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Trustee Savings Bank Bill

Volume 73: debated on Wednesday 20 February 1985

The text on this page has been created from Hansard archive content, it may contain typographical errors.

As amended (in the Standing Committee), considered.

9.30 pm

On a point of order, Mr. Speaker. On Second Reading, I questioned the legality of the Bill in a paraphrase of the Latin expression nemo dat qui non habet—you cannot give what you have not got. The Economic Secretary to the Treasury did not deal with that point, but he admitted that there was no detailed knowledge about the ownership of the trustee savings banks and that ownership could not be determined.

Therefore, I refused to serve on the Standing Committee that considered the Bill, but I have carefully considered what was said in Committee, because, although I concede immediately that Parliament is sovereign, I do not accept that the House can authorise the TSB to enter what is clearly an illegality — to sell something that it does not own. The Bill is nonsense and should be withdrawn. The Government ought either to include in the Bill an authorisation for the TSB to become possessed of all its assets and proceed from there towards the sale, or to create a mutual company.

Parliament is being asked to pass nonsense and I ask you, Mr. Speaker, to rule that the matter should go back to the Government for reconsideration.

I am grateful to the hon. Member for St. Helens, South (Mr. Bermingham) for having given me notice that he would raise the point of order. I have considered carefully the point that he has made and I have to rule that it is not a matter for the Chair. If the Bill is defective, as the hon. Member claims, it is for the House to decide whether to pass it. It is not a matter for me.

Further to that point of order, Mr. Speaker. I have been approached by a number of people who have asked whether Parliament is able to legislate in this way. I appreciate that it does not fall within your purview to take these decisions, but surely the Leader of the House should make a statement dealing with the accusations that have been levelled against the Government and with the suggestion that the Government do not have the right to legislate. Before the Bill comes before the House, the Leader of the House should clear the way. The Bill is consuming parliamentary time and that is a matter not for the Economic Secretary to the Treasury, but for the Leader of the House who protects the interests of all hon. Members.

That is not a matter for me. The hon. Gentleman can table an amendment on the matter —indeed, the Government could table an amendment—or vote against the Bill. It is certainly not a matter for the Chair.

New Clause 1

Share Flotation

'On the vesting day employees of the TSB Group and holders of deposits in the TSB Group shall be offered 55 per cent. of the shares of the Group.' — [Dr. McDonald.]

Brought up, and read the First time.

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

The purpose of the new clause is to take account of the history and traditions of the TSB, which has been closer to a mutual organisation than to a public limited company, and of what was once the expressed hope of the TSB. The banks gave evidence to the committee that reviewed the functioning of financial institutions in 1979. The summary of evidence stated:
"The Trustee Savings Banks have demonstrated a will and ability to adapt to modem commercial requirements and the changing needs of their customers, whilst retaining a fundamental purpose which is not dictated by purely commercial interests."
The TSB not only acknowledged its traditions, but outlined what it hoped that its future would be: it hoped that it would not be devoted entirely to commercial interests. That theme has been continued in the comments on the TSB's change of status and in the TSB's own hopes that depositors and employees will wish to take up shareholdings. The Sunday Times on 11 November 1984 referred to the need to resolve the TSB's legal structure. The article stated:
"The first preference (and one to which some"—
others would say many—
"members of the TSB adhere) was to retain mutuality. But this received an official thumbs down, because of accountability problems."
I do not believe that the term "official" is intended to refer to the Government's attitude. The Government's role in the Bill is to facilitate the changes that the TSB's management wishes to bring about. The management has stressed the problems faced in setting up a mutual organisation. The TSB's existence as a mutual organisation is not clearly defined in the way in which building societies are.

The Sunday Times article went on:
"For a start, by abandoning its mutual status, the TSB jettisons its basic difference from the high street clearing banks. Other attractive babies, too, could disappear down the plughole with the mutual bathwater.
The TSB's great strength has always been the traditional loyalty of its 6 million customers. Personal customers account for over 95 per cent. of its customer base."
More interestingly, and certainly more surprisingly to Conservative Members, the Financial Times leader of 17 January echoed and developed that theme. It accused the Government and the management of the TSB of being too unimaginative in their consideration of the TSB's future status and organisation. When the Financial Times puts the matter as a choice between a mutual organisation and a public limited company, it is being unimaginative.

The new clause says that, even if the future organisation has to be a public limited company—first, because of accountability and, secondly, because of the need to raise capital—it does not have to conform exactly to the form taken by other high street banks and other companies. We believe that consideration should have been given to forming a plc in which the majority of shares are held by the employees and holders of deposits. To some extent, that would have taken account of the TSB's traditions, the hopes that it would not be a purely commercial enterprise and the fact that, until now, the TSB has been different from the high street banks in its relationship with its customers. Personal customers account for much of its business. If the majority of the shares were offered to employees and depositors, they, too, would have an opportunity to continue those traditions.

The Banking Insurance and Finance Union, 98 per cent. of the membership of which are employees in the TSB organisation, would like to see a preferential share issue of this kind. They would regard it as being similar in some ways to the British Telecom and Jaguar flotations. However, when we discussed a similar issue on Second Reading the Economic Secretary to the Treasury said:
"I do not think that it would be appropriate for the legislation itself to include specific provisions about the flotation or about the subsequent conduct of the TSB as a private sector company …
I believe that the overall purpose of the Bill is helpful to the TSB and its depositors."—[Official Report, 14 January 1985; Vol. 73, c. 71.]
Opposition Members must part company with the Minister on that. There is no reason why shares should not be offered in the way suggested in new clause 1. It could be done within the scope of the normal mechanisms of share flotation and transfer. There would be no particular problems if all of the 55 per cent. laid down in new clause 1 were not taken up, because the unsold shares could be the vested property of the board.

It may be suggested that there may be pricing difficulties about insisting that the share flotation should take place in that way. That is true if one accepts the view that institutions are prepared to pay more for shares than individuals are. The TSB may lose out on the sale of shares, if it has to sell a significant percentage of them to individuals. However, that is not an unavoidable outcome. If individuals and, in this case, the employees and depositors, to whom the issues involved could be spelt out, as the TSB can easily inform them, realise that institutions have been rationed on the flotation, they can expect the value of their shares to increase in future.

To suggest that the TSB should be treated and should operate like every other high street bank is to ignore the history, traditions and importance of its personal customers. It is not like another bank, and many people would argue, as the Opposition argue, that every effort should be made to ensure that the TSB continues to offer a different sort of service. That was in part meant in the Page report in 1973, which referred to a third force in banking.

By tabling the new clause in this way we are saying, "If the TSB must become a public limited company, it does not need to be wholly commercial in its purpose, and shares need not be distributed as they are distributed for other banks and public limited companies".

My hon. Friend is making an excellent speech and many important points, as expected. Is she aware that not only is the TSB being regarded as yet another clearing bank, making a total of five instead of four clearing banks, but that the clearing banks see it as a main competitor? I have had discussions with a number of banks, and it is clear that eventually there will be a merger either between the TSBs and the other banks, or between the clearing banks because the United Kingdom cannot accommodate five large clearing banks.

9.45 pm

I thank my right hon. Friend for his intervention. Some of his points will be relevant to new clause 2 which is designed to limit individual shareholdings to prevent such a take over. We can see why other high street banks regard the TSB as a competitor. The Midland's position is a little shaky. Following the flotation of its shares, the TSB will have roughly the same value or even a little more than the Midland bank, and no doubt the Midland bank will be watching the TSB's operations somewhat nervously.

I want to focus on the difference in the shareholding and the fact that it could make a difference to the way in which the TSB operates in the future. It is essential to preserve what should be preserved from the TSB's past. The matter has been discussed with representatives of the TSB management. Those discussions do not leave one unworried, for two reasons. I received the impression that the TSB management regarded a wide shareholding, spread among the large number of individuals, as extremely expensive to operate. The bank would be required to inform each shareholder about its accounts. They would have to be informed of the date of the annual general meeting, the agenda and such matters.

That reaction makes one fear that the TSB is moving somewhat away from its 1979 statement when it said that its future would not be dictated by purely commercial interests. I was sorry to have that response and a lack of commitment to as large and wide a spread of shareholders as possible among depositors and employees. I understand the reasons for that, but nevertheless I was worried at that response.

Although the TSB has offered its depositors priority pink forms, it does not expect there to be a large share take up from them. It does not see that the majority of its depositors can take up the shares. That is a pity. The TSB should be going all out to encourage shareholdings by its employees and depositors. The new clause will ensure that that happens and that the bank can have a public limited company structure which is rather different from that of other commercial organisations and the banks with which it will compete.

I support the new clause which was so ably moved by the hon. Member for Thurrock (Dr. McDonald). My party has had a long and honourable record of supporting and seeking to promote measures to encourage workers and participants in industry to own their own jobs.

It will come as no surprise to anyone in the House that the new clause is one which my right hon. and hon. Friends in the Social Democratic party support. In Committee we were represented by the hon. Member for Stockton, South (Mr. Wrigglesworth). We find the clause advantageous and we support it.

Judging by the Government's rhetoric, it is odd that they cannot support the new clause rather more readily than appeared to be the case from reading the report of the Committee stage.

On Second Reading, the Minister said:
"I welcome the opportunity that this Bill will provide for spreading share ownership more widely and, in particular, for enabling those who have been involved in the business of the TSB as customers and employees to invest more directly in their future."—[Official Report, 14 January 1985; Vol. 71, c. 31.]
That is a sentiment with which we would agree.

It seems that the Minister on that occasion was only paraphasing, perhaps restating, the commitment given in the White Paper, of which it may be worth reminding ourselves. It said:
"Customers and staff will have priority in subscribing for shares."
The clause calls for no more than that to be put into effect.

When the Bill was considered in Committee, the Minister said:
"it would be a good idea if depositors and staff were to have a really substantial holding in the TSBs."
Again, the clause asks for no more than that the Minister put into effect the rhetoric of his speech on Second Reading, his speeches in Committee and the statements in the White Paper.

The Minister also said in Committee that fixing a figure to how the Government would put their commitment to wider share ownership into practice would be rather difficult. He then said:
"it is impossible now to mention figures. I have talked figures with the TSB".—[Official Report, Standing Committee D, 31 January 1985; c. 91.]
What the Minister did not state was the conclusions that he had reached. Since the Minister said that it was impossible to talk figures when he was discussing these matters with the TSB, it may be possible for him to give us an indication now of the percentage of shares he envisages being offered to the employees and to the contributors of the TSB. If he were able to mention some figure—no doubt less than 55 per cent., but at least an indication of how far the Government wish to make a commitment to honour their own rhetoric — many Opposition Members would doubtless feel satisfied without pressing the clause.

I ask the Minister to clarify his statement that he did not see it as appropriate to offer figures then, although he implied that at some time in the future he would be able to say how far he was able to commit himself. However, if the Minister cannot do that, I think that we are entitled to believe that what the Government are expressing in terms of wider share ownership and all the great ideas that we now hear them articulate are hollow rhetoric. Rhetoric comes cheap. It is by the actions of the Government in the matter that we will determine their true intentions.

As the hon. Member for Thurrock said, there can be no clearer case for a commitment to the concept of wider share ownership than the TSB. No cause was ever more suitable for the Government to show their sincerity than in respect to the TSB, an organisation founded on the concept of mutuality, which is at the heart of the organisation, and one which has involved itself in group and community activity in a unique way — to use the Minister's words:
"a unique organisation in today's world."—[Official Report, 14 January 1985; Vol. 73, c. 36.]
Under the proposed clause, the Minister has the opportunity to preserve and build on that uniqueness and to give the work force, the contributors and those involved with the TSB a chance to begin to own the estate in the future of the TSB.

The Government claim that they want to see wider share ownership. If they reject the clause, hon. Members will suspect that they are giving not wider share ownership to employees and those involved with the TSB, but a wider opportunity for the established banks to own a chunk of the TSB and to do with that chunk what they will.

What has the Minister to lose by accepting the clause? It is drafted in a reserved fashion. It does not require that members of the work force of the TSB or, indeed, contributors of the TSB should own 55 per cent.; it asks only that they be offered 55 per cent.

If the Minister means what he has said consistently throughout the debates on the Bill, he should accept the new clause. If not, will he allay some of our suspicions by at least indicating what proportion he means to allow to be offered to the work force and contributors of the TSB? In the absence of such an assurance, many of us will believe that the Government's rhetoric on the matter is hollow and that they have no intention of putting their assurances into practice in a realistic fashion.

