury work force and to the company's long-term future. Our Government offices and regional development agencies are also in touch with Cadbury and are pursuing further information from Kraft.
Peter Luff (Mid-Worcestershire) (Con): What I am concerned about is that for months Ministers in the Department, particularly the Secretary of State, were indicating their opposition to this takeover. They have demonstrated that they have no powers to prevent the takeover from happening and now they are seeking assurances from Kraft. Can the Minister confirm that they have no powers to enforce these assurances?
Ian Lucas: If the hon. Gentleman is patient, I shall discuss the Government's powers. We are determined that the levels of investment in Cadbury UK are maintained and that, at a time when people are worried about their jobs, the utmost is done to secure those jobs.
A number of concerns have been raised both in the House and in the media about the proposed takeover, and I wish to deal with each in turn. The first relates to
the suggestion that the Government could have done more to intervene. Let me make it clear that the Government have no statutory power to intervene in this case. The relevant independent competition authorities are responsible for considering whether it gave rise to any concerns about a possible loss of effective competition. Ministers have the power to intervene in merger cases only where they raise specific concerns relevant to a legitimate public interest such as national security. There seems no reason to consider that such an intervention would be appropriate in this particular merger.
The second question relates to the level of debt involved in the takeover and the knock-on effect that it might have for jobs at Cadbury plants. I am afraid that the answer is that the matter must be one for the shareholders to decide.
The third and final issue that I wish to touch on is foreign ownership. I understand the concerns about the impact on jobs, but we must not forget how much this country benefits from foreign investment. My hon. Friend referred to the investment made by companies such as Toyota and Honda. Indeed, it is not simply new investment for greenfield sites, as she mentioned; companies such as Mini in Oxford and Bentley in Crewe have benefited hugely from foreign investment and from takeover situations. We must recognise that it is very valuable to have a system that encourages investment from overseas. There is currently $5 trillion of foreign investment in the UK-that is $5 trillion of foreign shareholding providing the money for millions of jobs, new investment and innovation-so it would be wrong to cast doubt on the value of foreign investment. Let us not forget that this works both ways; UK outward investment is slightly higher than our inward investment. For example, in 2000 Vodafone took over German firm Mannesmann for £112 billion. We thus have to think carefully about the investor relationship that has served this country so well in those respects.
Ian Lucas: I do intend to address the issue of long-term investment, if I am allowed to proceed. I recognise that there is a valid concern about the nature of ownership. The Government consider that the best way to run a company is through enlightened shareholder value and for directors to take a long-term view. That was at the heart of the company law review that led to the Companies Act 2006. The best companies apply that principle, and we want to make sure that all do. It is up to shareholders to take a decision on the plans in front of them, but they need to look beyond short-term profit.
We believe that there is real value in having a discussion about how we build a stronger culture of long-term commitment to sustainable company growth in this country. That should be based on co-operation between the ultimate owners, fund managers and the corporate sector. Recent reviews by Sir David Walker and Sir Christopher Hogg have raised important issues, particularly
to do with the effectiveness of institutional investor engagement in the long-term interests of UK companies. One part of the solution will be the new investor stewardship code on the responsibilities of institutional investors. The Financial Reporting Council will consult on that shortly.
It is important that we take into account the position of all individuals who have funds from which they earn money-pension funds and other investments-and encourage them to take an active role in determining how their sums are invested in future. The Secretary of State for Business, Innovation and Skills recently had a very productive round-table discussion with investors, fund managers and representatives of companies to consider those important issues and to look at how to improve engagement for the long term.
The debate engendered by the proposal and the takeover has created an atmosphere in which many new ideas on long-term investment are being put forward. The Government will consider those ideas as they come forward. They have already initiated debate and reports from Sir David Walker and Sir Christopher Hogg; some of that work predated the proposal. In our discussions with the investor community, we repeatedly stress the importance of long-term investment for the future of British industry, and we stress that long-term investors should have the interests of the United Kingdom at the forefront of their minds.
Cadbury is an iconic brand. It has had, and continues to have, a huge impact, not just on the lives of its work force, but on the community around it and on the country. We understand the concerns that Cadbury employees have at this uncertain time about their jobs and the survival of this valuable British asset. We are determined to maintain levels of investment in Cadbury in the United Kingdom, and to ensure that jobs are secured.
What Kraft has been saying until now is encouraging. We will continue to talk to it about the future, and to discuss its proposals for development of the business in the UK. Ultimately, those are matters not for the Government but for shareholders of the company. The last thing that we wish to do is threaten investment in UK companies, but I believe that there is genuine cause for concern-concern that has been eloquently expressed in this debate. I am sure that the Government will reflect on that. The concern is not about who owns a company, but about the nature of that ownership. We are working to encourage and strengthen among investors a culture of long-term commitment and engagement to businesses based in the United Kingdom.