I beg to move, That the clause be read a Second time.

We have just passed the business motion and very amicably it was done. I suspect that, had we known that we would have a statement lasting an hour and a Te n-Minute Bill, we might well have re-jigged our agreement. We tried to arrange discussion on one of the most important aspects of the Bill right at the beginning. We shall just have to see how we go.

At last we have the articles of association. We had them towards the end of the Committee stage, but by then it was, of course, too late to discuss them. It is, therefore, appropriate that we discuss them today because it is the first time we have been able to do so. It is equally appropriate that we will eventually discuss the final copy, which is the reason for the new clause.

We should, as of right, be given the chance to debate the articles of association of companies that are to be privatised. That debate should take place as they pass from being "shell" companies. If a company was being nationalised the House would expect the legislation m contain details of the rules by which the company was to be run. Equally, the articles of association of denationalised companies should be put into an order, discussed and voted on.

Nothing in the Bill tells us about the nature of the company or its relationship with the Government. I shall come back to that when we discuss Government directors. Such details are central to legislation which, in effect, sets up a company as this Bill does. The articles should be dealt with by Parliament.

We are talking only of draft articles. It would be appropriate that the final articles—I do not know to what degree they are to be changed—of Britoil and any other company privatised under the legislation should be dealt with in the way suggested in the new clause. That is the full purpose of the new clause.

The new clause allows us to discuss the articles. Upstairs we should have had to contrive a way to discuss them. At the beginning of the articles is the memorandum of association of Britoil. It says what the objects of the company are. The House is setting up the company. We are entitled to look at its objects.

Paragraph (C) on the first page of the memorandum states:

"To carry on all or any of the businesses of developers, producers, refiners".

I go no further at this point. The new company, Britoil, must have the right, if it so wishes, to move into refining. It may not be clever to do that at the moment. In setting up the company on behalf of the Government, does the Secretary of State see it as being able, if it wishes, to move into refining?

As I read the continuation of the paragraph, it appears that Britoil can not only deal in coal but produce it. The Secretary of State had the articles drawn up. I am not raising the problem of the National Coal Board. It has a monopoly, with small companies at the edges. I presume that Britoil could go into coal production in other parts of the world. Will the Secretary of State confirm that?

On page 8, clause 3 (LL) states:

"It is hereby declared that in this clause:

(i) 'petroleum' means any of the following (other than coal) namely:— (a) mineral ore, natural gas and bituminous shales"

. Why is natural gas included in that way? I could guess. In the Bill as a whole the ability to produce oil has been taken away from the British Gas Corporation. Here Britoil is being allowed to go into the production of natural gas.

Obviously.

The issue arose in another discussion on the Bill. If a company goes for one, it may get the other. Is that the reason? I am only seeking knowledge and not making a profound point. It is difficult to make profound points on articles of association.

I turn to page 23 of the articles. It is important to get this clear. What on earth are the directors of these and other firms supposed to be doing? I raise a personal point. I have always been sceptical about what a Government director does in these companies. It would be useful to know what the Secretary of State has in mind. He is to appoint the Government directors.

Article 85(E) states:

"The number of Directors referred to in paragraph (A) of this Article is:—

(i) two, at any time when the voting shares registered in the name of the Secretary of State represent more than 35 per cent. of the issued voting shares;

(ii) one, at any time when the voting shares registered in the name of the Secretary of State represent more than 20 per cent., but not more than 35 per cent., of the issued voting shares;

(iii) none, at any time when the voting shares registered in the name of the Secretary of State represent not more than 20 per cent. of the issued voting shares."

Article 10(E) on page 4 states:

"The Special Share holder may require the Company to redeem the Special Share at its nominal amount at any time."

Is it the Government's long-term intention completely to withdraw from a shareholding in the company? If so, will the Secretary of State come back to the House and tell us why? He has powers over the number of directors and to redeem the special share. We have been told that the special share is an important element in protecting the national interest.

I find article 71 (B) on page 19 intriguing. It states:

"If there are, in the opinion of the Special Shareholder reasonable grounds for believing that any person or relevant persons has obtained or is attempting to obtain, directly or indirectly, control over the Board or its composition, the Special Shareholder, whether or not he has received any notice pursuant to paragraph (A) of this Article 71, shall give written notice to the Board that he believes that there are such grounds, specifying them."

There is then set out action that the special shareholder can take. What are the reasonable grounds? Why has the Secretary of State put in the words "reasonable grounds"? I read constantly in the newspapers of early morning coups, secret board meetings—[AN HON. MEMBER: "Dawn raids."] Yes, dawn raids—that is a much gentler way of putting it.

If the grounds are reasonable, the Secretary of State will not know anything about it. It will all be over before he can do anything. What has the Secretary of State in mind? Will there be in the Department of Energy an office with a notice on the door "Reasonable grounds office"? Will there be a little chap going around the companies where there are special shareholders listening to find out whether anyone is to do anything so quickly that the special shares cannot be used?

On the same point of control, in regard to article 71(B)(i) I turn to the EEC and its rules, if that is the right word. On the basis of a 51 per cent. shareholding by the Government, as I understand it, the EEC assumes that we have control of the company. Can the Secretary of State be absolutely sure that if we are below that—as we will be initially and even more so afterwards, I anticipate—the European Court will not rule that we are no longer in control of the company, with all the consequences of that?

Even so, I am advised that Stock Exchange rules say that when a certain percentage of share ownership has been reached the owner of those shares has the right to buy the rest of the shares. I am seeking knowledge. Has that been taken into account in the drawing up of the articles of association? We want an assurance from the Secretary of State that legal problems will not arise.

I should like to get one point clear when the Secretary of State replies. The right hon. Member for Leeds, South (Mr. Rees) has raised a good point. As I understand it, there is no way in the present arrangements whereby we can have a special share. I know of no company—Government owned or privately owned—that has a special share system. Certainly I know of no company which has a special share system whereby the shareholders do not actually own any equity in the company. There is an attempt to make European company law. I am advised that there is no way in which this system can be integrated into that. Is it not possible that the Secretary of State is embarked on a perilous voyage of company law that will not stand up either in the British system or in the European system of company law?

I am grateful to the right hon. Gentleman for reinforcing the question I asked. No doubt we shall get an answer at the end of the day.

In regard to directors, there are many basic arguments about what the Government are doing in the Bill. However, over the years under the National Enterprise Board, the industrial relations commission and the Industry Act 1972, there has been a mix of ownership of companies. In some instances I would not want it, but in other instances it is appropriate.

As long ago as 1964 the Labour Party manifesto said that a Labour Government would

"Go beyond research and development and establish new industries, either by public enterprise or in partnership with private industry."

In Opposition we are talking about the investment of funds in companies which are publicly owned and partially publicly owned. I am talking not about nationalised industries with appointed directors in a non-Company Act atmosphere, but about companies with a Government shareholding of 100 per cent., 51 per cent. or even 49 per cent., in which the Government appoint directors. In what way will the Secretary of State seek to influence the Government directors?

Article 85(A) says that the Secretary of State has the right to appoint directors. I am interested to know why it is put that way rather than that he will appoint directors. The greatest number he can appoint is two out of seven or two out of 20 if the Government have more than 35 per cent. of the shares.

The degree of control in Britoil will be no greater than in BP, but I accept that that is a separate position. BP happens to have two Government directors and I have always been sceptical about their role.

For the moment let us stick to the role of directors in mixed economy firms that will arise out of privatization—or the other way round, for the reasons that I quoted in our 1964 manifesto. What is the role of these directors to be? Is there an analogy with The Times where there are independent directors? They are all publicly appointed with a clear role to look after the national interest, but, as someone said, however, "You could have fooled me".

I ask about the role of directors in this company because once we start going more broadly into the role of directors in this growing range of companies there might be ifs and buts. I can ask the Secretary of State directly about this because he has put it in the articles of association. I am dealing with Britoil, although the new clause is wider. At least, this will enable the Secretary of State to concentrate on why he told the drafters of the articles of association that he wanted Government directors.