I, too, support the new clause, which is a modest proposal. It merely suggests that on vesting day employees and holders of deposits in the TSB should be offered 55 per cent. In view of what the Government have said about the notion of wider share ownership—about the so-called property and share-owning democracy that they want to see—it would make sense for them to accept the new clause.

The TSB has been an unusual banking institution. Historically, it provided merely a mechanism by which people could save. They deposited money on which interest accrued, but the organisation did not make a profit and did not have shareholders. It existed solely for the activities of those who held accounts with the TSB.

As my hon. Friend the Member for Thurrock (Dr. McDonald) pointed out, many of the 6 million account holders are in the lower income groups. Those are the people the bank has aimed to serve. I fear, therefore, that something important could be lost in the shift away from the traditional mutual type of organisation to the new plc arrangement.

The TSB has changed considerably, away from its previous personal form of banking and into the new range of services about which we have heard so much since the mid-1970s. The banks have moved into cheque accounts and Trustcards, thus putting themselves into high interest lending and connections with UDT, an organisation for financing consumer spending. The whole range of banking is broadening.

I do not know what will happen when flotation takes place and the bank receives the money from that flotation, perhaps £500 million to £600 million. What it does with it will be within the prerogative of the new management. For those who have been account holders, and the employees who have served the TSB ably in the past, it seems not unreasonable to give them the opportunity to buy shares in the bank.

I should like to see the organisation, because of its mutual roots, providing the basis for a democratic form of management. In particular, I should like to see the employees having a say in the types of service that the new plc group will provide, especially in relation to the way in which it will fit in with the current joint stock banks.

My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made an interesting point about the possibility of mergers. I cannot see where this will go. Will the TSB become part of the joint stock banks, or will it be absorbed? We know that in the 1960s—

It being Ten o'clock, the debate stood adjourned.

Business Of The House

Ordered,

That, at this day's sitting, the Trustee Savings Banks Bill may be proceeded with, though opposed, until any hour.— [Mr. Peter Lloyd.]

Question again proposed, That the clause be read a Second time.

A matter of great concern is how the new TSB will fit into the banking system. My right hon. Friend the Member for Ashton-under-Lyne expressed his concern about a merger, and the Midland bank was keen on developing what it called the cloth cap accounts. It pushed this hard in the late 1960s and early 1970s, and is still interested in that. Similarly, it encourages student accounts, although these are not the cloth caps accounts. These are people whom they hope and expect will have substantial deposits in the future. We do not know what will happen. We do not know whether this ready-made organisation of cloth cap accounts could be sensibly absorbed into the joint stock bank arrangement, particularly bearing in mind the investment that the joint stock banks have made in their technology, networks, terminal systems, data bases and all the other stuff that is needed to provide a payments and other financial systems.

There is a big question mark, and because of the traditional background of the TSB, to which other hon. Members have referred, the people who are employed in the banks should have a say in how the organisation should develop. The only mechanism for this is through the holding of deposits. I am still a little suspicious about the possibility of a merger. I am concerned that the big institutions will come in and buy up substantial shares. There is a tremendous risk, and I know that hon. Members share my concern. Many hon. Members, particularly Labour Members, would be concerned if the Minister were to waste this opportunity to provide a broader share of ownership and decision-making in the TSB group.

The Labour party believes that the original idea that we had at the time when the Page report was produced, of a banking system that exists merely to serve people, is a laudable concept. We know that the clearing banks found it difficult to compete with the TSB group because it did not have to make a profit and did not have any shareholders. The TSB arrangement has valuable attributes and it would be sad to see them go.

I hope that the Minister and the Government will support this new clause, because the opportunity of retaining this important structure, serving the people that it does, could be lost for ever unless we provide a mechanism for sharing the management and the ownership of this group between the employees and the account holders.

I am in favour of new clause 1 because half a loaf is better than nothing. On Second Reading I took strong objection to the whole Bill. I do not believe in making long speeches at funerals and effectively we are burying the TSB and interring the prospects of transforming it into a mutuality.

Reference has been made to the significance of the 55 per cent. initial controlling interest for depositors and staff of the TSBs. It is important to have that provision, to prevent a merger or a takeover by a domestic or a foreign bank of the trustee savings movement. It will be difficult to prevent the TSB from becoming A N other bank. Although new clause 1 aims to preserve distinctiveness in the operation of the bank, its objective is by its nature limited.

It would be useful to know the probable apportionment of the 55 per cent. shareholding among the top management and the remaining staff of the bank and depositors generally. As my hon. Friend the Member for Thurrock (Dr. McDonald) pointed out, the view of the top brass in the TSB was that it would be too much bother to deal with 7 million or 8 million depositors. This makes me wonder how other organisations and, indeed, the country are run when we consider how large the population is.

It is the view of the Government that, so far as possible, this should be a property-owning democracy and now, apparently, a bank-owning democracy too. I hope the Minister will accept the new clause; otherwise there is a danger that the shareholding possibility that is opening up as an Aladdin's cave will end up as an exclusive club for a few shareholders. I hope the Minister will tell us that he was correct all along in his interpretation that the Government were taking essentially a neutral stance. Those may not be quite his words, but I think they were the sentiments of the Treasury. The Government were distancing themselves from, dare I say, the mechinations of the powers that be in the TSBs. It was the TSB that wanted the Bill. The Government were merely the willing handmaiden in the whole process.

I hope the Minister will tell us that he is accepting the new clause because, as I said, half a loaf will at least guarantee an element — hopefully a controlling element—of depositor and employee shareholding interest in the new PLC. That is very important. I hope the Minister will put his commitment where his brief at Second Reading lay.

The new clause is fulfilling for the Government the intention that they said that they had in this legislation of trying to turn the Trustee Savings Bank if not into a mutual bank, which the Oppostion would like, at least into something as near a mutual bank as possible within the scope of the legislation. We are taking that intention and attempting to embody it in the legislation.

It was the intention of the Page report that the TSB should be a third force in British banking. It was the assumption that prevailed throughout the 1970s, the assumption that was dominant in the TSB itself and the assumption embodied in Labour's own legislation in 1976 that the TSB should be a mutual bank. The Government have decided that we cannot fulfil that intention with the totality that we would like, but that we can come somewhere near it, and this new clause reserving 55 per cent. of the shares for the customers and employees of the TSB, comes as near as we think we can get.

It is important to come that near, because the TSB was different, is different and should be different from the other high street banks. It is a bank run in mutual fashion, the profits of whose operation go to those who provide them—the customers. This is as near as we can get to that. It is a novel principle. It is an important principle to maintain, because the TSB has been much more like a people's bank than any other bank. It is part of the community, and that is how our amendment tries to keep it.

I also speak not only out of concern for that principle but on the basis of another very basic human emotion. I am motivated by the purest altruism and concern for my fellow man. That motive is pure, simple and unadulterated hatred of the commercial banks. They provide us at our expense with their marble halls and their sanctimonious lectures from bank managers to customers burdened by a crippling rate of interest that the banks choose to impose. They spend enormous sums to put self-congratulatory advertisements on television telling us what a marvelous job they are doing, whether the advertisements come from inside the cupboard or from the soaring spaces that the NatWest chooses to embody in its commercials. They go in for endless public relations to tell us what a marvellous job they are doing. They support Tory Members of Parliament as consultants. They provide endless sermons for customers. All these are paid for by the crippling interest rates that customers are having to carry.

The banks have been the only beneficiaries of this Government's policy of high interest rates. They have encouraged those rates to go ever higher for their own benefit and enrichment and not that of their customers. Every time there has been a threat or even a minor stirring on the exchanges against the pound sterling, there has been a Gadarene rush of banks, usually led by Barclays, to hike up interest rates and impose even more crippling burdens on their customers.

Since 1979, there have been four occasions when the banks have brought about high interest rates subsequently endorsed by the authorities, so one assumes that the banks are acting with some nod or wink from the authorities in response to exchange rate pressures. The first was in autumn 1981, the second in autumn 1982, the third in July of last year and the fourth this January. On each occasion, the use of interest rates by the banks prompted the dominant impression that they were being used not simply to convey concern about the state of the money supply or of the interest market but to shore up the pound sterling, and to do so for their own benefit.

The only beneficiaries of high interest rates are the banks themselves. They determine the high interest rates from which they are the only substantial beneficiaries. That is the approach, in a market economy, of the high street banks. There was a classic example on 7 January, when the December money supply figures were announced. The authorities were clearly relieved that sterling M3 had fallen by 0·5 per cent., bringing the annual growth rate down to the top end of the target. There was no reason for interest rates to rise. However, the clearing banks took the initiative once again and there was a Gadarene rush to raise interest rates.

That is the approach of the high street banks to our economy and the people who pay for it are their customers. The banks act directly against the interests of the nation, of anyone with an overdraft and of anyone who borrows. That is what their concern for the community amounts to. It is important that the TSB should not become just another of that crew of condottieri who are doing well out of high interest rates at the expense of their own customers.

10.15 pm

Furthermore, without the safeguards embodied in new clause 1, the TSB, as a high street bank, would be a prey to inevitable takeover bids. There are now four high street banks. The TSB would be a fifth. The competition is so intense that the TSB would be bound to be sat on or taken over. There would be bound to be some onslaught on its integrity and independence.

The TSB is in acute danger or becoming just another high street bank, pushing up interest rates and ruining British industry. The banks are notorious for their lack of concern for the basic productive capacity of this country. They lend umbrellas to people when the sun is shining —driving up the inflationary pressures by enormously increasing borrowing capacity—and then screw up the economy by taking the umbrellas back as soon as it begins to rain. We do not want the TSB to become another such bank. We want it to continue to be run in the interests of its own customers.

The banks take the people's credit and use it for the profit of the plutocrats who own them. That profit should be used, for the people who helped create it by using the bank's credit and providing it with the opportunity to extend that credit. Only if the profit returns to the customers of the bank is the principle legitimately fulfilled. We cannot keep the TSB mutual — that pass was sold by the Government, though it should have been defended—but we want to keep it as mutual as it can be within the framework of the legislation.

Accepting new clause 1 is the only way of safeguarding the future of the TSB. I reluctantly accept that the Bill is likely to be given its Third Reading later tonight. I shall certainly vote against it, but one must face facts. Because of the majority on the Government's side, the Bill is likely to be passed.

That being so, we can only protect the future of the TSB and respect its history and traditions by ensuring that, at least in the initial stages, the staff and account holders have a majority shareholding.

The Government tell us that it is really the TSB—not the Government — that wants the Bill. Whom, at the TSB, have the Government consulted? Have the staff, down to the cashier at the local branch, been given an opportunity to express their views? Have customers been consulted? I am fairly certain that the answer to both of those questions is no, as I have seen nothing to that effect in branches in my constituency.

I worked in a bank for the first 10 years of my working life and I know something about joint stock banks. There were the big five in the 1950s and the mergers of the 1960s. I have no doubt that, if the Bill goes through and there are no safeguards to protect the TSB, it will soon be taken over. If the staff have been consulted and said that they support the Bill, my comment must be that they have not looked to their future job security. If there is a merger or a takeover, whatever the assurances, there will be branch closures and changes. In many parts of the country there are too many building societies fighting for customers in the high street, and the same is true for banks. With increasing mechanisation and changes, there will be closures.

When the Burnley building society was taken over by the Provincial building society to become the National and Provincial, assurances were given about job security for at least two years. The merger is not two years old and yet there are rumours this week that 300 jobs are to go in the Burnley area because dual head offices are no longer to be kept. I have no doubt that the same will happen with the TSB. The only way in which to protect its identity, to respect that identity and to respect local traditions is to allow staff and customers to have a majority shareholding. That will ensure that the TSB remains the TSB and does not become just another clearing bank.

10.22 pm

I welcome the opportunity for this debate. The hon. Member for Yeovil (Mr. Ashdown) referred to what I said on Second Reading. He noted, and others have accepted, that I expressed myself then, as I did in Committee, as being favourable to the idea that customers and staff of the TSBs should have the greatest practical possibility of becoming shareholders in the new public limited company. I still hold that view.

