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New Clause 2

Volume 21: debated on Wednesday 31 March 1982

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Method Of Sale Or Valuation Of Shares In Subsidiary

`Before the disposal of any shares in any subsidiaries established under sections 1 and 9 draft orders establishing the

method of the sale of the shares, and their valuation of any such shares shall be laid before Parliament and shall be subiect to an affirmative resolution.'.— [Mr. Rowlands.]

Brought up, and read the First time.

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.

6 pm

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.

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?

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.

6.15 pm

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.

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—.

It being Seven o'clock, MR. DEPUTY SPEAKER proceeded, pursuant to the Order [8 March] and the Resolution this day, to put forthwith the Question already proposed from the Chair.

Question put, That the clause be read a Second time:—

The House divided: Ayes 214, Noes 275.

Division No. 114]

[7 pm


Abse, LeoColeman, Donald
Allaun, FrankConcannon, Rt Hon J. D.
Alton, DavidCook, Robin F.
Anderson, DonaldCowans, Harry
Archer, Rt Hon PeterCox, T. (W'dsw'th, Toot'g)
Ashley, Rt Hon JackCraigen, J. M. (G'gow, M'hill)
Ashton, JoeCrowther, Stan
Atkinson, N. (H 'gey,)Cryer, Bob
Bagier, Gordon A.T.Cunliffe, Lawrence
Barnett, Rt Hon Joel (H'wd)Cunningham, Dr J. (W'h'n)
Beith, A, J.Dalyell, Tam
Benn, Rt Hon TonyDavidson, Arthur
Bennett, Andrew (St'kp'tN)Davies, Rt Hon Denzil (L'lli)
Bidwell, SydneyDavies, Ifor (Gower)
Booth, Rt Hon AlbertDavis, Clinton (Hackney C)
Boothroyd, Miss BettyDavis, Terry (B'ham, Stechf'd)
Bottomley, Rt Hon A. (M'b'ro)Deakins, Eric
Bradley, TomDean, Joseph (Leeds West)
Bray, Dr JeremyDixon, Donald
Brown, Hugh D. (Provan)Dobson, Frank
Brown, R. C. (N'castle W)Dormand, Jack
Brown, Ron (E'burgh, Leith)Douglas, Dick
Callaghan, Rt Hon J.Douglas-Mann, Bruce
Callaghan, Jim (Midd't'n&P)Dubs, Alfred
Campbell, IanDuffy, A. E. P.
Canavan, DennisDunn, James A.
Cant, R. B.Dunwoody, Hon Mrs G.
Carmichael, NeilEadie, Alex
Cartwright, JohnEastham, Ken
Clark, Dr David (S Shields)Edwards, R. (W'hampt'n S E)
Cocks, Rt Hon M. (B'stol S)Ellis, R. (NE D'bysh're)

