Orders of the Day — Commonwealth Development Corporation Bill [Lords]

House of Commons, 14 July 1999.

INVESTMENT POLICY

Gary Streeter (Conservative, South West Devon)

I beg to move, That the clause be read a Second time.

Michael Martin (Deputy Speaker, Glasgow Springburn)

With this, it will be convenient to discuss amendment No. 1, in clause 18, page 8, line 23, leave out from 'association' to 'unless' in line 24 and insert ', investment policy and statement of business principles'.

Gary Streeter (Conservative, South West Devon)

Conservative Members wish the Commonwealth Development Corporation to succeed. We believe in the CDC and, for most of the past 50 years, the CDC has flourished under Conservative leadership. Our concern—which is reflected in the new clause—is that, after the Bill is passed by the House and the CDC becomes a partially privatised company, gradually, it will move away from its developmental objectives. We expressed that concern in Committee; it is our greatest concern about the Bill; and we now return to it. It has been established that, after the company is privatised, it will have to increase its return on capital invested from the current 7 to 8 per cent. to about 18 per cent. per annum, so that investors will receive a return on their investment. The company will be under pressure to deliver after the Bill has been passed. Indeed, managers are already making changes—on the ground, in the field, in sub-Saharan Africa—looking for different types of investment to make. We also know that the Secretary of State is keen for a switch from loan to equity-based investment—but that is not the only change; the type of company in which the CDC is investing is changing. The CDC is increasingly looking for more high-yielding, profitable companies, regardless of whether those companies employ large numbers of people in the developing world or particularly benefit local economies in sub-Saharan Africa or Asia. The CDC is looking for yield and return to shareholders. Although that is a terrific incentive, which we support for companies around the world, the CDC is a different type of company. For 50 years, the CDC has received taxpayers' investment. The company was established to invest in pre-emerging markets—to go where no other investor would go. We simply do not want that important niche activity to be blown away by the Bill. Therefore, the question that we ask—which is dealt with in the amendments—is whether the Government have adequately protected and safeguarded the new CDC's developmental objectives. New clause 1, and other suggestions that I shall make later in my speech, are intended simply to build another line of defence to ensure that such important safeguarding is provided. It would be sacrilege if all the careful foundations laid over the years by the many people who have worked for that excellent company were destroyed. It would be more than tragic if, in future, the CDC's high reputation for helping thousands of people in the developing world were to be wasted as the company moves away from its developmental objectives and all that it has held dear as shareholders apply pressure on the board of directors to increase returns. I should make it clear that I am not talking about this Secretary of State, the current board of directors, or the board of directors that will be appointed after the Bill is passed—no one in their right mind would think that any of those people would deflect the CDC from its developmental objectives—but about a CDC that, at some point, after shareholder pressure builds and a board of directors accedes to it, goes in a direction that everyone concerned with the Bill does not want. We want to ensure that the entrenchment about which the Secretary of State boasts so loudly is watertight. In Committee, the Minister made some interesting comments on that matter, putting in a nutshell what the Government feel that they have done to safeguard and entrench the company's developmental objectives. He said: It is important to have not just a belt and braces approach"— looking at him, I suspect that that applies to his personal life, too— but other safeguards. My remark was unkind, and I withdraw it instantly. He went on to say: We have the golden share, the 25 per cent. shareholding, the two directors, the statement of investment policy, the statement of business principles and the memorandum and articles of association. We therefore have six elements tying the CDC."—[Official Report, Standing Committee D,, 17 June 1999; c. 23.] The Minister has—fair enough—identified six safeguards; that could not be clearer. I should like briefly to examine each of them in turn, to ensure that the Government have done enough. We have been told that the first safeguard of the CDC's developmental objectives is the 25 per cent. shareholding. However, it is worthless as a safeguard. It does not prevent 75 per cent. of the shareholders passing the special resolution that is needed to change the memorandum and articles of association. It cannot prevent a change in the investment policy. The fact that the Government will retain 25 per cent. of the company is utterly worthless as a safeguard; that one did not come up to the mark. Secondly, we were told that two of the directors would be appointed by the Department for International Development. However, at another time in Committee, we were told that the board would probably consist of 11 people, two of whom would be appointed by the DIFD. Of course, some of the investors would want their own representatives on the board, and those representatives will be the most susceptible to succumbing to pressure to shift the company away from its developmental objectives. In the Secretary of State's terminology, two out of 11 may be a majority. I can imagine meetings in the Department for International Development. Ten or 11 people might be present, and all might oppose the motion except the Secretary of State, but the motion would be carried. I can understand that that might happen in the Department for International Development, but she must realise that two directors can easily be outvoted in a board of 11. Those two placed directors cannot protect or safeguard the developmental objectives on their own. Therefore, I am afraid that, as a safeguard, the presence of two such directors is utterly worthless. Thirdly, we come to the statement of business principles, which we embrace and support. I quoted it extensively at Second Reading; I do not intend to do so again. It is a very worthy document. Who could disagree with the principles set forth in relation to business integrity, the environment, health and safety and social issues? However, that statement of business principles does not differ significantly from the business principles that any major multinational corporation would adopt. I have looked at business principles adopted by BP, Shell and Marks and Spencer, and they are all rather similar. There is nothing in those business principles that would cause the company to adhere to its investment policy or to its developmental objectives. That was the third safeguard that the Minister set out, and it also is a damp squib. Fourthly, the Minister said that the memorandum and articles of association were part of the safeguard; but there is no general protection in the memorandum and articles as a whole. I assume that the Minister was referring to article 51, which relates to investment policy. I believe that it is worth reading. Article 51(A) says: CDC will have an investment policy to cover the conduct of CDC's investment business. The policy must be designed to achieve CDC's objective of maximising the creation and long-term growth of viable businesses in developing countries and achieving attractive returns for shareholders. Those words are more or less now contained in the mission statement. However, that paragraph merely points us towards the investment policy. Article 51(B) says: The policy must include a particular focus in the conduct of CDC's investment business on benefiting poorer countries. especially those in sub-Saharan Africa and South Asia. Who could disagree with that? However, it simply points us towards the investment policy; it does not add to it or buttress it. Article 51(C) says: The directors will conduct the investment business of CDC in line with the investment policy. They will establish procedures which enable them to see whether the investment policy is being complied with by CDC and, to the extent relevant, its subsidiary undertakings. We already know that the company is to be run, according to this piece of paper, in line with the investment policy; but, as I shall show, that investment policy is not watertight. That policy, the only safeguard in relation to the conduct of the company, does not contain the necessary safeguards. Finally, article 51(D) says: The directors will report each year in CDC's annual report on CDC's compliance with the investment policy. This report will contain sufficient information to allow a reader to make an informed assessment of the investment business of CDC and its subsidiary undertakings as against the requirements of the investment policy. That is a very welcome statement. No doubt, the company's annual report will contain information about the investment policy and whether the directors are complying with it. We welcome all that, but it merely points us towards the investment policy, which I shall consider in a moment. The report referred to in article 51(D) is simply a report by the directors, not to Members of Parliament or to some compliance committee, but to the shareholders—the very people who, in future, might put the directors under pressure not to comply with the investment policy. Therefore, the memorandum and articles of association—the fourth safeguard—are not in themselves a safeguard. They simply point to the investment policy. The fifth safeguard that we were assured of was the golden share. Article 51 says that there shall be no change in the investment policy without the consent of the special shareholder—that is the Secretary of State, the holder from time to time of the golden share. That is welcome. It means that the investment policy cannot be reduced or diluted without the Secretary of State's specific approval. We welcome that; we support that part of the memorandum and articles of association. However, it tells us nothing about the existing investment policy. It adds nothing to the safeguard, or otherwise, constituted by the existing investment policy, and, if the existing investment policy is flawed—as I say that it is—the fact that the Secretary of State must give her consent to any change to it does not help us at all. We come to the sixth and final safeguard that the Minister told us about in Committee. The other five do not satisfy Opposition Members.

Tam Dalyell (Labour, Linlithgow)

On the golden share, what additional powers is the hon. Gentleman seeking? What is he saying ought to be there that is not? The golden share operation is very complicated and can be subject to all sorts of interpretations—as we know from experience over the years—but what exactly is the hon. Gentleman asking for?

Gary Streeter (Conservative, South West Devon)

That is a very fair question; the answer is this. I am asking, first, that we get the investment policy right in the first place, because that is the thing that is being entrenched; and secondly, that we incorporate into the Bill new clause 1, which at least will place on the company an obligation to report to the House, so that, annually, we who have superintended this company for 50 years might see the extent to which the investment policy is being complied with. Who knows, the Minister may spring to his feet in a second and agree. We say that the first five safeguards are utterly irrelevant and worthless and have no value in themselves, so we turn to the investment policy. The question that we ask is, does that policy prevent a future CDC moving away from its developmental objectives? I accept that the Secretary of State and the Minister genuinely believe that they have entrenched the developmental objectives in this way, but I do not think that they have succeeded. I remind them that I am talking about a future CDC, under pressure to perform—to move from an 8 to an 18 per cent. return—whose shareholders put pressure on the board to invest in high-yielding, high-performance companies. That is the context in which such a change might happen. I said in Committee that the investment policy, the text of which I now hold in my hand, would allow a future CDC to agree to invest in listed companies only—perhaps one, two or three of the top listed companies in one, two or three places, such as India, Zimbabwe, Kenya or sub-Saharan Africa. If the CDC invested in only one or two companies in one or two of those places—I accept that sub-Saharan Africa must feature—it would be complying with the wording of the investment policy. The Secretary of State did not disagree with that proposition. She said that Zimbabwe, India and Kenya have problems. We know that, but in each of those countries there are blue-chip companiescopper-bottomed companies. Would the letter of the investment policy prevent a future CDC board investing in one or two listed companies in South Africa only, where some of the world's most successful and wealth-creating companies are based? It certainly would not. I stand to be corrected by the Minister or the Secretary of State, but I can see nothing in the investment policy that would prevent a new CDC from investing on the South African stock exchange only. Nothing in the investment policy says how many companies the CDC must invest in, or what type of company it can invest in. Two or three minor provisions prohibit it from investing in certain types of company, but it can invest in any type of high-performance, high-yield company that it wishes, irrespective of the fact that it is not a spread or a mix or a portfolio mix that contains job-creating companies and is benefiting the local economy. We know that 70 per cent. of investment must be in the list of countries attached to the investment policy, but the list includes almost all the world. The list includes many poor countries, but it includes also many countries in which there are thriving businesses and stock exchanges. There is also a provision that 50 per cent. of the investment must be in sub-Saharan Africa. As I say, South Africa, Zimbabwe and Kenya all have copper-bottomed companies that the CDC could invest in. I do not think that the investment policy is watertight. It does not do what the Secretary of State told us it would do, which is to entrench the developmental objectives. I do not take great pleasure in saying that—I just think that we could drive a coach and horses through the policy. The test is not the likelihood of a future board investing in the way in which I have suggested, but whether it has the legal ability to do so. It is clear to me that it does. It is no good me bleating about this unless I make a specific suggestion as to what to do. The new clause suggests that the company should report to the Secretary of State on its investments and policy each year, and that that report should be tabled in the House of Commons. That does not close the loophole. It would be after the event, but it would at least give the House an opportunity, at an early stage, to debate such a breach of the investment policy and to do something about it. In Committee, the Secretary of State referred to an obligation to produce an annual report, and the Department produces an annual report. However, the report is not debated as a matter of course in the House of Commons. The annual report deals with everything that the Department is doing in that year. How much space will there be to analyse in detail the investment policy of the new CDC? We want a specific report, dealing with the extent to which the new CDC has complied with its investment policy. Let the House decide whether the 50 years of investment by the British taxpayer is being honoured and safeguarded by the new CDC. In Committee, the Secretary of State said that the Select Committee could look into the matter from time to time. The distinguished Chairman of the Select Committee, my hon. Friend the Member for Hertford and Stortford (Mr. Wells), is here this evening. I wonder whether the Committee would have the right to investigate decisions made by a company in the private sector—a company with 75 per cent. of its shareholding owned by private investors. Would the Select Committee have the right to call for the directors to attend the Committee? Would it have the right to investigate as it needs to? I do not think that the safeguards are adequate, and the Minister and the Secretary of State should consider agreeing to the new clause, saving us all the bother of a division. If they accept it, an annual report will be presented to Parliament, so that we can srcutinise what the company is up to. We must be in a position to monitor the company and to act quickly. My second helpful suggestion is to change the investment strategy now, before the Bill goes through. We have five paragraphs on the first two pages of the investment policy which deal with general principles and provisions. However, the investment policy lacks a catch-all provision that is designed to express the spirit that lies behind the past 50 years of the CDC, as well as the future, in terms of the mixed portfolio and its investment in companies which generate jobs and benefit the local economy. When those expressions are found in the policy statement, there is a caveat about the opinion of the directors or the profitability of the company. Let us have a clear statement in the investment policy, setting out the spirit of the developmental objectives pursued by the CDC prior to this Bill becoming law. In future, the measure would give an aggrieved shareholder the right to go to law to claim that the company was breaching its investment policy. At the moment, we can drive a coach and horses through the policy. However, a paragraph setting out the spirit of the CDC past and future would give an ethical investor—who may be worried that the company is moving away from its developmental objectives—a chance to go to law and seek redress. There would be something for a court to hang an order on. At the moment, that is not there.

Tam Dalyell (Labour, Linlithgow)

The imputation is that the CDC has invested, if not improperly, at least in grey areas. Is there any evidence of investment that is unsatisfactory? The hon. Gentleman ought to produce it if he is saying that.

Gary Streeter (Conservative, South West Devon)

The hon. Gentleman—whom I deeply respect—has missed the point. Previously, the CDC has not been under pressure to produce a financial return. Once the Bill goes through—when the hon. Gentleman will be voting for privatisation—the CDC will move from a return on capital invested of about 7 per cent. to one of 18 per cent. My argument is that there will be shareholder pressure on the board of directors to deliver a new level of profit. Increasingly, the board will move away from investing in the beneficial, long-term, job-creating local economies of which the company has been so proud in the past towards high-yield, fast-return, high-tech companies. There is nothing wrong with such companies, but the CDC was designed to open a new niche in development overseas, on behalf of the British taxpayer, in pre-emerging markets and countries. Our fear, that the CDC will move away from that special niche, caused us to table the new clause. There are concerns that the Government are trying to do something that they cannot do—find a third way for the CDC. Of course, there is a case for the sale of the CDC, and we all want private sector investment. There is a case for fully privatising the company to attract a large sum of money which we can invest in the developing world. There is a case also for retaining the CDC in the public sector and for finding other ways of opening the windows and attracting private sector investment while the company remains publicly accountable and under public control. Is there a case for burdening the company with regulations—and expecting it to fly in the private sector—so that the price on sale would be reduced, while setting up a creature that cannot live up the expectations of private investors and will be tugged, year after year, away from its developmental objectives? The new clause reflects our belief that the Government are trying to find a third way for the CDC which simply does not exist. We very much hope that the Government will listen to our arguments, make sure that the developmental objectives are safeguarded and accept the amendment.