The hon. Member for Thurrock (Dr. McDonald) spoke of the history and traditions of the TSBs, which she respects, and which the hon. Member for Burnley (Mr. Pike) has just endorsed. All of us who have been involved with the Bill feel strongly about that. She drew attention to the long tradition of TSBs attending to the needs of personal customers. I am not sure that the joint stock banks should be regarded as such financial ogres as the hon. Member for Great Grimsby (Mr. Mitchell) painted them to be.

I am sure that the manner of business of TSBs is appreciated by those who have used them. They are valued and respected in the financial community as having a special place because they have a wide spread of depositors among many groups who might otherwise not have bank accounts.

The hon. Member for Great Grimsby said that the trustee savings banks were and should be different from other high street banks. I hope that they will retain a great deal of their individuality. The hon. Member for Kingston upon Hull, West (Mr. Randall) said that the trustee savings banks serve the people. I am sure that that is one of the reasons why they have been so successful. The changes that the Bill will bring about will increase, not hinder that development. A few years ago the trustee savings banks found it difficult to maintain their customer base. They were unable to offer the kind of facilities that were provided by other high street banks, but they have been successful in providing for their customers the facilities that they need. The proposals contained in the Bill should enable the trustee savings banks to improve the facilities that they offer to their customers. I accept that employees and depositors should be encouraged to hold a substantial part of the share capital when the new TSB group becomes a public limited company.

I draw the attention of hon. Members to paragraphs 7, 8, 9 and 13 of Sir John Read's letter to my right hon. Friend the Chancellor of the Exchequer which is included as an annexe to the White Paper. In his letter of 6 December Sir John Read emphasises that the issue of shares to the public would be made
"in a manner which will achieve wide ownership of the new TSB group among our customers and staff."
He goes on to say:
"We are firmly set on the principle of wide ownership of our shares, with priority for our customers and staff."
The question is whether it would be right to put into statutory form the specific figure of 55 per cent. Although I am in sympathy with the spirit of the new clause, I do not believe that it would be in the interests of the trustee savings banks or of a successful flotation for that figure to be spelled out.

If the Minister is turning down the inclusion of the 55 per cent. provision in the Bill, why was Sir John Read's letter so convincing? It would be far better if Sir John Read's proposal were enshrined in the Bill rather than that one should have to interpret a letter from the chairman of the Central Board of the Trustee Savings Bank.

I take the hon. Gentleman's point. It is one that not only he but other hon. Members have raised and I shall try to answer it. The hon. Member for Yeovil said that if I did not think that 55 per cent. was right I ought to suggest another figure. The hon. Member suggested that a figure ought to be included in the Bill as evidence of the Government's commitment to that principle.

I have considered the matter most carefully. The question falls into two parts. First, is it right that the Government should specify details relating to the issue of shares? I have come to the conclusion that it would not be right for the Government to do so. One of the reasons for that conclusion is the nature of the provisions that would have to be made. I accept what Sir John Read said in the letter. I take those assurances at face value. It is a subject which I have discussed with him at considerable length. I am sorry that the hon. Member for Thurrock received a worrying impression. It certainly is not the impression that I have received from discussions with the TSBs. It is for that reason that I said that I particularly welcome this debate.

10.30 pm

We had a lively debate in Committee on the same point. I said at the time that I thought that it was helpful that it should be on the record that there was a strong wish by those who were dealing with the Bill in Parliament that Sir John Read's expressed intentions should be carried into effect by means of the share issue. I endorse that today in the wider forum of the Floor of the House of Commons.

When we consider the provision that 55 per cent. of the shares of the group should be offered to employees and depositors in TSBs we come up against exactly the sort of problem which has convinced me that it would not be right for the Government to try to set out the precise details of the proposed issue.

I shall give way, but would it not be better if I were to continue the argument?

I want to intervene on that particular point. The hon. Gentleman has said that he does not think it right for the Government to give figures. In Committee he said:

"Although it is impossible now to mention figures". — [Official Report, Standing Committee D, 31 January 1985; c. 91.]
Is there not an implication there that it would be possible some day to mention figures? If he cannot honour that commitment at this point, will he tell us when he will mention figures?

No, the hon. Gentleman has misunderstood what I said in Committee. He assumes that when I said that it was not possible a few weeks ago to state a precise figure that I might be able to do so today. The point that I made in that debate in Committee, which I readily repeat now, is that it is not possible in advance of the circumstances of the issue to establish the exact arithmetic.

Perhaps I was unwise to give way because I was about to come to the reasons why it is difficult and would not be helpful to insert a precise figure. Before I come to those points let me make a further general remark which may help the hon. Gentleman. I think that I quoted half and half in Committee as being the sort of figure that I would like to see. I shall not quibble whether it is 45, 50 or 55—something of that kind. I should like to see a substantial proportion of the shares of the issue being so allocated. I have given the range of the sort of figures that would be acceptable. But it is not right to pick on a single figure here and now regardless of the circumstances of the market, the demand for this type of share and the amount that depositors and staff will be able to provide at the time in the light of those conditions to apply for shares. If one tried to introduce a provision of the kind set out in new clause 1 the terms of the issue would be made so rigid that they could hardly be carried out.

I shall not fall back on the well-tried method of Treasury Ministers in turning down an amendment or new clause on the grounds of drafting. That would not be in the spirit of the Bill and the way in which we have discussed it. But sometimes drafting questions contain the essence of the difficulty. In this case the essence of the difficulty is contained in the fact that the way in which shares will be offered will not be that a precise number of shares will be available, neither more nor less, for depositors and staff, but that priority in application will be given to employees and staff for a certain proportion of the shareholding. The amount allocated to them will depend on the amount for which they apply and on the amount for which other potential shareholders apply.

It is possible—indeed, I should like to see this—that if a certain percentage were allocated for depositors and staff, they might also get some of the remainder. It is because we cannot determine the circumstances of the issue that I concluded that it would be wrong for the Government to set out precise conditions for the issue.

Some Opposition Members may not be convinced that that is an obstacle to accepting the new clause. The issue was raised in Committee and I have thought about it carefully. It would undoubtedly limit the freedom of action of the TSBs if a specific formula were included in the Bill. I am keen that a substantial percentage of the shareholding should go to depositors and staff, and I hope that the TSBs will encourage that. They have undertaken to grant priority and we expect that undertaking to be fulfilled.

However, to say that a certain percentage of shares—neither more nor less—shall be allocated to depositors and staff, regardless of how many they wish to apply for and regardless of how many other potential shareholders wish to apply for would make it more difficult, rather than easier, to achieve the objectives that I believe are shared on both sides of the House.

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

The House divided: Ayes 82, Noes 183.

Division No. 119]

[10.37 pm

AYES

Alton, DavidClwyd, Mrs Ann
Archer, Rt Hon PeterCocks, Rt Hon M. (Bristol S.)
Ashdown, PaddyCohen, Harry
Bagier, Gordon A. T.Cook, Frank (Stockton North)
Barnett, GuyCook, Robin F. (Livingston)
Barron, KevinCowans, Harry
Beckett, Mrs MargaretCraigen, J. M.
Beith, A. J.Cunliffe, Lawrence
Bennett, A. (Dent'n & Red'sh)Davies, Ronald (Caerphilly)
Bidwell, SydneyDavis, Terry (B'ham, H'ge H'l)
Blair, AnthonyDeakins, Eric
Boyes, RolandDewar, Donald
Bruce, MalcolmDormand, Jack
Buchan, NormanDubs, Alfred
Campbell-Savours, DaleDuffy, A. E. P.
Canavan, DennisEastham, Ken
Carlile, Alexander (Montg'y)Evans, John (St. Helens N)
Clarke, ThomasFatchett, Derek
Clay, RobertFields, T. (L'pool Broad Gn)

Fisher, MarkMillan, Rt Hon Bruce
Godman, Dr NormanNellist, David
Hamilton, James (M'well N)Park, George
Hattersley, Rt Hon RoyParry, Robert
Haynes, FrankPenhaligon, David
Hogg, N. (C'nauld & Kilsyth)Pike, Peter
Holland, Stuart (Vauxhall)Prescott, John
Home Robertson, JohnRandall, Stuart
Hughes, Simon (Southwark)Redmond, M.
John, BrynmorShort, Ms Clare (Ladywood)
Kennedy, CharlesSkinner, Dennis
Kirkwood, ArchySnape, Peter
Leadbitter, TedStewart, Rt Hon D. (W Isles)
Lewis, Ron (Carlisle)Thomas, Dr R. (Carmarthen)
Lewis, Terence (Worsley)Thompson, J. (Wansbeck)
Lloyd, Tony (Stretford)Wardell, Gareth (Gower)
Loyden, EdwardWareing, Robert
McDonald, Dr OonaghWelsh, Michael
McWilliam, JohnWilson, Gordon
Marek, Dr JohnWinnick, David
Mason, Rt Hon Roy
Maxton, JohnTellers for the Ayes:
Maynard, Miss JoanMr. Allen McKay and
Meadowcroft, MichaelMr. Austin Mitchell.

NOES

Alexander, RichardHamilton, Neil (Tatton)
Baker, Nicholas (N Dorset)Hampson, Dr Keith
Baldry, TonyHanley, Jeremy
Beaumont-Dark, AnthonyHargreaves, Kenneth
Boscawen, Hon RobertHaselhurst, Alan
Bottomley, Mrs VirginiaHavers, Rt Hon Sir Michael
Brandon-Bravo, MartinHayes, J.
Bright, GrahamHayward, Robert
Brooke, Hon PeterHeddle, John
Brown, M. (Brigg & Cl'thpes)Henderson, Barry
Bruinvels, PeterHickmet, Richard
Budgen, NickHicks, Robert
Burt, AlistairHind, Kenneth
Butcher, JohnHolt, Richard
Cash, WilliamHoward, Michael
Chope, ChristopherHowarth, Alan (Stratf'd-on-A)
Cockeram, EricHowarth, Gerald (Cannock)
Conway, DerekHowell, Ralph (N Norfolk)
Cranborne, ViscountHubbard-Miles, Peter
Dorrell, StephenHunt, David (Wirral)
Douglas-Hamilton, Lord J.Hunter, Andrew
Dunn, RobertJackson, Robert
Fairbairn, NicholasJones, Gwilym (Cardiff N)
Favell, AnthonyJones, Robert (W Herts)
Forsyth, Michael (Stirling)Jopling, Rt Hon Michael
Forth, EricKellett-Bowman, Mrs Elaine
Franks, CecilKey, Robert
Freeman, RogerKing, Roger (B'ham N'field)
Gale, RogerKnight, Gregory (Derby N)
Galley, RoyKnight, Mrs Jill (Edgbaston)
Garel-Jones, TristanKnowles, Michael
Greenway, HarryKnox, David
Gregory, ConalLang, Ian
Griffiths, Peter (Portsm'th N)Latham, Michael
Ground, PatrickLawrence, Ivan
Hamilton, Hon A. (Epsom)Leigh, Edward (Gainsbor'gh)

Lennox-Boyd, Hon MarkRobinson, Mark (Nport W)
Lester, JimRoss, Wm. (Londonderry)
Lightbown, DavidRowe, Andrew
Lilley, PeterSayeed, Jonathan
Lloyd, Peter, (Fareham)Shaw, Giles (Pudsey)
Lord, MichaelShaw, Sir Michael (Scarb')
Luce, RichardShepherd, Colin (Hereford)
Lyell, NicholasSilvester, Fred
McCrindle, RobertSkeet, T. H. H.
McCurley, Mrs AnnaSmith, Tim (Beaconsfield)
Macfarlane, NeilSoames, Hon Nicholas
MacGregor, JohnSpeed, Keith
MacKay, Andrew (Berkshire)Speller, Tony
Major, JohnSpencer, Derek
Malins, HumfreyStanbrook, Ivor
Malone, GeraldSteen, Anthony
Maples, JohnStevens, Lewis (Nuneaton)
Marland, PaulStevens, Martin (Fulham)
Marlow, AntonyStewart, Allan (Eastwood)
Mates, MichaelStewart, Andrew (Sherwood)
Mather, CarolStewart, Ian (N Hertf'dshire)
Mawhinney, Dr BrianStradling Thomas, J.
Maxwell-Hyslop, RobinSumberg, David
Mayhew, Sir PatrickTaylor, John (Solihull)
Mellor, DavidTaylor, Teddy (S'end E)
Merchant, PiersTerlezki, Stefan
Meyer, Sir AnthonyThomas, Rt Hon Peter
Miller, Hal (B'grove)Thompson, Donald (Calder V)
Mills, Iain (Meriden)Thompson, Patrick (N'ich N)
Mills, Sir Peter (West Devon)Thornton, Malcolm
Mitchell, David (NW Hants)Thurnham, Peter
Moate, RogerTownend, John (Bridlington)
Montgomery, Sir FergusTracey, Richard
Morris, M. (N'hampton, S)Trippier, David
Moyninan, Hon C.Trotter, Neville
Murphy, ChristopherTwinn, Dr Ian
Neale, Gerrardvan Straubenzee, Sir W.
Needham, RichardViggers, Peter
Nelson, AnthonyWaddington, David
Newton, TonyWalden, George
Nicholls, PatrickWaller, Gary
Normanton, TomWardle, C. (Bexhill)
Norris, StevenWatson, John
Onslow, CranleyWells, Bowen (Hertford)
Oppenheim, PhillipWheeler, John
Ottaway, RichardWhitfield, John
Page, Richard (Herts SW)Whitney, Raymond
Patten, J. (Oxf W & Abdgn)Wilkinson, John
Pawsey, JamesWinterton, Mrs Ann
Portillo, MichaelWinterton, Nicholas
Powell, William (Corby)Wolfson, Mark
Powley, JohnWood, Timothy
Proctor, K. HarveyYeo, Tim
Raffan, Keith
Rhodes James, RobertTellers for the Noes:
Rhys Williams, Sir BrandonMr. Tony Durant and
Ridsdale, Sir JulianMr. Tim Sainsbury.
Roberts, Wyn (Conwy)

Question accordingly negatived.

