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Lord Fraser of Carmyllie: As the noble Lord indicated, the amendments are designed to remove the Secretary of State's power to make more than one transfer scheme, and to ensure that property, rights and liabilities transferred under it go to a single successor company as defined in the Bill.

I hope that by the time I conclude the Committee will not continue to believe that there is an element of backsliding on the part of the Government. I hope that our position is clear, but perhaps I may take a minute or two to explain where we stand.

The policy decision behind the drafting of this Bill has indeed been to keep sales options open. In our view it is still too early to make irrevocable decisions about the form in which AEA Technology should be privatised. I repeat: if AEA Technology can meet the ambitious targets that it has set itself, then sale as a single independent entity may well be achievable. But if it does not, then other options may have to be examined.

I am encouraged that the noble Lord has such confidence in AEA Technology's ability to succeed as a single entity. He echoed the views of a number of other noble Lords. I am very well aware that the view in this place appears to be that a unitary sale is the preferred approach. My ministerial colleagues have already indicated in another place that this may well be

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the best way forward. I very much share the hope that AEA Technology will indeed be sold as a unitary authority. Realistically, there may be no other option if the sale is to be achieved within, say, the next 12 to 18 months.

However, at this stage we cannot be certain that unitary privatisation necessarily represents the best way forward, and I hope that the Committee would agree that it would be foolhardy to put all our eggs in one basket. These amendments would close off all options and oblige us to follow a course of action which might not turn out to be in anybody's best interests.

I hope that the noble Lord will agree, on reflection, that it would be imprudent to limit our ability both to act in the best interests of AEA Technology as a business and to secure best value for money for the taxpayer.

I cannot therefore give the noble Lord the absolute commitment that he seeks, or indeed accept these amendments. As I said, the effect would be to close off all other options, no matter how much we might prefer the single entity option. It would oblige the Government to follow a course of action that might not turn out to be in the best interests of either AEA Technology or the taxpayer.

However, when the House returns to the Bill in the autumn—clearly it cannot do so at any earlier stage—for the Report stage, the position may well be clearer. We shall certainly have a much better idea as to how AEA Technology is performing, and how far other options might satisfy the Government's stated objectives for the sale. I hope with that proposal the noble Lord will agree to withdraw his amendment. He should certainly not take it that in any sense at this stage we seek in any way to exclude the single entity option for which he argued so vigorously.

Lord Thomson of Monifieth: Before the Opposition Front Bench responds to the Minister's remarks, perhaps I may say a word from these Benches. First, we strongly support the case that was made by the noble Lord, Lord Haskel. Our preferred option is to maintain AEA Technology as a unitary body. We believe that the best way to do that, in the British interest, by way of preserving this very valuable national asset, would be by flotation. The case was made, and I shall not repeat it, for the advantages of synergy. This is a high-tech industry, in which the real capital is the brilliant people who work for it. By "synergy" we mean the kind of professional camaraderie that comes from that sort of body. It takes a long time for it to be built up and it can very easily be destroyed.

For those reasons, we on these Benches strongly support the case for maintaining the unitary character of the organisation and for flotation. The Minister very reasonably put his case to us and said that these matters will be considered further. In due course we shall come to further amendments on the Marshalled List to which we shall seek the Government's agreement not merely to reconsider the matter in the autumn but, if options are to be kept open, to have them reconsidered by Parliament at a much later stage before final decisions are taken.

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In the meantime, I welcome the fact that the Minister is ready to look again at this matter in the autumn. However, we very strongly press the view that this is a national asset of great value to us and ought to be maintained as a single entity.

3.30 p.m.

Lord Peston: In joining the debate, I should first like to welcome the Minister's comments. Certainly, we look forward in the autumn to what one might call more and better particulars on this matter.

