§ ' .—(1) The Secretary of State may, with the consent of the Treasury, by order substitute for any percentage for the time being specified in section 16(2) above such other percentage as may be specified in the order.
§ (2) Subject to subsections (3) and (4) below, any amount payable or paid by any company in respect of levy under that section on any disposal shall be allowable as a deduction from the consideration in the computation under the 1979 Act of the gain accruing to that company or to any other person on the disposal.
§ References below in this section, in relation to any disposal on which levy under that section is chargeable, to the levy amount are references to any amount so payable or paid in respect of the levy.
§ (3) Subsection (2) above shall not apply where—
- (a) apart from the deduction of the levy amount an allowable loss would accrue to the company or to any other person on the disposal; or
- such a loss would so accrue if the levy amount were deducted;
§ (4) Subsection (2) above shall not apply where a disposal on which levy under section 16 above is chargeable is one which, by virtue of section 267(1) or 273(1) of the Income and Corporation Taxes Act 1970 (company reconstructions and amalgamations and transfers within groups of companies), is treated as made for a consideration ("the original consideration") giving rise to neither a gain nor a loss.
§ (5) Where in any case within subsection (4) above the original consideration is less than the market value at the time of the disposal of the land or interest in land which is the subject of the disposal, the consideration for which the disposal is treated by the provision in question as being made shall be increased by—
- (a) the levy amount; or
- (b) the excess of that market value over the original consideration;
§ (6) Except as provided above in this section, no amount payable or paid in respect of levy under section 16 above or interest on such levy shall be allowed as a deduction or otherwise taken into account in computing any income, profits or losses for any tax purposes.
§ (7) There shall be paid into the Consolidated Fund—
- (a) all payments received by the appropriate Minister in respect of levy under section 16 above; and
- (b) all interest paid to the appropriate Minister by virtue of any provision of an order under that section.
§ (8) In this section "allowable loss" has the same meaning as in the 1979 Act; and in section 16 above and this section—
- (a) "the 1979 Act" means the Capital Gains Tax Act 1979; and
- (b) references to an interest in land include any right in, over or in relation to land.'.—[Mr. McLoughlin.]
§ Brought up, and read the First time.
§ Mr. McLoughlinI beg to move, That the clause be read a Second time.
Madam Deputy SpeakerWith this it will be convenient to discuss the following: Government amendments Nos. 27 and 28.
Amendment No. 47, in clause 16, page 12, line 21, leave out from 'be' to end of line 34 and insert
'charged at the rate of one hundred per cent. on the amount of the gain, and shall be payable by the chargeable company to the Secretary of State.'.Government amendments Nos. 29 to 37.
§ Mr. McLoughlinThe amendments constitute a significant change to the arrangements envisaged in the Bill for the Government's levy on onward disposals of land. They take account of almost all of the concerns that were expressed about the arrangements by my hon. Friends in Committee. They do not, I surmise, take account of the views of the Opposition, because there was a total divide in Committee on the points. I do not wish to say anything further about what happened in Committee, but instead to deal with the heart of the matter.
The Government take the view that the sale of a port under the Bill will be carried out through a process of competitive tendering. Nevertheless, it is still possible that land which some of the ports hold will turn out to have a significantly higher value than was appreciated at the time of sale.
In such cases, the subsequent sale of such land would be subject to capital gains tax. But we consider that there should be a further levy on the enhanced value of such property to prevent excessive windfall gains for the purchaser of a port in the same way. As I explained a few minutes ago, we see the levy on the proceeds of disposal as preventing excessive windfall gains at the time of sale.
Of course, as I made clear in Committee, one of our objectives in seeking the privatisation of major trust ports is to make it easier for them to realise the value of their property holdings, so we need to strike a careful balance between preventing excessive windfall gains and deterring the port companies from turning their property to best account. The balance is difficult, and a number of my hon. Friends, who, I expect, are representative of opinion on this side of the House as a whole, made it clear during debates in Committee that they did not feel we were striking the right balance, but instead that the scales were too loaded against the ports.
969 Amendment No. 27 clears the way, in drafting terms, for amendment No. 28. That amendment is designed to answer most of the points that my hon. Friends have made. First, it defines the disposal of land or an interest in land in terms of the Capital Gains Tax Act 1979. That makes it clear that we are envisaging not a new tax, but rather a levy, or surcharge based on existing tax earnings. In particular, this responds to concern about the levy being charged for deemed disposal on the granting of planning permission. With the new formulation, that falls outside the scope of the levy, and, indeed, amendment No. 32 specifically deletes it from the Bill.
Secondly, although we continue to see the need for the levy to operate over 10 years, because a reduction to five years would encourage companies simply to defer disposals until they escaped levy altogether, we accept that, after the first five years, the rate should be tapered.
Thirdly, we have also taken account of the combined effect of the levy and of CGT on gains resulting from land disposals. This is the most obvious example of the need to strike a balance that I have just mentioned. Accordingly, the rate of levy is to be 25 per cent. for the first five years, reducing to 20 per cent. in years six and seven, and to 10 per cent. for the rest of the 10-year period.
If I may anticipate the provisions in new clause 9, the House will see that subsection 2 provides for the levy to be deductable against capital gains for the purpose of capital gains tax. That means that, for the first five years, the maximum combined effect of the levy and of CGT will be 49.75 per cent. of the chargeable gain, falling after five years to 46.4 per cent., and after seven years to just under 40 per cent. I pointed that out to Committee members in a letter that I wrote to them a few weeks ago, because I knew that they would want the full details of that important matter.
The remaining amendments on clause 16—Nos. 29 to 36—are drafting consequentials either of amendment No. 28, or simply of the need to move one or two of the existing provisions in clause 16 into new clause 9.
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Two other points of interest to my hon. Friends will be dealt with in due course by the order to be made by my right hon. and learned Friend the Secretary of State, under subsection (3). First, that order will provide that the base date for the valuation of land for the purpose of the levy will be the date on which the company ceases to be a wholly owned subsidiary of the former port authority, that is the date on which the disposal begins. The base value will be the market value at that date.
