HARBOURS (LOANS) BILL

HC Deb 21 December 1971 vol 828 cc1381-426

Order for Second Reading read.

7.5 p.m.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths)

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

All parts of the House are agreed to the need for efficient ports. If we cannot get our goods quickly and efficiently on and off ships, this country cannot hope to prosper. Today with the realignment of international currencies and the imminence of British entry into the Common Market and the prospect of a revival of our own economic activity, we may well be crossing the threshold to a period of trade expansion. As this happens the amount of goods passing through our ports is likely to grow substantially, making it all the more important to put our ports industry on to a sound financial footing. The Bill is designed to do this. The reasons for it can be stated simply.

The constitutions and financing methods of many of our ports are out of date. Their earnings are too low. Some hon. Members lay the blame for this on poor managements, others on industrial strife. To both these causes must be added the problems of obsolescence and rapid changes in technology and trade patterns. Excessive reliance on short-term borrowing has also meant that some ports have had to meet, or roll over, their maturing debt in unfavourable market conditions.

Faced with this situation, my right hon. Friend's policy is not one of caution or of directing nationalisation. Nor is it one of subsidy. It is reform and reinvigoration, based on self-reliance and a keen regard for reality. To this end he has strengthened the National Ports Council so that in collaboration with port authorities it can play an active part in establishing realistic financial targets and strengthening managements. For their part the ports themselves must put their own house in order. They have raised their charges to reflect more nearly the cost of doing business. They need also to mount a vigorous attack on costs, to rationalise existing facilities and to realise assets that are no longer required.

I am glad to say that this more realistic policy has produced a welcome turn in the tide. All the indications are that the 1971 results, for nearly all the major ports, will show a substantial improvement over 1970. Confidence is reviving. Here and there too the House will have noticed an improvement in labour relations. The Bill is designed to keep up and extend the momentum of reviving confidence in our ports. It gives effect to the proposals set out in the White Paper "Financial Policy for Ports" published at the end of September and is thus an integral part of the Government's programme for strengthening port management and finances.

Clause 1 is the basic enabling Clause. It enables my right hon. Friend to make loans to harbour authorities with sound financial prospects to assist them in refinancing capital debt. These loans will be made only if we are satisfied that the loan is justified having regard to the financial prospects of the port authority concerned.

Hon. Members may wonder whether a situation is likely to arise in practice where a port with sound financial prospects is nevertheless unable to raise money for debt refinancing on the market. The short answer is that this has already happened in two cases. Even when a port's long-term prospects are satisfactory temporary market factors may produce this situation, so there is no doubt that the Bill meets a real need.

Mr. Martin Maddan (Hove)

What are those two examples?

Mr. Griffiths

I will be glad to tell my hon. Friend, but perhaps he will allow me to come to them at an appropriate point.

Clause 1 provides for the National Ports Council to be consulted in all cases. The council will carry out a thorough analysis of the applicant authority's forecasts of traffic, revenue and cash flow; its plans for development and rationalisation; its charging, cost reduction and depreciation policies; its debt refinancing plans; and its proposals for improvements in board and management structures.

The council will recommend a loan only if it is satisfied that the authority's financial prospects appear to be sound or that there is a reasonable expectation of their being made so by modifications to existing plans which the council will agree with the authority. It will also recommend conditions to be attached to any loan, together with provisions for the subsequent monitoring of that port's performance by the council.

The terms of the loans will be designed to encourage port authorities to continue to borrow on the market wherever they can; or, where they do borrow from the Government, to seek alternative sources of finance as soon as possible. The loans will normally be on a long-term basis but at interest rates commencing some two percentage points above the Government's lending rate and they will rise progressively.

Such terms should result in strict financial disciplines and improved earnings, which in turn should encourage the market to resume lending on an appropriate long-term basis. Improvements on these lines should pave the way for the introduction of private equity capital which would further stimulate competitive and commercial attitudes.

Clause 2 applies in relation to the new loans the existing powers of the National Ports Council under the 1964 Act to obtain the necessary information to enable it to carry out its functions. These powers are subject to the appropriate restrictions as to disclosure of information.

Clause 3 relates to any loans made before the Bill is passed. The White Paper said that any such loans would be made from the Contingencies Fund. Clause 3 therefore provides for the Secretary of State to reimburse the Contingencies Fund from the moneys that the Bill will provide from the National Loans Fund.

The House will wish to know that loans have already been made to the Clyde Port Authority and the Forth Ports Authority—these are the two cases I mentioned—to cover debts to be paid between 11th November and the end of the present year. About £5 million has been agreed for the Clyde and up to about £3.5 million for the Forth. I am sure that hon. Members representing these areas will welcome these sums.

Mr. Frederick Mulley (Sheffield, Park)

What rate of interest has been charged on this money and what does the ominous phrase "rise progressively" mean? How will it be progressively increased in these two cases?

Mr. Griffiths

These loans have been made, as I said, from the Contingencies Fund and the Bill will enable the Secretary of State to repay from the National Loans Fund. Therefore, these loans are covered on that principle and the Bill provides for their repayment. On the point about the interest rates, I will obtain that information for the right hon. Gentleman and I will let him know before the House gives up the Bill tonight.

These loans are repayable over 10 years and are initially subject to a rate of interest 2 per cent. higher than the current Government lending rate. That answers in part the question of the right hon. Member for Sheffield, Park (Mr. Mulley) and there is provision for subsequent changes in the light of events.

Mr. Robert Hughes (Aberdeen, North)

What is the current Government lending rate, so that we may be clear about it?

Mr. Griffiths

I will have to obtain that information because it varies from time to time, but I will certainly let the hon. Gentleman know during the evening. The point is that interest charges will be 2 per cent. over the going rate with provision for them to increase progressively after the first two years. There are also provisions entitling the authorities to repay loans earlier if they want to.

If the rate of interest is high and is subject to increases as the years go by, there is much greater incentive to port managements to put their houses in order, to obtain better results and, therefore, to create the confidence which will allow them to go to the commercial market and strengthen their finances in that way.

Mr. James Johnson (Kingston upon Hull, West)

How does the hon. Gentleman arrive at the magic figure of 2 per cent? Is it plucked out of the air? Has he been advised by the market that this will provide incentive? Why not 1 per cent.?

Mr. Griffiths

The hon. Gentleman may ask why any figure was chosen. This is the judgment which the Government have formed on the best available advice as to what figure would place upon the ports a financial discipline encouraging them to put their houses in order rapidly so as to be able to borrow at the lower market rate and get out from under the higher rates of interest which the Government will be charging for their loans.

Clause 4 sets a limit on the aggregate amount of loans that can be made to harbour authorities for debt repayment purposes under the Bill and for capital development purposes under Section 11 of the Harbours Act, 1964. The limit set in Clause 4 is £200 million, with provision for an increase to £300 million with the consent of the House. The present limit for loans under the 1964 Act is £75 million, with provision for an increase to £125 million by Resolution of the House. It seemed to us that it would be for the convenience of the House if Clause 4 of the present Bill were to set a limit covering not only the new loans under the Bill but also the up-to-date requirements for loans under the 1964 Act for a reasonable period ahead.

The figures in Clause 4 take into account information at present available about port authority plans for development over the next five years and the amounts of capital debt due for renewal in the same period. Figures of this kind can only be broad estimates at this stage, particularly since we hope to restore full reliance by the port authorities on the market for their refinancing. For this reason it is desirable to avoid separate limits for the two different types of loan. The House will, of course, have the opportunity to review matters should its consent be sought to increase the limit from £200 million to £300 million.

I believe that hon. Members on both sides will accept the aims of the Bill. It would have been very satisfying if there were no need to provide loans for this purpose. As the need exists, however—although I hope on a limited scale—it would not be right to withhold it and thus jeopardise progress towards stability and self-sufficiency in the ports industry.

Dame Irene Ward (Tynemouth)

We seem to have heard nothing about other than Scottish ports. Does my hon. Friend intend to explain which ports are taking advantage of this facility so that we may know exactly where we stand? I do not want to hear only about Scotland. What is happening in England?

Mr. Griffiths

I am always glad to oblige my hon. Friend. The Bill provides a lending facility which will be operated by my right hon. Friend which will make money available on the terms I have outlined to any port covered by the Bill. My hon. Friend may have one or several ports in mind. It will be up to them to make application to the National Ports Council and explain their case.

Dame Irene Ward

I thank my hon. Friend for that reply. I want to know whether Scotland has already impounded some of this money, as it were, and whether no other ports have made application.

Mr. Griffiths

I explained that after the publication of the White Paper the two ports I mentioned sought assistance. They were provided with assistance from the Contingencies Fund. Under Clause 3, the Bill provides powers for that money to be repaid to the National Loans Fund. Thus, those two Scottish ports will pay that money to that National Loans Fund.

It is perfectly open to all other ports—except those in the British Transport docks sector which obtain their money in a different way—to come forward for loans under these powers. It will, of course, be for the National Ports Council to advise whether such loans should be made available.