Tam Dalyell (Labour, Linlithgow)

It behoves those of us who were not on the Committee to be brief, and I simply wish to ask two questions. First, the history of golden shares is rather unsatisfactory. I wonder whether my hon. Friend the Minister has any comment on the operation, or lack thereof, of the golden share. It is always given as a failsafe but, in fact, is seldom used. If there is a crisis or difficulty, the golden share is not quite a satisfactory fall-back, as is often made out. Secondly, thanks to my hon. Friend the Minister's position with the Inter-Parliamentary Union, I had the good fortune three years ago to be a member of the IPU delegation to Nepal. It is in the context of Nepal that I ask whether the CDC's attitude to risk has been all that it might be. I have just come from a little ceremony at the Nepalese embassy. I was able to talk about those matters, knowing that this business was coming up. Is risk sufficiently taken into account in the operations of the CDC when it comes to investment in countries the figures for which suggest that they are very poor? Nepal may seem very poor from the figures, but it is run in such a way that there is very little child malnutrition or illness; it is impressively run in many ways.

Clare Short (Labour, Birmingham, Ladywood)

Nepal's gross domestic product per head is $200 and almost all the women are anaemic. There is great poverty and high infant mortality. The country is very romantic and attractive, but the people's poverty is very great. We must work more effectively with Nepal on children's education and development.

Tam Dalyell (Labour, Linlithgow)

I am glad that my right hon. Friend, whose visit to Nepal was extremely successful, takes the attitude that something must be done.

Jenny Tonge (Liberal Democrat, Richmond Park)

I am speaking in support of amendment No. 1, but I urge Ministers to consider the new clause seriously. There is little difference in it from what is already in page 25 of the articles of association. It requires more detail and would have to be presented formally, but it would not substantially alter the spirit of the Bill and would give more information and make everyone a lot happier. Amendment No. 1 is not designed to slow down the Bill. The Liberal Democrats support getting more money into development and changing the way in which the Commonwealth Development Corporation is run, but we are concerned about the conflict between development and getting a good return for the shareholders, which the hon. Member for South-West Devon (Mr. Streeter) eloquently set out. As the Select Committee heard, the problem is trying to serve both God and mammon. We want to strengthen the Bill and make it less ambiguous.

Clare Short (Labour, Birmingham, Ladywood)

This is an enormously important matter. Both opposition parties, in their misunderstanding, paint a depressing future for developing countries. If those countries cannot attract private sector investment that will get a reasonable rate of return, their prospects for economic development are disastrous. Both the hon. Member for South-West Devon (Mr. Streeter) and the hon. Lady are suggesting that sustained economic development in developing countries through the private sector is impossible. That is clearly not the case.

Jenny Tonge (Liberal Democrat, Richmond Park)

I entirely agree that developing countries need investment and we all want them to have it, but to attract that investment they often have to cut corners on sustainable development and the good of their people and environment. As the Bill is currently drafted, the Government will hold a golden share that gives the Secretary of State special rights under the articles of association. Clause 18(3) requires any alteration of those articles that require the Secretary of State's approval before they can be altered to be approved by both Houses of Parliament. That is worrying, as it implies that there is a choice as to which articles require the Secretary of State' s approval before they can be altered. Under article 51(F) of the articles of association, any alteration to the investment policy would require the approval of 50 per cent. of shareholders and the special shareholder. Under article 52(E) any alteration to the statement of principles and policies may be made by the CDC board by a majority vote, including at least three members of the business principles committee. The articles of association, the investment policy and the business principles appear to be in descending order of importance as to how far away from the Government and the Secretary of State they can be before any change is made, but the Bill's aims will be met only by adherence to business principles and to the investment policy, which sets specific targets for the percentage of new investments made for the benefit of poorer countries: at least 70 per cent. of investment by the CDC, or improved investment vehicles, over any five consecutive periods, has to be, in the opinion of the directors, for the immediate or prospective benefit of poorer countries. In the old CDC, an additionality test was applied. That will no longer happen and, according to the Library research paper, any investigation of potential investments will have to include an assessment of compatibility with the CDC's ethical values or business principles. That is clearly set out in the technical box in the research paper, and the potential mismatch between commercial viability and development value is also clearly summarised. Under the previous legislation, the CDC was charged with the task of assisting overseas countries in the development of their economies. The term "development" is significantly missing from the Bill and there is only limited mention of it in the accompanying documentation. Instead, the CDC argues that its business principles will support and reinforce the development focus. As the hon. Member for South-West Devon said, codes of conduct and business principles are wonderful things and come in very glossy brochures, but they are not always adhered to in practice. If we want proper development to occur through sustainable and ethical investment, the real control that the Secretary of State and the Government need is of the business principles. They are the key, because they direct the investment policy—a change for the CDC—that is controlled by the articles of association. Why then can the business principles be changed with only the lightest touch from Parliament via the Secretary of State's nominees on the business principles committee, with no direct reference to the Secretary of State or Parliament? I beg the Secretary of State to accept our proposals and ensure that the business principles, and thus the investment policy, cannot be changed without the agreement of Parliament.

Edward Leigh (Conservative, Gainsborough)

I wonder why Ministers are opposed to the concept of an annual report. It may be because they are rather schizophrenic about what exactly the new company will be. They are trying to persuade the House that it can have all the virtues of a private company but meet the objectives of a publicly owned company. Article 51(A), which was referred to by the hon. Member for Richmond Park (Dr. Tonge), clearly states: CDC will have an investment policy to cover the conduct of CDC's investment business. The policy must be designed to achieve CDC's objective of maximising the creation and long-term growth of viable businesses in developing countries and achieving attractive returns for shareholders. Paragraph (B) states: The policy must include a particular focus on the conduct of CDC's investment business on benefiting poorer countries, especially those in sub-Saharan Africa and South Asia. The Government will refer to that article in defence and say that it will ensure that CDC will help the poorer countries, but as my hon. Friend the Member for South-West Devon (Mr. Streeter) pointed out, there are many successful large companies in those poorer countries which will inevitably have to attract the investment of the new CDC if it is to meet its obligations to its shareholders. If I know anything about company law, it will be required by law to act in the best interests of their shareholders. The Government have tried to convince the House that we will be able to meet the objectives because of the articles of association, but if one reads them one comes to the inevitable conclusion that the defensive mechanisms against preventing the company from becoming like any other investment company in the private sector are not as strong as they should be. Given that there is some doubt on the subject, surely it is not too much to ask for an annual report to Parliament so that we can be convinced that the company is meeting the objectives that we all share.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

I can understand why the hon. Member for Gainsborough (Mr. Leigh) is concerned and I shall deal with his point later. He has not been involved in the Second Reading and Committee stage, so I understand why he may not fully appreciate the safeguards contained in the Bill. However, I despair of the Opposition Front Benchers. They sat through Second Reading and Committee and heard the Secretary of State's clear explanations—and mine—but they seem incapable of understanding, or they are unwilling to understand. I do not know whether the problem is my inadequacy, but I shall try again—

Menzies Campbell (Liberal Democrat, North East Fife)

It will be a waste of time.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

Well, as the right hon. and learned Gentleman knows, I am a helpful cove so I will try again. I must tell the hon. Member for Richmond Park (Dr. Tonge) that there was ample opportunity to table amendments in Committee. Indeed, she will recall that we did not use one of the sittings that we were allocated. We were willing to hold another sitting to deal with any amendments, but no one took up the opportunity. I assure her that all her concerns, which we share and understand, are adequately covered in the Bill. I hope that she will accept that assurance and not press her point. An amendment containing provision for an annual report was tabled in Committee and my right hon. Friend Secretary of State dealt with it extremely well. She explained that the CDC will be required by the Bill to make an annual report to the Secretary of State, who is required to make an annual report to Parliament. That can, if the Opposition wish, be debated in Opposition time or the Government can make time to debate it. The hon. Member for South-West Devon said that it would not be debated as a matter of course, but there is no guarantee either that a CDC annual report would be debated as a matter of course because provision for that is not included in the amendment. The Select Committee also has powers. It has an effective Chairman and its members know what they are talking about. The Committee can, if it wishes, call the Secretary of State, or myself, or officials before it to ask questions about the CDC and its investment policies.

Bowen Wells (Conservative, Hertford and Stortford)

I thank the Minister for his kind remarks. Can he confirm that as the Government will always hold the golden share unless Parliament decides otherwise, the Select Committee will always have the power to call Ministers and officials in front of it to explain the policy that the CDC is adopting?

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

The hon. Gentleman has, as usual, gone straight to the point and grasped it. The Select Committee will be able to do that. The hon. Member for South-West Devon again gave the hypothetical example he gave in Committee that the CDC might invest only in the top three listed companies in Kenya, India and Zimbabwe. That is not likely, not only for developmental reasons but for good investment reasons. Any organisation in its right mind would not have such a portfolio and that is a totally unlikely scenario. The Government have carefully considered what the CDC's development role should be and how it should be complementary to the role of others. The CDC's aim is to maximise the creation and long-term growth of viable businesses in developing countries, especially the poorest countries, to achieve attractive returns for shareholders and to implement ethical best practices. Practical measures to implement those are entrenched in the CDC constitution. The hon. Member for South-West Devon referred to my contribution in Committee in which I desrcibed the relevant six elements. Then he took one and said that it was not enough. He took another and said that that one was not enough. He went through all six, but he failed to understand that it is the combination of all of them that will work. For example, the golden share will give the necessary rights over changes that a share of 25 per cent. might not be able to block. We are protected by the golden share, the investment policy and the business principles. The hon. Member for South-West Devon also raised the question of whether the sectors in which the CDC invested would change over time. They are already changing to take account of the CDC's present obligations. For example, in India, the CDC has invested in the first private sector internet access provider. That will help business access information and generate new business opportunities related to the internet. In Africa, the CDC has invested in the expansion of cellular telecoms, which have a significant effect on business efficiency. The CDC is investing in new areas, helping development and getting a good return, but it is not ignoring traditional sectors. For example, in Belize—a country that the Opposition know well, for reasons I will not go into—CDC Industries is in the process of completing a $40 million investment in the citrus industry. In Bolivia, the CDC has invested £3.8 million in Banco Sol, a micro-finance institution which finances 85,000 micro-enterprises in Bolivia. The CDC is helping development and getting a good return. The hon. Member for South-West Devon also raised the question of the two directors and said, in a glib and superficial way, that two would not form a majority over 11. Even I can work that out. However, he did not say that the business principles committee will have four members and the Secretary of State's two nominees must be on it. The board of directors cannot change business principles unless a majority of the business principles committee—at least three—agree. If the Secretary of State's nominees do not agree, a majority of three cannot be achieved. Even the hon. Gentleman can work that out. I can tell my hon. Friend the Member for Linlithgow (Mr. Dalyell) that we do not envisage changing the role of the golden share or abandoning it. It gives power to stop change. The occasions that he mentioned happened under a Conservative Government. We are determined to use the golden share if the necessity arises, but we do not think that it will, because the CDC board that we envisage will want to operate on the investment and business principles that we have agreed with it. Finally, on amendment No. 1, we can understand why it has been tabled, but it is not necessary. The mechanisms that we have set out will provide the proper protection. Parliament has a role. Unless Parliament agrees otherwise, the CDC is required to have an investment policy designed to achieve the objective of maximising both the creation of and the long-term growth of viable businesses in developing countries and of achieving attractive returns for shareholders. We have that power at the moment. No change can be made to the investment policy, for example, without the approval of the majority of ordinary shareholders and the consent of the special shareholder, the Secretary of State. The investment policy therefore cannot be changed without her approval. The method for changing the business principles is different, because the issues raised are different. Change to the business principles and policies can be made only by a majority of the board which, as I said earlier, is to include at least three of the four members of the business principles committee. The hon. Member for South-West Devon talked about belt and braces, and rather unkindly said that I am the sort of person who needs them. The Bill provides for two sets of both—or even three, given what I said to my hon. Friend the Member for Linlithgow. The matters that have been raised are adequately covered.

Jenny Tonge (Liberal Democrat, Richmond Park)

I am still worried that the CDC's—and the Minister's—trousers will fall down. The business principles are key to the success of the whole operation, yet they are less controlled than the investment policy. My earlier point was that it should be the other way around.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

I should certainly be acutely embarrassed if my trousers fell down. The CDC would be embarrassed if anything went wrong with the links between its investment policy and business principles. However, I urge the hon. Lady to consider the matter again. The investment policy is far more important, in the context about which she is worried, than the business principles.

Jenny Tonge (Liberal Democrat, Richmond Park)

The Bill states clearly that the investment policy is determined by the business principles, whereas the old CDC adopted a process of additionality.

George Foulkes (Labour/Co-operative, Carrick, Cumnock and Doon Valley)

The matter has been explained, in Committee and again today. Of course all the elements are important in different ways, but they are deeply entrenched. We expect CDC's investments in all sectors to make a contribution to development and to achieve attractive returns. That will give us the best of both worlds, and I urge the hon. Member for South-West Devon, in the light of my third—and I hope lucid—explanation to him, to withdraw the unnecessary new clause.

Gary Streeter (Conservative, South West Devon)

The Minister is being uncharacteristically complacent. His belts do not fit and his braces are slack. The Bill contains a real risk that the developmental objectives of the company will be lost. The 50 years of careful and patient investment by the CDC and this country's taxpayers are being placed at risk by the Bill. The Minister is too complacent to accept that, and I urge the House to vote for the new clause.