Ellis, Tom (Wrexham)Morris, Rt Hon C. (O'shaw)
English, MichaelMorris, Rt Hon J. (Aberavon)
Evans, Ioan (Aberdare)Morton, George
Evans, John (Newton)Moyle, Rt Hon Roland
Faulds, AndrewNewens, Stanley
Field, FrankO'Halloran, Michael
Fletcher, Ted (Darlington)O'Neill, Martin
Ford, BenOwen, Rt Hon Dr David
Forrester, JohnPark, George
Foster, DerekParker, John
Foulkes, GeorgeParry, Robert
Fraser, J. (Lamb'th, N'w'd)Pendry, Tom
Freud, ClementPenhaligon, David
Garrett, John (Norwich S)Powell, Raymond (Ogmore)
Garrett, W. E. (Wallsend)Prescott, John
George, BruceRace, Reg
Golding, JohnRadice, Giles
Graham, TedRees, Rt Hon M (Leeds S)
Grant, George (Morpeth)Richardson, Jo
Grant, John (Islington C)Roberts, Albert(Normanton,)
Grimond, Rt Hon J.Roberts, Gwilym (Cannock)
Hamilton, W. W. (C'tral Fife)Robertson, George
Harrison, Rt Hon WalterRobinson, G. (Coventry NW)
Hart, Rt Hon Dame JudithRobinson, P. (Belfast E)
Hattersley, Rt Hon RoyRooker, J. W.
Haynes, FrankRoper, John
Heffer, Eric S.Rowlands, Ted
Hogg, N. (E Dunb't'nshire)Ryman, John
Holland, S. (L 'b'th, Vauxh'll)Sandelson, Neville
Home Robertson, JohnSever, John
Homewood, WilliamSheerman, Barry
Hooley, FrankSheldon, Rt Hon R.
Horam, JohnShore, Rt Hon Peter
Howell, Rt Hon D.Short, Mrs Renée
Howells, GeraintSilkin, Rt Hon J. (Deptford)
Hoyle, DouglasSilkin, Rt Hon S. C. (Dulwich)
Huckfield, LesSilverman, Julius
Hughes, Mark (Durham)Skinner, Dennis
Hughes, Robert (Aberdeen N)Smith, Rt Hon J. (N Lanark)
Janner, Hon GrevilleSoley, Clive
Jay, Rt Hon DouglasSpearing, Nigel
Johnson, Walter (Derby S)Spriggs, Leslie
Jones, Rt Hon Alec (Rh'dda)Stallard, A. W.
Jones, Barry (East Flint)Steel, Rt Hon David
Jenkins, Rt. Hon. RoyStewart, Rt Hon D. (W Isles)
Kerr, RussellStoddart, David
Kilfedder, James A.Stott, Roger
Kilroy-Silk, RobertStrang, Gavin
Lambie, DavidStraw, Jack
Lamborn, HarrySummerskill, Hon Dr Shirley
Lamond, JamesTaylor, Mrs Ann (Bolton W)
Leadbitter, TedThomas, Dr R. (Carmarthen)
Lewis, Arthur (N'ham NW)Thorne, Stan (Preston South)
Lewis, Ron (Carlisle)Tilley, John
Lofthouse, GeoffreyTinn, James
Lyon, Alexander (York)Torney, Tom
McCartney, HughVarley, Rt Hon Eric G.
McElhone, FrankWainwright, E. (Dearne V)
McKay, Allen (Penistone)Wainwright, R. (Colne V)
MacKenzie, Rt Hon GregorWalker, Rt Hon H. (D'caster)
McNally, ThomasWelsh, Michael
McNamara, KevinWhite, Frank R.
McTaggart, RobertWhite, J. (G'gow Pollok)
Marks, KennethWhitehead, Phillip
Marshall, D (G 'gowS'ton)Whitlock, William
Marshall, Dr Edmund (Goole)Wigley, Dafydd
Marshall, Jim (Leicester S)Willey, Rt Hon Frederick
Martin, M (G'gow S'burn)Williams, Rt Hon A. (S'sea W)
Mason, Rt Hon RoyWilson, Gordon (Dundee E)
Maxton, JohnWilson, William (C'try SE)
Maynard, Miss JoanWinnick, David
Meacher, MichaelWoodall, Alec
Mellish, Rt Hon RobertWoolmer, Kenneth
Millan, Rt Hon BruceWright, Sheila
Miller, Dr M, S. (E Kilbride)
Mitchell, Austin (Grimsby)Tellers for the Ayes:
Mitchell, R, C. (Soton Itchen)Mr. Ron Leighton and Mr. James Hamilton.
Morris, Rt Hon A. (W'shawe)