Secondly, there is clearly little point in applying the levy to minor disposals of land. Accordingly, a de minimis provision is needed, and the order will provide that individual disposals worth less than 2 per cent. of the proceeds of sale of a port, provided that they fall below £200,000, will be excluded from the levy. The order will also provide that the levy will be payable only on disposals of a value amounting cumulatively over the whole of the clawback period to more than 10 per cent. of the proceeds of sale of a port, provided that they do not exceed a cumulative total of £500,000.
§ Mr. WallaceMay I respond to the Minister's point that the base date for calculating the value and the increase 970 will be the date of transfer to the new company, when the company will cease to be a subsidiary of the port? Does that mean that, if the value of transfer is fixed on, say, 1 January for a transfer that will take place on I May. and planning permission is obtained in March for land that, accordingly will increase substantially in value after the date on which the price was agreed, that increase will not be reflected if there is a subsequent sale at a much enhanced price?
§ Mr. McloughlinI shall come back to the hon. Gentleman on that issue when I have thought more about his question. I shall try to answer him at some stage during the debate.
New clause 9 consists partly of provisions transferred from clause 16 and the provision to which I have already referrred, and makes the levy deductible against gains for the purpose of capital gains tax. It also includes provisions, in subsections (3) to (5), to ensure that the payment of a levy will not be allowed to create a loss for the purpose of capital gains tax. Finally, amendment No. 37 is a drafting consequential later in the Bill.
This is an important aspect of a privatisation of this sort, where unforeseen gains may arise on the subsequent sales of land. In drawing up these amendments, we have taken the views expressed in Committee carefully into account, and I hope that my hon. Friends, if not Opposition Members, feel that the package of measures that we now have extends the right balance of interests between the new port owners and the taxpayer beyond the disposal into the early years of privatisation. I therefore hope that the amendments will be acceptable to the House.
May I return to the question of the hon. Member for Orkney and Shetland (Mr. Wallace)? The example that he gave might be the case, but I shall confirm that to him later. If necessary, I shall write to him in due course.
§ Mr. LeadbitterI hope that the Minister will accept that the House needs to be quite clear about the meaning of new clauses 9 and 16 and the amendments under consideration.
New clause 9 states:
The Secretary of State may, with the consent of the Treasury, by order substitute for any percentage for the time being specified in section 16(2).That is rather a dog's breakfast. It does not tell the House very much—we shall have to vote on it—about the impact that it may have on the ports. For example, the Tees and Hartlepool port authority had disposable assets of some £60 million. The Minister should recognise—we have often repeated the fact—that, when the levy under that Bill was 50 per cent. or nearly £30.5 million, we understood the extent to which the port authority would be denied half the value of the disposable assets and that the holding company would have the rest. That would go against the raising of moneys for the flotation. Moreover, we could measure the extent to which the subsidiary company—the port—would be disadvantaged.The Minister is not listening to me. Hon. Members would be wise to consider the point that I am making. The new clause affects many ports and the employment prospects of those who work there. Although hon. Members may not have job security, we are much more privileged than those who must suffer the vicissitudes of economic recessions. The issue concerns jobs, men and management, and the extent to which the Government are 971 seeking, rather greedily, to accrue to the Treasury moneys which they have not helped to earn. That is the nub of the problem.
Will the Minister consider this serious matter objectively? Before the House votes, it is entitled to know the exact implications of this important new clause and the amount of money that we shall take from those ports, which will not have been earned by the Government. It will be a windfall for the Treasury, which will benefit in the same way as it has in every privatisation so far. The Government have done little for the economy but, by selling off the plate and silver, they have given the Treasury millions of pounds.
The Bill deals with small ports as well as large ones. To put it in perspective, the Tees and Hartlepool port authority is the third largest port in the United Kingdom in terms of volume of trade. However, the Bill deals with many other ports which come way down the scale, with assets of less than £60 million or even as low as £20 million.
If, under new clause 9, the Secretary of State is allowed, with the usual wording,
with the consent of the Treasury"—not of the House—to tinker with the provisions already in the Bill and change the circumstances in which the levy would be applied, thereby altering the percentages in the Bill, we should know beforehand what effect that will have on the ports that the Government seeks to privatise.Anyone who runs a business would want to know his returns as a percentage of his turnover and the tax that he would have to pay. Somebody may buy into the business. If that somebody is not the House of Commons or those who draft legislation but the Government of the day with the consent of the Treasury, that is not an interesting business arrangement, because they are in the same pot together. The Prime Minister is the First Secretary to the Treasury. Naturally, the business wants to know the course that the Government will take in the absence of any democratic processes being put into effect.
The Bill provides that in the first year
the levy shall be 40 per cent. of the corporation tax payable by the company.In the second year, it will be 32 per cent.; in the third, 24 per cent.; in the fourth, 16 per cent.; and in the fifth, 8 per cent. How have the Government arrived at these percentages? Instead of 40 per cent. in the first year, why not 41 per cent. or 39 per cent? Instead of 32 per cent. in the second year, why not 28 per cent?The term "corporation tax" does not present us with a specific figure. As we are taking money from other's pockets, the House is entitled to know by what tests, criteria or judgments the Government arrived at the percentages to which I have referred. We all know that, if there are no factors in an equation save X, the value of X can quickly be ascertained. Does the House know what "corporation tax" means in the sense of real money?
I am expected to vote on these issues this evening. Well, perhaps it would be more accurate to say that, according to our procedures, the Government would welcome a decision by the Opposition not to vote on the new clauses and amendments to enable them, the Government, quickly to take the Bill through the House this evening. Of course no one wants to stop the Government taking their Bill through its various stages of consideration unless an important matter of principle is involved. Governments govern and Governments get their Bill, but all Administrations have a responsibility to explain to the 972 House how they have arrived at their figures, bearing in mind the fact that the Treasury will be given consent to change the figures.
In effect, we are being asked to approve the new clause and then to go to the Strangers' Bar for a pint of beer, or the Tea Room for a cup of tea or coffee, and say to ourselves, "We have done a good job. A non-elected body called the Treasury will be able to change the figures in future." That is not a responsible way to deal with our ports. I hope that the Minister will respond to his natural inclination to honesty and explain why elected Members of this place are expected to agree to the Treasury being empowered to alter the figures in future.