Will the task of these directors be exactly the same as that of the other directors who will be elected by the shareholders? Will the directors whom the Secretary of State appoints represent the Government's view? The Secretary of State may say, after consultation with his advisers, "We need somebody on that board who is good on receivership. The company does not look healthy so let us have someone who understands that sort of thing". Or he might decide to appoint someone with great financial acumen or someone who knows a lot about research in oil supply.

A Government appointed director is of that sort. He carries on in the same way as any other director but a Government director is surely there to look after the Government's interests. What sort of person does the Secretary of State have in mind? I would be interested to go further, but I suppose it is too difficult.

Another question that has arisen in the last year or two is whether the Government directors will have fiduciary responsibility in that their job will be to look after the interests of the firm on the basis of the articles of association, and they will be there for that purpose alone.

They cannot be directors otherwise.

That may be so, but a Government might wish to do something directly against the narrow, but important, interests of shareholders. Why was the provision for Government directors included in the articles, and what is the intended meaning of the Secretary of State's responsibility? That is important, as there will be more Government directors. It is a growing occupation. Whatever Governments have done, the number of such directors has increased in the past 10 years. The mix of the economy will continue and people will be appointed to boards, whether it be with 51 per cent., 30 per cent. or 75 per cent. of the shares. We should be clear about that. Some believe cynically that such positions are sinecures for people who behave themselves. I reject that entirely. I am sure that the Secretary of State has in mind a purpose for Government directors.

rose—

The right hon. Gentleman is always extremely helpful. Of course I shall give way.

If the Secretary of State has fewer than half the company's shares, the directors whom he appoints will be obliged by company law to act in the interests of all the shareholders. As the majority of shareholders are not represented by the Secretary of State, directors appointed by him will therefore be bound to act differently from the Secretary of State if they feel that the other shareholders are suffering as a consequence of the decisions that he is urging on his appointed directors. I do not believe that Government appointed directors will necessarily do what the Government want them to do.

If that is the case, why are the Government bothering? Nevertheless, the Secretary of State has the special share. We should clear the matter up. In doing so, we shall do a good turn to those who work in other firms with Government directors.

I turn now to the national interest and foreign shareholders. Is the special share intended to protect the national interest? Is it intended, for example, that nonresidents should not have shares? There are other ways of achieving the same result.

When British Aerospace was privatised, the Government included a provision which, however incompetently it was drawn up, served that purpose. Would that not be a better way than depending on a special share which might disappear? The day must surely come when the special share disappears, so if the national interest is involved in this way it will suffer. I accept, of course, that the articles are not drawn up in the same way as those for British Aerospace.

Those are the major points arising out of the articles of association. They are important and this is the first time that we have discussed them. The House should have a further opportunity to examine the articles when they are no longer in draft. The Opposition propose that

`The Articles of Association of any subsidiary established under sections 1 and 9 shall be laid in draft before both Houses of Parliament and shall be subject to an affirmative resolution '

This is particularly important, as the articles may change fundamentally over the years. If such a change took place, the new clause would provide for the articles to be embodied in a Bill if the Government continued to proceed in the present way. The Opposition believe that this is the right way to proceed. The new clause should be adopted in the interests of parliamentary accountability.

The articles of association are novel. I have a few brief points to put to the Secretary of State.

First, have the articles been submitted to the council of the Stock Exchange? Has it expressed a view on the matter? I put that point in Committee to the Secretary of State, whose interest in financial matters was exhibited in a previous incarnation as the writer of the Lex column in the Financial Times. Would memorandum and articles of association of this type suffer the scrutiny of the council of the Stock Exchange and others interested in protecting shareholders?

I well understand that the articles are drafts, that we are discussing a shell £100 company, and that there will be considerable embellishment before the articles become part of a prospectus. Nevertheless, it is shabby for a Government who purport to believe in enhancing private enterprise and releasing ensnared shareholders to embattle shareholders almost totally by means of a golden share. It is like being in President Lincoln's Cabinet when, apocryphally, he sat back and said:

"The Ayes are 10 and Noes are one, but the Noes are the President, so the Noes have it."

The articles will enable special shareholders to outvote the majority of shareholders on practically everything if they think fit. That is not in the interests of all shareholders. It does not wash with the established conventions or, indeed, with the legal position of companies now. I accept that other objectives have been put upon company directors. They must now look after the interests not only of shareholders, but, and rightly, the interests of employees, but the traditional view remains that directors should look after the interests of all shareholders and protect them.

By the articles, the special shareholder, if he or the Secretary of State sees fit—we do not know what he will be pressed to do or how he will be persuaded to use that special share—may look after the national interest as opposed to what may be thought to be the interests of all shareholders.

Article 10(E) states:

"The Special Shareholder may require the Company to redeem the Special Share at its nominal amount at any time."

How can that square with article 10(A), which states:

"The Special Share may be transferred only to the Secretary of State or to a Minister of the Crown or to the Treasury Solicitor."

That seems to suggest that the special share may be redeemed by the company. What is the consideration for the special share? There is no sign in the articles of association of what consideration may be offered to the special shareholder for that privilege.

That either has a meaning or it does not. Either special shares can only be transferred to the Secretary of State and his nominees, or they can be redeemed. If they can be redeemed, what is the consideration for the redemption? An extraordinary privilege is being given away. I am not a lawyer and these are legalistic points, but either that has a meaning in the articles of association, or it does not.

This is an attempt by the Secretary of State to square the circle. He is hiving off an important Government-owned enterprise. I shall not go into the case of Amersham International Ltd. and its present valuation. There may be opportunities to do that later in the debate. We are examining the logic and the benefit to the nation of this measure. The Secretary of State, in his strong-willed way, is entitled to get his policy, but we are entitled to say that it is wrong-headed.

The hon. Gentleman must recognise the difference between an equity investment, which is entitled to profitability, and what would be a purely voting share, which has control but no profitability attached to it.

That is an absurd suggestion from the Conservative Benches. We are talking about having all the power without much of the responsibility in terms of equity. The council of the Stock Exchange and the CBI have been irate about class A shares and have deprecated them. Yet, as a result of this shareholding, in many instances the Government will outvote those who hold the equity and take the risk.

rose—

No, I shall not give way again at this stage. The Government will outvote those who take the risk. That is an appalling suggestion.

I give warning on this. The Secretary of State has made a very interesting suggestion. If, as I hope, the next Government is a Labour Government, the Secretary of State's example will be examined further. It is a wonder that my right hon. Friend the Member for Bristol, South-East (Mr. Benn) is not already delving into it. We might consider the possibility of taking a golden share in the 100 largest companies in the country and outvoting everyone. What is the use of planning agreements and all the paraphernalia of committees if we can simply follow the Secretary of State's example and take a golden share? It is no wonder that my right hon. Friend called him the East European Minister. He is now outclassing East European Ministers.

This is an absurd suggestion in terms of the operation of the traditional joint stock company in this country. I know that there are variations, but the Secretary of State must give precedents. He cannot do so because he is creating his own precedent, in which those taking the risk in terms of equity capital can be outvoted. I know that the articles of association are in draft and can be altered, but the Government must answer these questions. If the council of the Stock Exchange has examined the articles of association, we should have its views on them. If it has not, the Secretary of State should throw them in the wastepaper basket.

The demand was frequently made in the Standing Committee that the articles of association should be produced, in view of the problems which arose over how to safeguard the national interest following the disposal of the equity oil assets of BNOC and the formation of the acquiring company, Britoil.

Having examined the articles of association, particularly those on page 19, I do not think that there is much more than a fig-leaf of protection. As the Monopolies and Mergers Commission showed in relation to the Royal Bank takeover, doubt must always be expressed about any assurances given about control and so on once the equity in a company has been disposed of. The Government intend to dispose of the equity but to try to retain some minimal control over Britoil through the special shareholder.

I believe that the Government's efforts may be impotent in terms of paragraph 71(B). The Minister referred to the provision there that

"If there are, in the opinion of the Special Shareholder, reasonable grounds for believing that any person or relevant persons has obtained or is attempting to obtain, directly or indirectly, control over the Board or its composition,"

the special shareholder would then have certain powers.