Adley, RobertFinsberg, Geoffrey
Aitken, JonathanFisher, Sir Nigel
Alexander, RichardFletcher, A. (Ed'nb'gh N)
Alison, RtHon MichaelFletcher-Cooke, SirCharles
Amery, Rt Hon JulianFookes, Miss Janet
Ancram, MichaelForman, Nigel
Arnold, TomFowler, Rt Hon Norman
Aspinwall, JackFox, Marcus
Atkins, Rt Hon H.(S'thorne)Fraser, Peter (South Angus)
Atkins, Robert (Preston N)Fry, Peter
Baker, Nicholas (N Dorset)Gardiner, George (Reigate)
Banks, RobertGardner, Edward (S Fylde)
Beaumont-Dark, AnthonyGarel-Jones, Tristan
Bendall, VivianGilmour, Rt Hon Sir Ian
Benyon, W. (Buckingham)Glyn, Dr Alan
Best, KeithGoodhart, Sir Philip
Bevan, David GilroyGoodhew, Sir Victor
Biffen, Rt Hon JohnGoodlad, Alastair
Biggs-Davison, Sir JohnGorst, John
Blackburn, JohnGow, Ian
Blaker, PeterGrant, Anthony (Harrow C)
Body, RichardGray, Hamish
Bonsor, Sir NicholasGriffiths, E.(B'y St. Edm'ds)
Boscawen, Hon RobertGriffiths, Peter Portsm'th N)
Bottomley, Peter (W'wich W)Grist, Ian
Bowden, AndrewGrylls, Michael
Boyson, Dr RhodesGummer, John Selwyn
Braine, Sir BernardHamilton, Hon A.
Bright, GrahamHamilton, Michael (Salisbury)
Brittan, Rt. Hon. LeonHampson, Dr Keith
Brooke, Hon PeterHannam, John
Brotherton, MichaelHaselhurst, Alan
Brown, Michael (Brigg&Sc'n)Havers, Rt Hon Sir Michael
Browne, John (Winchester)Hawkins, Paul
Bruce-Gardyne, JohnHawksley, Warren
Bryan, Sir PaulHayhoe, Barney
Buck, AntonyHeddle, John
Budgen, NickHenderson, Barry
Bulmer, EsmondHeseltine, Rt Hon Michael
Burden, Sir FrederickHicks, Robert
Butcher, JohnHiggins, Rt Hon Terence L.
Butler, Hon AdamHogg, Hon Douglas (Gr'th'm)
Cadbury, JocelynHolland, Philip (Carlton)
Carlisle, John (Luton West)Hooson, Tom
Carlisle, Kenneth (Lincoln)Hordern, Peter
Carlisle, Rt Hon M. (R'c'n)Howe, Rt Hon Sir Geoffrey
Chalker, Mrs. LyndaHowell, Rt Hon D. (G'ldf'd)
Channon, Rt. Hon. PaulHowell, Ralph (N Norfolk)
Chapman, SydneyHunt, David (Wirral)
Churchill, W. S.Hunt, John (Ravensbourne)
Clark, Hon A. (Plym'th, S'n)Hurd, Rt Hon Douglas
Clark, Sir W. (Croydon S)Irving, Charles (Cheltenham)
Clarke, Kenneth (Rushcliffe)Jessel, Toby
Cockeram, EricJohnson Smith, Geoffrey
Colvin, MichaelJopling, Rt Hon Michael
Cope, JohnJoseph, Rt Hon Sir Keith
Corrie, JohnKaberry, Sir Donald
Costain, Sir AlbertKershaw, Sir Anthony
Cranborne, ViscountKitson, Sir Timothy
Critchley, JulianLamont, Norman
Dean, Paul (North Somerset)Lang, Ian
Dickens, GeoffreyLatham, Michael
Dorrell, StephenLawrence, Ivan
Douglas-Hamilton, Lord J.Lee, John
Dover, DenshoreLe Marchant, Spencer
du Cann, Rt Hon EdwardLennox-Boyd, Hon Mark
Dunn, Robert (Dartford)Lester, Jim (Beeston)
Dykes, HughLewis, Kenneth (Rutland)
Eden, Rt Hon Sir JohnLloyd, Ian (Havant & W'loo)
Edwards, Rt Hon N. (P'broke)Lloyd, Peter (Fareham)
Eggar, TimLoveridge, John
Elliott, SirWilliamLyell, Nicholas
Emery, Sir PeterMacfarlane, Neil
Eyre, ReginaldMacGregor, John
Fairbairn, NicholasMacKay, John (Argyll)
Fairgrieve, Sir RussellMacmillan, Rt Hon M.
Faith, MrsSheilaMcNair-Wilson, M. (N'bury)
Farr, JohnMcNair-Wilson, P. (New F'st)
Fell, Sir AnthonyMcQuarrie, Albert