New Clause 2

Share Ownership

'During the first five years following the vesting day no one individual may own more than five per cent. of the Group's ordinary shares nor after a five year period has elapsed may any one individual own more than 15 per cent. of these shares.'. — [Dr. McDonald.]

Brought up, and read the First time.

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

Hon. Members who have studied the Bill and the White Paper will be aware that new clause 2 is part of the letter which the chairman of the Trustee Savings bank wrote to the Chancellor of the Exchequer. In it he made it clear that when the TSB had been set up in its new form the draft memorandum of association would contain these provisions. We have transferred them to the new clause in an effort to include them in the Bill.

There are two reasons for that. One of them, the future of the TSB, has been discussed at great length in the press. Views were expressed as far back as last July. In a typical example, the Glasgow Herald stated:
"Quite how the TSB empire with total assets above £9·5 billion and owners of United Dominion Trust, TSB Trustcard and TSB Trust Company (insurance services and unit trusts) can be guaranteed against a future takeover bid, is unclear. If first-time buyers should prove amenable to a buy-out, then what kind of ring-fence would the Government erect to stop them?"
That quotation illustrates that the Government should erect some kind of ring fence against a possible takeover. No ring fence against a takeover is contained in the Bill.

The Government have accepted the assurances about the nature of the draft memorandum which were contained in the letter from the TSB chairman. The Opposition's disquiet about that arises from the fact that, although we accept that it may be difficult to change the draft articles of association, it is not impossible to do so. Although that seems to be a long-term guarantee against a takeover, it is not as secure as at first appears. My first point therefore is that we need to include the ring fence in the Bill rather than depend upon the assurances in the chairman's letter.

My second point relates to the speculation about a takeover. In the earlier part of last year it seemed that the TSB would be ripe for a takeover. Its attractions were spelt out, for example, in the Glasgow Herald article. The TSB has wide outlets and a large number of personal customers, which could prove attractive to an American bank trying to find a secure foothold in British personal banking. Many people felt that the TSB was in danger of being taken over.

I find it interesting to note that towards the end of the year, when it was fully appreciated how much the share flotation was likely to raise—between £700 million and £1 billion is most consistently quoted—it was felt, as the Daily Telegraph put it:
"that the TSB will suddenly have a lot of money to spend, and may go on a City shopping spree to pick up, say, a fund management company and a stockbroker to go with existing banking, trustee and insurance business."
The speculation changed towards the end of last year when it became apparent that the TSB would have spare cash and might consider taking over another company. That would not be excluded by new clause 2.

To sum up, the reasons for introducing the new clause are to provide a secure ring fence against a takeover and to ensure that the history and traditions of the bank, which have been firmly rooted in this country, continue. It has been a domestic bank. That is especially true of the bank as it exists in Scotland, where 45 per cent. of bank outlets are controlled by the TSB. The bank has involved itself with the local community and we would not wish to see it taken over by one of this country's major financial institutions or by an American bank, which would use it solely to gain a foothold in this country's banking sector. Whereas the Minister is prepared to accept assurances, for which we respect him, of course, we prefer to include them in the Bill because we feel that this will ensure a more secure future for and be better way of preserving the history and traditions of, the TSB.

I wish briefly to support my hon. Friend the Member for Thurrock (Dr. McDonald). It is always pleasant to hear one's own words of wisdom quoted, and the article in the Glasgow Herald happens to have been written by me.

The flotation of the TSB is one of the give-aways of the decade. It is essential for the Committee to approve the proposed clause in order to avoid the TSB being parcelled out to the various institutional interests that want to buy the shares.

I have heard reference to cloth caps in connection with the TSB. I personally have never worn a cloth cap or, indeed, a bowler hat. I am simply a bare-headed Scot.

It is important for the Committee to recognise the community of interest that has developed in the TSB and to ensure by acceptance of the clause that there is a safeguard for the development of greater customer satisfaction, at the same time avoiding the potential dangers of a takeover.

I want to see this provision enshrined in the Bill. I am not taken in by letters from chairmen and the optimism of the management about what is likely to happen with regard to the flotation. I had the impression earlier in the debate that the Treasury had moved from its position of neutrality into one in which it was utterly neutered by the TSB management. I therefore hope that the Minister in reply will accept the principle behind the proposed clause.

I support the proposed clause and commend hon. Members for their restraint and skill in drafting it. The wording is substantially that contained in the White Paper, as reflected in the letter from Sir John Read. Indeed, it takes its words almost directly from the Minister's mouth. I seem to have the habit of quoting the Minister in Committee, but it is important that he should be invited to honour what he said by the action that he takes in the Bill. On Second Reading, the Minister said:

"for the first five years … there should be a limit on a shareholding by any one shareholder of 5 per cent. of the capital, and thereafter a limit of 15 per cent."—[Official Report, 14 February 1985; Vol. 71, c. 33.]
Thus the Minister agrees in detail with the wording of the proposed clause. In that sense, the clause enacts the Minister's own rhetoric.

Unhappily, the Minister said in Committee and on Second Reading that he considers the matter to be one for the TSB and not for the Government. Indeed, in Committee he said that it did not require legislation. His arguments for supporting that conclusion, judged by my reading of the Committee proceedings, are deeply unconvincing. If the safeguard is so important as to be expressed as a cardinal principle in the White Paper and referred to by the Minister as a matter to which he gives weight, why not enshrine it in the Bill? What has the Minister to lose by inserting it in the Bill? I hope that he will explain why it can be included in his statements but cannot be enshrined as a safeguard in the Bill.

The Minister has claimed that as a result of the general belief that he has expressed, it would be many years before the TSB might be taken over. I am not sure that I share that view. At 15 per cent., it would require only 11 investors at a modest £50 million or so to reach the point at which they could control the TSB. Indeed, some of them might be the very banks with which the TSB will be in competition. The Minister has said that he wants safeguards against takeovers. Let him prove it by accepting the new clause.

11 pm

We have a paradox in the way in which the world economy is moving. It is that the banks grow fat when the world goes wrong. Because under the Conservatives the world has gone more wrong than ever before, the banks—thanks to the Government's policies of high interest rates and an emphasis on money—have grown fatter than ever before.

The world is full of predatory banks, and that is the phenomenon that the new clause attempts to control by erecting a ring fence round the TSB. Just as our banks are taking over banks in other parts of the world — most notably the Crocker bank in California, which must have been the purchase of the century; how anybody could ever again believe the advice of the Midland on investment policy, given its astuteness in respect of the Crocker bank, is a question we might ask in this context—so foreign banks want to get into Britain.

They want access to a banking world which is at present closely controlled and dominated by the big four. In that situation, the TSB must present an object as desirable as the Prime Minister at Holyrood House on a wet Friday. The TSB is a desirable bank for a takeover because it has a large number of high street outlets, the trust of a large body of customers who are accustomed to a close and satisfactory working relationship, and because the Government are treating it as if it were a piece of lost property being sold at police auction to make a bob or two.

They are sending it out into the world cash rich with all those desirable characteristics. In that situation, it is almost certain that foreign banking organisations which want to get not just a toehold but a major position in the banking world in this country will find it a most desirable object. It would be a disastrous outcome of our deliberations if the loved and trusted TSB, the people's bank, became the Manhattan TSB or the Jihad TSB.

It occurred to me, when my hon. Friend was referring to the Prime Minister at Holyrood, that the right hon. Lady is at present in the United States. Does he foresee a situation in which the flotation of the TSB could be a dollar earner for the economy, given how well the dollar is doing?

I must not be tempted to go down that path, given how well our competitors, particularly West Germany and Japan, have done with the over-valued dollar and how badly we have done, and we could do with the dollar earnings. I acquit the Prime Minister of the charge that my hon. Friend levies against her, of the desire to flog off British assets, but I do not acquit foreign bankers of an insight into an opportunity such as the TSB group presents, unless protected by provisions such as those in the new clause. I would not want the TSB in Grimsby to be hoisting a sign saying, "The Gaddafi Bank of Grimsby", which is possible without the protection afforded by the new clause.

It is essential that this banking group is kept in a close relationship not only with the customers but with the country. It should be kept free of foreign control and takeover.

New clause 2 is an extension of new clause 1, in which we offered preference to employees and account holders to ensure that the small man has a say in the TSB group. New clause 2 proposes an arrangement whereby big institutions would not be able to control the TSB arrangement. It is important to enshrine this in the Bill. I hope that the Minister is able to accept it.

To prevent the big battalions of the City institutions from coming in and doing all that they are bound to do, because the TSB group is an attractive organisation, we must say not only that we shall not allow that at the beginning but must maintain the principle. This is why I support the laudable suggestion of the 50 per cent. figure after five years. The great advantage of ensuring that there are small investors is that it will add to the protection of the TSB plc after the legislation has gone through the House. It will protect it from being taken over by the other domestic banking institutions. Therefore, TSB plc will retain the traditions of the TSB group, which have been valuable to the country and its customers, and therefore should be retained.

Although the TSB group has extended its services, it has not invested in the technology and all the other things that are needed to run a fully comprehensive service. In that respect, as the TSB group has a comprehensive range of branches, it is attractive to all the other institutions. It would plug in nicely to the clearing banks which have invested so much into the payment systems and the large computer networks, into which the TSB group has not invested to the same extent because the extension of its services has taken place more recently. Logically, it would make sense to plug the two groups together, but if that happens, it would have serious effects.

In addition, the international aspect needs to be looked at. If there is a takeover, it will be because of the traditional background of the TSB, and it would be undesirable to allow the TSB plc to fall into foreign hands. It will be an attractive banking organisation for foreign banks to take over. The liquid assets of the bank will be considerable if the flotation is successful. Therefore, the bank would be able to embark on a new programme of extension of services and even acquisition. That would be attractive to the big institutions. I do not mean that in a negative sense. We all want to see our financial institutions being successful because they are a crucial part of our economic, business and commercial system. But let us retain the personal element.

I hope the Government will support the ring fence around the TSBs to which my hon. Friend the Member for Great Grimsby (Mr. Mitchell) referred. It is a valuable mechanism which would be appreciated by the 6 million customers who have traditionally banked with the TSBs.

The debate has focused on the provisions for maintaining the independence of the TSBs for the longer term future. During the debate on the last new clause we were talking about the provisions in the Bill as they might affect the TSBs beyond vesting day and the reorganisation which was covered directly by the Bill. I said that I thought it was not right for the Government to lay down specific arrangements for the flotation itself.

New clause 2 would provide a set of rules for the TSBs for the indefinite future. There is perhaps a greater difference between the Government and the Opposition on this new clause. I understand the point made by the hon. Member for Thurrock (Dr. McDonald), who was supported by the hon. Members for Glasgow, Maryhill (Mr. Craigen), for Great Grimsby (Mr. Mitchell), for Kingston upon Hull, West (Mr. Randall) and for Yeovil (Mr. Ashdown). They thought that absolute protection against any shareholder acquiring more than 15 per cent. of the shares should be set down in a statute for ever. They feel that the TSBs should be kept by statute in a special position, which could be changed only by another trustee savings bank measure.