City of London (Ward Elections) Bill

John McDonnell (Labour, Hayes and Harlington)

On a point of order, Mr. Deputy Speaker. I gave notice to Madam Speaker that I would raise this point of order, which relates to the point that I made on Second Reading. You will recall that I asked whether the Bill was compatible with section 19 of the Human Rights Act 1998, and whether legal advice had been sought and published. We have debated the Northern Ireland Bill this week—it contains a clear statement by my right hon. Friend the Secretary of State for Northern Ireland that it complies with the Human Rights Act 1998. I believe that a similar statement should be attached to all future legislation. Section 19 of the 1998 Act requires that the Minister in charge of a Bill in either House of Parliament must, before Second Reading of the Bill make a statement about the compatibility of the Bill with the convention rights defined in section 1 of the Act. The Northern Ireland Bill states that the Secretary of State for Northern Ireland has made the following statement: In my view the provisions of the Northern Ireland Bill are compatible with the Convention rights. That seems to be the procedure for legislation as regards human rights. On Second Reading, Mr. Deputy Speaker, you suggested that this was a matter for the courts. I can appreciate that, but clearly individual Ministers or promoters of Bills must now ensure that they comply with the Human Rights Act. The issue to which I am referring is specifically in relation to the convention on the protection of human rights and fundamental freedoms as amended by protocol 11. Article 3 of that protocol, which is headed, "The Right to free elections", states: The High Contracting Parties"— that is, the individual countries that have signed the convention— undertake to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature. It does not refer to businesses. We are now operating in a supra-national political and legal environment. Of course, we are governed by Parliament, which is sovereign, but it is no longer totally so in relation to that legislation. Therefore, I asked earlier at the Private Bill Office whether that legal advice was sought, whether the Lord Chancellor had given his opinion, and if so, what it was—should it be published or at least laid in the Vote Office or the Library? In my view, if the House knowingly and wilfully proceeds to introduce legislation that is contrary to the convention, that is one thing. That is a decision of the House, individual Members promoting the Bill and Ministers who may support it. However, if hon. Members blunder into legislating contrary to the convention, without advice, it is a dereliction of duty on behalf of the Lord Chancellor or the Officers of the House in not affording us such advice. I would welcome your views, Mr. Deputy Speaker.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I am grateful to the hon. Gentleman for giving notice of his point of order. I hope that I can resolve the matter in fairly simple terms. In the case of a private Bill, the issue that the hon. Gentleman raises is a matter for debate and not for the Chair. The House will be aware that section 19 of the Human Rights Act 1998, as the hon. Gentleman reminded us, obliges a Minister in charge of a Government Bill to make a statement of compatibility before Second Reading. No similar provision occurs in the case of either private Member's or private Bills.

John McDonnell (Labour, Hayes and Harlington)

Further to that point of order, Mr. Deputy Speaker. Can I clarify the matter? Is any hon. Member who seeks to promote legislation in debate in the House liable, therefore, to digress against the convention on human rights, which we have incorporated in legislation? If we enact this legislation—I hope that we do not because it contravenes everything that we stand for both in terms of human rights and party policies—does that mean that the City corporation, if it instigates some form of election under the legislation, is open to legal challenge? I would be grateful if, at some stage, in addition to the advice that you have provided, the Lord Chancellor could be consulted and we could have some advice on that matter, too.

Robert Jackson (Conservative, Wantage)

Further to that point of order, Mr. Deputy Speaker. It might be relevant to report to the House that, as Chairman of the Select Committee that considered the Bill—we spent several days on it and heard petitioners—I can confirm that that issue was not raised by any of the petitioners and did not come before the Committee at any stage.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Member for Hayes and Harlington (Mr. McDonnell) does not do himself a service because he has illustrated that that is a matter for debate; it is not a matter on which the Chair can rule.

John McDonnell (Labour, Hayes and Harlington)

Further to that point of order, Mr. Deputy Speaker. Previously, I raised a point of order about declaration of interests. Under the heading, "Declaration of Members' Interests" in the code of conduct, the principle is clearly established that Members shall fulfil conscientiously the requirements of the House in respect of the registration of interests in the Register of Members' Interests". Paragraph 5 of the code of conduct states clearly: The main purpose of declaration of interest is to ensure that fellow Members of the House and public are made aware, at the appropriate time when a Member is making a speech in the House or in Committee or participating in any other proceedings of the House, of any past, present or expected future pecuniary interest". It also mentions miscellaneous interests. We are debating legislation that would give companies and banks within the City of London the right to a vote and, therefore, the right to an interest within the City corporation. I do not believe that any hon. Member has so far declared any interest in relation to this matter. However, I cannot believe that there is no hon. Member or member of the Committee who does not hold some form of bank account or have some interest in a body that is located within the City of London. I have a Co-operative bank account—there is not an awful lot in it, but I still have it. That bank is located within the City. That is an interest, because that company will now have a vote in the City corporation elections if the Bill is enacted.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The position is clear. Any hon. Member who believes that he has in interest relevant to any matter that comes before the House should declare it. If any hon. Member feels that there has been a failure to disclose, there is a procedure for reporting and investigating that.

INTERPRETATION

John McDonnell (Labour, Hayes and Harlington)

I beg to move amendment No. 7, in page 2, line 19, at end insert— 'relevant employee" means a person whose principal or only place of work on the qualifying date is ordinarily the hereditament in respect of which the entitlement to appoint a voter arises and who works for that qualifying body.'.

John McDonnell (Labour, Hayes and Harlington)

On Second Reading, there was considerable dissatisfaction with the Bill. The Committee was established and petitioners petitioned against the Bill. There have been some minor amendments, but they are insignificant. The statement from the Committee draws attention to the fact that the Bill remains flawed—extremely flawed. A number of proposals are recommended in that statement to make further improvements. As it is a matter of debate, the Committee did not consider human rights, or the contravention of the Human Rights Act 1998, even though that matter was raised on Second Reading. It was a dereliction of the duty of the Committee not to discuss that matter in Committee or to seek legal advice. However, the Committee set out a number of detailed recommendations—

Robert Jackson (Conservative, Wantage)

The hon. Gentleman accuses the Committee of dereliction of duty, but we were confined to the requests that were put before us by petitioners. It was our duty to consider those. Human rights were not raised by any of the petitioners.

John McDonnell (Labour, Hayes and Harlington)

I should have thought that any Committee should take into account the Second Reading debate and the matters raised in it, if only for the background and the environment in which it considers the legislation. I am happy to give way to the hon. Gentleman if he wants to explain why the Committee did not take cognisance of the Second Reading debate. The human rights convention was a critical issue in that debate, yet the Committee blatantly ignored it. Members of the Committee pursued its practices and considered the matter, possibly thereby incurring some liability in the future.

John McDonnell (Labour, Hayes and Harlington)

In mitigation, Mr. Deputy Speaker, I think that I was provoked to enter into debate on that matter because of the intervention, but I will not test your patience any further. The special report lays out a number of interesting suggestions for the City corporation and, in that respect, I congratulate the Committee for at least identifying the fact that the Bill is flawed and stating that it should be part of a wider reform process. In other words, it is the first step on a long path to establish some form of democratic government within the City corporation to protect the rights of the residents. It is in that context that I tabled my amendments. The need for reform is beyond doubt. The City of London corporation accepts the need for reform, although it does not implement reforms. Indeed, in an almost jocular way, it ignored most of the recommendations that have been made so far. The statement agrees that reform is needed, but the tragedy is that none of the recommendations can be contained in the Bill. That most significant point was made by the Chairman and other members of the Committee. The Bill will do little to achieve a process whereby we can have confidence that the corporation will reflect the interests of its residents or even of its business community. The statement includes a range of recommendations for the promotion of reform. However, most of them rely on the good will of the corporation—that is why I tabled my amendments. It has taken 600 years to rely on the good will of the corporation.

Gareth Thomas (Labour, Harrow West)

Will my hon. Friend give way?

John McDonnell (Labour, Hayes and Harlington)

I will give way if my hon. Friend wants to correct the number of years.

Gareth Thomas (Labour, Harrow West)

A thousand years.

John McDonnell (Labour, Hayes and Harlington)

That is a millennium achievement for the corporation. The amendments attempt to redress the balance, because the Bill fails to tackle the problems of the democratic deficit of the corporation. Most of the recommendations in the special report of the Committee rely on the corporation to review boundaries, to examine internal or external boundaries, or to obtain legal advice on its powers. The corporation does not seem to have enacted even that recommendation—or, if it has, none of us is aware of it. If the corporation has obtained legal advice and hon. Members have seen it, I should be happy to read a copy of it. In relation to the recommendations on boundary review, why can not the corporation use the boundary commission like any other local government body? We have received no commitment in writing from the corporation that it has approached the boundary commission. In the statement, there is an admission that the right of veto on the common council of the City of London still exists. Before I tabled my amendments, I hoped that there would be one letter from the corporation stating that it would withdraw the veto. We can all remember cases of individuals who were vetoed, even after their election. The classic example is Mr. Malcolm Matson. I understand that he communicated with several hon. Members before Second Reading. The amendments attempt to move the measure forward within its own constraints. I tabled other amendments, which were not selected. They would have ensured that the residents had a controlling vote. It may have been rather ambitious to attempt to abolish the business franchise through my amendments. The corporation is the last vestige of undemocratic privilege within our system of government that is formally constituted in legislation. It is the last hurdle—the last hedge that we must go over.

John McDonnell (Labour, Hayes and Harlington)

I accept your ruling, Mr. Deputy Speaker, but there is a background to the amendments that needs explanation. It is the undemocratic nature of the existing system. We must explore that to ensure that the amendments tackle the problems that are part of the undemocratic privilege exercised by the City of London corporation.

Michael Connarty (Labour, Falkirk East)

I commend my hon. Friend for filling in those details for some of us who did not follow closely the Second Reading debate. I hope that the Chair will not interrupt so much in future.

Michael Connarty (Labour, Falkirk East)

I apologise if the Chair is offended. However, Back Benchers should be defended by the Chair. I hope you, Mr. Deputy Speaker, will defend our right to hear someone who is clearly knowledgeable, so that we can fill in the background. I apologise if you were offended by the way that I put it.

John McDonnell (Labour, Hayes and Harlington)

Thank you, Mr. Deputy Speaker.

Norman Godman (Labour, Greenock and Inverclyde)

May I ask a question about amendment No. 13? I understand that that amendment would give relevant employees the right to stand for election as a voter. If the amendment were passed, would every employee in a City establishment—within the square mile—have the right to stand as a voter representing that company? I have more than a passing interest in the matter; I am a council house tenant of the City of London corporation and a peripatetic constituent of the right hon. Member for Cities of London and Westminster (Mr. Brooke), who is one of the supporters of the Bill.

John McDonnell (Labour, Hayes and Harlington)

I am not sure whether there are any amendments on peripatetic voting, but 1 advise my hon. Friend not to suggest that to the corporation. Even if we cannot achieve full, universal, adult suffrage for the corporation—as there is in the rest of the country and in America and in most European and other states—at least, given the argument that it is a business district, the employees who make the wealth of that area should be able to vote. That is the purpose of my amendments. [Interruption.] I do not know whether that was an intervention or a sedentary comment. Initially, I wanted to establish universal suffrage, but that was rejected by the corporation. In Committee, representatives of the City of London Labour party—I apologise for not being able to consult them directly, because I should have welcomed the opportunity to discuss the amendments with them—proposed that votes should relate to the number of staff employed by bodies within the City. They referred to that system as the payroll vote. That is what my amendments suggest. Under the existing system, the vote is cast by the business itself, rather than by a person who is either a local resident or an employee who daily earns his or her living in the City. Even under the proposals in the Bill, the vote will be owned by the business. The amendments would ensure that there is at least some link between those who reside or work in the City and the exercise of power by the corporation. On Second Reading, we did not discuss the existing system. I apologise, Mr. Deputy Speaker, if you think that my remarks go beyond the amendment, but it is important to recognise how the system operates at the moment and the way in which we want to reform it. 7.30 pm As hon. Members know, the court of common council is one element within the corporation. It comprises 25 aldermen, including the lord mayor and about 130 common council men. I appreciate that the corporation has offered to reduce that number as part of its reforms. In effect, that body becomes the government of the City because it operates the functions of local government. It is therefore the key body that we want to influence. We want to ensure that it has some connection to those who live in the City and, more importantly in this debate and what is permissible within the context of the Bill, those who work there. Other elements of the corporation include the court of aldermen, which has 25 members, and the common hall. In our discussions to date, the main concerns that we have expressed relate to abuses of the system and out-of-date facets such as the way in which it is dominated by individual companies. The corporation can be fixed by those companies, the residents' vote can be overridden and the businesses that have begun to flourish in the City over recent years have no role and no say. The Bill is an attempt at least to give those businesses an input into the operation of the City. On what basis, however, should those businesses have any input whatsoever? Surely, that input must be based on the interests of their employees. They are the people who earn the wealth for the company, who reside in the City for much of their time in employment, who are directly affected by the corporation's decisions and who therefore have the right to have a say in those decisions.

Robert Jackson (Conservative, Wantage)

I hope that before the hon. Gentleman concludes his speech, he will give his answer to the question that was in the minds of members of the Select Committee about the practicalities of compiling a register for all the employees who work in the City, so that they can participate in the exercise that he desrcibes.

John McDonnell (Labour, Hayes and Harlington)

That is a good point, which I intended to address later in my remarks, but I shall deal with it now. That issue was raised in response to the corporation's proposals, and concerns were expressed about how one would conduct an assessment of the number of employees within a particular business. However, national insurance numbers, payrolls and taxation by the Treasury give us the necessary information. That information will be compiled and used under the Employment Relations Bill, which has passed through both Houses of Parliament. Under that legislation, ballots will be held among work forces to determine trade union membership and recognition. I do not, therefore, see any outstanding impediment to identifying the number of employees in a company and on a particular site.

Tony Colman (Labour, Putney)

I understand that the City of London Labour party did not press that particular amendment when the matter was considered in the Committee. Will my hon. Friend explain why the amendment was not pressed?

John McDonnell (Labour, Hayes and Harlington)

I cannot speak for the City of London Labour party, but I shall try. From my discussion with party members at the end of the Committee proceedings—I apologise to Kate Green and her friends if I have got this wrong—I understood that the corporation was not willing to accept the amendment. I can therefore understand the petitioners' approach. They were keen to ensure that the maximum number of their recommendations for improvement were accepted. In my last conversation with Kate Green, who is the secretary of the City of London Labour party, I accepted that the party would have to compromise on several issues, but I thought that we should try to press the matter further. That is the role of individual Members of this House when petitioners come up against a brick wall. In this case, the corporation was that brick wall because it refused to budge and to accept any further compromise. In such cases, it is the right and the job of Members of Parliament to protect individuals and organisations. If there had been a chink of light in the corporation's position or any sign of compromise, we could have allowed the Committee to meet again to examine the reforms in more detail. I should have welcomed that. However, members of the City of London Labour party—and, perhaps, the members of the Committee, but they can comment for themselves—may have thought that the corporation would not budge any further so it was not worth them making any more effort.