5.15 pm

Leaving aside for the moment the difficulties that the special shareholder may sometimes have in determining whether there is an indirect attempt to take over control of the company, there is still a problem in the wording dreamt up by the Department's lawyers. They must be "reasonable" grounds. If this had been worded in such a way as to give the Secretary of State, or his other persona, the special shareholder, absolute discretion to intervene at any time, there would be less difficulty. Having used the term "reasonable", however, the Secretary of State and the special shareholder, if challenged, will be under an obligation to defend the discretion being used as "reasonable"

. If the procedure set in motion by article 71(B) were attacked, the attacker would presumably be able to go to the courts. What would be the "reasonable grounds" on which the Secretary of State or the special shareholder could intervene? To judge from the speeches and arguments in Committee and on Second Reading, it is patently clear that the objective of the reasonable grounds would be to maintain the national interest in relation to the oil assets being disposed of.

If anyone can take the Secretary of State or the special shareholder to court, it follows that the objective of the national interest may not be found by the courts to be "reasonable". The United Kingdom courts, including the Court of Session, if the jurisdiction of the Scottish courts were invoked, might find it reasonable, but if there were a subsequent reference, or indeed an initial reference, to the European Court and it appeared that the special shareholder had been trying to block an attempt by European companies or interests to take control of the company, I am sure that the European Court would regard the action of the special shareholder as unreasonable.

In those circumstances, the protection that the Government seek to build in by the extraordinary means of having a special shareholder would become utterly nugatory. I am not sure what legal advice the Minister has had on this, but it seems to me that, once having disposed of the equity, he will in effect have lost control of the company, especially if European interests within the EEC were seeking to establish control over it.

I shall not go into detailed criticism of the wording of article 71(B)(i), in which the attempt to secure control is couched in extraordinary gobbledegook. Those who play cards might express it more simply as giving the special shareholder the power to "trump" any opponents taking a view different from his own.

My second question to the Minister is practical rather than legal. What kind of experience would the Government directors have? Does the Minister intend that they should be business men or people with knowledge of the oil industry, or does he intend that they should be civil servants, whether retired or active? I recall that civil servants were the equivalent of directors in BNOC. Or do the Government intend to select from their placement list of the great and the good those who, for a small fee, would be willing to take up the onerous duty of safeguarding the public interest? As we are disposing of equity oil assets, it would be of interest to know what expertise the Government seek to place on the board of directors to safeguard the Government's interests in those assets.

Three main points have been made in this brief debate. The right hon. Member for Leeds, South (Mr. Rees) expressed concern about the understanding of the memorandum, the Government directors, and the powers that reside in the special shares. The right hon. Gentleman's understanding of the memorandum is correct in every respect. He asked about the definition of petroleum. There had to be a definition, and we have simply taken the definition that appears in the Petroleum and Submarine Pipe-Lines Act 1975. That seemed sensible and as far as I am aware has caused no problems.

The hon. Member of Dundee, East (Mr. Wilson) asked about Government directors. There is no intention that these should be civil servants, unlike the Government directors on BNOC. The analogy was made, and it is a familiar one, with the Government directors on BP. It seemed appropriate that as the Government have a large shareholding it should be represented by directors on the board. However, these directors will have exactly the same duties and obligations under company law as any other directors of the company. The right hon. Member for Leeds, South may ask what point there is in having them. While the Government retain a substantial shareholding in Britoil, there is a value in having on the board directors who can keep the Government fully informed—there are, of course, other channels of information—and perform, in general, the job that the directors of BP perform.

The right hon. Gentleman correctly said that I have the right to appoint the directors. However, I am not obliged to do so. If he is developing the strong argument that I should not exercise that right, it is one that I am prepared to consider. However, I am not yet persuaded. I believe that we should exercise the right to appoint Government directors.

Can the right hon. Gentleman tell the House whether the Government directors on BP have made any great contribution to the company? How often have they been called upon to defend public interest?

They perform their duties in the same way as other directors of BP. That is their job. They are a link between the Government, who have a significant shareholding of 39 per cent.—the Government will initially have a 49 per cent. shareholding in Britoil—and the company. There is a good precedent, and it is sensible to have such directors. It is not the heart and core of the matter—the special shareholding is a great deal more important and I shall come to that shortly—but on balance it is a sensible power to have in the articles. I am not sure of the right hon. Gentleman's position, but, if he believes that it is wrong to have Government directors, he should say so. I am prepared to consider not exercising that right, but at the moment I have not been so persuaded.

A number of questions were asked about the special share. Attention was drawn to the power under the articles for the Government's special share to be redeemed. The hon. Member for Dunfermline (Mr. Douglas) asked at what price the share would be redeemed. The articles clearly show that the share will be redeemed at par—at the nominal price. If the shares are £1 each, they will be redeemed at £1 However, we have no intention of having the share redeemed. The power is included because it is customary for articles of association to cover a range of contingencies. Those who are acquainted with articles of association will be aware of that. I give an undertaking to the House that not only do the Government have no intention of having the share redeemed, but that they have every intention of retaining it. If circumstances arise—I cannot envisage any—in which the Government feel that it is right that the share should be redeemed, we shall come to the House first. I give that undertaking freely, because it is the Government's intention to retain the special share.

Is it not true that under the Bill in its present form the Secretary of State, whoever he may be—probably not the right hon. Gentleman—can dispose of the share without parliamentary consent? The undertaking is, therefore, nonsense. It does not mean a damned thing.

That is an unwise and improper suggestion. I hope that the right hon. Gentleman, who was a former Minister, will withdraw it. When a Minister gives an undertaking at the Dispatch Box, it means something. To say that it means nothing is wrong. Ministers make such statements on many occasions.

It is true that redemption will not require parliamentary consent. I do not suggest otherwise. However, if the Government of the day at any time feel that circumstances have changed and that the share should be redeemed, the House will be informed before redemption takes place. More importantly, we have no intention of having the share redeemed. The whole point of the share is that it is held, and retained.

I accept the Minister's word. There may be other arguments to deploy, but I want to be clear that he is giving the undertaking on behalf of the Government.

I give that undertaking on behalf of the Government.

The hon. Member for Dunfermline asked whether the articles had been approved by the Stock Exchange council. The answer is "Yes, they have". I should not put before the House articles of association, and an important proposition, which had not been cleared by the Stock Exchange council. This is not the first time that the hon. Gentleman has suggested that this is a terrible proposal. He will recall that, although the power is slightly different, in Amersham International Ltd. there is a special share which has special powers. I was not aware that that put off investors. [Interruption.]

rose—

I shall now reply to the main point of the right hon. Member for Leeds, South on how the system is meant to work, the share and the rights attached to it, and why articles 70 and 71 have been included.

We have three key considerations and objectives in mind. We wanted to create effective safeguards which would enable the Government to prevent any unacceptable change in the future control of the company, whatever the nationality of the parties involved. That deals also with the issue raised by the hon. Member for Dundee, East. It is important to protect the character of Britoil as an independent company, responsible for its own management and business strategy.

The second point that lies behind the Government's thinking in devising this form is that it is essential, in the Government's opinion, that the special rights should not provide an opportunity for backdoor interference in the affairs of the company. I think that I made it clear on Second Reading—I certainly did so in Committee—that the Government do not intend to use their rights as a shareholder to intervene in Britoil's commercial decisions, except in the specific safeguard circumstances.

The Government do not expect to vote with their shareholding—that is the whole of their shareholding, leaving aside the special share—in opposition to resolutions supported by a majority of the board, although they will retain the right to do so. We have tried to construct safeguards that will operate as reserve powers. They will come into force only in the event of an attempt to take over voting control of the company, control of the board or of its compositions, or to alter the safeguards or any other key articles of the company.

5.30 pm

The powers are passive. They will need to be triggered by outside events beyond the Government's control before they can be brought into play. In practice, it is highly unlikely that they will ever need to be brought into play. The very existence of these powers will act as the most formidable deterrent to anyone who tries to take over control of the board, of the company or of the majority of its shares, and who the Government consider to be unacceptable.