The Government's purpose in the Bill is to ensure that TSBs can have an independent future and not be dependent, as they have been for so long, upon Parliament whenever changes need to be made in the structure under which they operate. I accept that the aim of the new clause to prevent a shareholding greater than 15 per cent. is more limited than the arrangement stipulated in statute up to now. Nevertheless, it would restrict the actions of the banks in areas apart from those about which Opposition Members have spoken.

The Minister is really saying that he is prepared to accept the assurances given in the White Paper. What does he think—

On a point of order, Mr. Deputy Speaker. I am trying hard to listen to the important points that are being made. I know that it is difficult at this time of the evening, but could hon. Members pay more attention to what is being said?

If conversations are to take place, I hope they will take place outside the Chamber.

How would the Minister view the takeover of the TSB by another bank or financial institution, particularly a foreign bank?

The hon. Lady has asked a question which was raised by herself and other hon. Members in their contributions to the debate on the clause. My view is that the 5 per cent. limitation for five years is desirable because there should be an absolute form of protection for a period after the TSBs acquire PLC status.

11.15 pm

I also think that there ought to be a substantial obstacle to takeovers beyond that time. I do not think that it ought to be an absolute obstacle, as the Opposition suggest. A takeover cannot arise for many years, so we are discussing conditions in the 1990s. After the issue, which perhaps may take place in the early part of next year, there will be the five-year period, taking us into the 1990s. There will then be a requirement for a special resolution with a 75 per cent. majority to change the articles to enable any one shareholder to own more than 15 per cent. of the shares. That is very difficult to surmount.

The fact that it is not impossible is important, otherwise the TSBs will be permanently set apart with a form of protection which will dilute the degree of accountability, and it could limit other activities in which they might want to engage. They might want to link with another body. They might want to have a new holding company holding the TSB roup and some other undertaking. They might wish to have a link with a major shareholder. I shall not speculate on the kind of shareholder that that might be, but I remind the House that a large insurance company recently took a significant minority holding in a British bank. That would be impossible if a 15 per cent. limitation were placed on any shareholding. It might be that, say, a 26 per cent. share holding was thought desirable. That would block any special resolutions and provide an effective means against any unwelcome bidder.

There is a difference of substance between the views of the two sides of the House. The Government do not believe that the TSBs should be held permanently in a special status which does not apply to any of their competitors or to other public limited companies. That is why I ask the House to reject the new clause.

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

The House divided: Ayes 68, Noes 168.

Division No. 120]

[11.17 pm

AYES

Alton, DavidJohn, Brynmor
Ashdown, PaddyKennedy, Charles
Barnett, GuyKirkwood, Archy
Barron, KevinLeadbitter, Ted
Beckett, Mrs MargaretLewis, Ron (Carlisle)
Beith, A. J.Lewis, Terence (Worsley)
Bidwell, SydneyLloyd, Tony (Stretford)
Blair, AnthonyLoyden, Edward
Bruce, MalcolmMcDonald, Dr Oonagh
Campbell-Savours, DaleMcWilliam, John
Canavan, DennisMarek, Dr John
Carlile, Alexander (Montg'y)Maxton, John
Clay, RobertMaynard, Miss Joan
Clwyd, Mrs AnnMeadowcroft, Michael
Cocks, Rt Hon M. (Bristol S.)Nellist, David
Cohen, HarryPark, George
Cook, Robin F. (Livingston)Parry, Robert
Cowans, HarryPike, Peter
Craigen, J. M.Prescott, John
Cunliffe, LawrenceRandall, Stuart
Davies, Ronald (Caerphilly)Redmond, M.
Davis, Terry (B'ham, H'ge H'l)Short, Ms Clare (Ladywood)
Deakins, EricSilkin, Rt Hon J.
Dormand, JackSkinner, Dennis
Duffy, A. E. P.Smith, C.(Isl'ton S & F'bury)
Eastham, KenSnape, Peter
Evans, John (St. Helens N)Stewart, Rt Hon D. (W Isles)
Fatchett, DerekThompson, J. (Wansbeck)
Fields, T. (L'pool Broad Gn)Wardell, Gareth (Gower)
Fisher, MarkWareing, Robert
Godman, Dr NormanWelsh, Michael
Hamilton, James (M'well N)Wilson, Gordon
Hattersley, Rt Hon Roy
Haynes, FrankTellers for the Ayes:
Hogg, N. (C'nauld & Kilsyth)Mr. Allen McKay and
Home Robertson, JohnMr. Austin Mitchell.

NOES

Alexander, RichardBurt, Alistair
Baldry, TonyButcher, John
Beaumont-Dark, AnthonyChope, Christopher
Boscawen, Hon RobertCockeram, Eric
Bottomley, Mrs VirginiaConway, Derek
Brandon-Bravo, MartinCranborne, Viscount
Brown, M. (Brigg & Cl'thpes)Dorrell, Stephen
Bruinvels, PeterDouglas-Hamilton, Lord J.
Budgen, NickDunn, Robert

Fairbairn, NicholasMills, Sir Peter (West Devon)
Fallon, MichaelMitchell, David (NW Hants)
Favell, AnthonyMoate, Roger
Forsyth, Michael (Stirling)Montgomery, Sir Fergus
Forth, EricMorris, M. (N'hampton, S)
Freeman, RogerMoynihan, Hon C.
Gale, RogerMurphy, Christopher
Galley, RoyNeale, Gerrard
Garel-Jones, TristanNeedham, Richard
Gregory, ConalNewton, Tony
Griffiths, Peter (Portsm'th N)Nicholls, Patrick
Ground, PatrickNormanton, Tom
Hamilton, Hon A. (Epsom)Norris, Steven
Hamilton, Neil (Tatton)Onslow, Cranley
Hampson, Dr KeithOppenheim, Phillip
Hanley, JeremyPage, Richard (Herts SW)
Hannam, JohnPawsey, James
Hargreaves, KennethPortillo, Michael
Hayes, J.Powley, John
Hayward, RobertProctor, K. Harvey
Heddle, JohnRhodes James, Robert
Henderson, BarryRhys Williams, Sir Brandon
Hickmet, RichardRidsdale, Sir Julian
Hicks, RobertRoberts, Wyn (Conwy)
Hind, KennethRobinson, Mark (N'port W)
Holt, RichardRowe, Andrew
Howard, MichaelSainsbury, Hon Timothy
Howarth, Alan (Stratf'd-on-A)Sayeed, Jonathan
Howarth, Gerald (Cannock)Shaw, Sir Michael (Scarb')
Howell, Rt Hon D. (G'ldford)Silvester, Fred
Howell, Ralph (N Norfolk)Skeet, T, H. H.
Hubbard-Miles, PeterSmith, Tim (Beaconsfield)
Hunt, David (Wirral)Soames, Hon Nicholas
Hunter, AndrewSpeed, Keith
Jackson, RobertSpeller, Tony
Jones, Gwilym (Cardiff N)Spencer, Derek
Jones, Robert (W Herts)Stanbrook, Ivor
Jopling, Rt Hon MichaelSteen, Anthony
Kellett-Bowman, Mrs ElaineStevens, Lewis (Nuneaton)
Key, RobertStevens, Martin (Fulham)
King, Roger (B'ham N'field)Stewart, Allan (Eastwood)
Knight, Gregory (Derby N)Stewart, Andrew (Sherwood)
Knight, Mrs Jill (Edgbaston)Stewart, Ian (N Hertf'dshire)
Knowles, MichaelStradling Thomas, J.
Knox, DavidSumberg, David
Lang, IanTaylor, John (Solihull)
Latham, MichaelTaylor, Teddy (S'end E)
Lawrence, IvanTerlezki, Stefan
Leigh, Edward (Gainsbor'gh)Thomas, Rt Hon Peter
Lennox-Boyd, Hon MarkThompson, Donald (Calder V)
Lester, JimThompson, Patrick (N'ich N)
Lightbown, DavidThurnham, Peter
Lilley, PeterTownend, John (Bridlington)
Lloyd, Peter, (Fareham)Tracey, Richard
Lord, MichaelTrippier, David
Luce, RichardTrotter, Neville
Lyell, NicholasTwinn, Dr Ian
McCrindle, Robertvan Straubenzee, Sir W.
McCurley, Mrs AnnaViggers, Peter
Macfarlane, NeilWalden, George
MacGregor, JohnWaller, Gary
MacKay, Andrew (Berkshire)Wardle, C. (Bexhill)
Malins, HumfreyWatson, John
Malone, GeraldWells, Bowen (Hertford)
Maples, JohnWheeler, John
Marland, PaulWhitfield, John
Marlow, AntonyWhitney, Raymond
Mates, MichaelWilkinson, John
Mather, CarolWintertpn, Mrs Ann
Mawhinney, Dr BrianWinterton, Nicholas
Maxwell-Hyslop, RobinWolfson, Mark
Mayhew, Sir PatrickWood, Timothy
Mellor, DavidYeo, Tim
Merchant, Piers
Meyer, Sir AnthonyTellers for the Noes:
Miller, Hal (B'grove)Mr. John Major and
Mills, Iain (Meriden)Mr. Tony Durant.

Questions accordingly negatived.

Clause 1

Preliminary

11.30 pm

I beg to move amendment No. 1, in page 1, line 9 after 'banks', insert

'(other than Trustee Savings Bank Scotland Limited which is hereby excluded from this Act)'.
The effect of the amendment is to exclude Trustee Savings Bank Scotland Limited from the Bill. It will retain Trustee Savings Bank Scotland as a trustee savings bank, but the prime effect of the change will be to secure the independence of Trustee Savings Bank Scotland. The amendment seeks to do what a Scottish Government would have done: to veto any attempt whatsoever to take this very important banking enterprise out of Scotland and subject it to alien control.

Although the Treasury Bench cannot, for once, be criticised quite so strongly as I would normally criticise it, it should accept that there is a valid reason why in this instance it should not seek to follow the advice given to it by the Trustee Savings Bank group. Trustee Savings Bank Scotland — so far an independent banking enterprise that operates within the confederation of the TSB group—will be incorporated in the TSB Group plc. The shareholding of the TSB Group plc will be a United Kingdom shareholding and the Scottish element of control over Trustee Savings Bank Scotland will be eradicated.

The Government ought to consider the importance of Trustee Savings Bank Scotland within the Scottish financial structure. It is unnecessary for Trustee Savings Bank Scotland to be made into a limited liability company. Within Scotland's financial network there are mutual companies like Scottish Widows and Standard Life which operate very effectively as mutual combines and which are respected not just in Scotland but elsewhere. If the Government decide that the banking structure would be improved by making trustee savings banks individually as well as a whole into public limited liability companies, Trustee Savings Bank Scotland ought, by this amendment, to be allowed to retain its independence.

If doubt is cast upon the ability of the bank to stand on its own feet, let me spell out some of the information about it. Trustee Savings Bank Scotland operates about 2 million separate accounts; it has 1·25 million customers; it has 25 per cent. penetration of the personal savings market in the banking fraternity; and, unlike the other trustee savings banks in the British Isles, it has a larger proportion of AB social classifications than most. Therefore, it cannot be classified, as the TSB group might be in the English context, as a poor man's bank. It is a very big bank. As the hon. Member for Thurrock (Dr. McDonald) said, it holds a substantial proportion of the banking premises in Scotland.

Moreover, nobody can doubt that, since the amalgamations, Trustee Savings Bank Scotland has been under very good and effective management. It has a good reputation. It has responded to new technology in banking. It has expanded its customer clientele and it has also been very productive. For example, on the overall working profit divided among the employees of the group, the Clydesdale bank, which is a fully owned subsidiary of the Midland bank and has no independence whatsoever within the Scottish banking context, produces a profit of only £2,600 per employee, whereas the Royal Bank of Scotland and the Bank of Scotland alternate between £6,500 and £7,500 profit per employee.