It has puzzled a number of noble Lords, and me in particular, that there is this very large, successful organisation—large in terms of capacity to carry out research and development—which is certainly very important. I find it very difficult to understand why its value would be maximised by not selling it off as a whole. In other words, separate from all other considerations, it seems to me obvious that, as an integrated whole, the organisation is worth more than it would be by selling it off in its separate parts. Without going ahead quite so strongly, the Minister seems to be saying much the same. Certainly, his honourable friend in the other place got very close to saying that.

Let me ask the Minister whether on that matter he is saying that the Secretary of State wants flexibility but he knows not what. Until one gets around to selling the body, it is best to have some flexibility just to be on the safe side. Is that the main part of the Minister's answer? Perhaps he could fill us in on that point in the autumn.

There was a separate question to which the noble Lord, Lord Thomson of Monifieth, alluded. It arises from the nature of the Bill. We did not fully appreciate a similar set of considerations with regard to the electricity privatisation Bill as has now arisen in terms of selling off the nuclear power side; namely, that having passed the Bill, the Government are under no obligation to come back to your Lordships with any of that matter. As I understand the situation, and the Minister will almost certainly confirm it, if this Bill is passed into law and then for one reason or another it turned out that AEA Technology was sold off in two parts, the Minister would simply say, "Well, that is in the Bill. We have the powers to do that and it is no longer your Lordships' business to query it". We can ask a Question or something of that nature. But in terms of a serious investigation of such a matter, this is our only chance to press the point.

I entirely accept the Minister's good faith in this matter but I hope that he understands that one of the reasons why we have pressed the point is that it is our only chance to do so. One day we shall simply be told, "Well, we have sold it off and thank you very much".

When governments bring forward skeleton Bills of this kind, one has to table amendments simply to clarify the matter. However, let me repeat my main reason for speaking, which is to thank the Minister for saying that he may have more to tell us in the autumn. We shall certainly have a chance, at least briefly, to exchange views on it at that time.

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Lord Haskel: I entirely agree with my noble friend Lord Peston that this Committee stage will be our only opportunity to find out exactly what the Government intend to do. This is virtually an enabling Bill and we need to discover the Government's intentions.

I also draw to the attention of the Minister the fact that in virtually every other privatisation the restructuring of the company has taken place before the Bill has come before your Lordships. In this case, the company has not been restructured and we do not know what will be privatised. That is why we must probe these matters.

One is left with the feeling that the Government will keep their options open and they believe that Whitehall knows best. From what the Minister said, I imagine that he will leave it to the City to decide what is best. Perhaps I may remind him that the City does not have a very good record on high technology companies. I hope that he will give these matters consideration. Obviously at Report stage we shall come back to this point. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 2 not moved.]

The Earl of Courtown: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Greenbury Report

3.36 p.m.

Lord Fraser of Carmyllie: My Lords, with the leave of the House I shall repeat a Statement made in another place by the President of the Board of Trade. The Statement is as follows:

    "Madam Speaker, I would like to make a Statement about the report of the Study Group on Directors' Remuneration, chaired by Sir Richard Greenbury, which was published today.

    "The group was set up in January this year on the initiative of the CBI, in the wake of public concern about executive remuneration in some public limited companies. The Government supported the setting up of the group and we now welcome the publication of its report. We congratulate the group on a thorough, speedy and authoritative review of the issues. We welcome its recommendations in principle and strongly support the emphasis which the group places on the need for pay to be justified by performance.

    "The group's report follows shortly after the report by the Select Committee on Employment on the Remuneration of Directors and Chief Executives of Privatised Utilities. While the Government will give a considered response to both reports when Parliament resumes after the Recess, the House will expect me to make some preliminary comments now and I willingly do so.

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    "Pay in the private sector is a matter for companies and their shareholders. The Greenbury initiative demonstrates that companies and institutional investors recognise the level of concern on this issue and are determined to act. There is no doubting the authority of the group's recommendations. The group's report vindicates the self-regulatory approach. It will deliver more effective, speedier results than legislation could achieve. Indeed, there has already been a perceptible change in some companies' attitudes to these matters.

