The following question stood upon the Order Paper:
To ask the Secretary of State for Trade and Industry if he will make a statement on his Department's proposal to sell its residual shareholding in British Aerospace.
The Government's residual shareholding of 96,852,746 ordinary shares, together with 50,000,000 new ordinary shares issued by the company, are being offered for sale at a price of 375p per share, of which 200p will be payable on application and 175p by 10 September 1985. All the offered shares have been underwritten. The offer will close on 10 May 1985.Applications for all the offered shares have been received from priority applicants, who have been guaranteed allocation of 55 per cent. of the shares they have applied for. The remaining 45 per cent. are available for applications by the public subject to the preferential entitlements of existing shareholders and eligible employees of the company. Copies of the prospectus for the offer have been placed in the Library.
I am delighted that the sale of the British Aerospace shares is going so satisfactorily. I hope that many workers within the industry will take up shares. Will my hon. Friend say whether he thinks, as I do, that this sale of shares is widely welcomed within the aerospace industry as a whole?
I am grateful to my hon. Friend for his comments. I am sure that the sale of the Government shareholding has been welcomed by the company, because British Aerospace has demonstrated its ability to operate profitably in the private sector. I am sure that the aerospace industry as a whole—and, indeed, the whole country—will benefit from the return of the company to full private ownership.
Is the Minister aware that today's statement is a further breach of the undertaking that the Government gave at the time of the sale that they would retain at least 25 per cent. of the shareholding? Virtually the whole of the profits of the company come from military orders, which are largely dependent upon public funding. There is a very considerable national interest involved and it is being abandoned by the sale. Far from that being welcomed, there will be widespread anxiety in the country about this further handing over of a national asset to private interests.
I refute totally what the right hon. Gentleman has said. It is not a question of abandoning a national interest. He will be aware of what was said in 1981 before the first stage of privatisation took place—that no further move would be made for the foreseeable future. It was indicated then that it would be in a year or two, and that the special share—details of which are set out in the prospectus, which I invite the right hon. Gentleman to read—would totally safeguard the national position, the special share being vested, as the right hon. Gentleman well knows, in my right hon. Friend the Secretary of State for Trade and Industry.
Will the Minister say why he believes that the sale of the shares will make British Aerospace more efficient? Is it not the case that British Aerospace has difficulty over dealing with its European partners, both in collaboration and in competition, because they have more Government support than is provided to our industries? Does not the sale of these shares have more to do with raising Government money than with making one of our primary defence industries more efficient?
No, it certainly does not have anything to do with that issue. If the hon. Gentleman cares to consult the company, which I am sure he will, he will discover quite quickly that it is extremely pleased not only that there should be a rights issue but that the shares should be made freely available on the market, thus indicating to the world at large that it is not dependent for its success upon a major Government shareholding.
Is my hon. Friend aware that many small shareholders who before the British Telecom sale had probably never heard of shares will welcome today's announcement? Can he say what special measures he will take to ensure that the small shareholder is favoured in the allocation?
Our attitude is favourable towards the interests of the small shareholder. However, my hon. Friend will appreciate that until the offer has been subscribed we cannot make any statement about the basis of allocation.
Will the Minister confirm that this company cannot be profitable without Government support? It is entirely dependent upon Government money. Is it not nonsense to sell off in this manner a high technology company whose future will be at risk if it has to depend upon the private market? Should it not therefore be retained in the public sector?
No, it should not. The hon. Gentleman is doing a great disservice to British Aerospace by describing it as being dependent upon Government support. It is not dependent upon Government support. There is a world of difference between the Government contracts and the export business of British Aerospace, which amounts to 63 per cent. The hon. Gentleman conveniently ignores that non-governmental business.
To follow up the question of my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), does the special share provide any kind of permanent guarantee? Are the promises to be honoured?
I refer the hon. Gentleman to the prospectus, where the details are set out exactly. I shall not detain the House by reading out the summary of rights and restrictions attaching to the special share. They are to be found in paragraph 7 of the statutory interests section. I can assure the hon. Gentleman and the House that it safeguards the national interest.
What proportion of the remaining tranche to be sold has been reserved for employees?
We have reserved 5 million shares for employees.
Is the Minister aware that the main reason why the Government are proceeding with the sale is the need by the Treasury to raise more money and that this has been placed far ahead of the efficiency or profitability of the industry?Secondly, is it not clear that the Government are breaking a pledge which they gave to the House? When the legislation was being discussed the Government told the House of Commons that they would retain 25 per cent. of the shareholding. There was no mention at that time of a golden share. It was only after the Government decided to renege on their commitment to the 25 per cent. that they pushed the golden share into place. Thirdly, will the Minister tell us whether Kleinwort, Benson, the bankers handling the sale, will on this occasion allow its employees to buy shares, as the Government have confirmed happened in the case of British Telecom, which, surprisingly, appears to have been approved of by the Government?
The purpose of the undertaking that was originally given—that 25 per cent. of the shares would be retained—was to block any change in the articles of association dealing with foreign ownership. As the special share will be equally effective in achieving that purpose, there is no reason to retain the 25 per cent. shareholding.As for the merchant bank advisers, may I remind the hon. Gentleman that Kleinwort, Benson is advising British Aerospace; it is not advising Her Majesty's Government. The Government are being advised by Lazard Brothers which has intimated to us that the staff who are directly involved in this exercise will not be allowed to participate in the offer.