Robert Jackson (Conservative, Wantage)

May I suggest an alternative interpretation of the attitude of the City of London Labour party, which is that it came to the conclusion, as we did in the Committee, that the approach that the hon. Gentleman suggested was not practical? The sources to which he referred may well enable a census to be taken of the number of employees, but if we are talking about giving a franchise to individual employees, we must consider the problem of establishing a valid electoral register when hundreds of thousands of people work in the City and there is a tremendously rapid turnover.

John McDonnell (Labour, Hayes and Harlington)

I understand the practical problems, but I do not think that any of them are insuperable. The most recent estimate of the number of people working with the corporation's boundary was about 250,000 employees. There is a turnover in most constituency electorates. In London constituencies, that turnover can be anywhere between 20 and 30 per cent. of the electorate, and in some instances it is even higher. However, I do not believe that mechanisms cannot be found to overcome those problems. There is an incentive for employees to come forward and register and, if necessary, to supply verification of their status if they want to vote. The incentive of providing a vote to individual employees would encourage people to come forward, register with the town clerk and provide sufficient information such as a wage slip or a letter from the employer. That would overcome the problems envisaged by the Committee and others. Perhaps we should adjourn the House now and invite the City of London Labour party to provide us with evidence on how to proceed.

Norman Godman (Labour, Greenock and Inverclyde)

The hon. Member for Wantage (Mr. Jackson) raises a difficult but legitimate question about eligibility. However, I offer my hon. Friend the analogy of employees in companies that have works councils. In all such companies of which I am aware, every employee, no matter how new, has the right to vote for representatives on the works council. In those circumstances, we do not apply the same criteria as we do in elections for local government, the Westminster Parliament or, dare I say it, the Scottish Parliament. The analogy of the works council might be helpful in dealing with an admittedly difficult question.

John McDonnell (Labour, Hayes and Harlington)

rose—

Andrew MacKinlay (Labour, Thurrock)

Will my hon. Friend give way?

John McDonnell (Labour, Hayes and Harlington)

Will my hon. Friend first let me respond to the previous intervention? A useful comparison can be made with works councils, but forms of industrial democracy will develop from the Employment Relations Bill. For example, we shall have the opportunity to ensure that there are accurate registers of people who are employed by a particular company when there are ballots on trade union recognition. We already have the trade union rights commissioner, who can investigate individual claims and disputes about trade union membership within a particular company. I do not think that the problems will be insuperable, because there is such expertise within the corporation. I pay tribute to the high quality of its staff and officers. Their ingenuity could overcome problems through co-operation employers' bodies.

Andrew MacKinlay (Labour, Thurrock)

I thank my hon. Friend for giving way, and 1 apologise to you, Mr. Deputy Speaker, for not being able to contain myself when I tried to intervene earlier. However, I thought that my hon. Friends the Members for Hayes and Harlington (Mr. McDonnell) and for Greenock and Inverclyde (Dr. Godman) were far too generous to the hon. Member for Wantage (Mr. Jackson). I find it breathtaking that he can trot out the nonsense that it will be difficult to compile a register. Our registers are a snapshot in time in terms of our territorial rights to be elected. I cannot see how anyone can suggest with any credibility whatsoever that one cannot have a snapshot in time in respect of who is on the payroll of companies in the City of London on a particular date. It is breathtaking in the extreme that anyone could advance such nonsense in the House.

John McDonnell (Labour, Hayes and Harlington)

I am a man of temperate language and moderation, a man of the middle of the road if not the middle way. Let me return to the point that I was making about the practicalities. The hon. Member for Wantage (Mr. Jackson), who chaired the Select Committee, may not recall the final statement by the City of London Labour party. It accepted that to amend the Bill to incorporate the principle of payroll votes would be a fundamental change. At that stage, it was anxious that such a proposal might be ruled out of order, but as a result of my amendments, that was not the case. It stated that such a change would require substantial redrafting and may not be possible without substantially altering the Bill to such an extent that it would not be before this Committee, but would be re-presented. If we agree tonight that the Bill should be amended in that way, the City of London corporation will be saved the time, money and expensive lawyers involved in having the Bill re-presented. Mr. Haines, who was representing the City of London Labour party continued: We take the view that the first steps towards City reform outlined in the Bill will not be the last. That was certainly the burden of our discussions with the City corporation. By all accounts, they were constructive meetings that were conducted in good humour. The City of London Labour party representative continued: We will monitor this new franchise and how it works in practice. We are pleased to have the opportunity to put the case for payroll votes now on the record for future consideration if required. That statement gave us the incentive to move our amendments tonight. The City of London Labour party was clearly constrained by the fact that it thought that such a proposal went beyond the Bill. That is clearly not the case, therefore we can discuss it tonight. The amendments seek to empower people who work in the City. I find it fascinating that my amendments would return the City corporation to its original roots and objectives and to its original method of representation. I am a traditionalist in that I seek to return the City corporation to its worker traditions. In the middle ages, the City comprised workers, business people and tradespeople who set up an organisation to represent their interests. It was a protosoviet—an embryonic workers' council. Although it was bourgeois, Trotsky would have appreciated it. In my opinion, the City corporation has the same line of ancestry as the Petrograd soviet. It was a group of workers coming together to seek representation. The amendments return to the tradition of employees and workers demanding some say about their working environment where they spend eight to 12 hours a day, or longer. I have gone through the history of the City of London. The idea of freemen of the City of London goes back to Roman times. It involved business men who were engaged in various trades and who had specific rights. The system continued into the middle ages without charter or incorporation. In its statement on the origins of its constitutional functions, the City corporation desrcibed itself as a commune. Its ancestry is clear. It is Marxist history—E. P. Thompson all over again. After the royal sanction, the City corporation established its rights on behalf of the workers—the freemen who worked in the City—through the guilds. It is fascinating that the rights of individual employees pervades the history of the City of London. 7.45 pm Some of us come from a guild-socialist background through the trade union movement. The operation of guilds within the City corporation embedded the vote on the basis of work and the production of wealth. A PhD on class analysis may well evolve out of that.

Robert Jackson (Conservative, Wantage)

I am grateful to the hon. Gentleman who is being extremely patient. His historical analysis is most interesting. If the City owes its origins to power having been seized from below and not to an act of concession from the Crown or indeed from Parliament, is it altogether appropriate to talk in terms of Parliament imposing legislation on it?

John McDonnell (Labour, Hayes and Harlington)

That is a valid point. The hon. Gentleman seems to be proposing that Parliament should not act, but there should be a revolution. A Conservative Member appears to have made a revolutionary statement. If we pursue that analogy, workers in individual companies should demand the right to vote. Perhaps we should encourage them to do that. The privileges that were bestowed on individual freemen were limited. The history of the City corporation is quite useful in terms of how registration evolved from the original right of individual workers and guild members to vote. Restrictions came about later. The hon. Member for Wantage is right to refer to interventions from above, as wealth and power eventually undermined the rights of individual workers to have a say in respect of their working environment and the present contorted, distorted, abused system developed. It is important to distinguish between those who create wealth and those who gorge on it. There is often confusion between the City and the City corporation. The City corporation is not the City. A good analogy was drawn in the Select Committee: it is as if Stratford on Avon was claiming to be the Royal Shakespeare Company. The City is a different element from the City corporation. The City corporation is simply a local government body that has engaged in profligate abuse of the financial resources for individual gain or personal enjoyment—the best free lunch in the country. Those who work and create wealth in the City have no relationship with the corporation because of the historical restriction of individual rights to vote. The Bill is an attempt at least to allow businesses some say, but it does not involve the creators of the wealth. It gives a vote to the owners of businesses, but not to the individual workers. That is why over the years the Labour party pledged to abolish the City corporation. It was frustrated by its refusal to reform. Successive manifestos on which we fought elections in London included the abolition of the City corporation.

Andrew MacKinlay (Labour, Thurrock)

Hon. Members may be aware that I am not a member of the London Labour party although my constituency is close to London. Will my hon. Friend tell the House when the Labour party altered the policy to which he has referred as—

John McDonnell (Labour, Hayes and Harlington)

I shall try to draw my hon. Friend's intervention into the scope of the amendment. There was a debate throughout the 1970s and 1980s within the Labour party on industrial democracy, and bizarrely the issue of the City corporation arose. There was a discussion about whether a range of reforms would include a stepping stone towards democratic reform within the corporation. The discussion involved an extension of the number of businesses that would be able to vote. There was even a discussion at that early stage about empowering individual employees or workers to have some say with regard to the corporation. To my concern, shortly before the 1997 general election the Labour party's proposal to abolish the corporation on coming into government was dropped. I do not think that the issue was debated in any great detail within the London Labour party. If it had been, we would have had the opportunity of having a similar debate to the one in which we are now participating. We would have been able to discuss a range of reforms. At that stage there would have been an opportunity on a continuum between abolition to status quo to insert into the debate some democratic discussions involving the work force within the City. One of the issues that arose on Second Reading was the special nature of the City as a business district, which was raised by my hon. Friend the Member for Dudley, South (Mr. Pearson). If a Member wants a business district in his constituency, let him have it and not intrude on London. That reflected the debate that took place during the 1970s and 1980s, which focused on who in business, if the City was a business district, should have a say. It was considered that that say should not be confined to the owners of businesses or to boards of directors, who are largely absentee landlords. It was thought that those engaged in the creation of wealth for a company should have a say. Unfortunately, the Labour party dropped the abolition proposal and there was not a semblance of a debate. There was then consultation within the—

John McDonnell (Labour, Hayes and Harlington)

The reason for drawing on the history, Mr. Deputy Speaker, was to explain how we have arrived at the present situation. However, I understand your point. In response to the demand for reform, the City corporation proposed introducing periodic re-election for aldermen, ending the procedure of allowing the court of aldermen to veto an individual—that has yet to be enacted or introduced—and streamlining clarification of the main procedures whereby an alderman progresses to become sheriff and subsequently Lord Mayor. It made a commitment on a steady reduction in the size of the court of common council from 330 members plus 25 aldermen to 100 members plus 25 aldermen. However, there was no discussion at that stage of employees having the right to vote. In "CityView" in March 1998 the corporation became very confident. The article states: The Corporation's proposals, the principles of which have been accepted by the Government, set out to improve the existing system and then extend the franchise to embrace a wide range of City businesses and organisations. There was no discussion about the organisation of the business vote or about the consultations that businesses would have to undertake with their employees or others about the exercise of that vote. Having drawn this to the attention of the Front-Bench spokesman at that time, a letter winged its way to the City corporation saying that its phrase, the principles of which have been accepted by the Government namely its proposals—was not true at that stage. There had been no acceptance by the Government and consultation was still taking place. I think that the corporation's minor reforms were set out under duress, and that is the point of the amendment. Every reform that the corporation has suggested has been like drawing teeth. They have all been forced under duress. That is why the debate is taking place. The proposals for reform set out by the corporation undermine the influence of residents. In addition, they take no account of the corporation's work force. Clause 4 refers to "workforce". It is a breakthrough. It is the light at the end of the tunnel. The corporation recognises that there are more people in the corporation than those who own businesses. These are the people who earn the money. Clause 4 states: A qualifying body which is entitled to appoint more than one voter pursuant to section 3(1)(c) above shall ensure that the appointments"— not elections— which it makes reflect, so far as is reasonably practicable, the composition of the workforce. This is the first time that there has been a reference to workers in any legislation involving the City corporation since the middle ages. It recognises for the first time that there is a work force within the City boundaries. We should be cheered that there is an opportunity to amend the Bill in a practical way that could be welcomed by the corporation, although it might feel under duress initially. I accept one of the arguments against the extension of the vote to employees, which is that it will contradict to some extent arguments raised on Second Reading and arguments discussed in Committee and elsewhere about the need for the strengthening of the residents' vote and the acceptance of universal adult suffrage to elect the City corporation. Those of us who believe in universal adult suffrage must accept that if employees have the right to vote, that will contradict residential rights. However, I accept that because it is a compromise. I have examined other legislation that has come before us this year in our process of democratic renewal of the United Kingdom to ascertain whether there were references that we could embody in the City corporation that would ensure universal adult suffrage and some involvement of employees, workers and businesses within the decision-making processes. In Scotland, the franchise is straightforward. It is based upon that of local government. The position is exactly the same in Wales, as it is in Northern Ireland. It is interesting that in Northern Ireland we are now establishing a civic forum of some sort. That involves civil society, which includes employers and employees' representatives, for example. There is some movement in the discussion that is taking place about the representations of individual employees. However, in the democratic renewal of London that we set out in our Green Paper, "A Mayor and an Assembly for London", and in the context of London government, I shall argue why it is so important that residents and employees, rather than businesses, have a vote. 8 pm In the Deputy Prime Minister's foreword to "A Mayor and an Assembly for London", he stated: When this government was elected less than a year ago, we embarked on a programme of democratic renewal in Britain. An essential part of this is modernising government in London". At that stage we were campaigning for the Greater London Authority and the structure of the assembly. The City corporation is part of that structure, and the Deputy Prime Minister made it clear that we were proposing new arrangements tailor-made for London with a powerful directly elected Mayor with hands-on responsibility for transport, economic development, strategic planning and the environment. The directly elected mayor will have significant powers and huge resources, which are to be exercised through consultation in the construction of strategies in each of those areas. The Deputy Prime Minister refers in his foreword to Londonwide solutions to congestion, pollution, poverty and social exclusion—all of which reduce the quality of life for Londoners", which under the subsequent legislation must be exercised in consultation with the London boroughs and with the common council, which is counted as a London borough. What is significant in the new structure of government in London is that the mayor will be elected and the assembly will be elected, but, in the development of those strategies, the mayor will have to consult every London borough and the common council of the City corporation. Under the Bill before us, the common council will receive its mandate from 5,000 residents, but that mandate will be swamped by the business vote which will be determined not by the people who create the wealth of those businesses, but by those who own them. In some cases, those people do not even have to attend their business in the City. If the mayor and the assembly are to determine the important strategies for London overall and for my constituency in particular, I want the vote of the City corporation, which will determine its input into the consultations, to be determined by residents, or at least by residents and workers in the City corporation area. That is the significance of the amendments. Under the Greater London Authority Bill, the court of common council of the City corporation will be consulted on the mayor's development of the transport strategy, the London development agency strategy, the London biodiversity action plan, the municipal waste management strategy, the London air quality strategy and the London ambient noise strategy. I shall give an example relating to my constituency. The London ambient noise strategy is critical in my area, and in west London generally, because of Heathrow airport. My hon. Friend the Member for Putney (Mr. Colman) has led some important debates in the House on the impact of air traffic noise on residents in west London. In the development of the noise strategy for London, the mayor will consult my borough, of course, but will consult on an equal basis with the common council of the City corporation. At present the decisions of that City corporation will largely be dominated not by the residents or the people who work in the area, but by the businesses. That means that the noise strategy for my area will be influenced not on any democratic mandate, not by people who are interested in living and working in London, but by people whose sole interest, in many cases, is to make money out of London. People who live or work in London know what the noise is like, they know about the problems of congestion and waste, and they have a view on those matters. Of course businesses have a transport interest, but for them, profit will always override environmental concerns. I want my environment protected by the new strategic authority for London, the London mayor and the assembly, but I want it protected in consultation with democratic institutions—people who are aware of the experiences of Londoners, and of what it is like to live and to work in London. If the City corporation has a role in all those policy areas without the democratic mandate of the residents or the people who work in its area, that will undermine the credibility of the new structures of governance of London.