It is largely because the Bill is not in my view a matter of contention between the two sides of the House that I confidently invite hon. Members to give it a Second Reading.

7.22 p.m.

Mr. Frederick Mulley (Sheffield, Park)

The whole House is grateful to the Under-Secretary for his careful explanation of the Bill, and I congratulate him on the way in which he presented it—like a Christmas present from a generous Government to the ports industry.

The hon. Gentleman said that extra money was being made available by the Government by way of loans and that the Bill contained powers which did not exist at present to make loans. Simply because, in a sense, the Measure provides an additional, if limited, facility, I cannot advise my hon. Friends to vote against it.

However, the hon. Gentleman did not, except in passing, relate the top of the iceberg—the pleasant idea of making more loans available—to the five-sixths of the Government's ports policy below the surface which is wholly detrimental to the future and proper development of our ports.

As the Explanatory and Financial Memorandum to the Bill explains: This Bill gives effect to the proposals set out in the White Paper Financial Policy for Ports' (Cmnd. 4794). The Minister made only a passing reference to that. In agreeing to this Second Reading, I wish to make it clear on behalf of my hon. Friends that we are not, in so doing, giving any sort of support whatever to Cmnd. 4794.

In my judgment, this is the worst kind of political pamphleteering. It is wholly inappropriate to the real and difficult problems of the ports industry, and, following the tradition of political pamphleteering, it sets up an Aunt Sally in paragraph I only to knock it down in paragraph 2. It shows no appreciation of, on the one hand, the real problems which are faced by the ports industry and, on the other, the important part this industry has to play in our economic survival. The existence of efficient ports is obviously important now. They will be even more important if, as I imagine, the Government go through with their plans to take us into the European Economic Community.

I trust that the Minister will convey to his right hon. Friend the need to look again at some of the administrative proposals in Cmnd. 4794. To begin with, I see no justification whatever for this idea of a penal rate of interest. Most ports are public authorities of one kind or another. We have the statutory trust corporations for large ports like London and Mersey, a number of others which are local authority ports like Bristol, and a number of ports in the nationalised sector including some important ones like Hull and Tyneside. Even where, as in Manchester, it is a private enterprise port, there is no doubt that Manchester would not have made the achievements it has without the solid support for many years of Manchester City Council.

I therefore see no justification for charging 2 per cent. above the Government rate. What charge has been made in the two instances given by the Under-Secretary? This is where we come to the ominous phrase in the White Paper to which I drew attention: and the rate will be increased progressively over the life of the loan". This is totally unacceptable. It represents a penal rate on what is, after all, an important public service; namely, the provision of efficient port facilities.

I appreciate the philosophy behind this. It is that the ports should go out to raise money on the market and that if each year they must pay more, they will be more encouraged to go to the market. But the Under-Secretary did not tell us how, through this action of the Government, the credit standing and credibility of a great many public trust corporations will not be eroded, if not destroyed. Consider, for example, the rigid behaviour of the Government in the crisis that occurred on the Mersey, when many stockholders were not repaid on the due dates and had to suffer a substantial reduction in their capital holdings.

It is, therefore, unlikely that there will be a great flood of support, particularly from small investors, for the loans that ports will have to seek if they are to avoid paying large premiums for every year they borrow under the Bill. As far as I understand the Measure, there is no proposal requiring these high rates of interest to be charged, and this is an aspect which, along with many others, we intend to examine in Committee.

There is nothing objectionable about the Bill as drafted. It is the hidden policy, the administration, behind it that poses serious questions in our minds. We think about the way in which the Mersey Board was treated. We think of this concept of a penal rate of interest. Above all, we think of the Government decision, announced some time ago, not to make grants available for modernisation projects in the ports.

I understand that the Government intend to fulfil the commitments and undertaking already in existence, but that, for example, any decision made in respect of Bristol will result in the Government making a song and dance about why the then Labour Government did not encourage Bristol to go for a big expansion of its port facilities. Indeed, hon. Gentlemen opposite have gone as far as sending one of their spokesmen there to stir things up. As I understand it now, Bristol has decided again that it will not get any grant. Am I right in that understanding, and that no grant will be given? The only possibility for finance, if it cannot be obtained from the market—and that will be difficult because of the Mersey Board—is to resort to loans at these very high rates of interest.

The Secretary of State for the Environment was talking in his White Paper about a lot of small businesses. That could make some kind of rough economic sense. The hon. Gentleman did his best when talking about putting houses in order and standing on one's own feet, and that kind of claptrap. But that will not do here. We know that this came out at the time when shoooting "lame ducks" was a favourite occupation of Ministers. Probably there was a little private competition between the Minister for Transport Industries and his right hon. Friend the Secretary of State for Trade and Industry to see who could shoot the most lame ducks in the shortest time. But now the Trade and Industry Department is going in the opposite direction, and has people looking around for lame ducks to which to give medical or appropriate treatement.

This very crude exercise in political propaganda as represented by the financial policy for ports will not do. I regret that we have not had the opportunity, despite the fanfare about how long and hard the Government were thinking about ports, of a discussion about the kind of policy, organisation and structure for ports that we need. We have had to do it rather belatedly in the current Session on the Second Reading of a Bill which, by itself, is not one to which we take strong objection, but we are worried about the whole philosophy behind the White Paper and what this may be doing to the development of the ports industry.

How does the kind of support we are now offering to our ports under this new doctrine compare with what our competitors in Europe will be offering to their ports? I am fairly certain that none of the European ports is being offered the present of borrowing money at 2 per cent. above the rate at which their government can borrow it, with a hidden clause of unknown but progressively higher interest charges every year over ten years. It could be a rate of 12 per cent. above the going rate of interest at the end of that period. Yet we shall have to compete with those European ports.

It is true that while we want to encourage competition between our ports for the goods coming in and out of Britain, and the European ports are not competing with us in that sense, a lot of merchandise comes to Europe in bulk and has to be broken down. Because this Bill is an open invitation to ports to raise their charges to the very highest level, the charges will determine whether, for example, a cargo goes to Rotterdam to be broken down and distributed around or comes to a British port. This has also a bearing on, perhaps, a decision of an American company whether to set up an additional plant. The hon. Gentleman seems to be very amused, but I assure him that this is a very serious aspect of the whole question. We need this kind of investment, and all the investment we can get. This is the basic problem at present. This may affect the decision of, perhaps, an American company on whether to invest in Britain or somewhere else in the Common Market.

The day has gone when any British firm can hope to sell goods on the basis of f.o.b. and let the buyers worry about carriage insurance, freight and so on. That is not on. We must now quote c.i.f. terms. Any increase in the cost of our port facilities will be added to the price of British goods which have to compete with others in Europe and around the world. It will be serious if we find that we are penalising our ports by the high charges which they have to make to provide the extra facilities that I would hope our export trade would demand, when other countries are making it much easier by way of grants, favourable loans, and so on. We have to look at this in the context not only of our entry into the Common Market but of our whole economic life.

It is important that ports should be efficient and that broadly, taking one year with another, they should pay their way. But we shall not have the right kind of port system or be doing the right thing for the development of our economic system if we go along with this paltry doctrine here, which might have made sense at a Tory rally 20 or 30 years ago but will not wash today. I hope that between now and the Committee stage there will be some hard thinking in the Department so that we can come out with a ports policy more in line with the needs of Britain.

The Bill provides an additional facility but it does not take away any of the existing powers of Ministers. Our complaint is that the Minister refuses to use the powers that he has to make grants and loans at reasonable rates and is substituting this instead. We shall not be dividing the House, but it would be wrong if I did not express the very strong concern felt on this side of the House about the trend of the Government's ports policy.

7.36 p.m.

Mr. John H. Osborn (Sheffield, Hallam)

The right hon. Member for Sheffield, Park (Mr. Mulley) referred to a Christmas present of £300 million, but surely the festive spirit has evaded him since he first rose to speak.

It is almost two years ago to the day, on 18th December, 1969, when the right hon. Gentleman was putting forward proposals for an entirely different way of handling the ports. He and I, although we represent constituencies in the same city, have diametrically opposed views on how to handle this situation. May I placate him somewhat, as it is the festive season, by assuring him that if he had come to the House with a request that we should have a £200 million bill for loans, and certainly if it had been a £200 million grant with a provision to raise it to £300 million, I for one would have questioned it.

I must not give the impression, however, that I oppose the Bill. I do not. In the circumstances the Bill is necessary, and I welcome the fact that it has been introduced at this time. I also welcome the response of the right hon. Gentleman in advising us that his right hon. and hon. Friends will not divide the House against it.

Much has happened in the last 10 years. There were the Rochdale Report and the 1964 Act setting up the National Ports Council. Even before the Act could be properly implemented the right hon. Gentleman's Government had a diametrically opposed view on how to handle the ports situation. During the last five years, as an inlander and because of the proposals to look into the ports and the Ports Bill, I have had occasion to visit many ports. One port management I visited said words to the effect "Owners may come, owners may go; Governments may come, Governments may go; but we go on managing the ports for ever".