Marland, PaulShelton, William (Streatham)
Marshall, Michael (Arundel)Shepherd, Colin (Hereford)
Marten, Rt Hon NeilShepherd, Richard
Mates, MichaelSilvester, Fred
Maude, Rt Hon Sir AngusSims, Roger
Mawhinney, Dr BrianSkeet, T. H. H.
Maxwell-Hyslop, RobinSpeed, Keith
Mayhew, PatrickSpence, John
Mellor, DavidSpicer, Jim (West Dorset)
Meyer, Sir AnthonySpicer, Michael (S Worcs)
Miller, Hal (B'grove)Sproat, Iain
Mills, Iain (Meriden)Squire, Robin
Mills, Peter (West Devon)Stainton, Keith
Miscampbell, NormanStanbrook, Ivor
Moate, RogerStanley, John
Monro, Sir HectorSteen, Anthony
Montgomery, FergusStevens, Martin
Moore, JohnStewart, A. (E Renfrewshire)
Morris, M. (N'hampton S)Stewart, Ian (Hitchin)
Morrison, Hon C. (Devizes)Stokes, John
Mudd, DavidStradling Thomas, J.
Murphy, ChristopherTapsell, Peter
Myles, DavidTaylor, Teddy (S'end E)
Neale, GerrardTebbit, Rt Hon Norman
Neubert, MichaelTemple-Morris, Peter
Newton, TonyThatcher, Rt Hon Mrs M.
Normanton, TomThomas, Rt Hon Peter
Nott, Rt Hon JohnThompson, Donald
Onslow, CranleyThornton, Malcolm
Oppenheim, Rt Hon Mrs S.Townend, John (Bridlington)
Osborn, JohnTrippier, David
Page, John (Harrow, West)Trotter, Neville
Page, Richard (SW Herts)van Straubenzee, Sir W.
Parris, MatthewVaughan, Dr Gerard
Patten, Christopher (Bath)Viggers, Peter
Patten, John (Oxford)Waddington, David
Pattie, GeoffreyWakeham, John
Pawsey, JamesWaldegrave, HonWilliam
Percival, Sir IanWalker, B. (Perth)
Peyton, Rt Hon JohnWalker-Smith, Rt Hon Sir D.
Pollock, AlexanderWall, Sir Patrick
Porter, BarryWaller, Gary
Prentice, Rt Hon RegWalters, Dennis
Proctor, K. HarveyWard, John
Pym, Rt Hon FrancisWarren, Kenneth
Rathbone, TimWells, Bowen
Rees-Davies, W. R.Wells, John (Maidstone)
Renton, TimWheeler, John
Rhodes James, RobertWhitelaw, Rt Hon William
Rhys Williams, SirBrandonWhitney, Raymond
Ridley, HonNicholasWickenden, Keith
Rippon, Rt HonGeoffreyWiggin, Jerry
Roberts, M. (Cardiff NW)Wilkinson, John
Roberts, Wyn (Conway)Winterton, Nicholas
Rossi, HughWolfson, Mark
Rost, PeterYounger, Rt Hon George
Royle, Sir Anthony
Sainsbury, Hon TimothyTellers for the Noes:
St. John-Stevas, Rt Hon N.Mr. Anthony Berry and Mr. Carol Mather.
Shaw, Giles (Pudsey)
Shaw, Michael (Scarborough)

Question accordingly negatived