Shaun Woodward (Conservative, Witney)

I am grateful to the hon. Gentleman for giving way. Can he explain to the House the difference, if there is any, between his position and that of the City of London Labour party, which stated recently: We accept that the common council will be better able to serve the financial City if the electors to which those representatives are accountable include those financial institutions. Can the hon. Gentleman explain his policy and the difference between that and the policy of the City of London Labour party, and whether he subsrcibes to the policies of those on his Front Bench?

John McDonnell (Labour, Hayes and Harlington)

I cannot speak for the City of London Labour party, although from discussions I believe that its views are very similar to mine. It is trying to get the best possible deal for local people. I can understand that. The best deal at present is to try to amend the Bill in such a way as to enhance the democratic rights of local residents, so that they are not swamped by businesses. The City of London Labour party has had to accept a series of compromises in its proposals to the Committee. If the hon. Gentleman wishes, I will provide him with a copy of the minutes of the Committee. The City of London Labour party accepted that the extension of the democratic franchise to employees was a subject for another day, as it could not be included in the Bill. I am at one with the thrust of the argument. I shall give way if other members of the Committee want to come in, but that is the thrust of the discussion that took place in Committee. The City of London Labour party is trying to get the best that it can from the legislation. I shall explain to the hon. Gentleman on another occasion the concept of transitional demand, which he may not have come across in the Conservative tradition. The City of London Labour party is trying to ensure that at least some minor improvements are made, even if we cannot go the whole way. I am trying to explain my position on the amendments, and at a later date I shall be happy to explain my overall position, but I could sum it up in one word: abolition. I accept, as do the City of London Labour party and the other petitioner, Mr. Malcolm Matson and others, that we must take what we can. Even if we cannot get universal adult suffrage, which exists throughout the rest of the country and which we fought so hard to achieve, at least let us get a recognition of the fact that businesses exist only as a result of their workers, and that we should give the vote to the employees. I hope that that answers the hon. Gentleman. I shall be happy to explain to him in further detail the overall policy to be pursued through abolition of the City corporation and its division into the individual boroughs or transfer to the auspices of the new mayor and assembly. It would be a wonderful financial base for the new strategic authority for London, but I am afraid that we have missed that opportunity. I tried to move an amendment to that effect on the Greater London Authority Bill, but we never reached it. I return to the import of the City of London corporation's role and the need to ensure that it will be representative of residents and employees. Within the new structure of London government, it will have a say equal to that of those other authorities which have a direct democratic mandate. Therefore, my amendments seek to ensure that, if we cannot go to the full extent of the democratic mandate, we at least move towards a halfway house. That recognises that there may well be a special area with large numbers of people working within it who should have their own say. There are opportunities within the legislation to ensure a modernising approach which will gear up the new structure of the City corporation, which will come out of the Bill, to meet more effectively the challenges of the new structure of governance for London overall. If the new City corporation reflects its residents and those who work within it rather than just businesses, there will be a significant voice to be heard on issues such as traffic congestion. The workers within the City corporation endure a daily life of traffic congestion from one end of the square mile to the other. There have been some improvements, but we need to hear from those who work in that area what it is like there, what are their concerns and what can be done to improve traffic congestion but—because no traffic problem in London can be solved within the square mile—within the strategic approach that the new strategic authority for London will undertake. That is why it is critical to engage those people in this debate. It is not just a matter of consulting them, but of ensuring that they participate democratically in the debate. That can come only if they have the right to vote. Other aspects that I have identified within the new strategic authority are ambient noise, waste management, biodiversity and the London development agency. I do not want to stray too far from the Bill, but I hope that the London development agency will be the engine for economic growth within London. We need to take on board the voice of business, and that is contained within the composition of the London development partnership, which it is hoped will become part of the new London development agency. We also need to ensure that, within London's economic development programme, we take into account the voice of those with a hands-on approach to working within the City—in other words, the employees, the workers. I want them to have a say in the development of London's economy. In the new structure of governance for London, such people will be consulted. Clause 33 of the Greater London Authority Bill obliges the mayor to consult on all the strategies of the Assembly, the functional bodies, the London local boroughs and the common council. What better than to have feeding into the views of the City corporation the views of those who create the wealth within the City on issues such as our city's economic development. I would welcome their views to nourish the discussion. The amendments make the City corporation accountable to real-life people. I hope that they protect the residents' vote as best they can. In addition, they introduce into the system not businesses, but workers: people who provide us with the economic base for Britain's future stability. 8.15 pm Amendment No. 7 defines a relevant employee. I have lifted part of that definition from the clause that I mentioned earlier relating to the work force. The amendment seeks to define a relevant employee as someone whose principal or only place of work on the qualifying date"— the date of registration— is ordinarily the hereditament in respect of which the entitlement to appoint a voter arises and who works for that qualifying body. Clause 3 contains three classifications of those entitled to vote. The first is those who are ordinarily in occupation for relevant purposes as owner or tenant of a hereditament—having a rateable value of not less than £200". The second is a "resident in that ward". The third is a person appointed"— not elected— as a voter in writing by a qualifying body". A qualifying body is defined previously in the Bill. Therefore, amendment No. 7 identifies a relevant employee as someone who works in a hereditament. In amendments that have not been selected, I attempted to ensure that only residents could vote. The clause goes on to say that a qualifying body would be able to appoint, not elect, a person as a voter only if it undertook a ballot of its employees. We have discussed the logistics of undertaking a ballot of employees. The proposal envisages a qualifying body registering itself with the City corporation, as would be necessary anyway because of the rateable value commitments, identifying to the town clerks, or the chief executive as he now is, the number of employees located within that hereditament, having that verified by the chief executive, and then, if necessary—in the event of an appeal, contest or whatever—the City corporation itself funding an independent commissioner to enable an assessment to be made in any disputes. Such disputes could arise from an individual employee contesting a matter, or his or her trade union representative. I thought hard about whether to build some concept of trade unions into the amendment, but I did not want to frighten the horses. To the City corporation it would be like a red rag to a bull. Nevertheless, there would be an opportunity for individual representatives to contest the calculation of the number of employees and the registration. If necessary, that could be part of any future report to Parliament about the operation of the system, which is contained elsewhere in the Bill. Amendment No. 13 may be the crux of the debate. Rather than have the appointment of a voter by whim, the onus must be on the qualifying body to go through some process in order to verify that the voter is acting in the interests not just of the individual company, but of those who work in that company, and those who can take a broader view in terms of the City corporation, the City area and its role in the governance of Greater London through the Greater London Authority and the advice that it provides, along with other London boroughs, to the mayor of London. The current legislation proposes that, when there is a dispute about an hereditament that straddles more than one ward, a determination should be based on the rateable value. I suggest, in amendment No. 16, that the determination should be based, for electoral purposes, on where the greatest number of employees are. If a building or company was located across two wards, the vote would be cast in the ward where the most people were employed. The people involved could then participate in discussion. Amendment No. 17 provides for the appointment of voters to relate not just to rateable values, but to the number of employees. All the amendments are intended to reflect the concept of voters as individuals—living human beings—rather than buildings, as it were, or owners of businesses. Amendment No. 30 is, to an extent, an attempt to challenge the concept of the Bill. It proposes the replacement of the word "appoint" with "elect". If a ballot were introduced among employees, someone voting on behalf of the business concerned would not be appointed, but elected. The amendment may seem trivial, but every reference to democratic processes that we can introduce in the Bill will send a message. It will send a message to the corporation of London that the days of appointments are over and that the days of rotten boroughs are over. We now demand elections. We demand democracy; our cry is "Democracy". I actually consider amendment No. 33 to be quite weak. I apologise for it. Schedule 1 establishes a principle relating to rateable value. The original proposal was amended in Committee; I welcome that amendment, which resulted from pressure exerted by petitioners. Originally, the relevant rateable value of an hereditament occupied by a qualifying body was £200 up to £10,000; that has now been amended to £200 up to £20,000. In the case of rateable value of more than £20,000 but not over £1 million, the maximum number of persons who can be appointed will be 1 for every complete £20,000 of that rateable value, plus 1 for any further amount thereof less than £20,000". On Second Reading, we were anxious about that purchasing of votes. I admit that the amendment may not be as well worded as it might be. I have suggested that there should be one vote for every 1,000 employees. I now understand the problem that that entails. It is not a practical problem; the problem is that rather than being rateable value, the currency is now employees. A body can now purchase a vote according to how many employees it has. Perhaps we should suggest to other Ministers that that arrangement could be part of the new deal. It could provide an employment creation scheme in the City. I jest, Mr. Deputy Speaker. Amendment No. 33 suggests one person for every 1,000 employees. That is a crude calculation. I have heard that there are about 250,000 employees in the square mile, although there may be more. The problem with the amendment is that, if a firm is broken down into a number of individual units, the one vote is there for up to 1,000 employees. That confronts us with the same issue with which we were confronted by the employment rights legislation: how do we define a particular unit? Perhaps we shall be able to solve that problem later. Perhaps we shall be able to amend the amendment in another place. The Minister shakes his head, but one never knows: there could be a revolution in the Upper House at some point in the near future. Perhaps their Lordships will recognise that this could provide them with a bargaining gambit for their future survival. Anyway, I want to ensure that the trade is not in individual employees, and that we do not reach a point at which companies break themselves down in order to gain the required number of votes, rather than being honest. Of course, instead of requiring one for every 1,000, we could have specified one up to 1,000, and then one for every 10,000 thereafter. That would have provided an incentive, and it was my original intention; but, again, I should like to return to the matter at a later stage. Amendment No. 33 is consistent with the principle that we have established. We are, in effect, throwing out the words "rateable value". This is not about rateable value: it is not about how much land someone purchases, how much he owns and what his wealth is. It is about real people: it is about thousands of workers and what they bring to our city overall—not just the City of London, but the city of London according to the old Greater London council boundaries. Amendment No. 35 is similar to amendment No. 16. It, too, deals with circumstances where there is more than one hereditament in the same ward. Again, we reject the idea that there should be an aggregate of rateable value, but suggest an aggregate of relevant employees. We want to be fair to individual companies and to enable them to exercise their right to vote, although they may not be based on a particular unit or may have split their operations between different areas in a particular ward. The overall process that I envisage is a dialogue with the corporation about the practical implementation of the amendments. I welcome the corporation's views on the concept of the definition of a relevant employee. I understand some of the difficulties that have been experienced with that definition, and I understand the point made in Committee—I think that it was the only valid point in this regard—about the change that has taken place in the operation of City companies. Employees used to be located in the City itself, operating on a day-to-day basis; nowadays, they hot-desk. An employee of a company may visit the site only once every three or six months. We need to construct a definition of a relevant employee that takes account of modern industrial and commercial practices in the City. Other people may be employed in the City and therefore count as relevant employees according to this definition, but may share a contract with a number of companies. Where will their ballot take place? It may be carried out on the basis of proportionality, or they may opt for a specific company. I would welcome the corporation's views because I think that it could advise us on a number of issues. I would also welcome a discussion with the London Chamber of Commerce and Industry, the south-west branch of the Trades Union Congress and the south-west branch of the Confederation of British Industry. As we know, working practices in the City change day by day, and that is bound to affect definitions in the legislation. The argument that the City has put forward in promoting the Bill is that one of the things that does not change is ownership of property. That is not true either. There is as much change of property and difficulty of definition of property as there is change of employee and difficulty of definition of employee.

Andrew MacKinlay (Labour, Thurrock)

I bet the British Oxygen Company has an office there.

John McDonnell (Labour, Hayes and Harlington)

If that was an intervention, I would welcome it.

John McDonnell (Labour, Hayes and Harlington)

rose—

Andrew MacKinlay (Labour, Thurrock)

Will my hon. Friend give way?

John McDonnell (Labour, Hayes and Harlington)

Certainly.

Andrew MacKinlay (Labour, Thurrock)

Does the BOC, for example, have an office there? If so, that is a classic example of where those things could be sold like chattels; indeed, the employees could be sold like chattels.

John McDonnell (Labour, Hayes and Harlington)

I would not want to get into a dispute about the BOC, as it is located in my constituency as well. I suppose that the following point is a declaration of interest: I hope that it will sponsor the Hayes horticultural show, which I have just re-established.

Jeremy Corbyn (Labour, Islington North)

My hon. Friend has made a point about what he called hot-desking in the City. People there can rent a desk for a short time and move on. I am unclear about something in relation to the Bill; I would be grateful if he could explain what his amendment means in this respect. If votes are to be distributed for a particular building, does the owner of the leasehold who sublets those desk places decide who has the vote, or does an amalgamation of the people who are the tenants of the leaseholder of the building decide how the vote will be allocated for that particular place? As part of a wholly extraordinary system of voting, that seems to be the most bizarre aspect imaginable.

John McDonnell (Labour, Hayes and Harlington)

We can approach the matter through a definition of the business that is located within the boundaries of the City corporation. The corporation is right: we can base it on some concept of rateable value to a certain extent. Having identified that that company operates in the area, the company is invited—the Bill does it, anyway—to acquire a vote. If the company so wishes to acquire that vote—it can do so under the Bill as it now stands, anyway—it will be just a small step on to say, "If you wish to acquire that vote, you must ballot your employees in the exercise of that vote. To do that, we need to verify the number of employees that you have. The number will determine how many votes you gain." Therefore, we seek to establish a self-reinforcing, self-interested system. In many respects, it could be a model for concepts of industrial democracy elsewhere.