One has to see the point of view of management on the dock front, because so much that is done in London and in Parliament seems so remote to these people. Two to three years ago many who were running our ports favoured nationalisation as a solution to their problems. It enabled local managements to escape from the responsibilities of management. Some of us have had the opportunity of meeting the Director-General, Mr. Maurice Gifford, and the new Chairman, Mr. Philip Chappell. Some of us have had an opportunity of visiting further ports in the last year. My right hon. Friend has imposed a new sense of purpose. He has brought in new management to the individual docks, harbours and ports. How right were the words of the White Paper, Cmnd. 4794: For many years the ports of Great Britain have been regarded as a service to be made available without adequate regard to costs, profitability or long-term financial health."! The Government have introduced a sense of purpose and urgency that the country should welcome.

The introduction of a Bill such as we are debating is an occasion to ask how the British ports are doing. I have had drawn to my attention the excellent Digest of Port Statistics 1971, which has an addendum giving a digest of the performance of the various ports. Some of them have done extremely well hut, for instance, the British Transport Docks Board has made a net deficit of £1.6 million, Southampton's; deficit being £900,000 and Newport's nearly £500,000. Hull made a substantial loss. The Port of London Authority has been in deficit, and the Mersey Docks and Harbours Board has made a substantial deficit, of about £3 million. This is the type of information we should take note of. What steps have been and should be taken to improve their performance?

There is another section dealing with capital expenditure which is very informative. The hours worked and the wages are reviewed in Section II of this report.

Mr. James Johnson

Does the hon. Gentleman want to make the case for extending to the public sector the same Shylock attitude, the same harsh disciplines, as we find in the Bill? Is that the thin end of his wedge, to give incentives? If not, why is he making that comparison?

Mr. Osborn

Did the hon. Gentleman intervene just because I mentioned Hull? I have looked at the list of ports and pointed to those that are in deficit. Others are in surplus. I could read out the list. I said that legislation of the type we are considering is the occasion to ask, "How are our ports doing, what information is made available to us and where does Parliament come in?" I do not see the purpose of the hon. Gentleman's intervention.

Mr. Johnson

If the hon. Gentleman does not, some others on this side of the House do. In quoting the statistics, is the hon. Gentleman making the point that, because certain ports are not doing as well as he thinks they should, they should be subject to the same severe disciplines that we have just been told are in paragraph 8 of the White Paper, and should only be given money at two points above the market rate? I could not understand why the hon. Gentleman picked ports out in that way.

Mr. Osborn

I am sure that if the hon. Gentleman wants to make his point later he can. I am asking how our ports are doing and saying that this is a time to take note of what is happening.

I referred to the average rate of capital expenditure, and the right hon. Member for Sheffield, Park has spoken about grants under Section 12 of the 1964 Act. It is reasonable to ask to what extent grants under that Act are expected to continue.

During the Committee stage of the Ports Bill in 1969 and early 1970 we were concerned with foreign competition. A report of the National Ports Council then gave a comparison of costs of continental and United Kingdom ports. The main conclusion was: From our investigations we have reached the conclusion that the four Continental ports we studied have a major advantage over the three U.K. ports. They receive massive financial aid from central or local government, who regard the ports as a vital part of their overall economy rather than as commercial enterprises in their own right. It has rightly been said that we must be careful to see that by raising prices for port services for goods going from this country to our export markets, or for imports, we do not put our ports out of business, losing the trade to the continental ports. Therefore, any trustee of the taxpayers' money wants to know how our ports are doing compared with continental ports and to what extent the continental ports continue to have the subsidy referred to by the National Ports Council.

The debate provides an opportunity for hon. Members to find out more about the activities of the National Ports Council. There are schemes for massive investment in our ports. As an industrial and trading nation, we are anxious that they should be the most efficient not only in Europe but in the world.

I readily accept that there is a new spirit and purpose in the management of our individual docks and harbours, which hon. Members are bound to welcome. I readily accept the necessity for the Bill, and I am glad that both sides of the House are supporting the proposals put forward by my right hon. Friend.

7.46 p.m.

Mr. Robert Hughes (Aberdeen, North)

The Under-Secretary of State said that this was a very important Bill, and very few hon. Members will disagree with that part of his statement. The Bill is all the more necessary as, after the welshing of the Mersey Docks and Harbours Board, port authorities wishing to borrow money on the open market find it extremely difficult. In so far as the Bill provides at least for some Government loans to be made available to repay capital debt, it is worth while having it on the Statute Book.

What disturbs me very much is the limited scope of the Bill, which shows clearly that the Government have no ports policy whatsoever, other than to try to inveigle private capital into the docks and harbours, hoping that that will be an incentive to make them a bit more efficient and competitive. I often feel that the statement that harbours and ports should be competitive is a bit unreal. I do not see how certain ports can be competitive if "competitive" means that they should attract more traffic. Certain ports, docks and harbours are totally dependent on the general trade of the country. My own authority, Aberdeen, gets the trade that comes to the North-East. It does not get trade from the Atlantic destined for the west of Scotland, because it would be nonsensical for shipowners to take their cargo all the way through the Pentland Firth, down the coast to Aberdeen and then by rail to Glasgow, when it can go to the Clyde. That is a simple example of how certain ports are totally dependent on the hinterland, their geographical position and the industrial life surrounding their area.

I am particularly concerned that the Bill seems to confirm that there will be no more grants for local harbours—full stop; that is the end of the matter. Whether or not Section 12 of the 1964 Act remains on the Statute Book, the Minister has made it perfectly clear that no grants are to be available. There is certainly nothing in the hon. Gentleman's speech tonight to suggest that we shall get grants in the future.

It is significant that on 30th July, in a Written Answer, the Minister for Transport Industries said: The Government have decided that the port modernisation grants scheme is no longer necessary or appropriate."—[OFFICIAL REPORT, 30th July, 1971; Vol. 822, c. 198] No evidence has been adduced why this decision should be taken. No evidence has been presented which suggests that modernisation grants are no longer necessary or appropriate. What evidence has the Minister got that these grants are not appropriate or necessary? The Government must look carefully at the ports situation.

The Minister may be aware that the Aberdeen Harbour Board—perhaps I should have given advance notice that I wished to raise the particular problems facing the board—is faced with a £1 million or Eli million programme to shore up the quayside and make the harbour tidal. The Minister has said in a letter to me: You will recollect that I informed the House on 30th July this year that the grant scheme was to end from that date. Again, no evidence has been adduced why the grant scheme should end. It is harbours like Aberdeen which need grants rather than loan assistance. It is difficult for a port like Aberdeen to show how it can provide more jobs by carrying out improvements. One has to know its precise position and trading difficulties. One cannot attract new industry to the ports. Therefore, this is the kind of scheme which should have some help.

It appears that the Government have no idea what they will do in certain of these areas. The Secretary of State for Scotland made an announcement from which he later had to recant. He did not do so personally; he sent a civil servant to do that job. The Minister does not seem to be aware of what is happening either. I requested him to reconsider the position about grants when we were discussing preliminary plans for Aberdeen harbour. He was most unhelpful. Certainly his letter is full of verbiage about the plans proving to make the harbour a viable concern. In his letter he says that the improvements appear to be relevant to the discovery of North Sea oil and he expects the oil companies to be at the base of any expansion programme because they should be charged proper rates so that harbour board can proceed with confidence.

Yet the Secretary of State for Scotland, welcoming the announcement about North Sea oil and the plans of British Petroleum to proceed, is reported in the following terms according to the Press and Journal of Friday, 17th December Welcoming the announcement last night, Scottish Secretary Mr. Gordon Campbell said: 'I am delighted to hear of B.P.'s momentous decision. This is a massive investment in Scotland's future. It provides immediate opportunity for Scottish firms to participate in the opening up of the North Sea oilfield and a continuing base for expansion.… For their part the Government, including the public authorities concerned, are taking the needs of this new development into account in their provision of supporting services, including housing, roads and port improvements.' Later, a Scottish Office spokesman emphasised that Mr. Campbell's reference to 'port improvements' did not apply to Aberdeen's proposed £1 million harbour expansion. He said: The improvements proposed by the Aberdeen Harbour Board are not related to the B.P. find. The Board and the Department of the Environment have discussed the proposals in a preliminary way and the Scottish Office have been involved. The Government are completely uninterested in what is happening to the smaller ports. They may be interested in some kind of financial killing which some of their friends might make by investing money in the larger ports of London, Merseyside, and so on—this may be the idea; I do not know—but they do not seem to be concerned about the smaller ports which are facing severe difficulties. I am advised that soundings in the market have made it clear that the market is not interested in coming into ports and harbours at this time.

I turn now to the curious doctrine of 2 per cent. above the current Government lending rate and its being increased progressively. It seems odd to suggest that it would help the ports to go to the open market, because the market is likely to say: "If you are able to pay 4 per cent. above the going rate to the Government, why are you not prepared to pay the same rate of interest, or marginally less, to us?" In other words, the market might be encouraged to be avaricious rather than to help. After all, the market has to try to get as good a return as it can.

