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Lord Lea of Crondall moved Amendment No. 57:


(" .--(1) This section applies if any property, rights or liabilities are transferred under a transfer scheme to a transferee which at the time of the transfer is--
(a) a company which is wholly owned by the Crown;
(b) a company which is wholly owned by the CAA;
(c) a company which is a wholly owned subsidiary of a company falling within paragraph (a) or (b).
(2) The Secretary of State may by order designate such a transferee for the purposes of this section.

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(3) The Secretary of State must ensure that, in relation to members' resolutions of the designated company, the proportion of votes exercised by the Crown shareholder, as a proportion of the total votes available to all shareholders, shall be in direct proportion to the proportion of shares in issue held by the Crown shareholder.
(4) The Secretary of State must ensure that the Crown shareholder must appoint a number of Directors to the Board of the designated Company, so that the proportion of its appointees on the Board is equal to the proportion of shares in issue held by the Crown shareholder.
(5) The Secretary of State must ensure that at least 5 per cent. of the designated company's issued ordinary share capital shall be held by an Employee Share Trust on behalf of employees.
(6) The Secretary of State must ensure that a representative of the Employee Share Trust is appointed to the Board of Directors of the designated company.").

The noble Lord said: My Lords, the amendment deals with the detail of the strategic partnership, which is lodged in the Library and is not on the face of the Bill. That makes matters rather difficult.

We first raised this matter in Committee. This is an unusual PPP, and the question arises of what view the House should take about the strategic partnership agreement. One can readily acknowledge that there is a tension between, on the one hand, giving potential bidders the reassurance they seek regarding their capital investment, and, on the other hand, a cluster of features of the industry, about which we have heard, which circumscribe that.

Perhaps I may begin with the formula under which 49 per cent of shares will be retained by the Government, 46 per cent will be for the strategic partner to purchase, and 5 per cent will be for the employees. In his reply at Committee stage, my noble friend said that the Government have always made it clear that the strategic partner will have operational control of NATS. He said that to oblige the Government to retain voting rights equivalent to their proportionate shareholding would effectively deprive the strategic partner of voting control. Of course it would--but what was the point of the 49 per cent, 46 per cent, 5 per cent split in the first place?

One of my noble friends referred earlier to PPPs in sectors such as the National Health Service and described how well they operated. Perhaps I may take that as an analogy and demonstrate why this particular PPP is not a normal one. Is it the case in the National Health Service that a PPP would operate on the basis that strategic control of a trust would be vested in a private sector partner even when that private sector partner had a lesser shareholding than the Government? Perhaps my noble friend will comment on that when he replies.

It has been pointed out that we are talking about an area of rapid structural change, which will increase in the coming years. That is an argument which cuts both ways. The Minister's speculation, which he has reiterated, is in the context of half-a-dozen centres dealing with the lion's share of air traffic over the whole of Europe. We look forward to the report of a high level group on the single European sky. That will be the start of the process my noble friend referred to as a tremendous opportunity for the UK air traffic control industry, NATS specifically.

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In some respects, it is rather unfortunate that the European dimension will become clear only after the Bill has passed all its stages. But, depending on the amount of water that will have gone under the bridge by then, can the matter not be adjusted, if necessary, by looking again at the strategic partnership agreement, both in terms of further relations with the bidders and in terms of the European dimension? Perhaps there was a hint of that in the Minister's earlier comment.

The second element in the amendment concerns employee interests. The key issue is found in subsection (6), which seeks to build on the proposal in subsection (5) that the 5 per cent of the shares earmarked for employees should be reflected in the appointment of a director. This would be minimum recognition of the fact that we are talking about a partnership between the different stakeholders. In this regard, perhaps my noble friend will reconsider the nature of the objection he advanced in Committee when he said that he does not believe that representatives can sit on a board because of a conflict of interest. I paraphrase. That is the last argument the Minister should use. If that is his argument, I should point out that there are conflicts of interest all over the place.