It is possible that at some future date the Government will seek to reduce their shareholding below 49 per cent. It is important to make it clear that the powers will remain however much the ordinary shareholding is reduced. That is why the safeguards are attached entirely to the single special share with a nominal value of £1 fully paid, which is held by the Government and which is separate from the rest of the shareholding.

Is that right?

The hon. Gentleman is not fully acquainted with Stock Exchange terminology.

The safeguards will remain fully active even if the Government have no other shareholding. It is right that there should be safeguards. There is concern on both sides of the House about the ownership of Britoil and its future ownership. The provisions that we are discussing meet that anxiety. They meet the will of the House on Britoil's crucial independence. We have given, as has BNOC and its advisers, considerable thought to the articles to ensure that they are an effective means of protecting Britoil's independence against unacceptable changes in control. Therefore, I commend the articles to the House.

rose—

No, I shall not give way. Time is limited and the right hon. Gentleman has intervened more than once.

It is the Government's opinion that it would not be appropriate to provide for the articles of Britoil, or any other subsidiary established under the Bill, to be subject to the affirmative resolution procedure or to any other parliamentary procedure. The Government take that view for two main reasons. The central purpose is to make Britoil like any other independent private sector oil company. It would be contrary to that purpose to make its articles of association subject to some form of parliamentary procedure when those of other oil companies are not.

Secondly, the procedure that the Opposition wish to introduce would be ineffective. If the new clause were to be accepted, Parliament could approve articles of association, but those articles could be changed. The feature that will prevent them from being changed as matters stand is the special share. That is what is important, and that is why it is part of the articles of association. There is no point in the procedure which the new clause seeks to introduce. It is both unnecessary and impracticable. I hope that the House will approve the arrangements that we have made to secure Britoil from unacceptable changes in control and that it will reject the clause.

I wish to protest at the way in which the Secretary of State has dealt with the debate. It is novel to have a special share system. If I understand the Secretary of State aright, Amersham International is the only other organisation that has such a system. Of course, that is an extremely bad example. The right hon. Gentleman's invention may prove in the course of time to be both novel and lasting. I suppose that we might apply it to BP and other institutions in which the taxpayer has a formidable if not an overweening interest. I agree that the right hon. Gentleman may have invented something that proves to be considerable. However, I object to his unwillingness solidly to argue on the articles of association.

In Committee we were not allowed to discuss the articles of association. It would have been desirable to do so. We were not allowed, rightly, as a matter of procedure, to discuss them. We have been able to discuss them only in the short period since half past four. The right hon. Gentleman is uncomfortably aware that his articles are so delicate that they should not be subject to any buffeting. There are rumours of hybridity and of many other difficulties in the public market place. I am not responsible for them. I do not know who Lex is today—I do not know who is the right hon. Gentleman's successor—but he, whoever he is, is probably speculating on the rumours. The right hon. Gentleman should try to bring all the rumours to an end and try to ensure that Britoil is launched comfortably and properly on its course. Unfortunately, he has not done that. It is the form of the guillotine that prevents him from so doing.

The right hon. Gentleman was not in Committee when the guillotine was introduced.

I certainly was. I was in Committee for the entirety of its discussions on part I, which was a complete bore. As the right hon. Member for Leeds, South (Mr. Rees) knows, we had to extract tooth by tooth the various issues arising from the articles of association that we now see in their full form.

The House has been allowed only one hour to debate what we are told by the right hon. Gentleman will be the greatest act of privatisation in British history. We are supposed to debate the articles of association in one hour. The new clause is designed to allow the House to debate them prior to the company going to the public exchange, to the money markets. I do not understand why the Secretary of State refuses to accede to the terms of the new clause, which do not seek to damage his Bill. There will be no doctrinaire infringement of his concept. We are not challenging him on the fundamental issues. He might be right, but we are arguing that he might conceivably be wrong.

That is what the House is all about. Ministers can be wrong and that is all we are saying. This conceited Secretary of State is so sure of himself that he did not allow the Committee, which was appointed by the House, to examine the articles. He refuses to give the House time to do so. He has presented them to us too late. He allows us only one hour to discuss them—he will have the backing of the Whips—and he expects us to accept them.

The right hon. Gentleman is making a fundamental error in parliamentary procedure and is misjudging the good sense of the British people. What he has done is wrong and he knows that it is wrong.

It is said that there is only one other example of a company in which there is a special share. I merely say to the Secretary of State that I have known other conceited Secretaries of State and Ministers of State. Unfortunately, they are not unusual. We have not had time to discuss the issues properly. It would have been very much better if we had been able to discuss them in Committee. We did not have time today to do so. We have heard some interesting points today, but I did not think that the Secretary of State was answering new clause 1. It refers to

"The Articles of Association of any subsidiary established under sections 1 and 9."

Therefore, it is not just this but all the other matters that could arise in the Bill. The articles of association should be laid before the House. That is all that we are asking for—nothing more or less. The Bill is short in parliamentary accountability all the way through. I strongly recommend to my right hon. and hon. Friends that we vote for the clause.

I beg to move, That the clause be read a Second time.

This new clause has become much more important as a result of the fiasco of the sale of shares in Amersham International during our deliberations on the Bill. That fiasco followed other privatisation blunders involving Cable and Wireless and British Aerospace. The succession of blunders should be a severe warning to the Government as they approach yet another attempt to privatise and sell, on a much larger scale, the shares of Britoil. It should not only be a warning but should provide some lessons to the Government. We believe that Parliament should have the right to debate those lessons and, in moving the Second Reading of the new clause, I wish to draw those lessons to the attention of the Government and obtain from them a series of assurances about the method of valuation of Britoil and any British Gas Corporation assets that might be sold.

The first lesson to be learnt from the three blunders, especially Amersham, is the Government's incompetence in handling privatisation and especially the incompetence of the Government's advisers. There has been a regular monotony about the sort of advisers to whom the Government have turned for advice on privatisation. We shall argue that the Government should remove all the advisers who were involved in the Amersham sale from any advisory capacity in the case of Britoil. There is no room for N. M. Rothschild and Sons Ltd. in Britoil and it is sad to know that, to date, it will be the adviser to the British National Oil Corporation.

Is not my hon. Friend being unduly harsh on the advisers? The company was given one form of advice and the Government were given another. That the Government took the wrong advice is directly their responsibility.

My hon. Friend draws attention to an important point. He will find, when I come to my second point, that I believe that there is a wider lesson to be learnt from Amersham.

The first lesson is that incompetence, whether of the Government or their advisers, has cost Britain money and benefited individual speculators. However, a much wider lesson must be learnt before there is any attempt to privatise Britoil. What emerged from Amersham was that there is a series of contradictory objectives built into the Government's privatisation programme. Those contradictory objectives led to the blunders.

Presumably, the first basic objective of privatisation is to maximise the proceeds derived from any sale. The idea is to get as much money as possible, to reduce the public sector borrowing requirement and to have the opportunity to give some tax relief in the run-up to an election. However, the Government then set down a series of other objectives which in many ways conflicted with the first objective. I do not necessarily quarrel with those objectives, but the combination tends to lead to a contradiction and to the sort of blunders that we saw in Amersham.

The second objective is the romantic view about popular shareholding capitalism. It goes back to the nineteenth century idea that there are many individuals in the country buying and selling shares all the time. That is not true, but the Government believe that it is true and that privatisation should be a promotion of the concept. So they try to disperse the shares as widely as possible, but in doing so they cannot maximise the proceeds from the sale. If the shares are split up and cannot be offered in large blocks, for which people would pay a premium price, the shares have rather less value.

The third objective concerns the desirable or undesirable control over the company. It also leads one to put restrictions on the sale of the shares which may allow the maximisation of the proceeds of any sale. Amersham typified that mixture of contradictions. The Secretary of State properly described the objectives during our debate on Amersham, but they can be conflicting. In Amersham, rather than an argument about sale by tender or sale by firm offer, the quickest and the best way to achieve maximisation of the proceeds would have been to sell the company lock, stock and barrel to an American company. We would have received much more than we did from the flotation of the shares. There are ways to maximise privatisation proceeds, but they conflict with the other privatisation objectives of the Government.