I am told that the most recent figures show that TSB Scotland has a profit of £10,600 per employee, so it is clearly a substantial, efficient and effective bank in the Scottish financial scene. However, it seems to have made no attempt to regain some measure of independence or even quasi-autonomy. The Trustee Savings bank on the Channel Islands, perhaps because of the different taxation regime there, and certainly because of the society in which it will function, will allow 49 per cent of the shares to be taken over by local Channel Islands people. That is a formula that TSB Scotland could have adopted. However, I submit that that would not be adequate, as it would have left overall control with the TSB centre in London.

The TSB could have said that TSB Scotland Ltd., as the representative of the progenitor of the Trustee Savings bank movement in the United Kingdom—it originated in Dumfriesshire when the first bank was opened—and bearing in mind its size and success, could have remained a trustee savings bank to continue the work which it has undertaken over the years. Secondly, it could have operated as an independent unit like the Royal Bank of Scotland or the Bank of Scotland. The Bank of Scotland has been an efficient bank. It was owned partly by Barclays Bank plc until recently. The Standard Life Assurance Co. bought out the 30 per cent. share that Barclays Bank had in the Bank of Scotland, so returning the Bank of Scotland to full Scottish ownership.

The Royal Bank of Scotland is an interesting example. Three or four years ago, a tremendous fuss was kicked up when two foreign banks—the Standard Chartered Bank plc and the Hong Kong and Shanghai Banking Corporation — came in like predators with the aim of acquiring control of the Royal Bank of Scotland. It could be said that at that time the Royal Bank badly needed a kick in the behind, because it had slipped behind in its development. It was not showing the same degree of enterprise as the Bank of Scotland.

One of the effects of the report of the Monopolies and Mergers Commission, which prevented the takeover of the Royal Bank of Scotland, was to transform the Royal Bank. It is now showing activity, energy and initiative that it failed to show hitherto. It is my contention that TSB Scotland could have filled a similar slot.

The third option is much more interesting. We have discussed the money that will be made available in the TSB Group as a result of the flotation of the shares. Apparently the flotation will realise something between £500 million and £700 million. If the Scottish bank had been floated separately, it would have had less free capital becoming available because of its size. However, it would have a considerable amount of capital arising from its deposits.

Now that Barclays bank has moved out of the Scottish banking scene, there is nothing to stop the TSB from entering into a merger or other arrangement with the Clydesdale bank, which has a low profit per employee. It should have been reintegrated into a new banking institution in the Scottish market. That is a great opportunity missed, and it will remain missed if the Government do not accept the amendment. I have no doubt that the Midland bank, which controls the Clydesdale bank, is somewhat stretched for cash because of the Crocker bank fiasco. It would do no harm if the Midland bank were to dispose of the Clydesdale bank, especially when we consider its overall activities in the rest of the United Kingdom. Those three options could still be available to TSB Scotland if the Minister were to accept my amendment.

I notice that the Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart), is present and I am sure that he will appreciate another reason why my amendment is desirable. Hon. Members on both sides of the House believe that it is important to build up the financial sector in Scotland. Unlike the north of England, which used to have an independent financial sector which has been eroded and taken over by the City of London, Scotland still has a large area of financial activity which can be useful from time to time in providing investment locally.

I fear that if TSB Scotland, which already has substantial penetration in Scotland, is taken over under the Bill, which will happen if my amendment is not carried, the funds which are raised in the flotation will not be spent in Scotland through the medium of TSB Scotland, but will be used for the expansion of the TSB group in those areas where it is not strong.

Obviously, one of those areas will be the south-east of England, where the group may want to set up in competition with the other joint stock banks. Another will be taking over finance houses or becoming involved in stockbroking and other such areas. The profits that come from those areas will be available not to TSB Scotland but to the group as a whole. It will be operated from London and the employees of TSB Scotland will not see much benefit from it.

In a strange way, by taking this rather cowardly decision, in copping out and selling out, the trustees of the TSB Scotland have, in a sense, stunted the growth of the company that they themselves have built up. I should not like the House to countenance that at all.

Another factor that must be mentioned is that we are faced with encroaching centralisation in the financial markets. It does the Scottish banking sector no good whatever if a major enterprise such as TSB Scotland is to be taken out of the control of interest within Scotland. It is a weakening of the overall fabric. For the financial strategy of the Scottish Development Agency and the Scottish Industry Department, it would be desirable if TSB Scotland were able to retain its independence and full autonomy.

Another reason why the amendment is vital is that there is no guarantee whatever of the jobs of the headquarters and other staff of TSB Scotland. Pledges have been given before — for instance, in connection with insurance companies which were taken over. After a number of years, insurance companies that had operated in Scotland for many years lost their independence then lost their identity and the jobs that went with the head offices of those companies were obliterated. With the passing generations, the promises and pledges which had been made at the time of takeover were seen to be completely and utterly empty.

The hon. Gentleman talks of centralisation and the obliteration of jobs. One new independent bank has been formed in this country in the past 100 years and that is Adam and Company in Edinburgh. Several merchant banks have been formed, such as Noble Grossart and it is in Edinburgh. Far from centralisation and anglicisation, those are independent bodies. Why cannot the hon. Gentleman ever give any credit to the country that he pretends to represent?

11.45 pm

I am glad that I have prompted the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) to participate in the debate; he has been absent for most of the evening.

Some small — in United Kingdom terms — banking institutions have been established, and I congratulate those who showed initiative there, but if the hon. and learned Gentleman studies the Monopolies and Mergers Commission report on the attempted takeover of the Royal Bank of Scotland he will appreciate the pressures facing the financial sector in Scotland. Many of his friends in the Conservative party in Scotland will tell him about their worries. [Interruption.] The noise from the Government Back Benches reminds me that some English yobbos are present. I do not expect them to be interested in the banking scene in Scotland. They will not get directorships from it, so they are not interested in it.

We are talking about a major bank which has operated in Scotland, through independent branches, for a considerable time. It has been amalgamated into a successful unit. I have given the figures and spelt out a strategy, which is not mine alone, but is the strategy favoured by the Scottish community, which is worried about the future and sees the opportunity for jobs in the financial sector.

I am worried that, if the Economic Secretary to the Treasury does not accept the amendment, TSB Scotland will disappear from sight. If it loses its identity, jobs at the head office will be lost. We are taking out one of the props of the Scottish economy. The Bill has been reasonably uncontroversial, but it will have a serious impact in Scotland.

That was the most parochial and short sighted speech that I have ever heard. The hon. Member for Dundee, East (Mr. Wilson) does not seem to realise, though he touched on it, that the savings movement began in Dumfries. Dr. Henry Duncan, who began it all, set up the savings movement throughout the United Kingdom. His lead in banking and commerce shows today in the great success of the TSB.

It is beyond the comprehension of most people who know anything about banking why the hon. Member for Dundee, East should wish to split up something which has been peculiarly successful. He ought to know that Scotland has led the banking and commerce world over the past few hundred years in innovation and strengthening banking through amalgamations. The amendment is contrary to movements in banking over the past 50 years.

The strength of the banks, achieved through amalgamations, has enabled them to develop banking services, aid for industrial development and commerce and banking practice. The amendment would deny those advantages to the TSBs. That shows how out of touch the hon. Member for Dundee, East is with the direction of banking today.

I hope that my hon. Friend the Economic Secretary to the Treasury will strongly oppose the amendment.

I listened with interest to the hon. Member for Dumfries (Sir H. Monro). The savings movement was started in Scotland in the hon. Gentleman's constituency by the Rev. Henry Duncan. The hon. Gentleman will appreciate that the savings movement in Scotland is light years removed from the sort of commerce and industry that pervades today's banking world. The savings movement in Scotland was unique. It was a working-class institution. People put their bawbees and shillings into bank deposits that were locked away in caskets and were not lent out at high rates of interest in the capital centres of the world. That was the unique flavour of the Trustee Savings bank, and the Bill is destroying that flavour.

The concept of mutuality is destroying the uniqueness, character, acceptability and approachability of these banks in the high streets of Scotland, and the hon. Member for Dumfries knows it. I understand that the hon. Gentleman is a sponsor of the Royal Bank of Scotland Bill. If that does not give his game away, I do not know what does.

I think that the hon. Gentleman is under a misapprehension when he says that the hon. Member for Dumfries (Sir H. Monro) knows it. The hon. Member for Dumfries would not give way when I was about to ask him whether he had read the Bill. The Bill proposes to do away with the existing TSB Scotland. It is proposed to subsume TSB Scotland within this new TSB plc. I can only assume that the man who represents Ruthwell did not read the Bill.

Having listened to the speech of the hon. Member for Dumfries, I believe that that is not an unreasonable inference.

I have had experience of the Trustee Savings bank. I remember going as a schoolboy to my first secondary school in Glasgow—[HoN. MEMBERS: "When?"]—more than five years ago! Every Friday I used to buy post office stamps with my half crown. When I had saved enough half crown stamps, I took my post office book to the savings bank around the corner. In that way I built up a credit balance. It was only when I went to university and the joint stock banks got hold of my money that I started to run up an overdraft, and I am still doing it.

The Trustee Savings bank is unique, because it is a savings institution. A savings institution is not like a bank; it is supposed to promote savings actively. It is important in rural areas such as that of the hon. Member for Dumfries and mine that savings are promoted, because people are remote from the centres of commerce and the captains of industry who are the hon. Gentleman's friends. They have special needs in the savings market which have not been fulfilled in any other way. It is true, therefore, to say that in the past the Trustee Savings bank has fulfilled a need. I fear for its future. The difference between a savings institution promoting savings and the type of animal that we shall end up with when the Bill is passed is not appreciated by the Government. We shall suffer because of that.

I do not like the Bill. It is one of the worst pieces of legislation that the Government have brought forward. There is a lot of logic in the amendment moved by my hon. Friend the Member for Dundee, East (Mr. Wilson). He said that there was no doubt about the quantitative basis on which the bank is founded. It could stand on its own with any other banking institution. It could also prosper, as it has done.

Cogent arguments can be put about Scotland's peculiar legal system and financial environment. My biggest fear—I know that this point does not apply only to this amendment—is that the concept of mutuality—the basis of the Page report—will go out the window in Scotland, as in other parts of the country.

Many of the present membership and management of the bank in Scotland are deeply worried that the concept of mutuality has been sold short. The Page committee talked about the need for the bank to be run for the benefit of its staff and customers, as opposed to the benefit of outside shareholders, for depositors to elect a board and for the bank to retain its assets. That is the essence of the matter, and the Government have got it severely wrong.

The former right hon. Member for Orkney and Shetland, now Lord Grimond, suggested, for the first time in my experience, that there was great scope for having local banks that invest in their local communities. In the Borders area and my own constituency, banks such as the TSB would be cheek by jowl with the people in whom they invested. The Government should be moving in that direction, but, instead, they are moving 180 degrees in the opposite direction. That is to be deeply regretted.

My experience in my constituency suggests that the TSB has been providing a unique service in such communities. The need for a bank such as the TSB as it is presently constituted in the Scottish financial services set-up is greater than ever. The Bill is bad. I hope that the hon. Member for Dundee, East will, if necessary, press the amendment to a Division, because if he does I shall be the first to follow him through the Lobby.

I should state my credentials by saying that when the Trustee Savings Bank movement was founded in the constituency of my hon. Friend the Member for Dumfries (Sir. H. Monro), my family lived in Fife. I took the opportunity recently to return to Scotland with my hon. Friend the Member for Fife, North-East (Mr. Henderson) and to visit TSB Scotland. We found, not a declining organisation, in which jobs were being threatened, but an expanding bank, which embodied both some of the best traditions of the TSBs and the particular independent strain in the financial field which Scotland has contributed.

The complaint made by Opposition Members, as the hon. Member for Dundee, East (Mr. Wilson) in part admitted, should be addressed, not to me, but to those who are responsible in the TSBs for the arrangement made possible by the Bill. The arrangement was not forced on the TSBs by the Government. The TSBs in Scotland amalgamated in 1983 to form TSB Scotland, and it was their wish then to join the other TSB bodies in England, Wales, Northern Ireland and the Channel Islands. The Bill makes their plans possible.

Does the Minister accept that just as the Bank of England has the duty of supervising the banks overall in the United Kingdom, so the Treasury, in promoting this legislation, is doing so because it does not run foul of public policy? In other words, if the Government had disagreed with the intention of privatising or changing the status to plc, they would not have produced the legislation, even if the TSB group had requested them to do so? If that is the case, and given the fact that in Scotland there are good public policy reasons why TSB Scotland should be excluded, would the Minister agree to accept the amendment?