Jeremy Corbyn (Labour, Islington North)

I want to press my hon. Friend a little. In trade union recognition legislation, there are problems about who is to decide what is a work force and what is not, but, clearly, where the building has the vote, if you like, and where a number of people there are self-employed—indeed, they might be self-employed for short periods—how do we decide which group of people has some say, or otherwise, in the selection of those who will be eligible to vote under the legislation?

John McDonnell (Labour, Hayes and Harlington)

It is a problem. We need to establish a mechanism, as we do in other areas, under which there is an incentive for the company to register—it will want to influence the City corporation. Having done that, the mechanism needs to incentivise the company to engage its work force, and to incentivise the work force itself to ensure that it works with the company to define where it is located, how it wants to be involved and how it will become engaged in the democratic process in the area. It is not that different from the early processes that this country went through in establishing a democratic process overall. In some of the debates in the Chamber about the Great Reform Bills that were passed, all the arguments were advanced; people said, "How can you identify where people are? There will be problems of corruption in terms of multiple voting." It is not beyond the wit of man to devise a system whereby we can engage workers themselves, so that they have a role and a say within not just their firm, but their locality. There is a ready mechanism. There is a classic example in my constituency. It was referred to in Committee by Mr. Malcolm Matson. There is almost a mini-city in my constituency. It has virtually 60,000 inhabitants. They do not live there; they work there. It is called Heathrow airport. However, those people have no say whatever—there is no democratic engagement—in the processes that govern that working area; that is what it is. There is one road left within the boundaries of Heathrow; it just comes within it. The houses there are largely bought up now. We used to canvass them years ago. Again, the proposals in the amendments are a model for the workers within Heathrow to have a say not over the wider area in my constituency, but within that defined area of Heathrow. The aim is to give them a say in what some of the companies are undertaking. In that instance, the company that controls the whole area is the British Airports Authority. Since its denationalisation, it has retained its planning powers—for example, it still has the power of compulsory purchase. The Minister and I had a discussion about the matter on another occasion. The statements that were made at that stage had to be corrected because, within that area, the BAA exercises a role almost like that of the City corporation. The model for the City corporation gives opportunities for engagement in those sectors of the working locality where employees have a right to have some say. That is what the amendments propose. I refer to the proposals of the City of London Labour party during its discussions in Committee. It recognised that the principle of the payroll needed to be examined further. It accepted that there were some problems, but did not accept—the hon. Member for Wantage, who chaired the Committee, has now left the Chamber—that they were practical problems involving the operation of the system; it said that they were to do with the drafting of the Bill. I can understand that, because the City corporation was determined to ensure that there was no movement on the original Bill. However, I have been at other situations where sponsors of Bills have been willing to discuss and to amend their Bill before presentation to Committee. That did not happen in this case.

Andrew MacKinlay (Labour, Thurrock)

As I understand it—perhaps my hon. Friend will clarify the matter for me—although the intention behind his amendment is to extend the franchise to employees, the arguments that he is advancing to support it are the same as those that were used by the right hon. Member for Cities of London and Westminster (Mr. Brooke) and his parliamentary colleagues when they amended the law to grant the right, elsewhere in England and Wales, to stand in local authority elections on the basis of "principal place of work". The arguments that they used were that people identify with their work, and that, although some people may not sleep in a certain area, they identify with their place of work because they live, sleep and breathe work. The previous Conservative Government—on the basis that people identified with, shared in, and were proud of, where they worked—advanced the argument that the law should be amended to extend the right to stand for election to municipal office. The Official Report will show that such arguments were advanced by, among others, this Bill's principal advocate, the right hon. Member for Cities of London and Westminster. I should think and hope that he might reflect on the fact that those were powerful arguments not only then, but now in our consideration of the Bill.

John McDonnell (Labour, Hayes and Harlington)

My hon. Friend is right—there is undoubtedly an irony in all of this. If Labour Members stand for anything, we stand for people's right to exercise their democratic wishes to achieve their ambitions and objectives—which we would identify as socialism. The irony is that, here we are, almost at one with the right hon. Member for Cities of London and Westminster (Mr. Brooke) in arguing for some form of recognition that elements within industry or commerce should have a role to play in the City of London corporation and should exercise a vote. Ironically, that runs counter to much of what we stand for. For that reason, I have been arguing that my amendments are transitional onescompromises—and an attempt to ameliorate the Bill's provisions, so that the work force might have a vote.

Phil Sawford (Labour, Kettering)

I served on the Committee, and I sought clarification on the matter of declarations of interest, as I knew that the Labour party was one of the petitioners. At no time did anyone advise or suggest to me that I had an interest in the City of London simply because I had a bank account. However, as the issue has arisen, I shall declare such an interest: I have a bank account, which is usually in deficit. Throughout the Committee stage, I felt that we were restrained by the Bill's scope in the type of amendment that we could table. However, I settled for a type of uneasy compromise that I felt made some moves in the right direction. The special report that accompanied the Bill stated: the Committee is, however, of the view that neither the Bill nor the additional assurances"—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. I am sorry to interrupt the hon. Gentleman, but interventions are increasingly stretching into mini-speeches. Could he make his point now, quite briefly?

Phil Sawford (Labour, Kettering)

It finished: can entirely remedy the problems in the governance of the City. I simply draw the attention of my hon. Friend to that fact. Even at the end of the Bill's Committee stage, the Committee members, with the restraints that we were under, still felt that much more needed to be done.

John McDonnell (Labour, Hayes and Harlington)

I accept that point. Although I had some anxieties about it, I think that the Committee, within certain bounds, did a reasonable job. Earlier in the debate, I expressed my anxiety that the Committee would not be able to take proper cognisance of some of the issues raised in Second Reading, and therefore would not be able to give the advice that was required of it. When, for example, the City of London Labour party suggested enfranchising the work force, in a payroll vote, the Committee should have sought advice on whether it should seek such an amendment from the City of London corporation. I think that, at that stage, the Committee could have been sufficiently forceful to ensure that the corporation accepted the amendment being promoted by the City of London Labour party. I believe that moral pressure could have been employed to ensure that the amendment was accepted. I regret that advice on the matter was not taken by the Committee at that point, so that such an amendment could have been tabled. It was a valid issue in the Bill. When I drafted amendments to enable that to happen—again I apologise to the City of London Labour party for not consulting it on my amendments' detail, which is most probably why they are not particularly eloquent ones—and sought the Private Bill Office's advice, I was told that the Private Bill Office would check whether it would be in order to amend the Bill in such a manner. My amendments were in order, and they were selected. If Committee members and the City of London Labour party petitioners had been made aware of that fact, the point on the amendment could have been made more forcefully. The City of London corporation could have compromised on that issue, as it has on so many other, relatively minor ones—except for the right to veto, which is an important one. If that had happened, we would today have been debating a fundamentally different Bill. We may not necessarily have been happy with such a Bill, but we would have been closer to being able to say, "Some form of democracy is being practised in the City of London corporation."

Tony Colman (Labour, Putney)

My hon. Friend has spoken about compromise. We have all received a letter from the City of London Labour party, which supports the Bill in its current state. Does he agree that the worst possible situation would be for the Bill to fall, because, if it fell, the status quo would persist and we would not make the advance that, I believe, everyone accepts that the Bill represents?

John McDonnell (Labour, Hayes and Harlington)

That is a valid point to raise when we are discussing an amendment, because the amendment seeks to amend the Bill, not to defeat it. If it were a wrecking amendment, it would not have been called. Therefore I take my hon. Friend back to the point that I made—I shall not delay the House—in relation to the earlier intervention. When representatives of the City of London Labour party appeared before the Committee, they said: We have commended to the corporation an alternative proposal that votes should relate to the number of staff employed by bodies within the City—a system we refer to as a payroll vote. I shall not waste the time of the House by reading out more of the detail of the minutes, but they show that the representatives were obviously of the view that such an amendment could not be made to the Bill. I commend them for it. I had a conversation with Kate Green, secretary of the constituency party—one of the best advocates for the Labour party that the party could have. In a considered way, working with her colleagues, she drafted amendments, discussed the matter in detail with the Corporation of the City of London, sought compromises and achieved some. Nevertheless, I believe that, if members of the constituency party had been aware that it was possible to amend the Bill in this way, they would have pressed further, and I believe that, in that case, the Corporation of the City of London would have provided us with something tonight that we could have debated, thus maintaining some semblance of a feeling that we were reforming. I would willingly give way to my hon. Friend the Member for Kettering (Mr. Sawford), who served on the Committee, to allow him to say whether that is his impression, because I believe that there is a real opportunity here.

Norman Godman (Labour, Greenock and Inverclyde)

In relation to amendment No. 13 and the view of the City of London Labour party on the Bill, might I remind my hon. Friend that the promoters of the Bill have promised, inter alia, that the number of members returned by residential wards will be reviewed to protect their proportion on the Court of Common Council"? Does my hon. Friend know who will conduct that review?

John McDonnell (Labour, Hayes and Harlington)

It relates partly to a later amendment on the report of the Secretary of State, which I should like to discuss at some stage. However, I shall answer that question because it partly relates to the point that my hon. Friend the Member for Putney raised, which is that the review of the wards is a significant amelioration of the current system. Who won that amelioration? The City of London Labour party campaigners and Malcolm Matson and other petitioners. That is excellent, but, even in that regard, a compromise h as been accepted, because who conducts the boundary review? The Corporation of the City of London itself, because it does not come under the auspices of the boundary commission. In fact, one of the proposals that was advanced in the statement was that the boundary commission should be involved in the redrawing of ward boundaries. I would welcome—it does not have to be written in blood—a statement from the City of London corporation, confirming that it will involve the boundary commission in that process.

Jeremy Corbyn (Labour, Islington North)

rose—

John McDonnell (Labour, Hayes and Harlington)

I shall press on, if I may. That situation is very similar to that regarding the City cash; this does relate specifically to my amendment. One of the reasons to empower employees in the system is to enable them to have the power to have some oversight of the corporation and its finances. Some say that £1.6 billion is sitting in the City cash—money which is not audited by the district auditor or by the Audit Commission. It is a separate account, hidden from view.

Jeremy Corbyn (Labour, Islington North)

If the boundary commission is not involved—and if the court of common council is, in effect, the boundary commission—is my hon. Friend aware whether any of its decisions, were they to be perverse, could be challenged by judicial review on the grounds of fairness towards those who live and work in the City of London?

John McDonnell (Labour, Hayes and Harlington)

I am not a lawyer, although I have some historical experience of libel law which I wish to put behind me. I would suggest that anybody, including the City corporation, is open to judicial review on the basis of the Wednesbury principles of reasonable behaviour. In any decision, the City corporation—as a local government body—would come under those Wednesbury principles which, as you know, require any body or individual, alderman, councillor or whatever—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. First, may I remind the hon. Gentleman to use the correct parliamentary language? Secondly, he is getting away from the amendments. I would be grateful if he would return to them.

John McDonnell (Labour, Hayes and Harlington)

I apologise for the language, Mr. Deputy Speaker. It requires one to take a decision, having taken into account all the relevant factors and dismissed all the irrelevant factors. That is a definition of the Wednesbury principles. The issue of the City cash is critical and relates to the boundary issue. The Committee observed that there would be the benefit of increased transparency if the corporation were to seek the opinion and experience of the boundary commission for England in conducting a boundary review. That is a request, and I urge the City corporation to accede to it. My hon. Friend the Member for Putney asked why the amendments that I tabled were not previously pressed by the petitioners in Committee, and why the Bill does not contain them. We will have received correspondence from the two petitioners. One, from Malcolm Matson, sets out the basic arguments against the Bill and asks us to vote against it. On the amendments, however, the City of London Labour party wrote to a number of hon. Members, explaining their acceptance of what I consider to be considerable victories for the party in its petitioning of the Bill. However, the party accepts that there has to be a further process. The local Labour party was grateful to those hon. Members who supported and endorsed the proposed amendments by contacting the corporation. However, I am not sure how many pressed the issue of empowering the payroll vote, as is set out in the amendment. The Committee members and the petitioners were of a view that that was beyond the remit of the Bill, when clearly it was not. That is why we are debating the matter tonight. The Committee was minded to go further, and the City of London Labour party was able to strengthen the amendments, to the extent that the Committee produced a Bill which was substantially different and essentially more democratic. The Labour party's letter lists those reforms. However, it was unable to list any proposal or amendment similar to my amendment on empowering employees because, like others, those concerned thought that it was beyond the power of the Bill. My hon. Friend the Member for Putney prayed in aid the City of London Labour party, and said that we should accept what we have. If this does not happen, he suggested, there will be catastrophe—the status quo will continue for another millennium and we will never get the chance to make the body in some way accountable and democratic. The letter says: The City of London Labour Party agrees that the amended Bill delivers less than the ideal reform to bring the City into line with democratic local government practice. Further reform will not be easy but is necessary. The Committee itself made certain suggestions. The challenge will be to find ways to advance them. The amendments take up that challenge. It was clear that those petitioners were frustrated in their proposals because of a view that was taken of the amendability of the Bill.

Tony Colman (Labour, Putney)

Clause 7 clearly states that there will be a full review after not more than five years, and that gives us the chance to make progress.

John McDonnell (Labour, Hayes and Harlington)

That part of the Bill is important. I have tabled a further amendment reducing that time from five years to two. I sought to embody the call for further reforms in amendments, so that the report to the Secretary of State would have to contain reference to progress on all those matters; but I was told that that was out of order and such amendments could not be tabled. It does not help to pray in aid clause 7, because it is so weak and ill defined and does not force the corporation to implement the recommendations in the statement. I understand why my hon. Friend the Member for Putney is clutching at straws. I am, too. I am trying to achieve the best possible amendment of a poor piece of legislation.

Michael Connarty (Labour, Falkirk East)

I have some interest in the correspondence and petitions on behalf of one particular organisation. I hope that my hon. Friend will take it into account that the idea of giving the widest possible franchise is of interest to democrats regardless of whether they live in the City or in the adjacent area. Will he use more force in arguing on behalf of the democrats that if the provision that he seeks is in order it is justifiable to insert it in the Bill?

John McDonnell (Labour, Hayes and Harlington)

I accept that point and my hon. Friend's remonstration. There is an argument that we are setting a precedent in this Bill for a widening of the franchise in particular areas. That has some advantages and some dangers and—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Gentleman's remarks are getting increasingly general. He is to some extent going over ground that he has already trodden. The House will be well aware that he has dealt in some detail with all the amendments in the group. Perhaps he should now move on to new ground or think of concluding his remarks.