The moment that one tries to introduce other objectives into the concept of privatisation one moves away from the simplistic view of free market evaluation. The argument about the method of sale, when one should sell and the valuation to be put on the assets moves out of the strict simplistic arena of the free market to a series of other objectives that have nothing to do with what price one can get for the assets. It is right and proper, and is the purpose of our new clause, that those issues behind the valuation should be debated in the House before any final decisions are made. That is one of the basic lessons arising from the conflicting objectives of the Government towards privatisation, and it has led to the sort of blunders and fiasco that we have seen in the case of Amersham.

Our worry and concern is that if there was misjudgment and blunder over Amersham, an £80 million company, what will happen when we try to sell more than£1 billion-worth of oil assets in the form of Britoil? In addition, there will be further X hundreds millions of pounds worth of assets in respect of British Gas in the North Sea, to which we must add the sale of British Gas assets in Wytch Farm. All of those things will supposedly happen in the coming financial year.

I cannot quite understand the point that the hon. Gentleman is making. Does he believe that it is totally wrong as an objective to spread shares as widely as possible? I am aware of the argument that one man's gain is another man's loss, but surely it is better to spread the gain among the small investor rather than among the big companies.

I shall explain our position clearly and simply. We do not believe that assets should be moved out of public and national hands for private gain. Whether the small investor makes an extra special private gain or whether it is an institution does not alter the wrongness and immorality of selling national assets at a price far below their true value.

A cost must be paid for trying to disperse the shares. One does not obtain the true value of such shares if they are sold off lock, stock and barrel to one company or organisation. That cost should at least be acknowledged. Although the idea of dispersing the shares might sound warm-hearted and gentle, just as in the case of Amersham, the day after it is done the benefit disappears. Nearly half of Amersham's shares—25 million—changed hands the following day. As a result, one does not know whether a wide dispersal has been achieved. All that we do know is that a wide dispersal was achieved in the initial flotation. However, a day later those shares could be in the hands of institutions

. One has therefore paid a price for trying to disperse those shares to the so-called benefit of the wider interest or the wider concepts of popular share-owning capitalism. That reveals what is inherently difficult and wrong in the act of privatisation. If that happened with Amersham, what will prevent it from happening in the case of Britoil, a £1 billion-plus privatisation proposal?

These are not merely the dilemmas of a Socialist Opposition. They were well presented and described in what everyone agrees to be a relatively reputable study and guide to Britain's North Sea oil and gas by Mr. Martin Lovegrove. On the privatisation of BNOC, this independent source refers to exactly the same sort of dilemmas. On page 59 of the study he said:

"Whilst it is hard to justify any particular estimate, given in the evidence in the concluding paragraphs of the previous section it could be said the subsidiaries"—

by that he means BNOC subsidiaries—

"are worth anything between £2 and £2·5 billion. If Government were to strip the assets of the Corporation and sell say 50 per cent. at auction, at which both British and overseas companies could bid, the cash raised would probably reflect this estimate—e.g., £1 to £1·2 billion.

He continues:

"If BNOC shares are sold into the Stock Market, as Government currently intends, the money raised would probably be only of the order of £0·6 to £0·8 billion (although the state of the national economy and the world oil market, and the perceptions as to the chances of the Government's survival at the next Election, will naturally play a key role)…This is not regarded as being unreasonable…but it is still £0·4 billion less than the true realisable value."

All we are saying is that if one of the consequences of proceeding by a method of privatisation leads to a discount of nearly £½ billion, this House ought to have the right to discuss it and to decide whether that is the way we wish to proceed. That is the purpose of the new clause.

When talking about the various factors that could influence or affect the various amounts that might be obtained, and the valuation that could be placed on Britoil and British Gas oil assets, Mr. Lovegrove referred to the world oil market. We give a clear and unequivocal warning that unless something dramatic or significant happens to the existing oil market, there is no case for selling Britoil shares this year. The Government would be acting in dereliction of their duty if they did so.

No one who at present holds oil shares would sell them. The "grocer of Grantham" would not sell her oil shares. Her stockbroker would certainly not advise her to do so at present unless she was stuck for cash or wanted to raise money to buy Amersham shares. I do not know whether the Secretary of State or the Minister of State hold oil shares—I do not know whether they are allowed to do so—but I doubt whether their stockbrokers would advise them to sell the nation's oil shares at the present time.

I have taken advice from a number of stockbrokers in the last few days, and everyone has recommended that, unless one is stuck for cash, one should not sell.

Will not the hon. Gentleman nevertheless admit that the Government are not proposing to sell Britoil shares at this moment? The situation may be quite different even in a matter of weeks, let alone months.

That is true. I accept that the situation can change. Oil prices could fall further. If Sheik Yamani's blackmail works, perhaps that will stabilise oil prices. However, oil prices have fallen by 60 per cent. in the last 18 months.

I take as an example two typical British independent oil producers who are comparable with the proposed Britoil company—Tricentrol and Lasmo. The value of Tricentrol in the last 18 months, based on the stock market's current estimate, has fallen by about £150 million. The value of Lasmo has fallen by £415 million.

I am saying that if the Prime Minister and the Secretary of State—a grocer in Grantham and a business man in Blaby—held oil shares, they would not sell them in the current climate. We demand that the Government do not sell the nation's oil assets and oil shares in the current climate. We are opposed to the sale in principle, but even on the Government's own criteria, unless there is a dramatic and significant improvement in the oil share market, we do not believe that there is a case for such a sale taking place this year. If the Government did that, they would be selling short the nation's vital oil assets. They would sell them at a knockdown price and at the worst moment. An individual would not sell his oil shares now unless he was stuck for cash, and nor should the nation.

That is the basis of our new clause. I shall put some other basic warnings and conditions to the Government on their approach to this new act of privatisation. First, no adviser associated with Amersham should be involved in any shape or form with the sale of Britoil. They should not be the Government's advisers or advisers of BNOC. Therefore, Rothschild must go.

Rothschild must go.

I agree that Rothschild must go and certainly not get involved. They made enough mess in Amersham and should not be given the chance to make a bigger blunder or mess. I also wish to ask the Minister—this is the first opportunity I have had to do this and I gave him notice of this question through his officials—about the peculiar and interesting comment in the Government's paper on the sale of special assets. Paragraph 55 of "The Government's Expenditure Plans 1982–83 to 1984–85", concerning the sale proceeds from privatisation generally, states:

"Sale proceeds in 1982–83 are expected to total some £600 million. This assumes that proceeds from the disposal in 1982 of 51 per cent. of BNOC's upstream business, provided for in the Oil and Gas (Enterprise) Bill, will be received in two instalments: the first in 1982–83 and the second in 1983–84. It should be emphasised that the division of receipts between the two years is only an assumption and no decision has yet been taken on whether the flotation of Britoil will be on a partly-paid or fully-paid basis."

The concept of a partly paid basis at Amersham would have been unbelievable. On that basis, one could have paid half, cleaned up and, six months later, paid the rest. That would be an attractive proposition to anyone. Perhaps one must do that sort of thing to try to sell £1 billion of assets. First value them low enough to make sure that one can give them away and secondly ask the prospective buyers for a half and half payment. Do the Government put forward that as a serious proposition? Do we take paragraph 55 to be a kite-flying exercise or something deliberate and meaningful?

rose—

I will not give way to the hon. Gentleman because we are under the guillotine and he has already had an opportunity to speak.

When replying, I hope that the Minister will tell us a little about paragraph 55.

Thirdly, there surely must be no question of further underwriting fees for the new Britoil sale. The real scandal of Amersham was that £890,000 was paid to underwriters to launch a share which was 20 times over-subscribed. The first day led to a 40p premium and 25 million shares changed hands within 24 hours. An underwriting company picked up £890,000 for doing that. There should be no question of underwriting fees for the privatised sale of any Britoil shares.

I am sure that the hon. Gentleman understands the function of underwriters better than I do. Judging from his remarks, I beg leave to doubt him. Surely the function of an underwriter is to underwrite the risk before the launch. The hon. Gentleman said that the risk of Britoil not being sold was considerable. Therefore, perhaps the underwriters are performing a function in this case.