We are talking about a new style of partnership. My noble friend is to be congratulated on trying to innovate. But he says that this is one area in which he cannot innovate because of his experience in Glasgow 30 years ago. We have all had experiences. He said that in those days workers' representatives could not sit on both sides of the fence. We are now talking about innovation and about a stakeholder board, in effect. Life has moved on in the past 30 years. I hope that my noble friend will feel able to revisit his philosophy on these issues.

Lord Brett: My Lords, perhaps I may refer again to my "Gulliver's travels" to Canada. I raised with the people I met in Canada the role of the trade union directors--there were two trade union directors on the board--and I asked the airline representatives whether there was a conflict of interest. They said that one of the reasons for the success of the trust was both the choice of the partners--the board of directors--and the quality of the people. They said that they found it a great advantage to have trade union representatives--this was not the trade union representatives speaking but the other directors--because they knew directly that they represented an influence; that is, the staff. They felt that in the planning process and some of the difficult decisions they had to take, that allowed for a greater understanding and a greater confidence in the workforce than otherwise would be the case.

They have a stakeholder council similar to that envisaged in the PPP. They said that they did not believe that holding the trade union representation at that level would have provided anything like the value

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of having trade union representatives on the board of directors. I hope that the Minister will take that into account in his consideration of this issue.

Lord Clinton-Davis: My Lords, I support the amendment on behalf of myself as president of BALPA. I do not speak on behalf of BALPA but on behalf of myself.

As my noble friend Lord Brett said, there is an advantage in ensuring a proper reflection of the point of view of employees. The amendment does not state that the employee must be a representative of a particular union; it involves the idea that the employees have a contribution to make. Of course they have. There is no way other than representation through the official trade union that they can make that contribution.

I know of people who have been elected because they are members of BALPA and involve themselves in policies which are important to them and important to the people from whom they have come. But it does not seem to me imperative that they should represent individual employees per se.

The amendment encapsulates the idea that employees should have a voice--no more, no less. I entirely agree with the views of those who are in favour of the amendment.

7 p.m.

Lord Hoyle: My Lords, Gulliver's Travels was referred to by my noble friend Lord Brett; but perhaps we are talking about "Brett's travels". We owe my noble friend a debt of gratitude. On so many of the issues raised in our debates today he has ascertained whether there are practical advantages in what is being said.

To take up a point made by my noble friend Lord Lea, perhaps my noble friend the Minister did have some experience in a Glasgow shipyard years ago, but the idea of not being able to serve two masters has a ring of Marxism about it rather than of partnership with new Labour. Matters have moved on. We are talking about continuous partnership between employer and employee. As we are breaking new ground, the amendment offers a unique opportunity to put an employee representative on the board.

As always, my noble friend the Minister has approached us to see whether we could reach agreement that there should be consultation with the trade unions, of their being instrumental in advising on the appointment of a director and having the same director as on the board of trustees. However, in the words of the TUC, having a trustee director on the main board could lead to a conflict of interest. As I say, it is a substitute for the employees either being directly represented or having a representative on the board.

I turn to an equally important point. We must give the employees confidence in the changes that are taking place. At present, they lack confidence and trust. They are concerned about what is happening. The way to bring them along with us is to make sure that they are directly represented on the board.

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I hope that my noble friend the Minister will take this point on board and that he is prepared to break the necessary new ground. My noble friend means what he says; there is no doubt that he would consult with employers in relation to the appointment of directors. But there will be Ministers other than my noble friends who may belong to different parties with a different philosophy. Even given what my noble friend has said, a provision needs to be written in to the Bill. If consultation is to take place, we must ensure that it does not merely take place with this Government or this Minister but with other Ministers in future governments.

I hope that my noble friend will say that employees can have direct representation. However, even given his own method--namely, consultation--I hope he will agree to consider a provision on the face of the Bill to ensure that, whichever method is chosen, it will also happen in the future with governments of a different political hue.

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