John McDonnell (Labour, Hayes and Harlington)

Can I take your advice on that matter, Mr. Deputy Speaker? Do you mean new ground in terms of arguments on this group of amendments, or moving on to new amendments?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Provided that the hon. Gentleman's remarks are specific to the amendments, I will allow him to carry on, but they are becoming increasingly general and unrelated to the amendments and, as I have already said, he has covered each amendment in great detail.

John McDonnell (Labour, Hayes and Harlington)

Thank you, Mr. Deputy Speaker.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The hon. Gentleman acknowledged that amendment No. 33 might be inadequate or slightly defective in its drafting. What discussions has he sought to have or has he had with the corporation about the amendments, their effectiveness and workability?

John McDonnell (Labour, Hayes and Harlington)

That is a good point, and I apologise to the City of London corporation for not having fully involved it in the discussions around the amendments. My only excuse—it is a reason as much as an excuse—is that the time scale did not permit it. The initial view that the payroll issue would not be contained in the Bill was thought by us all to be appropriate. Having tested that point late in the day because I thought it was ultra vires, I was able to draft the amendments only in the past 48 hours. Discussion of the amendments tonight gives us the opportunity of consultation with the City corporation before the Bill goes to the other place and then comes back to us. The mind frame on the Bill was set early on by the non-advice to the Committee or it failing to seek advice on the remit of the Bill.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Gentleman clearly did not understand what I said earlier. His remarks are again general in nature and he must, if he is going to continue, confine himself to the amendments.

John McDonnell (Labour, Hayes and Harlington)

Thank you, Mr. Deputy Speaker. I was responding to an intervention. If that was inappropriate, fair enough. I will want to engage in as much consultation on the amendments as possible after they have been approved, as I hope, this evening. There is an opportunity, for example, to consult the City corporation on the detailed implementation of the amendments. Amendment No. 33 is not adequate, but I moved it tonight to provoke debate. The issue contained in the amendment is whether the figure of £1,000 is correct. As I suggested earlier, perhaps it should be up to £1,000 for the first vote and £10,000 after that. One approach would be to make a proper analysis of the working population within the City corporation boundaries and then to work back from that, through the definition of relevant employees within individual companies, to calculate the distribution of votes in such a way that we would not introduce a system that would swamp the residential vote by employee or payroll votes. That is one way of tackling the individual problem highlighted in amendment No. 33. It would be a simple mathematical calculation and would be obtainable fairly easily from the information that we have. That is another issue for consultation with the City corporation and others. We need to engage in that calculation in discussions with the business representatives. I mentioned the LCCI and the CBI earlier and I have welcomed their involvement throughout, as well as trade union representation. The amendments would improve the Bill in an unexpected way and the City corporation will welcome them. It would welcome the voice of employees in its deliberations. I would certainly welcome the voice of employees in the Londonwide deliberations. There are arguments about the democratic nature of the City corporation being based solely on a business franchise.

Jeremy Corbyn (Labour, Islington North)

I am interested in what my hon. Friend has said about employees and residence. The City of London has many unique features, but an interesting feature that is not entirely unique is that most of its housing stock owned by local authorities is without the purview of the City of London. For example, there is a large City of London housing estate in my constituency. It is well run and I have no complaints about that, but do any of the amendments envisage a role for City of London tenants to have a say about how housing policy is managed?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. That again is wide of the amendments before the House. The hon. Member for Hayes and Harlington (Mr. McDonnell) ought not to respond to it.

John McDonnell (Labour, Hayes and Harlington)

I shall therefore refer my hon. Friend to amendments that were not selected for debate. The thrust of my arguments has been to challenge the anti-democratic nature of the Bill, and to ensure that democracy is heard in the debate. On Second Reading and elsewhere, democracy has been very narrowly defined, based on voting either by residents or by businesses. We have introduced a wider definition which, if accepted, could introduce for the first time a concept of industrial democracy. That would be based not on the power of a particular firm, but on employees having a role in their firm and in their firm's locality. Some hon. Members will have engaged in the debate in the 1960s and 1970s, during the Bullock inquiry into industrial democracy. That debate was based on matters such as working practices, the work environment, health and safety and adequate representation. At no stage in that debate—

Peter Brooke (Conservative, Cities of London and Westminster)

rose in his place and claimed to move, That the Question be now proposed.

Peter Brooke (Conservative, Cities of London and Westminster)

On Second Reading, I took advice on the declaration of an interest in the Bill. I was told that I had no interest to declare, but, in order to make it clear beyond peradventure, I am content to refer the House to my entry in the Register of Members' Interests, and am happy to stand by anything that appears in that entry. The Second Reading debate was excellent, good-humoured and germane. I mean no disrespect to the hon. Member for Hayes and Harlington (Mr. McDonnell) when I say that so far this evening, we have heard a bit of a monologue.

John McDonnell (Labour, Hayes and Harlington)

Will the right hon. Gentleman give way?

Peter Brooke (Conservative, Cities of London and Westminster)

As my speech will be shorter than the one made by the hon. Gentleman, I shall wait a moment before giving way, although that is uncharacteristic of me. Under some compulsion from the House, the hon. Gentleman's amendments were put, and I shall speak briefly in rebuttal of them. The most enjoyable moment in his speech was when he got to amendment No. 33 and, in a manner worthy of the former Member for Burnley—who, on one memorable occasion, said, "I intervene upon myself, Mr. Deputy Speaker"—

Nicholas Winterton (Conservative, Macclesfield)

Was that Dan Jones?

Peter Brooke (Conservative, Cities of London and Westminster)

As my hon. Friend says, it was indeed Mr. Dan Jones. However, I should rather not take interventions unless they are absolutely necessary. The substance of the remarks of the hon. Member for Hayes and Harlington in moving the amendments was contained in his observations on amendment No. 13, which he desrcibed as the key amendment. He looked forward to amendment No. 33, which amended the schedule; that amendment also dwelt on the process. The majority of the other amendments were either paving or consequential amendments, so I shall run through them quickly; I shall concentrate on amendments No. 13 and 33. I think that the hon. Gentleman would agree that amendment No. 7 was a paving amendment. He took the view that amendment No. 13 was the key amendment. It would make an insertion in clause 3 so as to require the conduct of a ballot of relevant employees to decide who is to be appointed as a voter. No details are given about how such a ballot would take place, or about how the selection of candidates would be made. In any case, the amendment is inappropriate, because it harks forward to a proposed amendment to the schedule—amendment No. 33—which links the entitlement to appoint voters to numbers employed rather than to rateable values. As will be apparent under the substantive amendment to the schedule, that system is not workable for reasons to which I shall come. The hon. Gentleman spoke to amendment No. 16, to which I shall return because it is a little different from the others. Amendment No. 17 appears to be consequential, as does amendment No. 19. Amendments Nos. 30 and 31 are also consequential. Amendment No. 33 represents the heart of the hon. Gentleman's argument that, instead of an election system based on rateable value, we should have an election system based on payroll. The amendment replaces the existing scale of appointments in paragraph 1 of the schedule by a scale related to the numbers of employees. Qualifying bodies having up to 1,000 employees would receive one appointment, with one each for each subsequent 1,000. The possibility of using employees as an index was given detailed consideration before the promotion of the Bill. In the event, it became apparent that such a scheme would not be administratively workable.

John McDonnell (Labour, Hayes and Harlington)

The right hon. Gentleman suggests that there was detailed consideration of the proposal before the Bill was promoted. Who was consulted in that detailed consideration? It was certainly not London Members of Parliament, London local authorities or many of those who were involved in the petition against the Bill. That consultation does not seem to have taken place.

Peter Brooke (Conservative, Cities of London and Westminster)

The hon. Gentleman knows well that the Government made it clear that, if the corporation was not to be abolished, it had to reform its franchise. As it was to be reformed through the business vote, the consultations and discussions, not unreasonably, took place with business interests. In the event, it became apparent that a scheme such as that to which the hon. Gentleman addressed his speech would not be administratively workable. Such an approach would also mark a departure from the current principle of business voting in the City, and would therefore set a precedent for commuter voting. Rateable value has been chosen as the basis of the system for reasons of administrative convenience. By contrast, the allocation of votes by reference to the size of a company's work force would represent a considerable burden on business. The House should be aware that in developing the proposals for reform, the corporation gave full consideration to allocating votes on the basis of the number of employees. They found that asking companies to furnish the town clerk with their employment details is not as straightforward a task as it may seem. Many firms hold their payrolls centrally in regional centres. That may include information on all employees, whether or not they work in the City, and extracting the information on employees working in the City may not be especially easy. At the same time, there is considerable volatility in the City work force, with a staff turnover of up to 26 per cent. per annum. That would mean that the number of people employed within a company—

Andrew Dismore (Labour, Hendon)

Will the right hon. Gentleman give way?

Peter Brooke (Conservative, Cities of London and Westminster)

I would be grateful if the hon. Gentleman would let me finish my point. That would mean that the number of people employed within a company over a year will be highly variable. Adopting employment as a measure of entitlement to voting rights would therefore cause business greater expense to comply with voter registration than is the case with rateable values. I shall now give way to the hon. Gentleman.

Andrew Dismore (Labour, Hendon)

Will the right hon. Gentleman explain the difference between compiling a register of employees on a given day of the year, such as 10 October, and compiling an ordinary electoral register, as every local authority has to do—which is a much more complex job—on exactly the same date? Certainly in London boroughs the turnover of electors is greater than that of staff in businesses in the City.

Peter Brooke (Conservative, Cities of London and Westminster)

The hon. Gentleman has been involved in the City of Westminster, and he knows the rate of turnover there. I very much doubt if there is the same degree of turnover in his constituency. At any rate, an annual staff turnover of 26 per cent. is massive. It was also felt that if voting rates were allocated on the basis of employment, the scheme would become much more than just a modernisation of the existing business vote system. Allocating voting rights on the basis of employees rather than property would mean the introduction of a whole new principle into the British electoral system and might, as I said, provide a precedent for the introduction of the commuter vote. The rateable value of a property occupied by a qualifying body will, in any event, have some relation to the number of staff that it employs and thus the size of the payroll. Within each ward, therefore, the properties with the largest rateable values also have the most employees. Recognising that there might be some properties that carry high rateable values, but have few employees, the Committee amended the Bill to provide that a company or qualifying body cannot receive a greater number of votes than it has employees. That will prevent the potential abuse identified by the hon. Members for Tatton (Mr. Bell) and for Southwark, North and Bermondsey (Mr. Hughes) on Second Reading, whereby a qualifying body could sell voting rights to the highest bidder. The hon. Member for Hayes and Harlington will, as a result of the debate so far, be amply aware that the City of London Labour party is also of the view that the entitlement to vote ought to be related to the number of employees rather than rateable value. On day three of the Committee stage, Christopher Haines, chairman of the local Labour party, told the Committee: We have commended to the Corporation an alternate proposal, that votes should relate to the number of staff employed by bodies within the City, a system we refer to as the payroll vote—However we recognise that to amend this Bill to incorporate the principle of payroll votes would be a fundamental change". The City of London Labour party chose not to press the amendment in Committee and I hope that the hon. Member for Hayes and Harlington will withdraw his amendments tonight.

John McDonnell (Labour, Hayes and Harlington)

I shall not repeat what was said in a lengthy debate earlier, but I thought that I had made it clear to the right hon. Gentleman that the City of London Labour party, members of the Select Committee and other petitioners were constrained in that way not because of any refusal to support the principle of a payroll vote, but because of advice that it could not be included in the Bill. Now that we have discovered that it can, I am sure that they would support the amendment.

Peter Brooke (Conservative, Cities of London and Westminster)

I remind the hon. Gentleman that neither of us can rewrite history. The Select Committee sat in a quasi-judicial manner and made the determination that it did. The City of London Labour party chose not to press that particular element of its petition. I now turn to amendment No. 16 which I said was a little different. It seeks to amend clause 3(5) to provide that where a hereditament is in more than one ward it should be taken as situated wholly within the ward in which the larger number of employees are located. That is a wholly unworkable suggestion, as employees move around the premises rather in the same way as cattle move across the Irish border. It is unreal to attempt to make an assessment by reference to such a fluctuating quantity. The present arrangement is decided by reference to the greater part of the hereditament which is a physical entity, not a fluctuating quantity. For that reason I urge the House to reject amendment No. 16 as well.

Nick Raynsford (Labour, Greenwich and Woolwich)

We had a full debate on Second Reading on the merits of the Bill and I do not propose to reiterate that tonight. It is not a Government Bill, but it is the product of the Government's desire to see the City of London reform and modernise its electoral arrangements. The City is a unique and ancient institution. Its customs and practices are held dear by many people, but it is clear that some of those customs and practices are archaic and do not contribute to good effective and accountable local government. The corporation has recognised this and the current Bill is part of its response. The Government welcome the fact that the City is beginning to face up to the need to put its governance on a more modern footing. We believe that the proposals in the Bill are a step in the right direction. They recognise the special and unique nature of the square mile and the need for an inclusive form of local government that reflects the needs of all those who have an interest. That must include the companies and institutions established in the City, the workers employed by them and the people who live there.

John Cryer (Labour, Hornchurch)

Is my hon. Friend arguing that basing voting power on wealth or rateable value represents a modernisation of the franchise?

Nick Raynsford (Labour, Greenwich and Woolwich)

If my hon. Friend will bear with me, I shall make the point clearly. We propose changing the current franchise from one that is limited to sole traders and certain people with property interests and excludes the vast majority of firms that operate in the City. It is not essentially a business franchise. The change extends the franchise to businesses in general within the City and that is a step in the right direction. The Select Committee considered the Bill carefully and found that the measures within it were justified and that the Bill should proceed. It considered the detail of the Bill and took evidence from its promoters and from petitioners against. As a result, the Committee asked for a number of amendments to be made to the Bill.

Norman Godman (Labour, Greenock and Inverclyde)

I live in the City for some six months of the year. As is well known to my fair-minded adversaries, I am a council tenant of the City of London corporation. Is my hon. Friend satisfied that these developments will not in any way diminish the interests of the residents of the City who number some 5,000 compared with 250,000 people who come into the City every day? Some of my neighbours in Willoughby house in the Barbican are deeply concerned about the measures.

Nick Raynsford (Labour, Greenwich and Woolwich)

I can give my hon. Friend the assurance that he seeks. The matter was debated extensively on Second Reading. It has been established that while there has been an overall increase in the franchise because of the proposed extension of the business vote, the interests of residents are fully protected because the number of wards with a predominance of residents remains the same. Therefore, the number of councillors who are elected—[Interruption.]

