Fourth Standing Committee
on Delegated Legislation
Monday 12 February 2001
[Mr. Peter L. Pike in the Chair]
Draft Transport Act 2000
(Designation of Transferee)
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Robert Ainsworth): I beg to move,
That the Committee has considered the draft Transport Act 2000 (Designation of Transferee) Order 2001.
On behalf of the Committee, let me say how good it is to see you, Mr. Pike, elevated to the position of Chairman. We are certain that you will do as excellent a job as Chairman as you have as a Back Bencher. Congratulations. [Hon. Members: ``Hear, hear.'']
We are here today to consider a draft order under section 51(2) of the Transport Act 2000. Under section 103(6), a draft order must be laid before and approved by resolution of both Houses of Parliament. Parliament took some time to persuade itself of the benefits of Part I of the Transport Act, but it was persuaded and gave the Government authority to proceed with the establishment of the public-private partnership for National Air Traffic Services Ltd. However, Parliament wanted the public-private partnership to proceed hand in hand with a number of safeguards. I hope that today the Committee will agree to the instrument that gives effect to the relevant protections. It is a technical matter, but, given its importance, it is right that it should be fully debated.
The draft is a relatively simple document. It is intended to designate for the purposes of section 51 of the Act a company named National Air Traffic Services (No. 2) Ltd.which, for convenience, I will call NATS No. 2. That is to be a Government-owned company and is being established for the purposes of holding the Secretary of State's shares in National Air Traffic Services Ltd. It will be the vehicle for the NATS public-private partnership: 46 per cent. of the company's shareholding will be sold to the strategic partner, 5 per cent. will be made available to employees, and the Government will retain a 49 per cent. stake. For a company to be designated under this section, it must be in receipt of assets under a transfer scheme made under section 43 of the Act. The shares in NATSthe whole share ownership of NATSwhich are currently owned by the Civil Aviation Authority, are to be transferred to NATS No. 2 under a transfer scheme to be made on 31 March, which is the date on which it is proposed that the draft order will come into effect. A further requirement relates to public ownership of the transferee company. NATS No. 2 will meet that requirement as at the time of the transfer it will continue to be wholly owned by the Government.
Having set out the technical side of the order, I shall give some detail about its effects. The designation of the company will apply the various protections in section 51 to NATS No. 2. The first protection was widely welcomed when it was first proposed. The Secretary of State must ensure that he does not dispose of any shares in NATS No. 2 unless he is satisfied that a scheme is in place to ensure the completion of major projects relating to the provision of air traffic services. The projects falling within this category are the new Scottish centre at Prestwick and the new en-route centre at Swanwick. Hon. Members who were present on Report may remember that my hon. Friend the Member for Ayr (Ms Osborne) proposed that that protection be put on the face of the Transport Act. The centre at Prestwick is in her constituency and I am pleased to see her in Committee. Designation of the company will ensure that the commitment to complete the project given by my right hon. Friend the Deputy Prime Minister will be honoured.
There are two further protections on the Government's shareholding in the PPP. One limits the Government's ability to sell shares; the other limits what the Government may allow to happen to their shareholding if new shares are issuedfor example, to fund a capital investment. I shall deal first with the Government's ability to sell shares. A sale of shares in the designated company must not reduce the Crown's shareholding in that company to less than 49 per cent. As I have explained, the Government intend to retain a 49 per cent. stake. That level of Government shareholding reflects on-going public interest in NATS, which we believe is essential for the future provision of air traffic services.
Mr. Don Foster (Bath): Will the Minister give way?
Mr. Ainsworth: Yes.
Mr. Foster: I am grateful to the Minister for giving way, albeit reluctantly. Will he confirm that, although he eulogises the Government's intention to retain a 49 per cent. stake in the new organisation, the legislation enables a large proportion of those shares to be sold subsequently if the Government so choose?
Mr. Ainsworth: My reluctance to give way was due to my not seeing the hon. Gentleman come into the Room. I was taken by surprise; I do not know whether he was late. However, if can contain himself, that issue will be reached later.
Now, where was I? [Laughter.] I was explaining that the Government intend to retain a 49 per cent. stake. That will ensure that the taxpayer gets value for money and a share in any dividends. Again, the introduction of those protections was widely welcomed in Parliament.