The price is pitched and organised by the underwriters. On Amersham, they managed to collect £890,000 by organising a price 40p below what turned out to be the value, and then collected that £890,000 in fees. I understand why one needs underwriting fees in a private transaction. However, if the Government had been left with a percentage of the shares for Amersham, they would not have faced a terrible problem. They could hold those shares and decide what to do with them subsequently. There is certainly no case for producing large fees for underwriting the Britoil share. The Government can hold and bide their time if the shares are not sold. There is no problem in that respect.

The basic reason for raising all these points is to demonstrate that there are serious arguments. On the issue of privatisation, there are serious arguments when one moves away from a strict free market concept of valuation When one introduces other factors and objectives which affect and alter concepts of privatisation—as they did in previous privatisation measures and share launches—cost issues are involved. The House should have a right to debate such issues.

Therefore, the whole purpose of our new clause is to establish the principle that, before any decision is taken on valuation and method of sale, the Government must return to the House and debate the issue. From leaks, we understand that the Amersham debates took place when there were battles between the Treasury and the Department of Energy—Lawson v. Ridley. However, not one of those issues was brought to the floor of the House.

That occurred because there was no provision, when dealing with Amersham, to allow the issue to be brought to the House. Irrespective of the Opposition's stand on the divide about privatisation of public and private enterprise, the House ought to have a right, before the so-called "sale of the century" takes place, to discuss, approve or reject both the method and valuation of that company.

The Opposition have raised some important issues in proposing new clause 2. Although I cannot support the clause as a solution to those issues, I sympathise with some of the arguments advanced by the hon. Member for Merthyr Tydfil (Mr. Rowlands). Indeed, I have been critical of the Government's method of selling shares from the State sector back into the private sector, because in my view they ought to pursue that policy more strenuously. They would succeed in doing that if the method of sale were shown to be politically more acceptable.

To justify my arguments I shall refer not only to Amersham but to previous offers for sale. Cable and Wireless was certainly such an example. In that case, the method whereby the offers for sale was organised did less than justice to the Conservative objective of wider share ownership and risked discrediting the whole process of denationalisation. I am anxious that we get that right in future.

Offers for sale of concerns such as British Aerospace, Cable and Wireless and Amersham can certainly be judged as highly successful under the traditional criteria of Stock Exchange offers for sale. They were certainly successful as flotations. Nevertheless, they are subject to criticism, because they would have been justified as successful private offers for sale. However, they are not necessarily justifiable when dealing with public assets.

I am particularly critical that we have not given enough political guidance in these offers for sale to ensure that there is a genuine fair allocation to the small investor, and that we have not done enough to eliminate multiple applications—onal stags. Professional stags and multiple applications have a genuine role to play in normal offers for sale. However, when one is dealing with the sale of public assets at a discount—do not challenge—t is vital that the allocation of shares is seen to be as fair as possible, with a real emphasis on the small investor getting a fair share, rather than the multiple applicants.

The Cable and Wireless issue was more than five times oversubscribed. It allowed for a ballot for small applicants for 100 shares. Only one in three of those small applicants obtained shares. I know of small savers, including my mother-in-law, who has savings of only a few hundred pounds and is a pensioner. I advised her to make an application for 100 shares. She was unsuccessful in the ballot. However, I know of other friends and associates who made large applications and who did not have to enter the ballot. If one applied for 1,000 shares, one was automatically allocated 300 shares.

That system is justifiable and is an accepted method of launching a new issue when private assets are going into the hands of other private assets, but I maintain that that is not the right method when we are dealing with public assets going into private hands. There should be more political guidance to ensure that multiple applications are eliminated That can be done and it is feasible It costs only a little more in time and effort to do that. In most cases, multiple applications can be weeded out.

If the issue is oversubscribed, as I hope it will be, the allocation should be not just weighted in favour of the small applicant, but heavily biased in favour of him, so that there is not a ballot unless the number of small applicants does not cover the amount of shares on offer. If there is a ballot, the small applicants will have an equal chance with the large applicant. If such a method were adopted, we would promote the objectives of wider share ownership and popular capitalism in a way that would be politically more acceptable than the traditional methods of offer for sale that we have launched so far.

I do not accept the Opposition's argument, but they are right to refer to the premium that has been attracted to the offer for sale of Amersham International Ltd., for example. I accept that if an offer for sale is to be successful it ought to be pitched at a price that will attract savers and investors. There is nothing wrong with that. However, I maintain that it is extremely difficult, because market sentiment changes so quickly, to value a new issue beforehand. It is easy to be clever afterwards. Therefore, I believe that there is an alternative solution, which can be adopted and which has been adopted in other cases.

A tender offer is an alternative, but not one that will meet the objectives of wider share ownership. Offers for tender are primarily of interest to the larger institutional pension funds and put off the small investor, as they are so complicated. However, there could be a two-tier arrangement in an offer for sale so that some of the shares were allocated to the institutions that tendered for them in competitive bidding. That would establish a price that would be a market price rather than a price that was fixed in advance and might be wrong. The advantage of the tender offer is that it fixes a market price, because institutional investors are competing against one another as they would in an auction.

If about one-quarter of the shares to be sold were offered by tender to appeal to the institutions, that would establish a market price and the institutions would obtain a share of the offer. If one followed that with a second offer for sale, which was deliberately arranged to appeal to the small saver, with all the multiple applications eliminated, if the allocation of shares gave strong preference to small investors and if the price of that second offer for sale were fixed at about 10 per cent. less than the tender price—a small discount to attract the small investor—the State would receive a fair price and realisation for the sale. The institutions would get a share of the sale, but at an attractive market price from the State's point of view. The small saver would get a genuine chance to obtain the shares, rather than a large proportion of the shares going to the multiple speculative applicants.

The hon. Gentleman is making an extremely interesting contribution. Does he agree that the figure of £21·3 million for the underwriting fees in relation to Amersham International, British Telecom, Cable and Wireless and British Aerospace is excessive and is relevant to his argument? Does he dispute the figure of £21·3 million?

I am not discussing the underwriting figures. I was just about to suggest that if one adopted a system such as the two-tier sale that I am proposing there would be no need for underwriting fees, because the institutions that would obtain their shares by tender would be offered the underwriting for the second offer for sale, which would be set at 10 per cent. less for the small investor. The institutions would be given the opportunity to top up their initial allocations if the small investor did not subscribe to the second offer for sale. That underwriting would cost nothing at all.

Any pension fund that had acquired some of the shares by tender and wanted to top up its holding would jump at the opportunity of buying more shares at 10 per cent. less than the price of the original purchase. Therefore, the underwriting would be taken care of without fees on the second offer for sale to the small investor. I do not wish to go into further details, because I would be straying out of order if I were to do so.

The Government must give firm political guidance for future offers for sale. It is no use blaming the merchant bankers, the brokers or the institutions that handle the issues. They were only doing their job, using their normal methods for handling offers for sale. If any blame should be attached to anyone, it should be to us in the House and to the Government for not giving guidance and saying that the offer for sale should be organised so that the small saver would get a better chance and a fairer price than so far.

I was hoping that the hon. Gentleman would give a further explanation when he said that it would be easy to stop professional stagging. I should like to know how he would do that. The Stock Exchange has tried all ways.

I was just coming to that point. It is feasible to stop all but the most persistent multiple applicants. All that one has to do in advance is to announce that all cheques will be cashed. Many multiple applicants rely on the fact that the cheques are not presented. Such an announcement would eliminate the multiple applicants. They would not bother to apply because they have to put up the money. Secondly, it should be announced that it would be at least a week before the cheques were returned. If the Bank of England collected a little interest on the way, the taxpayer would not cry about that and nor would the Treasury. Therefore, if one announced in advance that all cheques would be cashed, that would discourage quite a few multiple applicants.

The applications should be computerised. The shares have to be allocated subsequently in any case. It is not beyond the bounds of modern techniques for the applications to be computerised, which would bring to light many multiple applications, unless they were disguised. Today when there are new issues many applicants do not bother to disguise the fact that they are making multiple applications. At least if my method were used, such applications would be more difficult, because under a computerised system they would come to light.