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. I say to the hon. Member for Harwich (Mr. Henderson) before he leaves the Chamber, and to the House in general, that electrical devices of the sort that have interrupted our proceedings should be switched off or left outside the Chamber. Madam Speaker takes an extremely strong line on this.

Nick Raynsford (Labour, Greenwich and Woolwich)

I was explaining, Mr. Deputy Speaker, that the make-up of the electoral pattern in the City is such that the wards that are predominantly—

Ivan Henderson (Labour, Harwich)

On a point of order, Mr. Deputy Speaker. I apologise for interrupting the proceedings of the House. I shall make sure that it does not happen again.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

I am grateful for that apology.

Nick Raynsford (Labour, Greenwich and Woolwich)

I was in the process of explaining to my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman) that the number of representatives who represent residents in the City of London will not reduce. Indeed, against the background in which there will be an overall reduction in the total number of councillors, the interests of residents will not be adversely affected. I know that the matter was considered carefully by a number of people who were particularly interested in the issue.

Gareth Thomas (Labour, Harrow West)

rose—

Nick Raynsford (Labour, Greenwich and Woolwich)

I want to make some progress but I shall give way to my hon. Friend, who was a member of the Committee.

Gareth Thomas (Labour, Harrow West)

I wonder whether my hon. Friend is aware that one of the reasons why those of us who sat on the Committee agreed to allow the Bill to proceed was the evidence that we received that there are so few voters in some of the wards that there is the potential for abuse, manipulation and a packed vote. Is my hon. Friend aware also that there is a strongly held view, at least by me, that the City corporation's leadership must respond to the challenges laid down for it within the special report and bring forward reforms and suggestions on how the reforms outlined in the special report can be brought forward?

Nick Raynsford (Labour, Greenwich and Woolwich)

My hon. Friend makes two extremely valid points. The process of reform is necessary because the current arrangements, as I have already said, are archaic and not conducive to proper and accountable systems of government. Secondly, as the Committee rightly stressed, a step has been taken in the right direction, but there is a need to go further. I have made that point personally to representatives of the City corporation on several occasions and I know that they take seriously my views and, above all, the views of the Committee. I believe that they intend to carry forward a further process of reform. They have given an undertaking that they will report on that within five years as part of the process. That undertaking was also given, I think, to the Committee.

Phil Sawford (Labour, Kettering)

rose—

Nick Raynsford (Labour, Greenwich and Woolwich)

I give way to my hon. Friend, who was also a member of the Committee.

Phil Sawford (Labour, Kettering)

My hon. Friend was in the Chamber when I said that the Committee felt constrained by the type of Bill that was before us. We felt that we were restricted in the sort of amendments that we could make to it. I drew attention to the special report, which clearly states that view. I learned a great a deal when considering the Bill. I learned of wards where there were no electors and of wards where there have been no elections for 25 years. I learned also of a veto system that prevented democratically elected people taking their place on the court of common council. At the outset of my consideration of the Bill I was reminded of a story about a chap who walked into a bank with a £18 note. When told that it was not legal currency and could not be accepted, the member of the bank's staff said, " We can change it for you. Do you want three £6 or two £9?" At the end of the Bill's—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Order. The hon. Gentleman must take his seat when I am on my feet. That intervention was far too long.

Nick Raynsford (Labour, Greenwich and Woolwich)

My hon. Friend makes better than anyone else could the case for reform. The status quo is untenable and the Bill is moving us forward in the right direction. I accept entirely, as I have already made clear, that there is a need to take the reform process further. The Committee asked for a number of amendments to be made to the Bill, covering a number of important issues raised by hon. Members on Second Reading. They include a test of "connection" with the City, which people nominated as corporate voters must satisfy; an inflation-proofing mechanism for the rateable value bands and thresholds, to ensure that the size of the new business electorate does not increase just because property values rise; and a provision—

John McDonnell (Labour, Hayes and Harlington)

On a point of order, Mr. Deputy Speaker. Can you advise us whether the Minister is speaking to the amendment, the Bill, or Third Reading? What is he speaking on?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

If the Minister were not in order, I would have stopped him.

Nick Raynsford (Labour, Greenwich and Woolwich)

Thank you, Mr. Deputy Speaker. I am slightly surprised that my hon. Friend, who spoke for two hours, questions whether I am in order. The Committee proposed amendments to ensure that the size of the new business electorate does not increase just because property values rise, and a provision to ensure that, in appointing voters, companies have regard to the composition of the work force—a point which my hon. Friend the Member for Hayes and Harlington recognised in his speech as a significant forward move. I believe that all those represent sensible improvements to the proposals for the new franchise. The Committee stated in its special report that it does not feel that the measures in the Bill go far enough. I do not dissent from that view. We have welcomed the proposals, but have always regarded them as a first stage in the process of reform. There is clearly much more that the City could do to improve the accountability and transparency of the way in which it is governed, and to streamline its decision taking. The Committee's report provides a useful indication of the priorities for the next phase of reforms. If this Bill is prevented from proceeding in its current form, the City franchise will remain unchanged, and the drive for reform from within the corporation will be stifled. I do not think that anyone who cares about reform wants that outcome. Significantly, the City of London Labour party—one of the two original objectors to the Bill—is now prepared to accept the proposals as a first stage in the process of reform, and has written to express that view to hon. Members, as we have heard from several hon. Members tonight. By allowing the Bill to proceed, the House will be giving further encouragement—

Michael Connarty (Labour, Falkirk East)

My hon. Friend spoke about the principles that the Government were applying and the fact that certain groups would be aided by amendments to the Bill. One group that he mentioned was workers, but he did not—

James Gray (Conservative, North Wiltshire)

On a point of order, Mr. Deputy Speaker. What possible interest can the Member of Parliament for Grangemouth have in the City of London (Ward Elections) Bill?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

The hon. Gentleman should know full well that hon. Members' constituencies do not prevent them in any way from taking part in our proceedings.

Michael Connarty (Labour, Falkirk East)

I am grateful for that, Mr. Deputy Speaker, and hope to see it underlined again and again. I am keen to hear from my hon. Friend the Minister how that throw-away phrase, "the enfranchisement of the workers", is linked to the logic whereby a company or body will appoint one or two people, according to its rateable value, and how that gives the workers anything. Is that a new departure—the third way—in industrial democracy?

Nick Raynsford (Labour, Greenwich and Woolwich)

As I said earlier in my speech, and as was pointed out earlier in the debate, clause 4 specifically requires a qualifying body to ensure that the appointments which it makes reflect, in so far as is reasonably practicable, the composition of the workforce. My hon. Friend the Member for Hayes and Harlington recognised that that was an important shift, compared with the Bill as previously presented. I believe that that is a significant step forward. By allowing the Bill to proceed, the House will be giving further encouragement to the City to continue the process of reform. The new electorate that the Bill will create, covering the full range of businesses operating in the City in place of the much more restrictive business franchise that previously existed, will become an added incentive. However, the amendments would fundamentally alter the way in which the Bill works. They have not been fully considered. Practical issues were raised by the Chairman of the Select Committee and by the right hon. Member for Cities of London and Westminster (Mr. Brooke), who is sponsoring the Bill, about the difficulty of implementing the proposals contained in the amendment. Nor have the amendments been the subject of local consultation, as the City of London Labour party had to point out to my hon. Friend the Member for Hayes and Harlington.

Dennis Skinner (Labour, Bolsover)

How many votes will the Worshipful Company of Skinners get?

Nick Raynsford (Labour, Greenwich and Woolwich)

I would require notice of that question. However, I undertake to look into it and to write to my hon. Friend. As my hon. Friend the Member for Hayes and Harlington admitted, amendment No. 33, the crux of the amendments, is a weak one. It would be inappropriate at this stage to insert the amendments in the Bill. The Government cannot, therefore, support them, and I hope that the House will not do so either.

Nicholas Winterton (Conservative, Macclesfield)

I fully support the measured remarks of my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke)—and, if I may say so without ruining his career, the constructive, positive and reasoned response to the debate by the Minister. He understands the City. I declare an interest in response to the intervention of the hon. Member for Bolsover (Mr. Skinner), with whom I have a great deal in common and whom I happen to admire immensely as a considerable parliamentarian, although he is out of place sitting where he is. The role played by the City provides a substantial advantage to the people of that area and considerable advantages to those who live within the City of London. I speak as an immediate past upper bailiff of the Worshipful Company of Weavers—the oldest, but in no way the most senior company in the City of London. We trace our foundation back to 1130.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. I remind the hon. Gentleman that we are discussing a group of amendments. Perhaps he could come directly to them.

Nicholas Winterton (Conservative, Macclesfield)

As one of my hon. Friends says, I am weaving a particular line in the case that I seek to make. The Minister, in responding to the amendments—

Clive Efford (Labour, Eltham)

rose—

Nicholas Winterton (Conservative, Macclesfield)

I am happy to give way to the hon. Gentleman, who happens to be an articulate and positive member of the Procedure Committee.

Clive Efford (Labour, Eltham)

I used to do quite a bit of weaving in the City myself, but no one has ever given me a vote.

Nicholas Winterton (Conservative, Macclesfield)

Democracy is an interesting animal. In itself, it does not necessarily provide the quality of service which the people of London expect and which all the residents of the City of London receive from the City corporation. My brief contribution to the debate is to support my right hon. Friend the Member for Cities of London and Westminster in the constructive remarks that he has made. If the hon. Member for Falkirk, East (Mr. Connarty), who represents a Scottish constituency with great distinction, and the hon. Member for Greenock and Inverclyde (Dr. Godman), another distinguished and experienced Member of the House, can participate, I hope that the Member for Macclesfield, which is in the north-west of England, can also contribute, bearing in mind my intimate knowledge of the City of London. Although, as the hon. Member for Bolsover will know, I do not support many of the things that the City does in an economic context, I believe that it plays a major, positive and very beneficial role in local government.

Dennis Skinner (Labour, Bolsover)

rose—

Nicholas Winterton (Conservative, Macclesfield)

I give way to the hon. Gentleman with immense pleasure.

Dennis Skinner (Labour, Bolsover)

All I can say is that the hon. Gentleman is now in favour of the block vote, and has deserted "one person, one vote".

Nicholas Winterton (Conservative, Macclesfield)

I have immense respect for the hon. Gentleman, and I like the point that he has made. I am highly principled: I believe in one man, one vote—or one man/one woman, one vote. We are dealing, however, with the City of London, a uniquely successful entity.

Jeremy Corbyn (Labour, Islington North)

Will the hon. Gentleman give way?

Nicholas Winterton (Conservative, Macclesfield)

I give way.

Jeremy Corbyn (Labour, Islington North)

A moment ago, the hon. Gentleman spoke of the City's good works and administration of local government. He will have heard my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) say that the City has reserves amounting to £1.6 billion in its coffers. I represent a borough that borders on the City. We have 10,000 families on housing waiting lists. Does the hon. Gentleman think that some of that money could be better spent in Hackney, Islington—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Gentleman's intervention does not relate in any way to the amendment, and I ask the hon. Member for Macclesfield (Mr. Winterton) not to respond to it.

Nicholas Winterton (Conservative, Macclesfield)

Of course I accept your ruling, Mr. Deputy Speaker. I have a full answer to the question put to me by the hon. Member for Islington, North (Mr. Corbyn), but, owing to my deep respect for the Chair, I will not give it. I merely say that I agree with the Minister that the Bill represents a considerable advance on what has preceded it, and I think that, for that reason alone, it would be inappropriate for it to be voted down. Bearing in mind the City corporation's assurance that it will continue to consider reform of what goes on in the City, I believe that the House should oppose the amendments, and support the Bill as it stands.

Phil Sawford (Labour, Kettering)

My speech will be short, as I intervened a couple of times earlier. I found serving on the Committee an enlightening experience. The Committee sat for several days, during which we listened to a good deal of evidence on behalf of the promoter and the petitioners. I learned a great deal about the inner workings of the City in that time, which led me to believe that it must be the most undemocratic, unrepresentative, unaccountable system left in this country. I felt, however, that it was making a genuine commitment to reform its methods of operation, and to increase its democratic accountability. The Bill proposes to extend the franchise by, in effect, giving votes to buildings. Votes would accumulate on the basis of the value of those buildings.

Jeremy Corbyn (Labour, Islington North)

My hon. Friend has examined the Bill. What evidence was there, in the response of the City of London corporation, of consultation with either individual businesses in the City or employees of those companies?

Phil Sawford (Labour, Kettering)

We were presented with a considerable amount of evidence that there had been consultation through the City of London corporation. There had also been residents meetings. There had been much consultation. The one group of people which probably had not been consulted in particular were employees. Residents and businesses had had consultation, but that brings us back to the amendments. My hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) is trying to include employees within the process. Although extending the franchise on the basis of property values is one way to give a broader franchise to people who are involved and who make their living in the City, it is very much on a corporate basis. The amendments would extend it to people who have a working interest, who make their living and earn their livelihood there. It is still less than full democracy.

John McDonnell (Labour, Hayes and Harlington)

The Minister raised the issue of consultation with those employees. My hon. Friend has alluded to that. In the previous debate, we proposed that, although there has been difficulty over consultation until now—the House has been constrained with regard to the Bill—if the amendment were passed, there would be a real opportunity for consultation. We could consult the City corporation, take the Bill to the other place and refer it back here, so that we could get the practicalities right.

Phil Sawford (Labour, Kettering)

As, I think, the only member of the Committee who has sat through the whole debate, it is not being disloyal to the Committee to say that the amendments were not considered. I am sure that others on the Committee were not aware that such amendments were acceptable within the terms of the Bill. Having looked at the amendments and considered their implications, I believe that there is a serious democratic deficit within the workings of the City of London corporation. No hon. Member can deny that. No democrat elected to the House can deny that.

Andrew Dismore (Labour, Hendon)

I am sure that my hon. Friend has heard of the homes for votes scandal in the neighbouring Westminster city council, which gerrymandered elections. Is not what is proposed in the Bill—votes for business—an even greater affront to democracy?

Phil Sawford (Labour, Kettering)

I thank my hon. Friend. I make no comment on the Westminster situation. I would rather concentrate on the issue that is before us this evening. My hon. Friend is right—it is capitalism gone mad. We now give votes to buildings. The bigger the building, the higher its rateable value, the more votes are obtained.

Peter Brooke (Conservative, Cities of London and Westminster)

rose in his place and claimed to move, That the Question be now put.

BUSINESS OF THE HOUSE