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("( ) No transfer scheme shall be made under subsection (2) before the first Session of the next Parliament after that in which this Act is passed.").

On Question, amendment agreed to.

Clause 47 [Accounting provisions]:

[Amendment No. 47 not moved.]

Clause 48 [Accounting provisions: interpretation]:

[Amendment No. 48 not moved.]

Clause 49 [Issue of securities]:

[Amendment No. 49 not moved.]

Clause 50 [Government investment in securities]:

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[Amendment No. 50 not moved.]

Clause 51 [Crown shareholding]:

The Deputy Speaker (Lord Murton of Lindisfarne): My Lords, in calling Amendment No. 51, I should point out that if it is agreed to, I cannot call Amendment No. 52 owing to pre-emption.

Lord Brabazon of Tara moved Amendment No. 51:

    Page 34, line 1, leave out subsections (4) and (5).

The noble Lord said: My Lords, in moving this amendment, I wish to speak also to Amendments Nos. 52, 54, 55, 61 and 65 to 67.

These amendments are similar to the ones we moved in Committee. They concern the sale of NATS and the percentages that are to be kept by the various parties. We do not see the logic of including the 49 per cent limit when that can be diluted down as far as 25 per cent. We find that a little difficult. In Committee we suggested that 26 per cent would make more sense as it would at least give the Government the right to block any measure that required a special resolution. The Minister disagreed with that premise. My understanding is that a 25 per cent holding does not enable a shareholder to stop the passing of a special resolution but that a 26 per cent holding does. I should like some clarification from the Minister on that point.

We are also concerned that a disposal should be by means of competitive tender. The identity, competence, honesty and reliability of the private partner are vital to the effective performance of air traffic services, yet the Bill gives the Government carte blanche as to how the partner is selected, a process that could give rise to accusations of cronyism and abuse if the procedure is not transparent and open. That is the purpose of Amendment No. 52.

Amendment No. 54 concerns the designated company's articles of association. There is little point in having rights attached in the articles of association to the golden share unless they include the right to object to any change in those articles. A 25 per cent shareholding would not itself enable the Government to prevent a change in the articles of association without the power to do so being included in the articles of association.

Other amendments in this group are along similar lines. Similar amendments were moved by me at the Committee stage. I do not propose at this stage to go into the detail of all the amendments. Suffice it to say, I shall be interested to hear what the Government have to say to some of the points I have made. I beg to move.

Lord Macdonald of Tradeston: My Lords, Amendment No. 51 would have the effect of removing the obligation of the Secretary of State to hold at least 25 per cent of the ordinary share capital in the designated company and not to dispose of more than 51 per cent. That would remove the Government's current obligation to proceed by establishing a public/private partnership and would instead pave the way for full privatisation. The Government remain

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convinced that the outright privatisation of NATS to which the previous government were committed would be a mistake.

The Government have considered at great length the other options for the future of air traffic control and the issue has been debated at length. We remain convinced that a public/private partnership is the appropriate solution. Our aim is to facilitate the development of a major British-based company, successfully going out and working in air traffic control in the UK and in countries around the world, and delivering safety for those countries and for the airlines which serve them.

It is the Government's view that the PPP will provide a secure vehicle for the major investment programme--estimated by current management to be in the region of more than £1 billion over the next 10 years--which everyone agrees is essential. That investment will secure the two-centre strategy for NATS. The PPP will achieve that and the Government's interests will be protected by a wide range of measures so that the Government, as a major shareholder, will have to give their consent for any significant actions by the strategic partner. The Government will have the right to appoint a number of non-executive directors to the board of NATS and retain a special share in the company. These partnership arrangements will ensure that the Government can continue to protect the taxpayer's financial interest as a minority investor in NATS and that NATS continues to act in the public interest.

The noble Lord asked about 25 per cent as a blocking share. But what matters here are the terms of the strategic partnership agreement. That document, which governs the relationship with the strategic partner, remains fully effective with 25 per cent. We believe that the PPP will give NATS the freedom it needs in the private sector to invest in the latest systems and safety equipment and to develop the business.

Noble Lords have expressed concerns that the PPP will compromise safety. I hope that they will accept that we have listened to those concerns by tabling the amendments which we debated at the start of today's proceedings. However, perhaps I may stress again that we shall have robust powers through the Bill, through the licensing regime and through the strategic partnership agreement.

As regards Amendment No. 52, Clause 51(4) seeks to ensure that the Crown cannot sell shares in NATS where to do so would result in the Crown holding less than a 49 per cent stake. Amendment No. 52 seeks to impose a further restriction on the Crown selling its shares in NATS by requiring it so to do only by way of competitive tender.

This amendment adds nothing to the protections that are already in place. The Government have always made it plain that they intend, as part of the PPP, to sell down the Crown's stake in NATS to 49 per cent (and it will do so by competitive tender). But I need to make it clear that this does not simply mean selling to the highest bidder. The strategic partner will be selected with a number of criteria in mind, covering

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safety, national security, management capability and commitment, financial credibility and capacity, quality of strategic planning and satisfactory solutions to any real or potential conflicts of interest. This being so, for so long as Clause 51(4) is in force, the Government will not be able to sell any further shares in NATS, whether by competitive tender or by any other process, and whether to a strategic partner or to anyone else. For that reason, I invite noble Lords to withdraw the amendment.

Amendments Nos. 54 and 65 seek to create a statutory requirement to prevent any change in the designated company's articles of association. I can assure your Lordships that these amendments are unnecessary. It is and always has been the intention of the Government that the PPP company's articles of association will be subject to protection to prevent changes to the key rights, such as the special share. Once enshrined in the articles of association, the special share cannot be removed or changed. Draft articles of association have been laid before this House. If noble Lords care to consult them, they will find that they do include this right. In the circumstances, there is no need to make legislative provision and I invite noble Lords opposite to withdraw these amendments.