6.30 pm

There are other ways in which the multiple applications can be discouraged. For example, one can say in advance that if any multiple applications are discovered they will all be eliminated as a penalty. I think that that would be a further disincentive. The genuine applicant for the shares will certainly not complain if cheques are cashed. A genuine applicant expects his cheque to be cashed. Nor would a genuine applicant for 100 shares complain if it took a week or so before the allocation of the shares was announced. That again would not damage the genuine investor, but it would discourage the more speculative stag.

There are other ways in which the Government could help to promote the objectives of wider share ownership and make the whole process of privatisation politically more acceptable. One such method is to advertise and to make the offers for sale more widely obtainable, perhaps through post offices. Advertisements for the prospectuses should be placed in popular newspapers, not just in the "heavy" newspapers.

There should be more emphasis on providing shares to employees. The Bank of England could become involved in seeing that there is fair play in the allocation of the shares and act as the principal sponsoring bank.

I am entirely in support of the Government's strategy to offer shares for sale. If we did it in a way that was less open to public criticism and was seen to be fairer to the small applicant, it would be possible to speed up the whole process. We could get other denationalisation measures launched in rapid succession. We could achieve the objectives of popular capitalism far more effectively if we were prepared to give a little more political guidance on the manner in which the offer for sale should be handled. If that is done, it will be to the advantage not only of the Government's strategy, but to the whole economy and its progress in years to come.

I intervene at this stage in order that I may do the hon. Member for Merthyr Tydfil (Mr. Rowlands) the courtesy of dealing with one or two of the points that he raised. I appreciate that we are working under a guillotine. Therefore, I shall try to keep my remarks as brief as possible so that others may be able to participate as we move on.

The hon. Gentleman started by giving us a fairly detailed account of his views on the Amersham International transaction. However, as most of us had already heard those views in Committee, he will perhaps forgive me if I do not follow him too closely along that line.

My hon. Friend the Under-Secretary of State went into great detail on 16 March on this matter. He explained to the House the thinking behind the whole way in which it was handled. He pointed out—it is only fair to the House that I should reiterate it—that whatever criticism may have been made, the shares allocated to small investors amounted to 22·6 per cent. of the issue, although their applications represented only 12 per cent. of the total. As a result of the special arrangements made for them, employees were allotted 33·6 per cent. of the issue and over 99 per cent. of the employees now have an interest in their company. The offers of free shares were fully taken up by the employees who, in addition, received all the shares for which they made preferential applications. Therefore, the Government's objective of giving employees a direct interest in their company was achieved.

The Amersham sale realised about £63 million for the taxpayer—an excellent return on the £6·3 million investment made by the Government. The Government's objective of a fair return for the taxpayer was achieved In short, as my right hon. Friend the Secretary of State said on an earlier occasion during our discussions on this question and also in the House on another occasion, the Amersham transaction was a success. From the taxpayers' point of view it was unquestionably.

The Minister referred to the employees as holding 33 per cent. of the shares. If he will check that figure I think he will find that it is more like 3·7 per cent. of the shares.

I apologise. The hon. Gentleman is correct. It is 3·6, not 33·6—a substantial difference. I willingly concede the point.

The hon. Gentleman then asked about the public expenditure White Paper. He very kindly gave me notice of the question, and I can give him a clear answer to it. The division of the receipts from the Britoil sale in the White Paper is simply an assumption only for the purpose of presentation in the White Paper and does not imply that any decisions have been taken on the timing of receipts. Clearly the possibility of a partly paid issue in which some of the receipts might be delayed until 1983–84 will need to be considered. I repeat that, as the White Paper makes absolutely clear, no decisions have yet been taken.

The question of the arrangements for the offer, including the timing of receipts, can only be resolved by the Government and their advisers nearer the time of sales and in the light of conditions at that time.

The hon. Gentleman quoted from Mr. Martin Lovegrove's book but, like most people who quote in debate, he quoted the part which best suited his argument. If the hon. Gentleman had read on a little further he might have been rather more enlightened, for Mr. Lovegrove goes on to refer to the advantages of privatisation for the corporation and concludes:

"In fact, it can be argued that with a sale of shares management"—

that is, management of the British National Oil Corporation—

"should be able to expand the corporation's operations considerably, to the extent that Government, as a minority shareholder, would benefit through increasing dividends and, of course, taxes."

So I think Mr. Lovegrove has given a very fair view in his book, but it is also fair that the House should have the other side of the story as well.

The shares in Britoil will be available for purchase by the public. The Government intend that they should be widely spread, and we are giving a lot of thought to ways of ensuring that small investors have a proper opportunity to buy Britoil shares. In that regard, my hon. Friend the Member for Derbyshire, South-East (Mr. Rost)—who has made such a useful contribution to our deliberations in Committee, particularly on anything to do with shares—has given us the benefit of his experience. We shall consider very seriously the points made by my hon. Friend and by other hon. Members. We are equally anxious that the small investor should be properly catered for.

Hon. Members will understand that at this stage the most I can say is that we would like there to be a fair measure of flexibility when the shares are allocated for the scaling down of large applications to give preference to small investors and to avoid undue concentration of ownership. We are taking safeguards in the articles against any unacceptable change of control of the company, a subject that we discussed earlier this afternoon.

There are several other aspects of the sale on which decisions have not yet been concluded and which cannot be finally settled until nearer the time of the sale, in the light of market conditions and in consultation with our advisers. But the Government's objective will be to obtain a fair price for the taxpayer, and my right hon. Friend has already assured the House that the Government would not go ahead with an offer for sale unless we were satisfied that the selling price represented fair value for the taxpayer. I made it clear in Committee that we would not arrange the sale of shares merely to meet a timetable. I made our objectives clear and said that we were anxious to obtain the best possible price.

The Government are determined to ensure that the taxpayer benefits fully and fairly from the sale of Britoil shares. An independent evaluation of Britoil's North Sea assets will be available from the consulting petroleum engineers Energy Resources Consultants Limited in advance of the sale. On the basis of the consultants' report and the advice that we received from our merchant bank advisers S. G. Warburg and Co. Ltd., the Government will be able to form a clear and balanced view of the value of the shares.

In addition, we shall look closely with our advisers at the market valuation of other oil companies, particularly those with North Sea interests. The House need be in no doubt that our valuation of the shares will be careful and thorough.

I wish to add another point relating to the practicability of laying a valuation of shares before the House. The carrying through of the Britoil offer must be a matter for executive action by the Government. The preparations leading up to the offer should not be carried out in the glare of publicity.

After all, the flotation will be an exercise of great complexity, which will require months of exacting preparatory work by experts before it is ready to go ahead. Many of the documents will entail heavy legal responsibility and much effort, care and thought will be needed in their compilation.

This is humbug.

It may be humbug to the hon. Member for West Lothian (Mr. Dalyell), but anyone who has been associated with a flotation will know the care that needs to be taken with such documents.

My Department will be obtaining a detailed report on the oil assets of Britoil from independent petroleum engineers. The prospectus that will be published at the time of the offer will include an evaluation of the principal assets of the company. It will be carefully considered in the light of the legal responsibilities that all involved in the offer, including the Secretary of State and the Britoil directors, will bear for it.

It would be wrong for the Government to anticipate the prospectus by publishing their valuation of assets in advance. A number of hon. Members raised that subject in Committee. For any such valuation to become available before shares are sold could be harmful to our objective of obtaining a fair price for the nation.

To sum up, some aspects of the sale of Britoil shares can be decided only nearer the time of the sale, but I assure the House that we will want shares to be available to a wide spread of the public and to small investors as well as to employees of the company. We are determined to obtain a fair price and we shall make sure that the shares are valued carefully and with the benefit of professional advice.

The Government have been open and fair in explaining their aims and objectives in the privatisation of Britoil. It would have been wrong for us to do otherwise, and I believe that we are on the right course. The requirements that the new clause would impose are unnecessary and it would be wrong for the House to accept it.