§ Mr. PrescottWe are discussing a controversial issue, and in Committee certain Conservative and Opposition Members united to defeat the Government. There will certainly be a Division this evening. I hope that I can have the attention of the Minister. I feel that too many discussions took place in Committee between the hon. Gentleman and the Government Whip. That led to a motion being tabled that meant that the new clause would be discussed at a late stage during our consideration of the Bill on Report. It is the usual practice of the House to deal with new clauses, and especially those tabled by the Government, at an early stage on Report. It was argued, however, on the basis of tortuous reasoning, that new clause 9 could be dealt with at a late stage. It happens, of course, to be the most controversial new clause and one on which there will be a Division.
I say with all respect to the Minister that my hon. Friends have worked well with him in a spirit of co-operation despite our opposition to the Bill. The hon. Gentleman could have given some warning of the move which I have described instead of causing us to be heavy at this stage. We said that we did not agree with their proposal and would debate the issue in full. That, of course, would have delayed progress. I think that the Government indulged in shoddy practice, especially as the Minister wrote to inform me of the formula that had been adopted for the clause on 2 April, almost 21 days ago.
§ Mr. McLoughlinPerhaps it would be appropriate for me to apologise to the hon. Gentleman. I am not trying to steamroller the Bill through the House. When it comes to any Divisions that might take place, he might then understand why we took the course to which he has referred.
§ Mr. PrescottI shall wait to see what happens. The Minister has given a generous apology and it is accepted. The reason behind the Government's actions is another matter, and one that could be debated all night. As I have said, I accept his apology.
Where will the money come from? That is the controversial issue. How will the Treasury get its share of the money that is in the land banks? Not all the trust ports are involved, and there are more than 100 of them. The controversy arises because of the criteria that are set out in the Bill. The relevant sum is £5 million for compulsion and only certain ports are candidates when it comes to the Treasury stepping in at some stage—that is, if the Treasury wants to take the opportunity of compulsory sale. In any event, the Government can exercise the relevant powers after two years. The present Government will not be in 973 office at the end of that period and we, the next Labour Government, will be able to use the excessive powers that the Bill provides to achieve different objectives and to meet different ends. I hope that everyone is aware of that.
In debating the new clauses and amendments, we are dealing with asset stripping. How can the Government take powers to ensure that they have access to what are considered to be community assets that are locked into the special arrangements of trust ports? This is not the first Bill to deal with trusts. I recall, however, that the Treasury chose not to take any money from the Trustee Savings bank. It seems that it has changed its view, perhaps because it has seen a great deal of land value attaching to the trust ports. In effect, it is saying, "There is a great deal of land value and we could have access to the money."
That is part and parcel of the Government's privatisation policy. It has nothing to do with a ports policy or with securing a more effective arrangement for the ports. It has nothing to do with helping ports that have genuine difficulties. There are others, of course, that are more than prepared to continue as before because they have not experienced difficulties. At the same time, other ports have experienced difficulties because of trust agreements.
It has not been possible to gain access to land values for development purposes, because it is a requirement of the trust that development must be in the interest of the port. I well understand that, and it would have been possible to meet the difficulty without privatising trust ports. It would have been necessary only to introduce a harbour revision order—that has already been done in some instances. That meets the problems of gaining access to assets to enable ports to be developed in the interests of the ports. The Government have even assisted those who have chosen to take that way forward.
The Government could introduce legislation or accept that the private Bill procedure could be pursued. Perhaps our debate goes to the heart of the private Bill procedure. My hon. Friend the Member for Hartlepool (Mr. Leadbitter) has talked, naturally, about Tees and Hartlepool, and one of the purposes of the debate is to discover how much money is available. There were some who were staggered when they learned how much money was available at my hon. Friend's port. They thought that that did not matter because of capital gains tax procedures, but some fancy dancing by some fancy tax lawyers showed that the Government would not get the money by means of the capital gains tax. It was then realised that a tighter procedure would have to be used, and that is what the clause is about.
The Government are not concerned with making it easier to raise capital. They are more concerned about the Treasury getting its take. It must be said that the Government have been clear about what they want to achieve. They say that they want to reduce obstacles to the development of ports and to enable other objectives to be pursued. If possible, they would like to give preference to a management-worker buy-out. That is the Government's declared aim, although some statements of late do not encourage one to believe that that is their purpose. I was doubtful about it from the beginning, but we are aware of the Government's declared aim. That being so, I feel that they would have adopted a different formula from the one 974 that is before us and that which appears in the amendments to clause 16. We must consider how effective the formula will be in meeting the Government's objective of helping the ports to develop.
I cannot emphasise enough the fact that this is really about the Treasury getting more of the resources that are available. We have the declared aim to see the proper development of the ports, because of limits on asset development, but the port authorities could now face a problem in view of the formula with which they are faced.
In other words, if the local authorities or trust authorities could be sold to private companies without any money being removed, it is clear that the amount of money retained in the companies would be considerable, simply because the value of those companies would be considerable.
The consequence is that with such rich asset values, their market value would be high from the point of view of potential development, and other predators might be interested in them. That might lead those wishing to buy a port finding that the value is higher than the actual asset value. That would make it difficult for preference to be given to a management-worker buy-out, and there are many examples of cases where such proposed buy-outs have not been able to raise sufficient money to buy at the required price.
The Government wish to allow competitive tendering. In other words, it will be an auction, with those concerned making bids. The Government said in Committee that they would not necessarily accept the highest bid. Certainly there is no requirement on them to do so. Reports have appeared in various newspapers giving the view of the Secretary of State, and although I am not sure that it is the view of the Department of Transport—perhaps the Minister will make the position clear—The Guardian stated that the Department of Transport had indicated that the highest bids would almost certainly secure ownership of the ports.
Is that true? If so, have the Government changed their position on the matter? If it is true, it is important for us to delve into the issues raised by the new clause because we are speaking of the employee share ownership plan—the ESOP arrangements—and the fact that the management-employee buy-out could run into trouble trying to raise the necessary money. Others may think of higher sums, setting a higher market value than the management-worker buy-out could accomplish. Borrowing against assets is the way in which most management-employee buy-out operations work.
We are tonight discussing the question of obtaining a balance. The Government have constantly told us that we must secure a balance that will not prevent the proper development of the port. In other words, sufficient resources must remain to enable port assets to be developed, with the port developing into other spheres, having been freed from its trust requirements.