It is not a matter of public policy whether TSB Scotland is excluded or separated from the rest of the group. If the amendment were to be accepted, TSB Scotland would be left in an entirely separate form from any other bank. It would be maintained under the old constitutional arrangements.

Having brought TSB Scotland into the group with the other trustee savings banks, there is nothing to stop it continuing its own independence to whatever degree it cares to negotiate and arrange with the central board and management to which it has contributed. Nothing in the Bill will stop TSB Scotland from seeking such a form of separate activity or independence.

12 midnight

If the Minister studies the White Paper he will find that after the date upon which the Bill becomes an Act the TSB Scotland is subsumed into the TSB group. Its board of trustees is extinguished from then on. The local board of TSB Scotland will be appointed by the TSB group centrally. Any vestige of independence there might be virtually disappears from then.

The arrangements were known a long time before the amalgamation took place in 1983. Those plans were put forward in 1982. All the arrangements that have taken place in the past couple of years and the future plans for TSB Scotland have been known and agreed by those involved. If it were otherwise, I am not saying that I would have tried to force a monolithic structure on the TSB. It is not for me to do that.

I understand my hon. Friend's point. The Scottish TSB will continue its tradition within the context of the group, but if he believes in that why did he not seize the opportunity presented by the Bill to allow it to have its own note issue in Scotland? That would have underlined its status within the context of the group.

The Government are not doing that, because they are not extending the right of note issue to any further banks. Those who possess it do so by virtue of a historical right which has not been removed. It has not been the policy of successive Governments for many years to extend the right of note issue.

I am puzzled by the Minister's line of argument. The implication is that we, as Members of Parliament, are wasting our time tonight. We might as well have accepted the TSB's proposals in their entirety, but the purpose of the debate is to scrutinise and amend proposals if need be. That is why we suggest that there should be an autonomous TSB Scotland.

I understand the hon. Gentleman's view, but, as I explained on Second Reading, the Bill is most unusual in that it contains some matters of public policy such as the vesting of assets which cannot be done in a group without ownership and the supervision and tax implications. That can only be done by a Minister on behalf of the Government through Parliament. The Bill also has, in many respects, the characteristics of a private Bill when Parliament is approached for legislation by a banking group which wishes to rearrange its structure.

It would not be proper for Ministers to come forward with legislation forcing bodies to reorganise themselves in a way which the Government or Parliament might think right but which those bodies do not wish. We do not have an autocratic system of that kind for bodies in the private sector. It would not be right to apply that to a TSB any more than it would be—

Will the hon. Gentleman allow me to finish my sentence? It would not be right for us to single out the TSB for that type of treatment.

If the argument is as the Minister states it, why is it that in the last year we have had the Royal Bank of Scotland Bill, the Barclays Bank Bill and the Lloyds Bank (Merger) Bill? Is it not because the Treasury recognises its responsibility in regard to banks and, indeed, if it wished to do so, it would support the amendment?

Those are private bank Bills. I tried to explain, but I think that the hon. Gentleman cannot have been listening, that this is a Government Bill because there are matters of public interest separate from private interests. The public interest matters are not those parts which are the internal interests of the TSBs, and it has never been suggested that they should be. Some Opposition Members wish that that was the case, but I do not think it would be proper for Government to decide what sort of internal reorganisation the TSBs or any other banking group ought to have forced upon them. Therefore, the Bill deals with those matters which are of direct concern of Government such as supervision, tax and the question of vesting and ownership, which can be resolved only by Parliament.

On that basis, I recommend the Committee to reject the amendment.

I am disappointed that the Minister has not accepted the amendment. He admitted that the Bill affected the public interest. He may well argue that point, although I think not very successfully, in relation to the Royal Bank of Scotland Bill and the other Bills to which the hon. Member for Gordon (Mr. Bruce) referred.

In this case, however, we have to put it clearly on record that we are dealing with a request from people who do not own the bank. There is no ownership of the bank; it is mutually owned by the depositors. The people who have come to this decision are the trustees and managers who are culpable in selling out what is the heritage of the Scottish people. They were given a trust in this matter, and they have not observed it.

We have a role to scrutinise and criticise legislation and to try to amend and improve it. If we think that there is a fundamental flaw in any legislation, it is not for the Minister, for me or, indeed, for any other hon. Member to accept that what we are told we have got to do.

I was elected to Parliament to use my own judgment in these matters, as are all hon. Members. The judgment I make is that the Bill is wrong, particularly in relation to the Scottish element within it.

I ask the Minister, even at this late stage, to change his mind.

Question put, That the amendment be made:—

The House divided: Ayes 29, Noes 137.

Division No. 121]

[12.07 am

AYES

Alton, DavidLoyden, Edward
Ashdown, PaddyMaxton, John
Barron, KevinMeadowcroft, Michael
Beith, A. J.Nellist, David
Bruce, MalcolmParry, Robert
Carlile, Alexander (Montg'y)Penhaligon, David
Clay, RobertPike, Peter
Cohen, HarryRogers, Allan
Craigen, J. M.Skinner, Dennis
Davies, Ronald (Caerphilly)Snape, Peter
Evans, John (St. Helens N)Stewart, Rt Hon D. (W Isles)
Faulds, AndrewWelsh, Michael
Home Robertson, John
Hughes, Simon (Southwark)Tellers for the Ayes:
Kennedy, CharlesMr. Gordon Wilson and
Lewis, Terence (Worsley)Mr. Archy Kirkwood.
Lloyd, Tony (Stretford)

NOES

Alexander, RichardLilley, Peter
Beaumont-Dark, AnthonyLloyd, Peter, (Fareham)
Boscawen, Hon RobertLord, Michael
Bottomley, Mrs VirginiaLuce, Richard
Brown, M. (Brigg & Cl'thpes)McCurley, Mrs Anna
Bruinvels, PeterMacfarlane, Neil
Budgen, NickMacGregor, John
Burt, AlistairMaclean, David John
Butcher, JohnMajor, John
Chope, ChristopherMalins, Humfrey
Cockeram, EricMaples, John
Conway, DerekMarland, Paul
Cranborne, ViscountMather, Carol
Dorrell, StephenMaxwell-Hyslop, Robin
Douglas-Hamilton, Lord J.Mayhew, Sir Patrick
Dunn, RobertMellor, David
Durant, TonyMerchant, Piers
Fairbairn, NicholasMeyer, Sir Anthony
Favell, AnthonyMiller, Hal (B'grove)
Forsyth, Michael (Stirling)Mills, Iain (Meriden)
Forth, EricMills, Sir Peter (West Devon)
Freeman, RogerMitchell, David (NW Hants)
Gale, RogerMoate, Roger
Galley, RoyMontgomery, Sir Fergus
Garel-Jones, TristanMoynihan, Hon C.
Gregory, ConalMurphy, Christopher
Griffiths, Peter (Portsm'th N)Neale, Gerrard
Ground, PatrickNewton, Tony
Hamilton, Hon A. (Epsom)Nicholls, Patrick
Hamilton, Neil (Tatton)Norris, Steven
Hanley, JeremyOnslow, Cranley
Hargreaves, KennethOppenheim, Phillip
Hayes, J.Page, Richard (Herts SW)
Hayward, RobertPortillo, Michael
Henderson, BarryPowley, John
Hickmet, RichardProctor, K. Harvey
Hind, KennethRaffan, Keith
Holt, RichardRhodes James, Robert
Howard, MichaelRhys Williams, Sir Brandon
Howarth, Alan (Stratf'd-on-A)Roberts, Wyn (Conwy)
Howarth, Gerald (Cannock)Robinson, Mark (N'port W)
Howell, Rt Hon D. (G'ldford)Rowe, Andrew
Howell, Ralph (N Norfolk)Shaw, Sir Michael (Scarb')
Hubbard-Miles, PeterShepherd, Colin (Hereford)
Hunt, David (Wirral)Skeet, T. H. H.
Hunter, AndrewSmith, Tim (Beaconsfield)
Jones, Robert (W Herts)Soames, Hon Nicholas
Jopling, Rt Hon MichaelSpeed, Keith
Kellett-Bowman, Mrs ElaineSpencer, Derek
Key, RobertStevens, Lewis (Nuneaton)
King, Roger (B'ham N'field)Stevens, Martin (Fulham)
Knight, Gregory (Derby N)Stewart, Allan (Eastwood)
Knight, Mrs Jill (Edgbaston)Stewart, Andrew (Sherwood)
Knowles, MichaelStewart, Ian (N Hertf'dshire)
Lang, IanStradling Thomas, J.
Leigh, Edward (Gainsbor'gh)Sumberg, David
Lester, JimTaylor, John (Solihull)
Lightbown, DavidTaylor, Teddy (S'end E)

Terlezki, StefanWhitfield, John
Thomas, Rt Hon PeterWhitney, Raymond
Thompson, Donald (Calder V)Wilkinson, John
Thompson, Patrick (N'ich N)Winterton, Mrs Ann
Thurnham, PeterWinterton, Nicholas
Tracey, RichardWolfson, Mark
Twinn, Dr IanWood, Timothy
Walden, GeorgeYeo, Tim
Waller, Gary
Wardle, C. (Bexhill)Tellers for the Noes:
Watson, JohnMr. Tim Sainsbury and
Wells, Bowen (Hertford)Mr. Mark Lennox-Boyd.
Wheeler, John

Question accordingly negatived.

Clause 2

The Cnetral Board And The Reorganisation

I beg to move amendment No. 2, in page 3, line 11 leave out

'is to be paid or left unpaid'
and insert
'for the transfer or for shares or rights to shares disposed of under subsection (1) above in connection with the reorganisation is to be paid or left unpaid for any period or, in the case of shares or rights to shares, is to be full consideration or discounted'.

With this it will be convenient to take Government amendments Nos. 3, 4, 5, 6.

This and the related group of amendments are purely technical. Their object is to ensure that the Government do not receive part of the proceeds of the issue. Because of the curious structure of the TSB group and its legal position, the central board could acquire the shares and, when selling them on to the public, become liable to capital gains tax because of the method that was followed. It is not the intention of the Government to obtain tax revenue in that way; the proceeds of the issue should go to the TSB. This amendment to schedule 2, with accompanying amendments to clause 2, will ensure that that does not happen.

Question put and agreed to.

Amendments made: No. 3, in page 3, line 13 after `above', insert

'relating to the transfer of assets by virtue of section 3(1)(b) or (c) below'.

No. 4, in page 3, line 17 after 'of', insert 'or in connection with'.

No. 5, in page 3, line 19 leave out from 'Treasury' to first 'the' in line 21 and insert

'(if they have not already done so under subsection (1) above), dispose of any shares or rights to shares in the new holding company which are held by or, as the case may be, vested in'.— [Mr. Ian Stewart.]

Schedule 2

Taxation

Amendment made: No. 6, in page 15, line 33 at end insert

'4A. For the purposes of the Act of 1979, gains arising on the disposal by the Central Board of any shares, or rights to shares, in the new holding company shall not be chargeable gains.'.— [Mr. Ian Stewart.]

Motion made, and Question proposed, That the Bill be now read the Third time.

12.19 am

I do not intend to detain the House on the Third Reading; I want to make only one or two remarks. As has been clear from the debate on the new clauses, the Opposition have sought to alter the Bill in such a way as to lead to the reorganisation of the TSB so that it might the better represent its traditions. We regret that the alterations were not made.

We know that the chairman of the TSB has given assurances that he intends to maintain the tradition of the TSB as personal banks which will continue to serve the local communities in which they were established. The Opposition will be watching the progress of the TSBs after flotation to see whether they fulfil the commitments which the chairman gave in his letter which accompanied the White Paper. We wish them well.

12.20 am

I must express a degree of amazement—the hon. Member for Crawley (Mr. Soames) is doing his usual business of sitting in his seat and making some kind of intervention— [HoN. MEMBERS: "Withdraw."] No doubt he has once again dined too well— [HoN. MEMBERS: "Withdraw."] I make the assumption—

I make the assumption, Mr. Deputy Speaker, that since you do not take interventions from a sedentary position, the hon. Member for Crawley wants to intervene. To satisfy my curiosity as to whether he is as good when speaking on his feet as he is when sitting on his backside, I shall give way to him. It seems that he does not wish to intervene.

