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Baroness Rawlings: I thank the Minister for his very clear explanation. This is an extremely complex subject, one which I should like to leave at the moment and return to at Report or Third Reading. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 17 [Acquisition of securities]:
Baroness Rawlings moved Amendment No. 4:
The noble Baroness said: The effect of this amendment is to ensure that the sale of CDC shares is not rushed and that the proceeds from it are maximised. At Second Reading, the Minister may have misunderstood me. I did not ask him when precisely the flotation would take place. Of course, as the Minister said:
My concern was fuelled by the analysis of the figures presented in the DFID press release of 14th July 1998. It appears that the Government intend to sell the CDC in two tranches: the first some time in the year
The Minister will no doubt point out that this process had already started at the end of 1997, when the Prime Minister announced that the CDC would be transformed into a public/private partnership. If this period is included, CDC would still have fewer than three years to turn itself around. We would like to give it more time to do so, without postponing indefinitely the injections of private capital. In order to do so, we would like to set a time antequam it is not possible to proceed with the sale, unless the Minister persuades us that our concerns are unfounded.
The amendment also seeks to prevent the Government from selling off CDC too cheaply. Having accused the Conservative Government of selling off the utilities too cheaply, the Labour Government, so sensitive to the ethical question, would scarcely wish to commit the same sin. However, in view of the difficulty of improving returns significantly and quickly, they may be tempted to resort to an elementary commercial trick: decrease price to increase demand. That would be a shame; in particular, if it is true that the proceeds of the sale would be ploughed back into the development through DFID. What assurances can the Minister give us that the sale will take place at the right price? I beg to move.
Baroness Amos: The effect of the amendment would be that it would not be possible to offer shares in CDC to potential private-sector participants until two years after passage of the Bill.
The noble Baroness has expressed concerns about the proceeds from the sale not being maximised. Perhaps I may reassure the noble Baroness that the timing of the sale will depend on a number of factors. In particular, we want to ensure that there is an opportunity to maximise the potential from the sale, particularly given that the proceeds would be used for development, as the noble Baroness rightly stated.
There is clearly a need for CDC to build a track record of successful equity investment in preparation for sale. Our intention is to create a long-term partnership in which government will have a significant stake; it is not to exit CDC.
A decision on the timing of the sale will be taken in the light of what is best for development. These interests would not be served by going to the market too early. Market conditions are one factor and if those were right, say, 20 months after enactment and if CDC was ready, we would not want to miss the opportunity. A two-year time limit would then be an unnecessary restriction.
I should like to reassure the noble Baroness that what we are seeking to do is to maximise proceeds from the sale when the market conditions are right, but we do not want to restrict the potential for doing that by putting a time limit on it.
In the light of that reassurance, I ask the noble Baroness to withdraw her amendment.
Baroness Rawlings: I thank the noble Baroness for explaining the matter so clearly. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Rawlings moved Amendment No. 5:
The noble Baroness said: This amendment to Clause 17 is designed to ensure that the destination of the proceeds of the sale is clear before the sale takes place. We strongly believe that the ethically-minded investor in particular would want to know where the money raised from the sale of shares is to go. We feel that Parliament and the ethical investor have a right to know.
The Minister will remind the Committee that the Prime Minister said to the Open Business Forum of the Commonwealth Heads of Government on 27th October 1997:
Finally, at Second Reading, the Minister said:
Lord McIntosh of Haringey: The noble Baroness said that I would remind the Committee of the Prime Minister's statement of 1997, but she has saved me the trouble and I am very grateful to her. It is certainly true that every single statement by Ministers, from the Prime Minister down, from the beginning of this exercise to date and from now on, has confirmed that it is the intention of the Government that the proceeds of any sale should go into the development budget rather than into the general Consolidated Fund. We have already agreed with the Treasury that the proceeds will be used for the development programme. This will be reflected
As we do not know the date of the final stage of the public/private partnership, clearly there might need to be some moving of these receipts from one year to another. We cannot be any more precise than that. Nevertheless, I can confirm that the Government's income and expenditure plans include the provision that receipts from the public/private partnership will go into the development budget, and only into the development budget. It makes sense for us to have an allocation in advance of the sale in order to plan expenditure and make best use of it, rather than spending receipts in one particular year. I hope that that assurance, which is very firm, that we not only intend that but have already made our plans contingent on that, will reassure the noble Baroness.
If I may make one of my petty little points about drafting, I do not believe that the amendment should be to this clause. Clause 17 is about the acquisition of securities by or on behalf of the Secretary of State. The amendment should really be to Clause 16 which is about the issue of securities. However, that should not inhibit the noble Baroness, if she is not satisfied, from coming back to this in a redrafted form on Report if she so wishes. In the meantime, I hope that she will think it appropriate to withdraw this amendment.
Baroness Rawlings: I thank the noble Lord for his reassurance and take his point. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 18 [Minimum Crown share-holding]:
Baroness Rawlings moved Amendment No. 6:
The noble Baroness said: Amendment No. 6 seeks to reduce the minimum government holding in CDC from 25 per cent to 5 per cent. This is a probing amendment. As we know, Clause 18 is the key clause. The clause sets out the basic structure of the public/private partnership. The Secretary of State holds the golden share, which appears to bestow on the Secretary of State more rights than those retained by the Government in other privatisations.
The Government will also retain at least 25 per cent of the ordinary share capital. What consideration led to setting that percentage? The Government appear to think that the stick of the golden share will become acceptable to private investors because of the carrot represented by the Government's commitment. As the provision is structured, while the Government hold the golden share, they would also shoulder the largest share of risk. Why would this structure entice private sector investment? We very much doubt that it would. I therefore question the figure of 25 per cent. Why not have a figure of
Finally, have the Government set targets for divesting from CDC? What figure would they regard as a success? I beg to move.
Page 8, line 11, at end insert--
("( ) The Secretary of State shall seek to attract private sector investment in the Corporation by the issuing of securities at market value not less than two years after the day on which this Act is passed.").
"timing depends on a number of factors, including market perceptions of pre-emerging markets and of CDC's track record and forecast performance".--[Official Report, 7/12/98; col. 723.]
Page 8, line 13, at end insert--
("(3) No securities in the Corporation shall be issued until a memorandum setting out how the proceeds of any such issue shall be treated by the Treasury has been laid before Parliament and a motion to approve it has been agreed to by resolution of each House.").
"I can also promise that all the money the Government raises from this sale will be ploughed back into our development programme".
This promise was reiterated in the White Paper, Eliminating World Poverty. Last summer, DFID, on the occasion of the Comprehensive Spending Review stated:
"The CDC will receive an injection of private capital through the sale of a majority share...It will provide receipts for the Dfid budget".
"The proceeds from introducing private capital into the CDC will be used for development assistance programmes...and not go straight into the Treasury pot".--[Official Report, 7/12/98; col. 739.]
The accumulation of statements to the effect that the proceeds of the sale will be earmarked for development is encouraging but not entirely reassuring. Will the Minister give assurances that this will be the case for the duration of this Parliament? We want to ensure that the Government do not wriggle out of this promise and that the rights of the potential investors are protected by giving Parliament the opportunity of expressing its opinion on the treatment of the proceeds. I beg to move.
4 p.m.
Page 8, line 15, leave out ("25") and insert ("5").
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