On the other hand, there is the problem of sufficient assets remaining in the port to attract others to put in a higher price, discouraging the management-worker buy-out. Unless the Government are prepared to intervene as a matter of policy to ensure that there is a management-worker buy-out, I cannot see how that balance will be achieved.
§ Mr. WallaceI understood that part of the Government's objective was to try to avoid asset stripping. 975 Does the hon. Gentleman agree that, if there were a provision which discouraged the port—albeit the privatised port—from selling off land to a speculator at a great price, the port might be encouraged to develop that land for port purposes, rather than it being sold and used for purposes which might be unrelated, it having been sold to a third party, to the port and its development?
§ Mr. PrescottThe hon. Gentleman raises an important point. He will be aware that we spent a considerable time in Committee examining that issue. We are anxious to ensure that whatever development takes place, it is port related. We are concerned with asset development, but that does not come well from a Government whose primary purpose, as outlined in the clause, is to achieve asset stripping. They say that it is being done in the name of the community, and their first justification for that is the argument that they have already made many loans. Hon. Members on both sides will agree that the Port of London authority is an exceptional case in that respect, which is why the PLA is being dealt with separately in the Bill.
It is clear from the Minister's statements in Committee that the total sums paid in loans given under the various harbour revision instruments have been very small indeed. They have been nothing like the sums that are likely to be generated by the selling off of assets. In other words, this has nothing to do with getting our money back, which would be a reasonable argument for the Government to use.
This is really about getting access to the surplus value, and those are assets which the Government do not own and for which they have done nothing. This is simply a means of getting money for the Treasury. if anyone doubts that the new clause is part of a financial measure, it is clear from the drafting that we are in the realm of the tax lawyers, and in the new clause the Treasury makes that absolutely clear.
§ Mr. LeadbitterThe question of land, as my hon. Friend says, is important. The Bill would not protect the proposers of any buy-out from subsequently undertaking unrelated port activities, using the land to obtain quick returns and high profits, whereas port investment is long-term, gives a low rate of return and provides low profits.
§ Mr. PrescottThe history of port development proves that to be true. My hon. Friend knows from previous debates about ports and transport issues—and certainly from what I have said during my 21 years in the House—that we are greatly concerned about that problem. The same fears were raised during, for example, Tory Government inquiries about ports. It is clear that developments have worked to the disadvantage of ports. Indeed, one of the first debates that I attended concerned the Merseyside authority, and at that time the Selsdon man of the then Tory Government claimed we had allowed the port to go to the wall. The Government ceased saying that when they discovered that lots of old ladies had shares in pension funds invested in the Merseyside authority. So they decided that a rescue operation was necessary and that the full rigour of the market should no longer apply.
There is a legacy of problems with which we are now having to deal, and I was surprised to hear it suggested that only one shipping company had been involved in purchasing ports. In fact, there have been a number of such purchases. Sealink bought out a number of 976 companies. Hon. Members may recall the celebrated occasion when P and O spent most of a night pouring champagne for Tory Members in the hope that they would stay and vote at the conclusion of the proceedings. They were led into the Lobby by the then Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher).
That shows how far people will go under the private Bill procedure. It need not be done under that procedure any longer. They will simply make a bid, and it is clear that many are interested in bidding, not simply for the development of the asset land but to eliminate competition. That makes one ask whether the Monopolies and Mergers Commission procedure will apply if, for example, an owner buys a port up the road and commences to close it down. Will the Government then intervene?
That shows how important it is to have the sort of national ports council that we seek, an issue that will arise when we debate later amendments. We must preserve the existing assets to enable port-related developments to take place. My hon. Friends and I intend no criticism when we say that an amendment that we tabled on the subject has not been chosen, but I am anxious to make it clear that the issue is of great concern to us.
What proportion will the Government take? It has been said that, apart from proceeds worth 50 per cent.—we shall debate that later—we are now talking simply about the disposal of the land. The Government's original position involved their taking 50 per cent., although they amended that in Committee.
§ Mr. McLoughlinrose——
§ Mr. PrescottI know the point the Minister has in mind. It was 50 per cent. over 10 years, and I assure the hon. Gentleman that I am not talking simply about corporation tax. I am referring to the Government taking 50 per cent. of the proceeds, although it comes to much more than that now. I am talking only about the first share of the value, so if it is £100 million, the Government are entitled to £50 million. With 35 per cent. corporation tax on the other half, we have the figure that concerned the Minister in Committee, representing the Government having 67 per cent. of the take.
§ Mr. McLoughlinReally?
§ Mr. PrescottThe Minister will recall the argument adduced by the hon. Member for Dover (Mr. Shaw) and other Conservative Members in Committee on an amendment that was carried and included in the Bill. They argued legitimately that it should not be more than 50 per cent. and that to take more would be exorbitant. They put forward a tapered formula which would provide a lower proportion. The amendment of the hon. Member for Dover was accepted and is expressed in the Bill as a proportion of corporation tax.
The argument in Committee was to the effect that the figures provided a take of nearly 50 per cent. The Minister put forward the counter-argument that it was about 18 per cent. less than we had calculated.
§ Mr. McLoughlinrose——
§ Mr. PrescottI will give way to the Minister shortly. Having suggested that it was 18 per cent. less, he thought the matter over and said that 18 per cent. was not acceptable. In the event, it is 17.9 per cent. In other words, 977 on the Minister's formula, to reduce it by 18 per cent. would not be acceptable but to reduce it by 17.9 per cent. makes it acceptable.
§ Mr. McLoughlinWill the hon. Gentleman remind me how Opposition Members voted on the amendment that they are apparently now seeking to overturn?
§ Mr. PrescottI do not want to complicate matters, especially as we have difficulty making sure that the Minister keeps to facts and figures. His concentration in these matters is not that great and his explanations are not always that clear. I have been re-reading the Official Report of our proceedings in Committee and have found myself utterly confused by his explanations.
I assure the hon. Gentleman that we are concerned with variable amounts, an issue to which I shall return. After all, the Minister is taking powers in the new clause to enable him to be variable. Is he not taking powers to vary the percentage, whatever it is? I do not know how much the figures can vary, but I do know that the Government can specify whatever percentage they want, as the Secretary of State decides. When I am Secretary of State I will be happy to exercise that judgment.