I hope that all is not lost. Will the Minister tell me what authority the Government have for saying that grants will not be paid? The 1964 Act simply states "the Government may, with the approval of the Treasury", and so on. I know that "may" is permissive. They can presumably stop payment or refuse to give a grant in the same way as they may decide to give a grant. My fear is that by repealing the Harbours (Amendment) Act, 1970, which makes reference to Section 13 of the initial Act, the passage of this Bill will make it impossible for the Government to make grants available even if they are persuaded to change their minds. I know that the chamber of commerce, the harbour board, the town council and all concerned in the City of Aberdeen are trying to get the Government to change their minds about grants. If the Bill goes through in this form I do not think they will be allowed to make a grant. Will the Minister tell us whether this is so so that we can table Amendments to try to get him to change his mind?

If the only power left, with the repeal of the 1970 Act, is to make loans, should point out that the Bill is silent about the rate of interest. The Minister has announced an administrative figure which he can vary up or down at will according to whether he regards the policy as working or not. If he thinks that interest at 2 per cent. is too penal, he can presumably reduce it to 1 per cent. to relieve local difficulties. But, as the Bill is silent about interest, will it be possible for the Minister to make loans at rates of interest lower than the current lending rate to help local authorities which are in difficulty or are having to finance a programme for which it is difficult to forecast precisely what the revenue will be? Will it be possible to make a loan with a deferred interest payment; that is, to give one, two or even five years' grace free of interest and then apply interest?

If we are to have a ports policy of any kind it must be flexible. There is no point in passing Bills through the House which are totally rigid in application, because the Minister may have to come to the House and say, "Though I have much sympathy with the policy, I am tied by Statute and it will require enabling legislation to change it."

I hope that the Minister will be able to dispel the widespread feeling in the North-East of Scotland that the Aberdeen Harbour Board has not been given much encouragement and that the Government's treatment of it has been shabby. I hope he will give every encouragement to go ahead with a proposal which will benefit not only the Aberdeen Harbour Board but the commercial interests of the whole of the North-East of Scotland. It is unfair that the harbour board should be asked to put a charge on rates applicable only to particular commercial interests to pay for a development which will benefit the whole of the North-East of Scotland.

8.0 p.m.

Mr. Martin Maddan (Hove)

I am not intervening to put a constituency point. Part of Shoreham harbour is in my constituency, but I am happy to say that it is a prosperous harbour which manages its own affairs extremely well and is not in any particular current difficulty. But I will give a word of encouragement to the hon. Member for Aberdeen, North (Mr. Robert Hughes), who spoke of Aberdeen competing with the Clyde. Harvey's Bristol sherry, which he might think would come from Spain to Bristol, actually comes to the Port of Shoreham and then goes by road to Bristol. Such can be the competition which one port offers another.

In the last Session I was a member of the Select Committee which dealt with the Mersey Docks and Harbours Bill before it became an Act. In that capacity I learned quite a lot about the Mersey Docks and Harbour Board. I had to make up my mind, as we all did, whether that board was malingering as a lame duck, whether it was a lame duck suffering from a self-inflicted wound, or whatever was the trouble. At the end of the day the Bill became an Act which gave power to the board to write off part of the loans which had been made to it by bond holders. It also had power to issue equity to such people.

The Select Commitee was very concerned about this and made a special report to the House. I will quote one paragraph from it: Your Committee are concerned that a private Bill should raise such a matter as the remission of debt by Act of Parliament. Having listened with great care to the detailed evidence they have found, on a division, that the Preamble is proved, having regard to the circumstances, which they do not believe could ever be repeated in exactly the same way. In view of this, this Bill should not be regarded as a precedent. I shall return to that last statement later in my speech.

Against that background, I ask whether this Bill will permit advances to be made by the Government to help with the repayment by the Mersey Docks Company of the debts which are still outstanding but which may be written off or written down at the end of the moratorium period. Does the Bill give the Government power to do that? If it does, is it the Government's intention to do it?

This is very important because there may be various policies for the ports, but at least people who have lent money to a port would expect to receive fairly even-handed treatment within a short space of time from the same Government. I looked at the figures quoted by my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn). I am not an accountant. I looked at what is entitled Table 200 and tried to compare as best I can the position of the Mersey Docks and Harbour Board in 1970 with the position of the Forth Ports Authority, which is one of the two mentioned by my hon. Friend the Under-Secretary of State, and also with the Milford Haven Conservancy Board.

The Mersey Docks and Harbour Board had a deficit in 1970 of over £3 million but—and a mere deficit alone does not prove anything—its deficit was about one-seventh of its revenue. The deficit of the Forth Ports Authority was £567,000, about one-sixth of its revenue. The deficit of the Milford Haven Conservancy Board was about one-twelfth of its revenue.

Another column in Table 200 deals with the net interest charge, which is very important. I compared net interest charged to the revenue, because this is dead money; it is an overhead which has to go out. In the case of the Mersey Docks and Harbour Board the net interest charge was about one-fifth of its revenue; in the case of the Forth Ports Authority it was about one-quarter of the revenue; in the case of the Milford Haven Conservancy Board it was about four-fifths of the revenue, so that practically the whole revenue went in interest charges.

It may be contended that the Mersey Docks and Harbour Board was in a different position from that of any of the other boards or authorities which may receive advances under the Bill. If that is so, it must be made clear in detail that will stand up to professional scrutiny. If the Mersey bond holders, who were affected by the Act of Parliament which remitted the debt of the Mersey Docks and Harbour Board to them, are to receive different treatment from that accorded to their opposite numbers on the Forth or the Clyde, or elsewhere, we have to be very clear that the circumstances on the Mersey were substantially different from the circumstances in these other authorities.

I do not believe that that case has yet been made. It may be made later but I hope that it will be made out early, because the Mersey bond holders were not simply those large City institutions which, for some reason or other, are supposed to be able to stand the writing-off of large amounts due to them—exactly why, I do not know. They were in many cases small people who put their money into what they thought—and they may not have been as prudent as possible in doing so—was a gilt-edged security.

Another Private Bill has just been passed by the examiners. This is the Milford Haven Docks Bill. The Select Committee which considered the Mersey Docks and Harbour Bill said, I remind the House, that this Bill should not be regarded as a precedent. We all know what happens to precedents. Already this Session we have the Milford Haven Docks Bill. It does not exactly follow the pattern of the Mersey Docks and Harbour Act. It does not provide for the writing-off of debt but it certainly provides for a moratorium on interest by Act of Parliament. I would be grateful if my hon. Friend the Under-Secretary of State would comment upon the Milford Haven Docks Bill and also on the effect upon the Milford Haven authority of this Bill.

I will roll all this together. What is the right policy for financing our docks? There can be argument about that, but when we have made up our minds as to what that policy is we must apply it even-handedly. The writing off of the Mersey Docks and Harbour Board's debt has not yet been done because under the Act it was not to happen until the end of the moratorium period of three years' duration. We must make up our minds what is the right policy and then apply it even-handedly. The White Paper says, as my hon. Friend reminded us: In normal circumstances there is no reason why viable ports should not continue to refinance debt as they traditionally have done—on the market: but if a basically viable port is unable to do so, loans will be made available by the Government for this purpose. I think there is a non sequitur there, at least on the surface, because if it is viable I judge that the market would be a good place for that to be decided.

Paragraph 5 says: Substantial short-term borrowing has exposed some ports to the problem of having to refinance debt in unfavourable market conditions". I do not know how those market conditions are likely to be more unfavourable than the proposed 2 per cent. over the lending rate with rises thereafter. It may be a good formula. It may be exactly what the doctor ordered. I am not contesting that, but what I am inquiring about is how, if boards were able to pay that rate of interest, they would not be able to raise money on the market.

Mr. Mulley

The hon. Gentleman has given a great deal of attention to this matter, especially in the context of Mersey. Does he not agree that the unfortunate consequence of the Mersey affair—although the House mitigated the Government's original thoughts set out in their first version of the Mersey Bill—is that it will become progressively more difficult for public authorities of this kind to raise money because they will no longer be able to give the gilt-edged impression which, rightly or wrongly they were -able to give before?

Mr. Maddan

If they did it wrongly, it is proper that that situation should have ended and I do not want to rake over that position.

Annex 2 of the White Paper contains, in paragraph 1, the four criteria by which the National Ports Council will examine an authority's finances. I believe that a comparison of the finances of the Mersey authority and other authorities which may benefit under the Bill must be carried out with great thoroughness and published in full if it is not to be thought that we in this House have meted out with one hand in the last Session certain treatment to Mersey bond holders and we are now, in the next Session of the same Parliament, meting out entirely different treatment to those who have lent money to other authorities.

What is sauce for the goose must surely be sauce for the gander, and I await my hon. Friend's reply with a great deal of interest. Perhaps it may be possible for me to have an opportunity, if necessary, further to press the matter in Committee where, from the inquiries that I have made and the advice that I have received, I believe that I shall be able to do so, having read the Money Resolution as well as the Bill.