    "The Greenbury Report will be underpinned by action by the Stock Exchange. Its recommendations are addressed primarily to listed companies. It is appropriate therefore that the Stock Exchange should enforce them through the Listing Rules. The Government welcome the Stock Exchange's announcement this morning that it will do so.

    "The Government have no intention of introducing a top people's pay policy. We do not begrudge top salaries for top performance. Our companies must compete at world level if our nation is to prosper. We must pay the rate for the job. Greenbury points out that although comparisons are difficult, total remuneration levels in the United Kingdom are well below American levels and broadly comparable with other European countries. The fastest way to drive our best talent abroad—in any field, not just business—would be to impose restrictions on earnings.

    "There has been particular concern about windfall gains arising from share option schemes in the privatised utilities. The Government accept the group's recommendation that for newly privatised companies no share options should be made until at least six months, and preferably a year or more, after privatisation. The great success of virtually all the privatisations of recent years has been a feature of the strengthening of Britain's economy. Consequently, some share options have yielded substantial benefits to those who guided that success. But the huge achievements of the privatisation programme have brought dramatic benefits for consumers in terms of lower prices, more choice, better consumer-focused service and more investment, as well as a large and growing flow of revenue to the Exchequer through taxation.

    "There are three recommendations for legislative action addressed to the Government. My right honourable friend the Chancellor of the Exchequer has already announced this morning that the Government will introduce legislation in the next Finance Bill to withdraw the income tax reliefs at present available to directors and employees participating in executive share option schemes which have been approved by the Inland Revenue. The withdrawal of the reliefs will take effect in relation to grants or the exercising of options on or after today.

    "The second and third recommendations are for minor amendments to the Companies Act to remove overlap with the group's proposals for comprehensive disclosure, and to amend the Companies Act rules on the disclosure of the value of pensions benefits, when

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    they have been drawn up by the actuarial professional bodies. The Government will consider both recommendations carefully and quickly. We remain willing to consider other legislative back-up if experience shows it is needed.

    "In summary, the Government welcome the publication of the Greenbury group's report. It is comprehensive and well judged. It will help ensure that pay is based on performance. It tackles specific problem areas with firm, fair and practical proposals. It is a package which meets today's needs and I believe it should be supported."

My Lords, that concludes the Statement.

3.40 p.m.

Lord Peston: My Lords, I thank the noble and learned Lord the Minister for repeating this rather short Statement made by his right honourable friend the President of the Board of Trade in another place. The Greenbury Report is a CBI report. I start off with one or two rather obvious questions. Is the report available to your Lordships in the Printed Paper Office, or do we have to write to the CBI and buy it? The Statement says that there is no doubting the authority of the group's recommendations. I am sorry to hear that. I doubt the authority of the group's recommendations, a matter to which I shall return. But since this is said to be authoritative, does the noble and learned Lord know whether the committee took evidence on a large scale, and is it publishing a volume of evidence to support what it has said? If that is the case, can we see it?

The Government implicitly state that these remarks are the Government's first response to the Greenbury committee. They say that a considered response will be made to the report when Parliament resumes after the Recess. Can your Lordships be assured that that considered response will include a considered response made to your Lordships, so that we can look at this matter in considerable detail and not merely be the afterthought to the other place?

It is as well to recall why this committee was set up and what it was all about. It was set up because of extreme public distaste, expressed by many people across the whole of our society—but not least by the Prime Minister and certainly not least by my right honourable friend the Leader of the Opposition—over an apparent desire on the part of certain senior executives to reward themselves to a degree, to put it as mildly as I can, that appeared to be rather unseemly. Others have made stronger statements but I shall say no more than that.