The second protection applies if, for some reason, the Government agree with the chosen strategic partner that new shares should be issuedfor example, to allow major capital investment or to allow a project to go ahead. The protection relates to the minimum level of the Government's shareholding: the Secretary of State is required always to hold at least 25 per cent. of the designated company's share capital.
That limit gave rise to much discussion in previous debates, and I am aware of some hon. Members' concern that that limit would give the Government a free hand to reduce their shareholdingindeed, some saw it as a stepping stone to full privatisation. We dealt fully with those matters when the Act was being considered. I assure the Committee that those protections allow the Government to sell only 51 per cent. of the shares in NATS, with the fallback provision that if, at some time in the future, the Government agree to new shares being issued, they must not allow the Crown to own less than 25 per cent. of that larger pool of shares. Those are important protections and assurances regarding the Government's continuing role in the PPP.
The next protection is that the Secretary of State must continue to hold a special share in the designated company. That requirement will be entrenched in the company's articles of association. With the shareholders' agreement, it will be used to protect the Government's rights in key areas such as the issue of new shares and the company's dividend policy. In essence, it will enable the Government to maintain the public interest while allowing the private sector freedom to run the business. The Conservatives, rightly, attached importance to the special share for the protection that it would afford in respect of national security. They also suggested that the European Commission might challenge the special share, but we remain firmly of the view that our plans to hold such a share are robust in this case.
The final protection is that the company's articles of association must not be amended without the Secretary of State's consent, and he cannot consent to any such alteration unless a statement of the proposed consent is approved by both Houses of Parliament. That is intended as a safeguard to ensure that the Secretary of State will not be able to consent without parliamentary approval to a reduction in the rights attaching to the special share.
I hope that I have explained with sufficient clarity the protections that this short order will introduce. When Parliament passed the Transport Act 2000, it gave its approval to the Government's proposal to establish the PPP, subject to certain safeguards. I trust that the Committee will now endorse the technical measure that gives those safeguards effect.
Mr. Robert Syms (Poole): I echo the Minister's words of congratulation on your elevation to the Chairman's Panel, Mr. Pike. I hope that you enjoy many happy hours of watching Committees debate weighty and important subjects, as we are today. In addition, today is my first opportunity to speak opposite the Under-Secretary of State. I congratulate him on his promotion and wish him every happiness and success in that new role.
The draft order is an important one. It is significant that a considerable amount of work was done in the Standing Committee on what became the Transport Act 2000; none the less, I have a series of questions. Will the Minister confirm that three bids have been made to be the strategic partner? How long will it take to assess the relative merits of the bids and what is the target date effecting a scheme? The Minister for Transport, Lord Macdonald of Tradeston, assured the upper House that the issue would be brought back to the Floor of the House for further discussion when the stage of having a preferred bidder was reached and when more details of the scheme were known; will that take the form of a statement, or will it be the subject of a debate? Will the Minister confirm that a statement will be made in the House of Commons so that hon. Members who have had concerns will have an opportunity to ask questions?
The Minister referred to the 5 per cent. employee shareholding, which is significant. We never really got to the bottom of how that would operate. It was presumed in Committee that there would not be a public listing of the shares. We still do not know what form the preferred bidder will take. The Minister said that some form of trust would be set up, so will he give a fuller explanation of how the shares in the 5 per cent. employee shareholding will be issued and traded? In his statement to the Committee, he said that the 5 per cent. of the shares would be made available. Does that mean that they will be given, sold or sold at a discount? Presumably they will be for employees and management, so on what basis will the 5 per cent. be divided and how will a market be made in those shares so that people who leave or join the company are able to participate in the 5 per cent. shareholding. It seems clear that the Government consider it a priority for those in the business to have a shareholding and to benefit from the growth of NATS No. 2, which would turn into the new company with a strategic partner.
The Minister referred to being robust in defence of the special share. He will know that Conservative Members have been concerned about the European Commission attacking golden shares. We had many happy hours of debate on the topic, but I should like further reassurance.
To sum up, important issues arise from the draft order, so I give notice that we may wish to divide the Committee.