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Nationalised Industries (Share Flotations)

Volume 87: debated on Wednesday 27 November 1985

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asked the Secretary of State for Trade and Industry what assessment he has made of the ability of the financial markets to absorb a series of large flotations of shares in nationalised industries.

The Parliamentary Under-Secretary of State for Trade and Industry
(Mr. John Butcher)

On the basis of the amounts that have been subscribed for attractive issues, I have no reason to doubt that the capacity of the financial markets will be sufficient.

I am sure the Minister will not be surprised to hear that neither do I doubt that. Does he acknowlege that although his party's objective is wider share ownership, his friends in the City are positively salivating at the possibility of so many blue-chip shares coming to the market? Their energies and the billions of pounds that they control will be directed to blue-chip flotations instead of funding new enterprises which could create new jobs in new industries elsewhere.

The other group of people that will be salivating are the population. The hon. Gentleman will be aware, for example, that arising from the British Telecom flotation, about 2 million subscribers were involved in what I thought was a Liberal principle of wider share ownership. I find the hon. Gentleman's attitude somewhat disconcerting.

Does my hon. Friend agree that the surplus of institutional cash flow over Government sales of gilts and assets during the next financial year will average nearly £2 billion per quarter, so that any suggestion that privatisation will lead to a shortage of investment funds is utter nonsense?

My hon. Friend has hit the nail on the head. The House may wish to know that in the 1985–86 financial year to date, net funds raised by new share issues totalled £6·5 billion, of which £4·6 billion was raised by the private sector and £1·9 billion by public sector issues.

Will it be possible to stop the fraud that took place at the time of the issue of BT shares? Will the Government take action against those who were fraudulently involved in making applications for shares in the BT flotation?

That is a matter for the Director of Public Prosecutions to decide on the basis of his investigations. I assure the hon. Gentleman that if there are lessons to be learnt on other aspects of the share issue procedures, we shall fully note those and consider them in future flotations.

Does my hon. Friend recall that prior to the flotation of British Telecom the Jeremiahs in the House and elsewhere said that there was no way in which the City could absorb such a large flotation and that he would need at least three tranches? As they were wrong, does my hon. Friend accept that when we consider further privatisation we can rest assured that there will be no problem from the flotation point of view?

I am grateful to my hon. Friend for that comment. The BT flotation vindicated all of the Government's hopes, particularly on wider share ownership. Even though the bitter opposition of the hon. Member for Newcastle-under-Lyme (Mr. Golding) to that measure is obviously still persisting, I hope that he will join me in congratulating the 96 per cent. of BT employees who took advantage of the share issue.

The Minister will be aware that the increase in the price of BT shares in one day showed clearly that the Government had sold them at well below their true value. Has not the privatisation timetable been forced by the need to create a large sum of money to be dispensed in electoral tax bribes in such a way that, once again, important British public assets will be sold at well below their true value, with greater pickings for the City, and to the ultimate public detriment?

The right hon. and learned Gentleman, perhaps willfully, misunderstands the working of the market. A fine judgment must always be made about what the market will stand when fixing a price on flotation, and Opposition Members enjoy misinterpreting that process. The advantages of privatisation stand in their own right as a means of obtaining wider share ownership.