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Originally, as I said, a 67 per cent. take was envisaged. Then the hon. Members for Thurrock (Mr. Janman) and for Dover moved amendments that would have resulted in a take of just under 50 per cent. Interestingly, they argued that the Tory Government were adopting a socialist land value tax. I readily accepted that argument, thinking that I could see another use for this Bill when I get hold of it, when I will be able to vary the percentage myself. I will be able to stipulate or reject any scheme that I choose to. That is almost as good as what happened with an Industry Bill that the Tories brought in in 1974. It provided the incoming Labour Government with all sorts of powers, and I look forward to being able to use the powers given under this Bill.
I hope that those, such as the Waterfront partnership, who have advised the Government on this matter will not come and advise me—I do not want advice from them.
Now the Government have come along with another formula in which they accept that there should be a taper. The period involved is a compromise. The first part of the new clause takes the five-year period into account, but it then embraces longer periods. The percentages will vary as between the periods involved. I assume that these ideas are in line with what the industry wanted. The Opposition do not have the advantage—or disadvantage—of having the industry talk to us, a fact about which I have complained before and which I shall take into account in different cicumstances in times to come. We have had to rely on the figures before us.
Now the Government have decided that the take will be no more than 49.7 per cent., including the levy and the share of corporation tax. The British taxpayer is to be denied the extra 18 per cent. and the Government have given up their claims about returning the money to the community. I do not know what changed the Government's mind; I only know that the Minister could not carry through his ideas in Committee with the support of Conservative Members. After a few shots across their bows, the Government have given up on the 18 per cent. 978 The Minister said in Committee that he could not see the Government giving up the difference of 18 per cent. It seems that he has been told to do so, although the Secretary of State has scuttled off now, so we cannot find out his thinking on the matter.
The Government have come round to 50 per cent., and one of our amendments argues for 100 per cent., with the period limited to five years. The rationale behind that is that we want to prevent predators coming in. We want to let them know that all a port's value has been removed so it is no longer an attractive proposition—unless the predator merely wants to buy it up so as to close it down and eliminate competition. If the Government leave 50 per cent. of the cash value in a company and that company is sold for £100 million, there will still be enough value in it to encourage predators to buy it.
The Opposition wish to eliminate this value, although we know about the problems of removing all the cash from a port company: that may prevent the port from developing. The idea is to give the port access to the extra value, and with the five-year limitation we could rule out this problem.
This is not our formula: it is the Government's idea. We would not do any of this in the first place, but given the choice between a P and O buy-out and a managers and workers buy-out I would put my money on the latter every time. Consortiums of property companies will not have the interests of port development at heart.
This will be a better formula and it is interesting that the Government have been forced to change their minds. I hope that the Minister will tell us something about his highest bid argument and about the ESOP arrangements. Was the report in The Guardianabout selling to the highest bidder correct? It is important to know that; the trust ports need to know, and it is relevant to the possible development or selling off of the municipal port authorities, to which the local authority ratepayers have contributed. If the formula is used and the Government give the excess to the Treasury instead of keeping to a formula under which we could readily identify what goes to the local authorities, there will be real problems with these varying percentages.
In Committee, we supported the 10 per cent. amendment so as to defeat the Government—I admit that. And we did defeat them, because the Government could not justify the 50 per cent. take. We told the Government that we would give them the chance to return and justify the idea to the House, but the Minister has failed to do that. If that is because of political realities, he should admit as much. Perhaps, on the other hand, the Treasury thought that the take was too high. Or perhaps the Minister included the new formula to satisfy Conservative Members with the 50 per cent. idea, hoping later to operate the variable machinery in the new clause so that the Government could get what they wanted quietly and without controversy by order under the Bill. We need a better explanation of all these matters than we have had so far.
§ Mr. David Shaw (Dover)The Opposition are clearly wrong on this issue. They are obsessed with the idea of asset-strippers and speculators and do not understand the needs of modern ports facing the 21st century. Those ports want to develop their assets, especially in places such as Dover, and not only assets related to the ferry industry but 979 those which will broaden ports' development so as to promote tourism, for instance, to the benefit of local people.
Moreover, other ports might want to expand into non port-related activities, thereby benefiting their communities by increasing local employment. At present they are somewhat stymied in what they can do. This Bill is designed to free up assets, and over the years that will increase employment opportunities in those areas.
Those of us in Committee who tabled the amendment that I moved wanted to ensure a balance between the interests of the taxpayer—obtaining reasonable proceeds for the taxpayer—and the interests of the ports. We were worried that the original wording advanced by the Government made calculations of the levy complicated, and that the tax rate on some calculations could have exceeded 70 per cent. Moreover, the levy would have operated as a disincentive to reasonable land sales, whether in the form of management buy-outs by others who might acquire the ports later.
I congratulate the Minister on the difficult negotiations through which he has gone and on the way in which the Department of Transport has managed, under his skilful guidance, to negotiate with the Treasury a deal which, although perhaps not too beneficial to the ports, is certainly not as advantageous to the Treasury as was the original deal. The Treasury has managed to extract its pint of blood in the form of a little extra for the taxpayer. We are worried that the taxpayer might take too much out of the privatisation and that other possible acquirers of the ports might lack an incentive to buy them out. I realise that the Minister and the Treasury have a responsibility to ensure that the taxpayer receives a good share of these resources—and so he will.
My hon. Friend the Minister should be congratulated on taking our points on board. The calculation of the levy is now much easier. It is much closer to capital gains tax principles which are widely understood by business and industry. The tax rate, having been reduced below 50 per cent., is obviously acceptable and is much better than it was. The tapering principle ensures that, if management is fortunate enough to acquire the port, there will not he a massive disincentive to reasonable asset sales. If asset-strippers really do exist, which I doubt—there are more likely to be genuine operators who want to ensure that assets are properly utilized—they will suffer from the fact that, under the tapering system, the tax is higher in the earlier years and reduces in the later years.
All in all, my hon. Friend the Minister and the Government should be congratulated on getting the clause into a sensible format. We who want privatisations to be encouraged, which I think goes for all of my hon. Friends—as opposed to Opposition Members, who sought in Committee to discourage privatisation and to remove the incentives from those who work in the ports to bid for them—are pleased with what the Government have done.