8.13 p.m.

Mr. James Johnson (Kingston upon Hull, West)

The longer I listen to the debate, the more I find this a bizarre Bill; but then we have a bizarre Government, so what can we expect?

I follow the argument advanced by the hon. Member for Hove (Mr. Maddan) and I am in tune with it. Paragraph 8 of the White Paper states: Such loans will, however be made only to those port authorities who satisfy the National Ports Council that their financial prospects are sound. I am not a financier and I have never worked in the City, but I once bought a house on a mortgage. It seems bizarre that a harbour authority should go to the Government for a loan on which the rate of interest is 2 per cent. above the market rate. If its financial prospects are sound, and that fact is verified by the National Ports Council, surely a harbour authority could get the money on the market at a better rate. I find this proposal rather unusual and I hope that the Minister will tell us exactly why the Government have put it forward. What is the philosophy behind this kind of, shall we say, step-by-step Government.

I intervene mainly because of the comments of the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn). Unfortunately, at least for him, the hon. Gentleman mentioned the port of Hull. I must, without being churlish, give the Bill a welcome, though the Minister will gather that it is a most guarded welcome. It would be churlish not to welcome the possibility of £300 million, or a substantial chunk of that sum, being spent on developments to make our ports better able to compete with Rotterdam, Hamburg and other foreign ports.

I begin to shudder when I hear phrases such as "the Bill is not meant to cushion" as though the Minister is playing snooker. I visualise lame ducks hobbling to market and I begin to look at the Bill with a jaundiced eye, particularly when I see in the White Paper in paragraph 8 such words as "carry out a stringent analysis", in paragraph 9 reference to "strict financial disciplines and the reference in paragraph 10(b) to the rate of interest being 2 per cent. over the market rate, because that could rise. It could go up to 3 per cent., 4 per cent. or even 5 per cent. over the life of a loan. That seems uncanny and unusual in the matter of lending money. It looks as though the Government are acting like a penny-pinching firm of accountants and intend to exact their pound of flesh.

I suggest that the Government should consider what previous Governments have done about Public works and development in the past through the medium of the Public Works Loan Board. I am prepared to argue that we should consider what happens in Sweden. There is there a farm bank for development loans in agriculture. Instead of charging a rate of interest 2 per cent. about the market rate, the bank provides loans on favourable terms to enable developments to be carried out. I should have thought that the State existed not to kick lame ducks but to help, in this instance, port authorities such as Aberdeen and others which needed help. The Government are carrying out their programme in the sacred name of City market ethics. I hope that Aberdeen will receive the help that it needs and will not have applied to it these strict financial disciplines.

As I said earlier, the hon. Member for Hallam referred to Hull. No doubt when I intervened I put my point rather clumsily, but perhaps I may try again to justify my attitude. When I hear the Minister, or anyone else talking about financial disciplines and about the financial analysis of ports and then going on to say that certain ports in the public sector such as Hull, Immingham, Goole and Grimsby do not do as well—

Mr. J. H. Osborn

I hope that the hon. Gentleman will read HANSARD carefully tomorrow. I looked at the list of ports. The top part of the list referred to ports under the British Docks Board and Hull is one of them. The hon. Gentleman and I represent Yorkshire constituencies. I assure him that, being a Yorkshireman, I am as interested in the success of this port as he is, and I have visited it. The hon. Gentleman is making a mistake in taking a point on this issue. I was reading from a list published in the report. The report is "The Digest of Port Statistics" and I happened to cite the information made available in the context of how the ports are doing. The hon. Member is raising a point that is really irrelevant.

Mr. Johnson

The hon. Gentleman must expect me, as a suspicious Opposition Member examining a bizarre Bill like this, having listened to the Minister and then finding one of his back benchers giving a list of the ports which are not doing well, to begin to think.

Here I put to the Minister a question called up from the vasty deep by the hon. Gentleman sitting behind him. Does he believe that these ports need the disciplines which he says they do—otherwise we would not have the Bill—and will he apply this same test, this same analysis and determination to the public sector, which I take it is not included in the financial provisions of the Bill, meaning those ports of the British Docks Board? My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) may well weigh in later with all his knowledge and expertise on matters concerning the Bill.

All I am saying is that as a Member for the City of Hull I would like the Minister to be quite clear when he speaks later and to state that he has no intention whatever of applying this kind of attitude or test to those ports that were mentioned earlier as not doing so well. I know what the present Government have done in other areas like the Clyde, and I do not want them in any way to start looking at the State sector in the way they are tending to do here.

Mr. J. H. Osborn

I do not want to intervene too much, but I could have quoted the Manchester figures which are much better. This would have brought up unpleasant memories of two years ago when Manchester was one of the ports which definitely wanted to remain in the private sector. Surely we should welcome the trend that is taking place and the support for the concept of equity participation. The hon. Member has also brought in a most important factor, that of interest payments. I apologise for listing these ports that are now in deficit first. The hon. Member is too suspicious. I could have started with Manchester and referred to the profit that has been made, but that might have antagonised him.

Mr. Johnson

I accept that, but I listened to the Minister earlier when he talked about certain ports which may not be doing well at the moment and therefore need short term help but which in the long term are viable with good prospects. Although it has been said that Hull is not doing as well as it was—and I accept that—it has enormous potential and no Yorkshire Member of Parliament should ever think anything else. This Humber estuary has a long-term potential second to none, once we get our approaches from the west with the two motorways and get the bridge over the Humber. We are facing the North Sea and the middle of Europe and have an economic future second to none. We on the Humber all accept this, and I hope that the Minister will tell me later that his attitude of mind or philosophy as embodied in the Bill in no way applies to the State sector to which our Humberside ports belong.

8.25 p.m.

Mr. James Hill (Southampton, Test)

I am sure that my hon. Friend on the Front Bench came this evening expecting to glow in the reflected gratitude of the Opposition for bringing forward this magnificent Christmas present at such a time. I suggest to the Opposition that they have been less than generous. He has come forward with a package which no matter how we look at it means £200 million with the possibility of £300 million. Surely on both sides of the House we must welcome this as another step towards strengthening port management and certainly the financial side of running our ports.

Mr. Robert Hughes

I am sorry to intervene so early in the hon. Gentleman's speech, but the Minister is giving nothing whatsoever to the ports except the right to borrow, and they then have to repay those borrowings at 2 per cent. above the current lending rate. They are not getting anything very spectacular in that.

Mr. Hill

Facilities are being provided for them to borrow at 2 per cent. over the Government lending rate. That is in the Bill, and no one is denying it. It is all very well saying that the bank will provide one with a facility at 2 or 3 per cent. over the lending rate if there is no money available. The Government are at long last making £200 million to £300 million available to ports not covered by the British Transport Docks Board.

Coming to the hon. Gentleman's point, the White Paper goes on to say: The terms of such loans will be designed to encourage port authorities to continue to borrow on the market where they can (or, where they do borrow from the Government, to seek alternative sources of finance as soon as possible). They should also result in strict financial disciplines which, together with improved earnings, will encourage the market to resume lending to ports on an appropriate long-term basis. This may be a viable proposition. It may be that the market is ready to lend to dock boards and harbour boards throughout the country, but I would hazard a guess that if there are poor figures in the financial structure of any board going to the market it will have to rely on the Government rate of 2 per cent. over the lending rate until it can prove it is viable.

The only doubt in my mind—I am sure my hon. Friend is quite aware of this—is that the loan will increase progressively over its life. If the life of the loan is 10 years and it is increasing progressively, I am sure my hon. Friends would like information to be given to the boards on exactly how much they will be committing themselves to.

My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) mentioned the British Transport Docks Board and Southampton, and on the Opposition side there was much discussion about Hull—which is apparently the finest port in the United Kingdom. That statement of course, is complete nonsense since the finest port in the United Kingdom is Southampton, and so it will remain for a very long time.

We at Southampton would not like to go to the market to borrow at this time. According to the statistics, in 1971 we lost £0.9 million. We have installed an integrated port communications system which gives supplementary radar information. This is coupled with a Honeywell computer and gives absolutely up-to-the-minute information on every movement throughout the port. That accounts for £250,000 of the £0.9 million.

Southampton is attracting, and will attract in the future, shipping lines that are using container ships. Are hon. Members aware that 1,000 ft. of jetty costs £5 million and uses 25 acres of land? In Southampton we are building another 6,000 or 7,000 additional feet of petty. If ports are to be modernised, they will need the whole of this £300 million. In Southampton we have brought in Devlin phase 2, and the port is now working for 22 hours of each day. This to some extent justified the £0.9 million deficit. This involved purchasing extremely costly equipment, and the port must have spare mechanical capacity to use on ships with tight schedules. The port is turning round 1.4 container ships every day with just two berths available.

The statistics show that £17½ million has been spent in Southampton. Hon. Members will understand why at this stage there is a loss, but next year and for many years to come we look forward to a very profitable balance sheet.