As I was saying, I must express a degree of amazement after listening to the hon. Member for Thurrock (Dr. McDonald), who has indicated that the official Opposition will not vote against the Bill. The safeguards for which they asked in Committee and on Second Reading have not been provided by the Government. We are surprised that they have decided not to oppose the Third Reading, because the Government are seeking to change fundamentally an institution which has its roots in the working-class areas of Britain and which has been famous in the past for serving those areas in a way which, as the Minister said, was unique. Now that the Government intend to change the nature of that institution, the Labour party does not intend to vote against them.

The Government have claimed during the passage of the Bill that this is a great advance towards wider share ownership and towards property owning. In reality it is revealed as a move in the opposite direction. The TSB sat uncomfortably in the banking sector and provided competition which the clearing banks could not meet. The London clearing banks obligingly said just that in their evidence to Page. The committee of the London clearing banks put forward to Page the argument that trustee savings banks represented unfair competition. The Page committee rejected that outright.

What the London clearing banks meant when they said that was that the TSBs were reaching parts of the nation which they could not reach, that the TSBs were providing a service which they could not provide and that they were getting at a market which the clearing banks could not get into because of the low operating costs. In the Bill a new principle is being established. It is not the well-known principle, "If you can't beat them, join them," but rather, "If you can't beat them, get the Government to make them join you." In the absence of the safeguards which we have sought from ther Government and which they have consistently refused to give, the Bill is revealed finally as no more than a mechanism for the Government to do the bidding of the clearing banks, and of the management of the trustee savings banks as well, to the cost of many of their depositors and some of their employees.

The Page committee said that there was a requirement in the banking sector for a third arm. It said that the TSBs could have become that third arm and fulfilled the need that it identified.

All right hon. and hon. Members who have followed the issue closely recognise that some of that pass —perhaps all of it—was sold in the 1976 Act. My hon. Friend the Member for Stockton, South (Mr. Wrigglesworth), who had some dealings with the Act, generously admitted as much in his Second Reading speech. He said:
"The Bill would not have been before us … had we clarified ownership of the banks in the 1976 Act … it might have been better had we gone down the road of mutuality in 1976."—[Official Report, 14 January 1985; Vol. 71, c. 50.] That is true. That is how we see it.
The Bill could have reversed what happened after the 1976 Act. It could have gone a long way towards restoring that mutuality which Page thought so important and which it wished to see encouraged. It could have maintained what the Minister described as the unique character of the TSBs. It could have fulfilled the urgent need that Page identified for a third arm in the British banking sector. Instead, it has taken a noble and in some senses unique institution, founded in the community with the capacity to offer banking to some of our poorest and most deprived areas, and made it into yet another faceless financial conglomerate in the City of London.

My hon. Friend the Member for Stockton, South said on Second Reading that at that stage he would not vote against the Bill, but he called for a number of safeguards. He asked for stronger guarantees about ownership. Those have not been provided. He asked for details of the amount of shares to workers and depositors. We again asked for those in new clause 1. Those, too, have not been provided. He asked for further details on the flotation. Those, too, have not been provided.

The Page committee called for the TSBs to be made into mutual organisations. That has not been done. The committee called for the development of a third force in banking. The Bill will not do that, either. The committee believed that the customer first, profits later ethic that gave cheap banking facilities to the less well off should be preserved. The Bill will almost certainly destroy that unique quality of the TSBs.

The Government had a unique opportunity with the Bill to give a new dimension to an old and proud tradition. They have not taken it, and it is an opportunity that has, sadly, been missed.

There is a need for new types of institutions to stand between the great corporate financial structures so loved by the Tory party and the great corporate state structures beloved by the Labour party. We need community-based institutions serving individuals rather than either profit or the state. That is what the TSBs could have become. The Bill destroys that opportunity, and the alliance will vote against it.

12.28 am

I intend to vote against the Third Reading because I believe the Bill to be wrong. I have opposed all its stages, and the only way now to express opposition to it is by voting against the Third Reading.

If the amendments had been carried, they would have provided safeguards for the future of the Trustee Savings Bank, and I regret that they have been rejected. But, even if they had been carried, they would still have provided a bad solution, the Bill would not have been a good one, and I would still have voted against it.

My hon. Friend the Member for St. Helens, South (Mr. Bermingham) raised an important point of order at the start of Report stage. I respect the view of Mr. Speaker, and accept that his ruling was correct. He ruled that it was not for him to determine whether the Bill was legal. However, he did not say that the Bill was legal. He gave no interpretation of that point. I believe that my hon. Friend's point may well have been important. How can one privatise something that, at present, is owned by no one? The Bill is suspect and questionable. Those who vote for it tonight may be voting for a Bill that will be found to be illegal. What will their position be then?

I said, when speaking on one of the amendments, that the trustee savings banks have a long tradition of service, providing a personal banking service for the ordinary working people. I started work in the Midland bank in 1954. The Midland bank then owned the Clydesdale and North of Scotland bank, now the Clydesdale bank. At that time the TSB was playing its traditional role. Since then it has developed rapidly with the introduction of cheque book accounts and Trustcards, and many other developments. I am not opposed to the TSB developing to meet the 1990s and the years to come. No doubt certain changes need to be made to give the TSB the powers and freedom to develop and meet the demands both of present and future customers. But I do not believe that the Bill is the right way forward. It is regrettable that the Government have brought it in.

Once again, the Government express their belief that the employees in an industry should have the right to buy shares, but they are not prepared to make any concession to ensure that there will be worker directors within the organisation. We have not debated that point tonight, but it was debated in Committee. The same thing happened in the case of the royal ordnance factories and in other cases. The Government talk of giving greater participation to the employees of the organisations that they privatise, but they are not prepared to give them any special position on the board of directors. That is something that could have been done.

The Bill is a bad Bill and this is a sad day for the TSB. I hope that it will continue to prosper, but I feel that it will not be many years before it is taken over. Whatever assurances are given by the chairman now, he may soon be replaced. His assurances are not worth the paper on which they are written.

Some years ago there was a local brewery in Burnley, Massey's brewery, which had been there for more than 100 years. It brewed a very good pint of beer. It was taken over by Bass Charrington. An assurance was given that there would be no closure of the brewery in Burnley. Surprise, surprise—the chairman of Massey's brewery suddenly became chairman of Bass North-West. He was also at that time the hon. Member for Morecambe and Lonsdale. As soon as he became chairman of Bass North-West, the Burnley brewery was closed down.

Is it not true that many of his right hon. and hon. Friends are not prepared to join the hon. Member for Burnley (Mr. Pike) in the Lobby because one of the unions involved has done a deal? It is sad that, on so important an issue, hon. Members should be inhibited from supporting the hon. Gentleman by such a factor.

I am not aware of any such undertaking and am certainly not party to it. I am also sure that my hon. Friends on the Front Bench are not party to any such agreement or undertaking.

The brewery I was talking about closed, despite all the undertakings. The identity of and the service provided by the TSB will not survive for long as it will soon be merged and its employees will find themselves out of work. Technology and the existence of too many banks and building societies on the high street mean branch closures in the future. If the TSB is taken over, its employees will find themselves out of work. I hope that the House will think seriously about the Bill and vote against it receiving a Third Reading.

12.35 am

I do not want to rehearse the issues in the Bill, as they have already been dealt with. Before the Bill leaves the House, I should like to thank all those who have been responsible for arranging a complex and technical Bill that will provide an important basis for the future of the TSBs. I should also like to thank the hon. Member for Thurrock (Dr. McDonald) and her team for their generally constructive approach to the Bill.

On Second Reading, I spoke of the TSBs' long history and distinguished past. I also said that we were confident that they had an important future. The Bill releases the TSBs from the restrictions of direct parliamentary accountability and opens the way for their further development as they have chosen. On behalf of the Government and, I hope, most if not all hon. Members, I should like to wish them every success in the future. Question put, That the Bill be now read the Third time:—

The House divided: Ayes 130, Noes 25.

Division No. 122]

[12.36 am

AYES

Beaumont-Dark, AnthonyDouglas-Hamilton, Lord J.
Boscawen, Hon RobertDunn, Robert
Bottomley, Mrs VirginiaDurant, Tony
Brown, M. (Brigg & Cl'thpes)Fairbairn, Nicholas
Bruinvels, PeterFavell, Anthony
Budgen, NickForsyth, Michael (Stirling)
Burt, AlistairForth, Eric
Butcher, JohnFreeman, Roger
Chope, ChristopherGale, Roger
Cockeram, EricGalley, Roy
Conway, DerekGarel-Jones, Tristan
Cranborne, ViscountGregory, Conal
Dorrell, StephenGriffiths, Peter (Portsm'th N)

Ground, PatrickNeale, Gerrard
Hamilton, Hon A. (Epsom)Newton, Tony
Hamilton, Neil (Tatton)Norris, Steven
Hanley, JeremyOnslow, Cranley
Hargreaves, KennethOppenheim, Phillip
Hayes, J.Page, Richard (Herts SW)
Hayward, RobertPortillo, Michael
Henderson, BarryPowley, John
Hickmet, RichardProctor, K. Harvey
Hind, KennethRaffan, Keith
Holt, RichardRhodes James, Robert
Howarth, Alan (Stratf'd-on-A)Rhys Williams, Sir Brandon
Howarth, Gerald (Cannock)Roberts, Wyn (Conwy)
Howell, Rt Hon D. (G'ldford)Robinson, Mark (N'port W)
Hubbard-Miles, PeterRowe, Andrew
Hunt, David (Wirral)Sainsbury, Hon Timothy
Hunter, AndrewShaw, Sir Michael (Scarb')
Jones, Robert (W Herts)Shepherd, Colin (Hereford)
Jopling, Rt Hon MichaelSmith, Tim (Beaconsfield)
Kellett-Bowman, Mrs ElaineSoames, Hon Nicholas
Key, RobertSpencer, Derek
King, Roger (B'ham N'field)Stevens, Lewis (Nuneaton)
Knight, Gregory (Derby N)Stevens, Martin (Fulham)
Knight, Mrs Jill (Edgbaston)Stewart, Allan (Eastwood)
Knowles, MichaelStewart, Andrew (Sherwood)
Leigh, Edward (Gainsbor'gh)Stewart, Ian (N Hertf'dshire)
Lennox-Boyd, Hon MarkStradling Thomas, J.
Lester, JimSumberg, David
Lightbown, DavidTaylor, John (Solihull)
Lilley, PeterTaylor, Teddy (S'end E)
Lloyd, Peter, (Fareham)Terlezki, Stefan
Lord, MichaelThomas, Rt Hon Peter
Luce, RichardThompson, Donald (Calder V)
McCurley, Mrs AnnaThompson, Patrick (N'ich N)
Macfarlane, NeilThurnham, Peter
MacGregor, JohnTracey, Richard
Maclean, David JohnTwinn, Dr Ian
Malins, HumfreyWalden, George
Maples, JohnWaller, Gary
Marland, PaulWardle, C. (Bexhill)
Mather, CarolWatson, John
Maxwell-Hyslop, RobinWheeler, John
Mayhew, Sir PatrickWhitfield, John
Mellor, DavidWhitney, Raymond
Merchant, PiersWilkinson, John
Meyer, Sir AnthonyWinterton, Mrs Ann
Miller, Hal (B'grove)Winterton, Nicholas
Mills, Iain (Meriden)Wolfson, Mark
Mills, Sir Peter (West Devon)Wood, Timothy
Mitchell, David (NW Hants)Yeo, Tim
Moate, Roger
Montgomery, Sir FergusTellers for the Ayes:
Moynihan, Hon C.Mr. Ian Lang and
Murphy, ChristopherMr. John Major.

NOES

Alton, DavidLoyden, Edward
Ashdown, PaddyNellist, David
Beith, A. J.Parry, Robert
Bruce, MalcolmPenhaligon, David
Carlile, Alexander (Montg'y)Pike, Peter
Clay, RobertSkinner, Dennis
Craigen, J. M.Snape, Peter
Cunliffe, LawrenceStewart, Rt Hon D. (W Isles)
Davies, Ronald (Caerphilly)Welsh, Michael
Evans, John (St. Helens N)Wilson, Gordon
Home Robertson, John
Hughes, Simon (Southwark)Tellers for the Noes:
Kennedy, CharlesMr. Michael Meadowcroft and
Lewis, Terence (Worsley)Mr. Archy Kirkwood.
Lloyd, Tony (Stretford)

Question accordingly agreed to.

Bill read the Third time, and passed.