§ Mr. WallaceI thank the hon. Member for Middlesbrough (Mr. Bell) for his kind comments earlier on events in my constituency and for the advice that he gave me.
When this matter was debated in Committee, I was occupied elsewhere and missed the vote. As I understand it, on a recount the Government lost the Division on the amendment and they had to table new clause 9 to ameliorate the effect of clause 16.
980 It is difficult to work out the Government's precise intentions. I agree with much of the analysis of the Bill by the hon. Member for Kingston upon Hull, East (Mr. Prescott) and, in particular, of the objectionable parts of the Bill about the compulsory nature of privatisation and those parts which relate to the levy on the proceeds of sale. However, different considerations apply to the provisions relating to the levy on a subsequent sale of land.
Much has been made of how much the Treasury would like to get its hands on through particular provisions in the Bill. I do not doubt that that may be one of the motivating factors, but if it is to rely on the proceeds under clause 16 and new clause 9, no such economic planning could take place. There is no mention in the financial memorandum of any likely proceeds or revenue to the Treasury which might come from clause 16. That would depend on how many ports were privatised, on how many ports subsequently sold land and on whether the sale of that land would lead to a sizeable gain to which the levy would be applied. Therefore, I do not think that that is the primary concern of the new clause.
However, the new clause is an attempt to stave off the worse effects of land speculation. I well remember the privatisation of Scott Lithgow in Greenock and Port Glasgow and the Government arrangement which allowed the sale of additional land to, I think, Trafalgar House at a relatively low price. Subsequently, the land was sold at quite a premium. There was considerable outrage at the use of public funds to help the sale and at the great profits that the private sector reaped from the sale.
If the Government are trying to discourage such land speculation and the taking of land out of port development, that should be encouraged. If they are trying to achieve a balance so that at least some proceeds from the sale remain with the port, providing additional capital for port development, although that is clearly a difficult balance to strike, an honest effort has been made to strike it. I do not think that the arguments that we have heard so far from the Opposition, not least the 100 per cent. levy which at times seemed to contradict the points made earlier by the hon. Member for Kingston upon Hull, East, persuade me that that would be a better balance than the one proposed in the new clause.
§ Mr. McLoughlinThe hon. Member for Hartlepool (Mr. Leadbitter) was right to say that the levy could be varied with the consent of the Treasury and by affirmative order of the House. Therefore, if it were to be changed, the House would have an opportunity to take a decision on it. It could not be done without the matter coming before the House.
§ Mr. LeadbitterThat usually happens late at night when everyone has gone home. Let me put a simple point to the Minister, who is always anxious to reply to points made. In March 1988, the Secretary of State for Transport made clear in an address to the British Ports Federation his disappointment at the ports' reluctance to respond to his invitation to privatise. The Bill comes in the light of that reluctance. Does the Minister suggest that, in the circumstances and having regard to the levy and the little bit that would be left to the ports, the Bill benefits the Treasury or the ports?
§ Mr. McLoughlinThere is no doubt that the Bill will be a tremendous benefit to the ports industry in the United Kingdom. It builds on a number of changes which have taken place over some years. However, that is probably more relevant for the debate on Third Reading.
I agree partly with the points made by the hon. Member for Orkney and Shetland (Mr. Wallace). The Opposition seem to want 100 per cent. for five years, although in Committee they voted for the amendment tabled by my hon. Friend the Member for Thurrock (Mr. Janman). That would seem to be the most damaging of all, because it would delay any development in the ports for five years.
§ Mr. PrescottThe only trouble with that statement is that it is not in line with the facts. The hon. Gentleman knows that my hon. Friend the Member for Stoke-on-Trent, North (Ms. Walley) wrote to all the ports concerned, and they wrote back saying exactly the opposite—they did not believe that this was helpful and they did not want to be forced into such a position. If the Minister believes that, why did he not leave it to the ports to make the decision instead of being forced into privatisation?
§ Mr. McLoughlinWe are dealing with the levy on disposals of property after the port has been privatised; we will come later to the compulsory element.
The Government have tried to take on board the concerns which were ventilated in Committee by my hon. Friends, and that is why the concession has been made. We have tried to make far clearer exactly how and on what criteria the money will be raised. There was confusion as to whether it was capital gains on top of the 50 per cent. That is why we have tabled new clause 9, about which I wrote to the Opposition and all members of the Committee before the Easter recess.
I have explained the reasons for what the Government have done. This represents a fair response to the criticisms made by my hon. Friends. I think that the Government have got it right. It is a fair balance for the ports industry to know exactly what kind of development would come under the windfall gains. We do not want to see huge windfall gains go: that is why, for 10 years, there will be some repayment to the Government, but on a tapering basis. That is fair.
§ Mr. PrescottOne of the amendments to clause 16 concerns a variable application. Is it possible that, by a new order, the Secretary of State could secure more than 50 per cent., or does new clause 9 set the limit? Might one end up with a levy of more than the 50 per cent. suggested by one amendment to clause 16?
§ Mr. McLoughlinNo. I made perfectly clear the procedure in respect of the amendments under consideration. A change could be made, but it would have to be done by affirmative order. However, I cannot help it if particular hon. Members are not present at the relevant stage. If they feel strongly enough, they will be certain to be present. On occasions, affirmative orders have attracted a very high attendance, depending on how controversial they are.
New clause 9 strikes a fair balance between the concerns that were expressed by my hon. Friends in Committee, and I commend it to the House.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 224, Noes 164.