In the context of the Common Market, Hull is looking to the future, as we are in Southampton. We hope that the Common Market will bring all that we shall ever want, but much depends on the labour force. The strike record in Southampton is excellent, with over 12 months of unbroken service to the shipping companies. There are few ports that can say that, and by "ports" I mean ports, not fishing villages and so on. Ports sometimes seem to include practically anywhere which has a jetty, but in speaking of the losses incurred in modernisation we must think of deep sea ports.

In the future there will be a great deal of modernisation in our western docks extension, and I am sure my hon. Friend has noted my Question on the Order Paper. We look forward to the approval of this by my right hon. Friend. Although Southampton cannot share in the benefits arising from the Bill, I welcome the measure, as I hope other hon. Members will.

8.32 p.m.

Mr. John Prescott (Kingston upon Hull, East)

My hon. Friend the Member for Kingston upon Hull, West (Mr. James Johnson) referred to me as being an expert but I hesitate to comment on the Bill, particularly as it is primarily concerned with finance and I am certainly no financial expert, although I have had experience of the problems facing the ports industry as my specialist field is shipping.

My constituency of Hull has the third largest port in the country and is facing many problems arising from the investment which has to be undertaken to enable the port to change over to the new tempo of trade. The Humber ports and many of the eastern ports are having to face similar problems, particularly in view of our entry into the Common Market.

The policy embodied in the Bill is the philosophy of the present Government and is contrary to the policy which was followed by the Labour Government. We have to decide how to encourage future potential growth in the ports. In my area the port is an important source of employment and in the ancillary industries which service it, and we have a great interest in the policies pursued by Governments to encourage the growth of the port industries.

The Bill embodies the policy mooted in the White Paper "Financial Policy for Ports", Cmnd. 4794, and is committed to the market philosophy of introducing financial disciplines by means of which it is hoped to encourage growth. This has to be taken in conjunction with the ever-prominent selfish profit motive that will encourage people to pursue it and thereby bring about the growth that we all desire, while the central authority would hope to co-ordinate policy through the National Ports Council and would play the rôle of guiding, assisting and advising ports.

The Bill will go further in that it will attempt to impose financial stringency in analysing whether a port should be assisted by refinancing capital debts incurred by investment in certain projects. It is obvious that this sort of philosophy has failed. The Rochdale Report pointed this out in 1962 and called for a much stronger central co-ordinating authority. The recent example of the Mersey Docks and Harbours Board again points to a failure of this policy.

The Minister for Transport Industries has blamed amateur management for causing these problems and for reflecting such a poor profit record which has not attracted any private capital and has chosen to apportion blame for the lack of aggressive development in our ports. The provisions of the Bill seem to follow the same line by suggesting that if financial stringency is applied, growth and profit will follow.

My hon. Friend the Member for Kingston-upon-Hull, West spoke of a 2 per cent. penalty. What may well happen is that in raising capital the industry will have to go cap in hand to the Government for refinancing capital debt. I hope that we get a reply on this point tonight.

There is sufficient evidence to show that the Government policy on ports and their development runs counter to the policy adopted by our major port competitors in Europe. I refer particularly to the competition which the Humber ports and East Coast ports in general face from such places as Rotterdam and Hamburg, which have aggressive development policies. Those continental ports receive subsidies and they have become a gateway to the thriving economic markets of other countries. No obstacle is placed in their way and they have been given an impetus to achieve full economic growth.

Another point to be borne in mind is that a policy involving financial stringency will place a further burden on our exports as port charges rise to meet extra debt charges. This in its turn will create further economic problems.

I should like to quote from a Press notice issued by the Department of the Environment on 22nd June in which the Minister dealt with ports policy. He said: The crucial test by which a port's future will be determined is the service which it offers to shipowners and users. A shipowner is not nowadays tied to a particular port. He is like a housewife choosing the shop which gives him the best value, free to go to the port that suits him best. We have heard a great deal about shopping around in other respects and it is now being applied to one of our basic industries. That is the idea, and I hope to bring out the importance of it later in my speech because it imposes severe penalties on certain port authorities.

Mr. Eldon Griffiths

Is the hon. Gentleman suggesting that shipowners should be tied to specific ports?

Mr. Prescott

That is an important point. If the hon. Gentleman will be patient I shall deal with it, because I hope that he will address himself to it. I say that because I think it is clear that the policy embodied in the Government's White Paper fails to meet the problems of our ports.

The difficulties of the Humber ports are those faced by any port competing with continental ports or, for that matter, with ports on other parts of our coastline. For that reason I hope I shall be permitted to spend a few minutes drawing attention to the financial problems of Hull which are in no way assisted by the policy set out in the White Paper.

We should like a good deal more information about investment decisions and the capital involved in them. I made the mistake of thinking that this Bill was to be introduced after the recess. However, it having made its appearance earlier, I hope that there will be an opportunity in Committee for hon. Members to deal with these matters in more detail.

The growth of Hull is important, not only for Yorkshire but for the country as a whole. It has tremendous potential, but it badly needs investment. It is for that reason that I stress the importance of the financial policies pursued by the Government. In my view some kind of maritime industrial development programme must be considered and requires massive investment.

Hull has seen a rapid decline in traffic in coal, timber and raw materials. This has been due partly to the fact that Commonwealth countries are now processing their own materials. Another contributory factor has been bad management decisions. I agree with the Minister for Transport Industries that the ports industry has suffered to a large extent from amateur management. That criticism cannot be confined to the ports industry, of course. In my view it is true of much of our industry, from Rolls-Royce downwards. The fact remains, however, that management decisions involving the removal of railway facilities from our docks have encouraged the reduction in traffic. When there is a reduction in traffic there is a corresponding reduction in the income from charges, and this gives rise to serious problems for ports like those in the Humber area.

If a port wants to grow and develop the new techniques which are necessary if it is to face the growing competition from European ports, an enormous amount of capital investment is required. I agree with the hon. Member for Southampton, Test (Mr. James Hill) that the massive capital required by a growing port cannot possibly be recovered in the short time that Parliament expects of the industry. Financial criteria are placed on port authorities which have to raise capital by means of charges, and that in itself compounds their problems. When charges are increased, there is more reluctance to use the port and, as a result, traffic begins to fall.

The problem of a port area like the Humber is that it has to raise capital. The flow of traffic is important for this reason, and here I deal with the Under-Secretary's question to me. He asked me whether I was suggesting that shipowners should be restricted to certain ports; in other words, whether a shipowner should be told which port he should use. People will go where the services are cheapest. This raises a problem because millions of pounds have been involved in building big port complexes and this money has to be recouped. The small ports, such as Scarborough, Flixborough, Whitby and Selby, situated on river estuaries, attract vessels bringing in timber and earn themselves "pin" money. Of course it is much cheaper at the smaller ports because the labour is cheaper and capital charges are nowhere near as large as at a large port. Container work is done off the dock estate. As a result, the traffic is syphoned away from the major ports and the ports authority has to recover debt and interest charges from a decreasing amount of traffic.

This is not the way to deal with the problem and ensure that our major ports attract the main traffic. It is a silly policy which will operate eventually to the detriment of all ports. The Government's policy will not solve this problem because the only answer is strong central control by the ports authority.

8.47 p.m.

Dame Irene Ward (Tynemouth)

This is an important Bill for port development. When such a Bill involving new arrangements for dealing with loans and port restructuring is laid before the House it is obvious that many people connected with ports have been in touch with the Government. Are the people who will be mainly concerned once the Bill becomes law in support of the Minister? Do they believe that this is the right way in which to develop competitiveness in the ports and to get rid of many of the ancient practices? Hon. Members get all sorts of representations on Bills like this because of their political philosophy or their interest in development. This Bill seems thoroughly satisfactory.

Mr. Mulley

May I help the hon. Lady? The issue which concerns the ports is that instead of having a grant from public funds they will have to borrow, and at very high interest rates.

Dame Irene Ward

The right hon. Gentleman may say that, but I do not share his point of view. I want the ports to be competitive, something which has never interested the Labour Party. Many industrial losses resulting from their Administration have caused us a lot of trouble. It is kind of the right hon. Gentleman to try to help me, but he is not helping me because I do not share his financial approach.

Mr. Mulley

I have been in the House a long time and have often heard the hon. Lady argue eloquently for Government aid for her area. I am surprised that she is not asking for a continuation of that aid for the Port of Tynemouth.

Dame Irene Ward

That may be, but I am a very flexible person and I judge everything on its merits. There is no reason why I should not support the Bill.

Every time I sail through Rotterdam I wonder how our ports will ever compete. I am glad that my Government are making the ports as up-to-date and modern as Rotterdam, so far as that is possible. My opinion of Rotterdam may be that of an amateur, but amateurs sometimes sec more than the professionals.

Mr. James Johnson

Surely an amateur like the hon. Lady or me must know that much more help than anything in the Bill is given to Rotterdam. The Dutch do not have a Bill like this.