More recently, all kinds of commentators have remarked that workers—ordinary men and women—are asked to settle for pay increases little different from the rate of inflation—in other words, very little in the way of real increases in pay—yet management, or some management, have not felt any obligation on their part to modify their demands to much the same set of numbers. Indeed, it is not merely that they have asked, "Please sir, can I have some more?"; but they have asked, "Please sir, can I have an extraordinary amount more?" In doing that they have given the lie to one of the main propositions on which the Government have based their

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policies for a great many years. They argued that if they lowered the marginal rate of income tax—that was a central plank of the Government's policy from 1979 until recently—there would be no need for senior management or executives to demand massive pay increases because at those low marginal rates quite low pay increases would still yield very considerable net gains to them. It is apparent that, having lowered the marginal rate of income tax while raising other rates of tax for other people, that has not acted in any way to moderate pay demands.

The question that caused all this was: why should there be massive differences in the rates of increase of pay within firms in particular? That has become confused with a different question of pay differentials altogether—the question of why top management should be paid more than the least skilled worker. That is a classical question and the answer is to do with rewards for ability, for investment in education and training and for scarcity. The point that Greenbury was supposed to address—on what little I know, which is only what the Statement says, it does not seem to have addressed it at all—is not the question of why the differentials should exist but why the rates of increase of pay for senior executives should be of several orders of magnitude more than for ordinary workers. In other words, if differentials are set as they are—and we can argue about that—once that has been correctly sorted out, rates of pay, it seems to me and I think to almost all serious commentators, except in very special cases, should increase at about the same rate for everyone in the organisation—top management, middle management, skilled workers and unskilled workers, bearing in mind that the firm itself is an integrated unit.

To take a specific case, I have no doubt that Marks and Spencer benefits enormously from having Sir Richard Greenbury. But I have to say that I think it also benefits from the person on the till who actually serves your Lordships and serves me. They are all part of the same organisation. I can see why Sir Richard Greenbury should earn more than the person on the till but I do not remotely see why his rate of pay should increase more than that of the person on the till as the general case. That is the matter that the report was meant to be about. In my judgment it does not seem to have been addressed.

In connection with these rates and increases in top people's pay, to argue that somehow they reflect their market value flies in the face of all reason. Are we to believe that in the privatised utilities these people's world productivity suddenly sky rocketed to the degree that it did? Is that what Sir Richard is asking us to believe? Is that what the Government are asking us to believe? I do not believe it. To take the best and most productive market in the world, the United States, I have looked and asked for evidence that any of these people has been remotely even thought of in head-hunting terms in that market. Incidentally, the Statement says—I was rather taken aback by this—that,

    "total remuneration levels in the United Kingdom are well below American levels".

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Jolly right they are! American GDP per capita and American productivity are far in excess of ours. It would be extraordinary if their remuneration levels were not higher than ours. What light is meant to be thrown on anything by that statement is completely beyond me.

There is a technical question to do with the privatised utilities. That was the origin of all this. It was pay in the formerly nationalised industries that caused all the fuss. The regulator exists in these industries because they retain monopoly power. The regulator is there to regulate the use of that monopoly power and to limit it as far as possible. What I do not understand—I have argued this and my noble friends have argued this for some years in your Lordships' House—is why the Government have set their face against the worst abuse of monopoly power that one knows about; namely, the use of monopoly power on the part of the management of those former nationalised industries to reward themselves. When we put down amendments to say, "Let the regulator have that as an area that he or she can look into", the Government steadfastly say no. That does not make sense to me.

The report favours self-regulation, but the report is an example of self-regulation. If one ever wanted to put up a case against self-regulation this report would be it. Can anyone really believe that the committee, which contained not a single independent element, would look harshly on its own rewards or the rewards of its friends? I must admit that until this matter came up I had no idea of the extraordinary interlinkages between those people. They all sit on each other's remuneration committees; they all know each other; many of them sit on the boards of several of the relevant firms. The idea that that somehow leads to an independent or rational outcome defies belief.

The other point that intrigues me is the obsession on the part of top management with relativities. It intrigues me because it reminds me of the worst days of trade union behaviour. It is exactly that with which the trade unions were always obsessed. There is a certain sense of schadenfreude, if I may use that word, to see the top management at least as obsessed as the trade unions were with "He is getting more than I am getting. Why?".

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