984| Division No. 120] | [8.20 pm |
| AYES | |
| Adley, Robert | Gale, Roger |
| Aitken, Jonathan | Gardiner, Sir George |
| Alexander, Richard | Gill, Christopher |
| Alison, Rt Hon Michael | Gilmour, Rt Hon Sir Ian |
| Amos, Alan | Goodhart, Sir Philip |
| Arbuthnot, James | Goodlad, Alastair |
| Arnold, Jacques (Gravesham) | Goodson-Wickes, Dr Charles |
| Arnold, Sir Thomas | Gorman, Mrs Teresa |
| Ashby, David | Grant, Sir Anthony (CambsSW) |
| Aspinwall, Jack | Greenway, Harry (Ealing N) |
| Baker, Nicholas (Dorset N) | Greenway, John (Ryedale) |
| Baldry, Tony | Gregory, Conal |
| Batiste, Spencer | Griffiths, Peter (Portsmouth N) |
| Beaumont-Dark, Anthony | Grist, Ian |
| Beith, A. J. | Ground, Patrick |
| Bellingham, Henry | Hamilton, Hon Archie (Epsom) |
| Bellotti, David | Hamilton, Neil (Tatton) |
| Bendall, Vivian | Hampson, Dr Keith |
| Bennett, Nicholas (Pembroke) | Hannam, John |
| Benyon, W. | Hargreaves, A. (B'ham H'll Gr') |
| Bevan, David Gilroy | Hargreaves, Ken (Hyndburn) |
| Biffen, Rt Hon John | Harris, David |
| Blackburn, Dr John G. | Haselhurst, Alan |
| Blaker, Rt Hon Sir Peter | Hawkins, Christopher |
| Body, Sir Richard | Hayes, Jerry |
| Bonsor, Sir Nicholas | Hayhoe, Rt Hon Sir Barney |
| Boscawen, Hon Robert | Heathcoat-Amory, David |
| Bottomley, Peter | Heseltine, Rt Hon Michael |
| Bottomley, Mrs Virginia | Hicks, Mrs Maureen (Wolv' NE) |
| Bowden, Gerald (Dulwich) | Hicks, Robert (Cornwall SE) |
| Bowis, John | Higgins, Rt Hon Terence L. |
| Boyson, Rt Hon Dr Sir Rhodes | Hill, James |
| Brazier, Julian | Hind, Kenneth |
| Brown, Michael (Brigg & Cl't's) | Hogg, Hon Douglas (Gr'th'm) |
| Browne, John (Winchester) | Howarth, Alan (Strat'd-on-A) |
| Bruce, Malcolm (Gordon) | Howarth, G. (Cannock & B'wd) |
| Budgen, Nicholas | Hughes, Robert G. (Harrow W) |
| Burns, Simon | Hughes, Simon (Southwark) |
| Burt, Alistair | Hunter, Andrew |
| Butterfill, John | Irvine, Michael |
| Campbell, Menzies (Fife NE) | Irving, Sir Charles |
| Carlile, Alex (Mont'g) | Jack, Michael |
| Carlisle, John, (Luton N) | Jackson, Robert |
| Carlisle, Kenneth (Lincoln) | Johnson Smith, Sir Geoffrey |
| Carr, Michael | Jones, Gwilym (Cardiff N) |
| Channon, Rt Hon Paul | Jones, Robert B (Herts W) |
| Chope, Christopher | Kellett-Bowman, Dame Elaine |
| Churchill, Mr | Key, Robert |
| Clark, Rt Hon Alan (Plymouth) | Kilfedder, James |
| Clark, Rt Hon Sir William | King, Roger (B'ham N'thfield) |
| Colvin, Michael | Kirkhope, Timothy |
| Coombs, Anthony (Wyre F'rest) | Knapman, Roger |
| Cope, Rt Hon John | Knight, Greg (Derby North) |
| Cormack, Patrick | Knight, Dame Jill (Edgbaston) |
| Couchman, James | Knowles, Michael |
| Currie, Mrs Edwina | Knox, David |
| Davies, Q. (Stamf'd & Spald'g) | Lang, Rt Hon Ian |
| Davis, David (Boothferry) | Lawrence, Ivan |
| Day, Stephen | Leigh, Edward (Gainsbor'gh) |
| Devlin, Tim | Lester, Jim (Broxtowe) |
| Dickens, Geoffrey | Livsey, Richard |
| Douglas-Hamilton, Lord James | Lloyd, Peter (Fareham) |
| Dover, Den | Lyell, Rt Hon Sir Nicholas |
| Dunn, Bob | McCrindle, Sir Robert |
| Emery, Sir Peter | Macfarlane, Sir Neil |
| Evennett, David | MacGregor, Rt Hon John |
| Fallon, Michael | MacKay, Andrew (E Berkshire) |
| Fearn, Ronald | Maclean, David |
| Field, Barry (Isle of Wight) | Maclennan, Robert |
| Fishburn, John Dudley | McLoughlin, Patrick |
| Forman, Nigel | Mans, Keith |
| Forsyth, Michael (Stirling) | Maples, John |
| Fox, Sir Marcus | Marshall, John (Hendon S) |
| Franks, Cecil | Martin, David (Portsmouth S) |
| Freeman, Roger | Maude, Hon Francis |
| French, Douglas | Maxwell-Hyslop, Robin |
| Fry, Peter | Mayhew, Rt Hon Sir Patrick |
| Mellor, Rt Hon David | Stanbrook, Ivor |
| Meyer, Sir Anthony | Stanley, Rt Hon Sir John |
| Michie, Mrs Ray (Arg'l & Bute) | Steel, Rt Hon Sir David |
| Mills, lain | Steen, Anthony |
| Monro, Sir Hector | Stern, Michael |
| Montgomery, Sir Fergus | Stevens, Lewis |
| Moore, Rt Hon John | Stewart, Allan (Eastwood) |
| Morrison, Sir Charles | Stewart, Andy (Sherwood) |
| Newton, Rt Hon Tony | Stewart, Rt Hon Ian (Herts N) |
| Nicholls, Patrick | Summerson, Hugo |
| Nicholson, David (Taunton) | Taylor, John M (Solihull) |
| Nicholson, Emma (Devon West) | Taylor, Teddy (S'end E) |
| Norris, Steve | Temple-Morris, Peter |
| Paice, James | Townend, John (Bridlington) |
| Patnick, Irvine | Tracey, Richard |
| Peacock, Mrs Elizabeth | Trotter, Neville |
| Porter, David (Waveney) | Twinn, Dr Ian |
| Portillo, Michael | Waldegrave, Rt Hon William |