Dame Irene Ward

I could not agree more. For development, with which the Labour Government were singularly unconcerned, one must have a sound economy and money available. They had all sorts of ideas but did not know how to pay for them. My Government's ideas might not be quite so all-embracing but at least they provide a sound financial basis on which to operate. Will our ports benefit and become competitive as a result of this Measure? That is the important question.

A lot has been said about Hull and ports in Scotland. I want to talk about the Tyne because we are losing out at present and it is clear to those who live and take an interest in my part of the world that the Tyne is declining whereas the Tees is building up, and this does not suit me at all.

Incidentally, in the old days, when the body which looked after this areas was the Tyne Improvement Commission, before nationalisation, it was much nicer to me and to my ideas than has been the case under nationalisation. I hope that when I next lunch with those people, particularly as private enterprise has come into the matter now, they will be nicer than they were obliged to be under the disciplines of the Labour Government.

Will the Tyne be able to develop under this and other legislation so that it can stand on its own feet and employ the numbers of people who used to earn their living on the Tyne? In other words, shall we be able to reorganise and become a competitive port once again?

I was recently in Europe with the hon. Member for Kingston upon Hull, West (Mr. James Johnson) and met people who were very knowledgeable about ports. Although we were there dealing with the probation service and similar matters I suppose it was unavoidable that the subject of ports would crop up. They told me that our system of cranes was deplorable and that the cranes we used in our ports were not capable of lifting very much.

What action does the Minister intend to take to stimulate port authorities into making us as competitive, if not as large, as Rotterdam? Are we to have the cranes and other modern equipment we need?

Mr. Prescott

I agree that our ports need modernising. Is the hon. Lady aware that Conservative market criteria are hard to apply when ports must first ensure that they are capable of attracting sufficient traffic and, second, that there is a sufficient return on the investment? The trouble today is that under the policies of the Conservative Party the ports are having to compete against each other and all sorts of other things.

Dame Irene Ward

I have faith in this Government and I am beyond the partisan arguments of hon. Gentlemen opposite.

My main point in rising is to ask whether our ports will be able to become competitive. I hope that they can, so that when I sail through them I can feel as proud as the Dutch feel about Rotterdam. I wish our ports luck in the future. I hope that they go ahead to greater things so that when we enter the E.E.C. they will be in a position to share in the trade which is desperately our due.

9.0 p.m.

Mr. Arthur Blenkinsop (South Shields)

I intervene only briefly. I start by apologising for being absent during the opening of the debate. I was detained at a meeting and was unable to be present. But as this matter affects directly my constituency, or could do so, it is obviously of very considerable importance to me, as it is to the hon. Member for Tynemouth (Dame Irene Ward). I was a bit astounded at the hon. Lady's comments because she has fought vigorously for her constituency in the past. No one would doubt that. Here we have a Bill which does nothing to help us on the Tyne. If anything, on the face of it, it would appear to make matters more difficult. As the hon. Lady has been a doughty fighter in the past, it is surprising that she should have given up the struggle now.

Dame Irene Ward

The hon. Gentleman need not bother about me. I know exactly what I am doing, and what I am doing for the Tyne. On the whole, the Conservative policy will serve our area better than that of the Socialists.

Mr. Blenkinsop

We have been told that faith moves mountains, but I am doubtful whether it will succeed on this occasion. But I associate myself with the hon. Lady in her questions to the Minister as to what precisely would be the relevance of the Bill to our area. Only a few days ago I was raising matters in the House at a late hour of morning about the situation on the Tyne. We have had to face a situation on the Tyne—one of the safest harbours, if not the safest, in the North-East of England—of a decline in the major trade of coal over the years, and this had not yet been replaced by an adequate alternative trade.

The tragedy for some of us, and for my own port of Tyne Dock, is that, after building up the iron ore trade and installing a great deal of equipment for it of a relatively very modern character, we now find that that trade is almost inevitably moving down to the Tees and will be lost, with a further loss of work for men in the area added to the dreadful proportion of over 15 per cent. of men unemployed in my constituency.

Mr. Prescott

A free market.

Mr. Blenkinsop

This is a very serious position. Therefore, naturally and rightly, the Tyne Port Authority is concerned with attracting new trade to replace the trade it has lost. In order to do that, it must concern itself with the facilities available. I hope that the comments of my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), who is naturally concerned about his constituency, do not suggest that there are not other major port areas, such as the Tyne, which have a very important part to play in the future.

Mr. Prescott

To get the record absolutely straight, in illustrating the Humber I said that it was illustrative of a number of problems in a number of port areas. I am sure that it affects a number of areas.

Mr. Blenkinsop

My hon. Friend is right, and I appreciate fully the problem he has raised about some of the smallest of the ports fighting for a limited amount of traffic, especially in timber, and the implications of this for any port attempting to invest in modern facilities in a big way.

An area like the Tyne is always faced with a challenge. On the Tyne we are told that we have to prove that there is traffic to justify investment in the modern equipment required. We have a circular argument: how can we hope to attract the traffic to replace what we are losing unless we have the courage to undertake that first investment?

One of the important criteria in considering the Bill, at any rate for us on the Tyne, is whether it offers us any hope of helping to carry out that new investment. I do not see that it does. If the Minister can tell us that it will make new facilities available, we shall be delighted to hear it, but we very much doubt whether that will be so.

We also have the tragedy that big reclamation undertakings are being started on the Tyne, including the reclamation of the Jarrow Slake, a huge area, in the hope of making facilities and sites available for new industrial development, but there will be no grants for that work either. If it had been a local authority development, they might have been available, but it is a port authority development. The Bill does nothing to alter that situation. I admit that it is a situation of long standing.

I very much fear that the Bill, which has had a pretty tepid welcome in the House, will not help us on the Tyne at all. If it does not give us the opportunity to help ourselves and modernise our own facilities, when will the Minister bring forward new proposals that will enable us to do so?

9.7 p.m.

Mr. Eldon Griffiths

With permission, I should like to reply to the debate.

It is interesting that the House should have spent the larger part of today's Sitting debating with some intensity a matter of a million pounds or so to be added to the Civil List whereas when we come to a Bill disposing of £200 million or £300 million of additional lending facilities—

Mr. Mulley

May I get the record straight? We are not giving an extra £200 million but are raising the lending limit to that figure. There is already a limit of £125 million.

Mr. Griffiths

The right hon. Gentleman is right, but I was just drawing attention to the curious paradox that there has been a great deal of oratory on an expenditure of £1 million, whereas tonight when we are dealing with much more substantial sums the House, I regret to say, is comparatively empty.

The debate has ranged very widely. The hon. Member for Kingston upon Hull, West (Mr. James Johnson) referred to the Government's policy as that of a Shylock. That is a curious description. We are making available to the ports industry some £200 million of loans, yet he repeated that it is a matter of penny-pinching, typical of Shylock.

Mr. Mulley

If the Government lend £200 million at 2 per cent. per annum to start with—and we do not know what it will be later on—they are making a cool £4 million a year, and that is quite nice for anyone.

Mr. Griffiths

If the right hon. Gentleman felt in a generous mood, would he be prepared to lend in the circumstances of some of our ports? That is the crucial point.

I should make it clear at the beginning that the Bill does not apply to British Transport Docks Board ports. A number of hon. Members have referred to the problems of the British Transport Docks Board. However, I cannot deal with them, because they are not contained within the Bill. There is no question of the British Transport Docks Board either asking for or being given loans under these proposals.

The Bill is not designed to provide for the development of new works. It is designed to finance the renewal of existing capital debt. Therefore, many of the questions which have been put to me are irrelevant to the Bill. However, I will deal with each of those points when I can.

The Bill is necessary because many of our ports have got into debt and are finding difficulty in refinancing that debt when some of it matures. The House will have many and various views why our ports are in debt. Some hon. Members will put most of the blame on managements; others will put most of the blame on the unions. I think that we must accept that, whatever the measure of blame between those two groups, there are a number of secular and technological changes in the nature of the ports industry and in the quality, character and direction of our trade which have created new situations. Therefore, we must look at the problem as a whole.

The uncertainty under which ports have had to operate, in part due to the proposals of the Labour Party to nationalise them and the change of policy brought in by this Government has made it the more difficult for ports to refinance maturing bonds when they have become due. The Bill is necessary to deal with the problem of refinancing capital debt; it does not deal specifically with anything else.

I will deal with the particular points which have been raised in the debate. My hon. Friend the Member for Tyne-mouth (Dame Irene Ward) asked about consultations. We have had the most detailed consultations, in particular with the National Ports Council, which will be an essential element in carrying out this policy. We have every confidence that it will assist us in doing so. My hon. Friend particularly asked, as did the hon. Member for South Shields (Mr. Blenkinsop), about the effect on the Tyne ports. If the Tyne ports have capital debt—I am advised that they have—it is open to them to apply, via the National Ports Council, to the Government for financial support in refinancing their debt. But I should also make it plain that the Government hope that many of our ports will be capable of refinancing their debts in the market, as many of them prefer and intend to do. Therefore, I should be wrong in forecasting that the Tyne ports will need the Bill. It is a matter for their judgment.

