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Lord Clinton-Davis: I support the observations made by my noble friend Lord Brett. I also support the observations made by my noble friend Lord Lea about Europe, but that is a feast yet to savour. I want to comment briefly on why the Government do not support the amendment. It seems to me self-evident that they should encourage employees to assert themselves to play a full participatory role on the board following the design which they have created.

There should be an employee representing the employee share trust on the board of NATS. That is the view of the IPMS and it is a view which I share. I do so because of my previous interest as an aviation Minister. I want to encourage the widest possible involvement in the decisions which are taken by the new board and the amendment is a way of doing so.

I do not say that we have necessarily achieved the wording that is most acceptable to the Government but the principle is clear. It should be acceptable to the Government because they ought to be involved on the board not only as regards their position but also that of the employees. They should be anxious to ensure that employees have a voice on the board. I believe that the amendment does that.

It is very important that employees' wider safety concerns are considered at the highest level. No one but the board member who represents the employees is in a position to understand that from a day-to-day point of view. It seems to me that no one else could, without a conflict of interest, fulfil that role in a way that is acceptable to the employees.

I believe that, along with the TUC, a trustee board member who is independent of government would represent the employees' interests most satisfactorily. However, that is a matter of detail; it is a matter with which we can come to terms only when the Government have accepted the idea in principle. I plead with my noble friend to accept the need for this role. He should ensure that the idea which he represents is understood by the workforce. That is the only way of doing it. There is no other avenue that he can explore satisfactorily. Therefore, I support my noble friends in what they propose. I shall happily ensure that my noble friend who is the chairman of our party follows me.

Lord Hoyle: My noble friends have said nearly all that can be said on this matter. We are concerned that the Government seem to have passed over all operational control to the private partner; indeed, the private partner will appoint all the executive directors. That is an attempt to get the Government to punch their weight in relation to the shareholding that they have in the company. We believe that directors should be appointed, in accordance with the shareholding, by the Government to the board. In that way, there would be a real public/private partnership and that is what we want to see.

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There should be an employee representative; that is, someone in whom the employees have full confidence. There have been, and still are, many misgivings about the setting up of the PPP. One way of overcoming those misgivings would be, as my noble friends have said, to enable the employees to feel that they have direct representation on the board through their nominee. I am sure that that would ease many of the difficulties that may arise or suspicions that may linger within the workforce. As my noble friend said, an employee representative--not a representative of the employers or of government, but someone who represents employees--would be extremely beneficial. I ask the Minister to accept what we are trying to achieve with Amendment No. 85.

Baroness Thomas of Walliswood: I rise to say briefly that I find the amendments very interesting. I do not know whether the 5 per cent or 10 per cent threshold is an immutable obstacle to what noble Lords are trying to achieve. I believe it is the case that under some company constitutions there can be special categories of voters who vote a particular employee on to a board. Perhaps that is the type of approach that one would be able to take in this case. In any event, I look forward to hearing the Minister's response and I hope that he will treat this idea with some sympathy.

Lord Brabazon of Tara: I, too, look forward to the Minister's response. I am curious as to how employees will benefit from their 5 per cent shareholding in the company. As I understand it, the shares will not be traded. Will there be a dividend? If so, how will that work? Will it be divided up among all the employees?

9.30 p.m.

Lord Macdonald of Tradeston: I am grateful for the contributions that we have heard, particularly from my noble friend Lord Brett, who has unmatched experience on the subject, as well as the constructive contribution of my noble friend Lord Lea of Crondall, who set the debate in the European context and referred to the changes that we anticipate.

I shall deal with the four objectives of the new clause in turn. The first is on voting rights. The Government have always made it clear that the strategic partner will have voting and operational control of NATS, except in relation to certain key areas where the approval of the government-appointed directors or in some cases the Secretary of State will be required. Obliging the Government to retain voting rights equivalent to their proportionate shareholding in NATS would effectively deprive the strategic partner of voting control of NATS, as its share of votes would be less than that of the Government. That would jeopardise NATS' private sector classification, which would ultimately deny it access to private sector capital, which is one of the key objectives of the PPP. In addition, the inability to give the strategic partner voting control would undermine its confidence in its investment. That could dissuade potential strategic partners from participating in the PPP process and eliminate some potentially attractive candidates,

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thereby reducing what the Government, and ultimately the taxpayer, receive for the NATS shares that we sell.

The second objective is to ensure the Government can always appoint a proportionate number of directors to the NATS board. That would deprive the strategic partner of board control, thereby again placing NATS' private sector classification at risk and rendering an investment in NATS unattractive to potential strategic partners. Furthermore, it would most likely result in the Government and the strategic partner having an equal number of directors, creating the potential for deadlocks at board level. That would jeopardise not only NATS' commercial future but its ability to put in place the systems and procedures that we think are necessary to guarantee the ongoing provision of safe air traffic services.

The third objective is to ensure that 5 per cent of NATS' share capital is held by an employee share trust. I hear what the noble Baroness, Lady Thomas of Walliswood, says. We are too far down the road to change the 5 per cent total. However, we are in discussion with trade unions about how that 5 per cent might be deployed and what the conditions might be. The noble Lord, Lord Brabazon of Tara, asked how it will be valued. Normally in such cases an internal market can be set up to allow values to be ascribed to the shares. The starting value will depend on the price that we get for the 46 per cent that we sell. The final details will have to be worked out in consultation with the strategic partner.

The Government have always made it clear that employees will be entitled to participate in NATS through that holding of the ordinary share capital. That policy has not changed. It is inappropriate to attempt to prescribe the details of a complex employee share participation arrangement in primary legislation. The amendment would require the shares to be owned, both legally and beneficially, by the employee share trust. That might deprive employees of the full benefit of the shares.

Finally, this new clause seeks to secure employee representation on the board of NATS. That is going a step too far. It would be highly unusual for a major UK company to have employee representation on its board, particularly in the case of a company which is intended to be operated along the lines of a listed company.

I speak as someone who has been a shop steward of two trade unions and a chairman of two public limited companies. In neither of those roles should I have been at all happy with the conflicts of interest which may arise: a board member has fiduciary duties in that capacity and yet there are the expectations of colleagues who have elected him into that position.

Lord Clinton-Davis: There are companies, are there not, in which the workers are represented not by an individual who is a member of the trade union

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concerned but independently? That being so, all I ask is that there should be an independent voice to represent the workforce.

Lord Macdonald of Tradeston: As ever, my noble friend is ahead of me. Both he and my noble friend Lord Hoyle are moving me in a direction in which I am extremely pleased to go. I believe that an employee representative would face a conflict of interest between the protection of the rights of employees and the best interests of the company. That might create tensions at both levels and would hamper the effect of management of the company and increase the risk of deadlock.

If the Government and the strategic partner had an equal number of directors, the employee representative would hold the balance of power, which would give employees an undue influence in the company with a share of only 5 per cent.

But we have not forgotten the position of employees. A stakeholder council is to be created which will be an influential body. Its views will carry considerable weight. More important, it will allow representatives of NATS' employees and users of aviation--

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