| Redwood, John | Walden, George |
| Rhodes James, Robert | Walker, Bill (Tside North) |
| Ridley, Rt Hon Nicholas | Wallace, James |
| Rifkind, Rt Hon Malcolm | Waller, Gary |
| Roe, Mrs Marion | Ward, John |
| Rost, Peter | Watts, John |
| Rumbold, Rt Hon Mrs Angela | Wells, Bowen |
| Ryder, Rt Hon Richard | Whitney, Ray |
| Sackville, Hon Tom | Widdecombe, Ann |
| Sainsbury, Hon Tim | Wiggin, Jerry |
| Shaw, David (Dover) | Wilshire, David |
| Shaw, Sir Giles (Pudsey) | Wood, Timothy |
| Shaw, Sir Michael (Scarb') | Woodcock, Dr. Mike |
| Shepherd, Colin (Hereford) | Young, Sir George (Acton) |
| Shepherd, Richard (Aldridge) | Younger, Rt Hon George |
| Skeet, Sir Trevor | |
| Smith, Tim (Beaconsfield) | Tellers for the Ayes: |
| Speller, Tony | Mr. Sydney Chapman and Mr. Tim Boswell. |
| Squire, Robin |
| NOES | |
| Abbott, Ms Diane | Davies, Rt Hon Denzil (Llanelli) |
| Adams, Mrs Irene (Paisley, N.) | Davis, Terry (B'ham Hodge H'l) |
| Allen, Graham | Dixon, Don |
| Anderson, Donald | Doran, Frank |
| Archer, Rt Hon Peter | Duffy, A. E. P. |
| Armstrong, Hilary | Dunnachie, Jimmy |
| Ashton, Joe | Eadie, Alexander |
| Barnes, Harry (Derbyshire NE) | Ewing, Mrs Margaret (Moray) |
| Barnes, Mrs Rosie (Greenwich) | Fatchett, Derek |
| Barron, Kevin | Faulds, Andrew |
| Battle, John | Field, Frank (Birkenhead) |
| Beckett, Margaret | Fisher, Mark |
| Bell, Stuart | Flannery, Martin |
| Benn, Rt Hon Tony | Flynn, Paul |
| Bennett, A. F. (D'nt'n & R'dish) | Foot, Rt Hon Michael |
| Benton, Joseph | Foster, Derek |
| Bidwell, Sydney | Foulkes, George |
| Blair, Tony | Fraser, John |
| Boateng, Paul | Fyfe, Maria |
| Bradley, Keith | Galloway, George |
| Bray, Dr Jeremy | Garrett, John (Norwich South) |
| Brown, Gordon (D'mline E) | George, Bruce |
| Brown, Nicholas (Newcastle E) | Gordon, Mildred |
| Buckley, George J. | Grant, Bernie (Tottenham) |
| Caborn, Richard | Griffiths, Nigel (Edinburgh S) |
| Callaghan, Jim | Griffiths, Win (Bridgend) |
| Campbell, Ron (Blyth Valley) | Grocott, Bruce |
| Campbell-Savours, D. N. | Hain, Peter |
| Canavan, Dennis | Heal, Mrs Sylvia |
| Clark, Dr David (S Shields) | Healey, Rt Hon Denis |
| Clarke, Tom (Monklands W) | Henderson, Doug |
| Clelland, David | Hoey, Ms Kate (Vauxhall) |
| Cohen, Harry | Hogg, N. (C'nauld & Kilsyth) |
| Corbett, Robin | Home Robertson, John |
| Cousins, Jim | Hood, Jimmy |
| Crowther, Stan | Howarth, George (Knowsley N) |
| Cryer, Bob | Howells, Dr. Kim (Pontypridd) |
| Cummings, John | Hughes, John (Coventry NE) |
| Cunliffe, Lawrence | Hughes, Robert (Aberdeen N) |
| Dalyell, Tarn | Jones, leuan (Ynys Môn) |
| Darling, Alistair | Jones, Martyn (Clwyd S W) |
| Kaufman, Rt Hon Gerald | Primarolo, Dawn |
| Lamond, James | Quin, Ms Joyce |
| Leadbitter, Ted | Radice, Giles |
| Lestor, Joan (Eccles) | Randall, Stuart |
| Lewis, Terry | Rees, Rt Hon Merlyn |
| Livingstone, Ken | Reid, Dr John |
| Lloyd, Tony (Stretford) | Richardson, Jo |
| Lofthouse, Geoffrey | Robertson, George |
| Loyden, Eddie | Robinson, Geoffrey |
| McAllion, John | Rogers, Allan |
| McAvoy, Thomas | Rooney, Terence |
| McCartney, Ian | Rowlands, Ted |
| McKay, Allen (Barnsley West) | Ruddock, Joan |
| McKelvey, William | Salmond, Alex |
| McLeish, Henry | Sedgemore, Brian |
| McMaster, Gordon | Sheerman, Barry |
| McWilliam, John | Sheldon, Rt Hon Robert |
| Madden, Max | Short, Clare |
| Mahon, Mrs Alice | Skinner, Dennis |
| Marshall, David (Shettleston) | Smith, Andrew (Oxford E) |
| Marshall, Jim (Leicester S) | Smith, C. (Isl'ton & F'bury) |
| Martlew, Eric | Spearing, Nigel |
| Maxton, John | Steinberg, Gerry |
| Meacher, Michael | Strang, Gavin |
| Meale, Alan | Straw, Jack |
| Michael, Alun | Turner, Dennis |
| Michie, Bill (Sheffield Heeley) | Vaz, Keith |
| Mitchell, Austin (G't Grimsby) | Walley, Joan |
| Morgan, Rhodri | Warden, Gareth (Gower) |
| Morley, Elliot | Watson, Mike (Glasgow, C) |
| Morris, Rt Hon A. (W'shawe) | Welsh, Andrew (Angus E) |
| Morris, Rt Hon J. (Aberavon) | Welsh, Michael (Doncaster N) |
| Mullin, Chris | Wigley, Dafydd |
| Murphy, Paul | Williams, Rt Hon Alan |
| Nellist, Dave | Williams, Alan W. (Carm'then) |
| O'Brien, William | Wilson, Brian |
| O'Hara, Edward | Winnick, David |
| O'Neill, Martin | Wise, Mrs Audrey |
| Patchett, Terry | Worthington, Tony |
| Pendry, Tom | |
| Pike, Peter L. | Tellers for the Noes: |
| Powell, Ray (Ogmore) | Mr. Frank Haynes and Mrs. Llin Golding. |
| Prescott, John |
§ Question accordingly agreed to.
§ Clause read a Second time, and added to the Bill.