The Labour Party has made it clear that it opposes asset-stripping and the new clause should be read in that context. We have also made it clear that a future Labour Goverment will reverse the process and ensure that speculative gains are not made out of it. The process is inherently corrupt. The so-called privatisation is a process of handing over public assets to private individuals or groups of individuals for their own personal or group profit. That is the fundmental objection to it.

6.45 pm

If Conservative Members argue that there is some risk involved, they had better look at the record. They know that the assets that they are handing over—British Aerospace, Cable and Wireless and Amersham International—are precisely the sorts of assets from which those who acquire them expect to make substantial personal profits. The Goverment have no intention of putting on the market British Rail or other public assets on which there is no prospect of investors making personal profits.

The process of privatisation is inherently corrupt and the corruption can be seen in the Amersham International scandal. That deal was a swindle of the taxpayer, as can be proved by the fact that long before the sale took place commentators were saying that there would be massive applications in the expectation of immediate and huge profits. And that is precisely what happened.

The Government have made much play of the small investor, but if they were really concerned about the small investor, by which they presumably mean the individual citizen, they would leave great public assets in public ownership, because only in that way can the ordinary citizen hope to gain an equitable share in enormously valuable public property.

Unless the Government have some weird idea of breaking public assets into 35 million pieces so that every citizen can have a piece—and the Government are not suggesting anything remotely approaching that—their so-called concern For the small investor is sheer hypocrisy. The Minister of State confirmed earlier that the employees, about which Conservatives profess to be so concerned, got only 3 per cent. of the Amersham International shares. Even the small investors got only 22 per cent. and the big boys who got 75 per cent. of the shares, made the killing on the deal.

That is why I describe the privatisation process as corrupt. It is a disgraceful corruption of the process of government in this country and for that reason alone it should be brought to a halt.

There is a particularly damaging aspect of the Bill and a particular reason why Parliament should have at least some say in the method of the sale of shares and their valuation. We are selling natural resources. It could be argued that various people contributed to the building up of the value of Amersham International, but the sale that is proposed in the Bill is that of natural resources—oil and gas—which belong to no one but the community as a whole.

We are attempting to sell the control and disposition of natural resources of all the people of this country, and the only reason for the sale is that those who buy shares expect to make a personal profit. There is no other reason why they should buy them. Even Conservative Members will hardly claim that those who buy the shares under this system do so in the hope of making a loss or out of sheer philanthropy. The only possible motive here is that the people, groups or corporations who acquire these shares do so because of their intention to make a personal profit, which is to come out of a natural resource that belongs to the whole country.

We are dealing here, as we were with Amersham and British Aerospace, with an area of high technology, an area where public investment over the years—in the case of gas, over decades—has involved research and development at a cost to public funds which cannot seriously be valued in cash. What we have is a coherent enterprise, built up by public money over a long period, the assets of which consist not just of buildings and equipment, but of the scientific knowledge and the engineering skill of the people involved. No true valuation can be put on that.

The Opposition are fundamentally opposed to this kind of swindle of the public purse, but if, through the statutory process, it has been agreed by Parliament that the assets should be stripped and public property should be given away for private profit—which is what Government Members want—then, at the very least, the new clause is justified. Parliament should at least be able to determine certain ground rules to prevent the deplorable scandal that occurred in the Amersham case and of which, in their hearts, Government Members are ashamed. Fundamentally, the Conservative Party is ashamed of the Amersham swindle, which involved paying huge commissions to people who were either grossly incompetent or grossly corrupt in the advice that they gave to the Government.

The very minimum that the Government should accept, therefore, is the proposition contained in the new clause, which is that Parliament should determine the ground rules if this sale is to take place in order to prevent a second swindle of the public purse.

I will not follow the hon. Member for Sheffield, Heeley (Mr. Hooley) any more than I suspect his Front Bench would wish to follow him, because the primary charge the hon. Member for Merthyr Tydfil (Mr. Rowlands) made was that the Government had been incompetent. Given the sort of speech we have had to listen to, does the hon. Member for Merthyr Tydfil not agree that the issues were all highly successful, since there is a threat over the market that a Labour Government would renationalise without compensation in some cases and with minimal compensation in others, while the SDP policy, if I understand it, is to provide a degree of market compensation? Against such a background, the launching of British Aerospace, Cable and Wireless and Amersham International, although oversubscribed, was a major success.

I ask my hon. Friend the Minister of State to give his attention to the combination of underwriting costs and the setting of the price of the issue, and the role of the Bank of England. I hope this sale is part of a rolling programme. I shall certainly be putting pressure on my right hon. and hon. Friends to speed up the process of denationalisation. If anything, it has been going too slowly and I criticise them for that. In that rolling programme I hope that the role of the Bank of England will be considered. There is evidence that, with the BP sale, in which the Bank of England was involved, the issue price was achieved at a more equitable cost, maximising the return to the public, even though much of it was conducted on a placing basis.

I come next to timing. The hon. Member for Merthyr Tydfil is playing for time when he suggests that we should delay denationalisation. He hopes that eventually there will be a general election and that the privatisation will not, therefore, take place. The current value of the asset within the industry is not the only relevant factor. Also relevant is the price that the asset will realise in relation to the Government's prevailing overall economic strategy. I might like the old-age pension to be increased by another 1 per cent. In order to achieve that, I might be prepared to sell Britoil at a discount, without maximising the resources, because that might be a better objective.

I ask my hon. Friend the Minister of State to disregard the Opposition's suggestions on this issue. They are similar to their views on direct labour—and we have all heard about direct labour and its efficiency. Instead he should remember that the overall economic context is important in deciding the timing.

My hon. Friend is right to listen to Parliament, to listen to the debate here and to listen to the Opposition. They could choose to devote half of a Supply Day to the issue, although they did not do so before. Instead the matter was raised in an application for an Adjournment debate by the right hon. Member for Leeds, South (Mr. Rees). The Government should certainly listen but, once the decisions are made and detailed negotiations are under way, it would not be right for individual political interference to take place.

I know and respect the hon. Member for Northampton, South (Mr. Michael Morris) as a member of the Public Accounts Committee. It would be wrong of me to comment on reports that will be published shortly in relation to British Aerospace, but I have to say to him that some of his remarks will not be borne out by the substance of the report which the all-party Public Accounts Committee will publish in relation to that particular venture, or by the views that the Committee will express on Government sales of public assets.

I say this by way of a challenge, because this is an issue that ought to concern both sides of the House, whether we favour the sale of public assets or not. The Government are entitled to use their majority to carry through their policy, but they are not entitled to confuse the electorate by embarking on mixed policies.

My hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) indicated that great difficulties lie ahead if the Government say they want to maximise the return to the public purse but, at the same time, they want to ensure the widest possible ownership of the equity of the assets. Even greater difficulties are encountered when one is dealing with, for example, the British National Oil Corporation. The Minister of State quoted Mr. Lovegrove's book. I ask the Minister of State, even at this juncture, to name one authority that says that the British National Oil Corporation will be more valuable if it is split up and sold as a disintegrated organisation. To put this asset on the Stock Exchange in a way that denies the logic of the industry devalues the asset at a stroke, and the Minister of State knows it.

In addition, the Minister of State knows that he is acting against the concerted advice of the board of the British National Oil Corporation. The hon. Member for Derbyshire, South-East (Mr. Rost) referred to our giving political advice. How are we going to give that political advice—behind your Chair, Mr. Deputy Speaker? In the Minister's office? Or on the Floor of the House? This is the place in which to give political advice, and if one is to do so one must have information. The Minister of State has indicated to us that all sorts of information will be available. There will be an independent survey but there is no indication that that survey, by eminent petroleum economists, will be made available to the Members of this House. How are we going to make a judgment? Will he give us an indication of that? That would, I imagine, be part of the prospectus. The prospectus has to be made public. Why should we not get an indication of the value of the public assets?

The Minister of State is knowledgeable about the oil industry. The Government and the Secretary of State are addicted to selling the assets by the end of the year. There is no way that that can be done, because of the state of the oil market. The Minister of State is hedging and trying to put a gloss on the matter.

The new clause is eminently fair and in the public interest. All hon. Members—.