Amendment No. 55 seeks to remove the right of the Secretary of State to amend or repeal Clause 51 by order. I can understand the concern of noble Lords that, on the face of it, these powers may seem rather wide-ranging. However, I believe that I can assure noble Lords that adequate safeguards have been put in place. Under the provisions of Clause 102(6) an order under this clause cannot be made without the approval of both Houses of Parliament; in other words, the affirmative resolution procedure will apply.

I should also like to draw the attention of noble Lords to the deliberations of the Select Committee on Delegated Powers and Deregulation. In its report on the Bill, the committee commented that it did not regard this power as inappropriate and saw the affirmative procedure as providing appropriate control over its use.

I should additionally mention that subsection (12) of Clause 51 is not without precedent. A similar provision has been made in Section 18 of the Commonwealth Development Corporation Act 1999, dealing with matters relating to the minimum Crown shareholding. That section contains a power enabling the Secretary of State to amend or repeal it by order, and again the affirmative resolution procedure will apply.

I hope that noble Lords opposite will accept that proper safeguards have been put in place as regards the use of these powers and I invite them to withdraw the amendment.

Amendment No. 61 tabled by the noble Lord builds on one he tabled during our earlier consideration of the Bill. I appreciate the noble Lord's wish to ensure that Parliament is kept fully informed about sums paid out and received under this guarantee.

26 Oct 2000 : Column 536

The amendment suggests that the Secretary of State must disclose the reasons for the default on repayment of sums paid out under the guarantee where he knows the reasons for default, unless he is not permitted so to do because of a duty of confidentiality. Although the Government might be aware of the reasons for the default, there could be circumstances where disclosure could prejudice the Government's ability to recover moneys paid out under guarantee, even where there is not an explicit duty of confidentiality.

The second part of the amendment requires the Government to outline to Parliament any steps they take to recover the sums in question. Again, to reveal such a course of action could place at risk the Government's strategy for recovering the moneys--even if they were under an explicit duty of confidentiality. There may, for example, be a number of competing claims for funds of the company. For the Government to reveal the action they are taking could compromise commercially confidential negotiations and give other creditors an advantage.

I can assure the noble Lord that, in resisting this amendment, I am in fact seeking to protect the interests of the Exchequer rather than wishing to be less open with Parliament. The clause already sets out requirements for the Secretary of State or the Treasury to lay statements before Parliament when the guarantee is given, when payments are made under the guarantee, and if the default occurs on repayment. Should such a default occur, the noble Lord would of course be able to probe Ministers of the day through the usual parliamentary processes.

I hope that this will offer the noble Lord comfort on the matter and that, in the circumstances, he will agree that it is appropriate not to make the suggested amendment. I therefore invite the noble Lord to withdraw his amendment.

Noble Lords opposite tabled Amendment No. 67 at Committee stage. Obviously, the explanation that I gave last time in defence of retaining subsection (4) of Clause 57 was not sufficient, so I shall make another attempt at it.

The subsection is essentially a protective measure. The direction to which it relates is one which requires the CAA to release NATS from debts which the latter owes to the CAA, in readiness for the establishment of the PPP. Once NATS is classified to the private sector it will not be able to borrow from public sources. However, it is not the intention that the Government will simply write off these debts. NATS' current debt to the National Loans Fund--approximately £300 million--can be dealt with in a number of ways. A likely course of action will be for NATS to take out a commercial loan at the time that the PPP is effected, which would be used to repay its debt to the National Loans Fund. Therefore the private sector and not the Government would be responsible for the debt. The precise mechanism will be decided nearer the time of the PPP, in conjunction with the strategic partner.

However, in complying with this direction, the CAA could be said to be acting in contravention of other duties placed upon it. It might be argued that the CAA

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was not furthering the interests of its users by releasing NATS from its debt, even though it was acting in accordance with a direction given to it by the Secretary of State. The CAA would then be placed in an intolerable position; the subsection is designed to prevent that from happening.

I must make it clear to noble Lords, as I did last time, that this subsection is not a means by which important matters such as safety can be circumvented. It is simply to prevent the CAA from being subjected to frivolous and vexatious claims. I hope that noble Lords opposite will accept this explanation and withdraw their amendment accordingly.

6.45 p.m.

Lord Brabazon of Tara: My Lords, I am grateful for the Minister's detailed response to the amendments. I am bound to say that they comprise rather too big a group. I should probably not have agreed to such a large grouping.

The Minister's opening remarks almost took the form of a Second Reading speech and were a commercial for the PPP proposal. The noble Lord need not worry so far as I am concerned. I am well aware of the need for investment in this sector and I am well aware of the absolute paramount need for safety. As I said earlier, we are grateful for the government amendments moved at the beginning of our deliberations.

As regards the detail of some of the amendments, I shall need to read most carefully what has been said by the noble Lord. However, I am bound to say that I remain puzzled by the argument over a 49 per cent stake and a 25 per cent stake. If it is proposed that the government holding should be reduced to 25 per cent, why mention 49 per cent in the first place?

So far as concerns the golden share--or the special share--I am sure that I shall come back to this at Third Reading. Since the Committee stage, we have heard a judgment in regard to the BAA situation. The whole status of golden shares in privatised companies is in some doubt. I do not intend to take up further time on these issues. As I said, I shall read carefully what the Minister said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 to 56 not moved.]

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