I was asked about the current rates of interest and the amounts which would be chargeable. The Government's lending rate is currently 6¼ per cent. With 2 per cent. added, the rate payable on a loan of this kind would be 8¼ per cent. That is a good deal lower than the rate which was chargeable only a few years ago when Bank Rate in this country was substantially higher than it is today. It does not lie in the mouths of hon. Gentlemen opposite to talk about exorbitant interest rates when, as a result of the reduced Bank Rate which this Government have brought about, the total interest which will be chargeable, including the additional 2 per cent., will still be lower than that chargeable under the Labour Government.

Mr. Blenkinsop

Surely the pertinent point is how the rates of interest compare with those of our competitors. At a time when rates are generally coming down, surely this is a fairly disastrous position.

Mr. Griffiths

I made the important point that the rate for loans will be 8¼ per cent. even including the 2 per cent. chargeable under the Bill. The rates for loans that have already been made to the two ports I mentioned range from 8 to 8⅜ per cent.

I was asked what increases there are likely to be after two years. There is no fixed amount. It will be flexible. It will depend upon the market situation, as it is bound to do, for if ports find it easier to go to the market for their money, plainly they will not be coming to the Government. Whatever the policy of the Opposition may be, it is the policy of the Government that the ports should be, as far as they can, encouraged to get their money from the market. Over a period of time, it may be that tile increase would be about ½ per cent. every one or two years, but I cannot give figures now. I can only say that we shall be flexible.

I was asked why there was to be a 2 per cent. premium over the Government's lending rate. We fixed this figure to provide a reasonable incentive to go to the market. We want to make sure that Government loans are not a soft option. The market rate itself will also be higher than the Government's lending rate. No one suggests that on the market one can obtain rates at exactly the rate set by the Government. It is wrong to say that there is a penalty of a full 2 per cent. over what it would cost to go to the market. It is the Government rate plus 2 per cent., and that might be very different from what the market would charge.

I was also asked about port modernisation grants. This grants scheme was ended by my right hon. Friend on 30th July for good and proper reasons. The Bill does not have any effect on new development schemes. It deals only with the renewal of existing capital debt, and, therefore, a debate about grants under the ports modernisation scheme is irrelevant to the purposes of the Bill.

Mr. Mulley

This point should be clarified. I understand that it was a purely administrative decision by the Minister not to pay grants. The power to do so remains. When the Minister made his announcement, we thought this Bill might deal with the point but I understand it does not.

Mr. Griffiths

My right hon. Friend ended the scheme because it was not doing any good. Despite the assistance given under the previous Government, there is no evidence that the 20 per cent. grant rate led to any significant increase in or acceleration of major capital developments by ports authorities. I make it clear that when I say that it was not doing any good I am referring to the refinancing of debt. That at least it was not assisting.

Mr. Robert Hughes

The House wants to be clear about this. Is the hon. Gentleman saying specifically that nothing in this Bill affects the Government's administrative power to introduce grants if they so desire?

Mr. Griffiths

My right hon. Friend decided that he would no longer make available ports modernisation grants because it was the policy of the Government not to pay investment grants but to turn over to a new system. It would have been inappropriate to have continued ports modernisation grants while discontinuing grants to industry. That is the short answer. For the future, I cannot tell.

I come now to the position of Aberdeen. It is not a fishery harbour for the purposes of the Bill, and, therefore, would be eligible for loans for debt renewal if the port were to apply and were to meet the necessary conditions. What the hon. Member for Aberdeen, North (Mr. Robert Hughes) was talking about was new development, not about money for re-financing. I understand that the Commissioners of Aberdeen Harbour want a grant. They can, of course, have a loan under the Harbours Act, if approved, at the normal Government lending rate, but this Bill, I repeat, deals with re-financing. The hon. Gentleman asked whether interest rates could be lower than the Government lending rate. There is nothing in the Bill to stop this but it would be contrary to Government policy to go in for selectively lower rates.

Bristol will not get a grant for the West Dock scheme because it is too late to qualify. Borrowing for the West Dock scheme is not covered by the Bill because the loans are only for debt renewal and not for new development.

My hon. Friend the Member for Hove (Mr. Maddan) raised the question of Mersey. This, as he properly recognised, is a complex issue, and one to which we might return in Committee, but my short answer to the point that he raised is that the Mersey Docks and Harbour Board was plainly not viable, and, therefore, its position its different from that of the ports that will be covered by the Bill. This policy covers those ports which are viable, or which can quickly be made so to attract the finance which the Government are making available. Mersey was not viable. It was insolvent. There therefore has to be a capital reorganisation scheme under the recent Act to which my hon. Friend contributed so much. That capital reconstruction scheme is necessary simply because the board was not viable This fact alone would have made it ineligible for loans under the Bill.

Mr. Maddan

Would my hon. Friend ask the National Ports Council to publish figures which would make the point that Mersey was less viable than the Forth ports authority and perhaps Milford Haven, which are to receive benefit?

Mr. Griffiths

I shall be glad to ask the council for any figures that will throw light on any point that my hon. Friend wishes to illuminate. The Bill covers those ports which are viable, or which can quickly be made so under arrangements which the council will discuss with them. We were, and still are, faced with the fact that the Mersey Docks and Harbour Board was not viable, that it was insolvent, and in the fact that a capital reconstruction scheme has to be undertaken there is proof positive that it was not viable and was not solvent.

My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn), as always, has done a great deal of homework on this issue, and he asked one crucial question: how are the ports doing? The short answer is that the ports are doing better now because confidence is returning and because my right hon. Friend's policies are commercially realistic and put the emphasis where it should be; namely, on persuading and, indeed, encouraging ports to return to equity financing by way of the market, which can make a far better judgment of the viability and commercial competence of the ports.

I am glad to say to my hon. Friend that, as regards Mersey, the chairman, Mr. Cuckney, to whom the whole House can pay tribute for what he has done at that port, says in his annual report: I am cautiously optimistic … I think it is gratifying to have some evidence that the unpalatable measures we have had to take so far have been justified in that we are beginning to create the base on which to establish a thriving and profitable port even though that will take a few years to achieve in full. The short answer to my hon. Friend is that confidence is returning, and that the ports are doing better.

I turn finally, to the general points raised by the right hon. Gentleman. He suggested that the policy of grants to the ports which he administered under the previous Administration was a better approach. We on this side of the House disagree. His policy is that of the soft option. The right hon. Gentleman wants to provide grants, or he wants to provide loans at specially favoured rates. But all the evidence is that the policy of soft options does not produce more efficient ports. On the contrary, the evidence is that those previous policies have landed our ports in increasing difficulty and in debts which they are unable to re-finance on the market.

Our policy is different. It is not a policy of subsidy. It is not a policy of nationalisation. It is a policy of commercial realism and financial discipline, and I believe that to be right. Our policy is founded on encouraging ports to go to equity financing and will help them over the difficult period when they need to re-finance some of the debt that has been incurred.

One question raised was: how could we be sure that money would become available from the market as and when ports wish to get out from under the rates of interest that would be charged? How can we be sure they will attract money from the market? I believe the answers are these: first of all, with more confidence, with greater trade, with better financial disciplines and better managements, ports will achieve better results and higher profits; and it is the higher profits and better results that themselves are the best advertisement for a port going to the market. There is no joy to be won in the market for the port which makes losses. Our concern is with ports that make profits. We believe that those are in the best interests of the country.

Mr. Prescott

May I ask the Minister to address his attention to the point I was developing that, as he points out, this leads to refinancing of capital debt and in that sense it is not only the British Transport Docks ports which face problems? There are other authorities to which this Bill applies which are facing the same problem with some ports siphoning off trade, which will increase the problems for the larger ports which will have greater capital debt problems than smaller ones.

Mr. Griffiths

Clearly, the hon. Gentleman likes the soft option and dislikes competition, and once again I can say that that is the divide between the two sides of the House. I can set his mind at rest to this extent: fishery harbours, which include many of the smaller ports to which he referred, will not be eligible under the Bill. I do not for one moment regard it as desirable in principle that shipowners should be placed under the constraint that they must go to certain harbours and not others. I believe it is in the general interests of trade in this country that they should have the widest possible choice in the harbours which they use.

Mr. William Ross (Kilmarnock)

The hon. Gentleman has referred to fishery harbours. Will he make clear that the Government still give grants to fishery harbours, certainly in Scotland?

Mr. Griffiths

Of course I will make that clear. The right hon. Gentleman who has not ventured to appear in this House until a few moments ago has now come here and stood up at the Front Bench on what is plainly a political fishing expedition for which I give him no credit at all.

There are encouraging signs of progress in the ports industry as a whole. In the past year there has been substantial progress. I hope the hon. Gentleman will welcome this since he represents a port. There has been substantial progress toward improving the revenue position of the industry. Much closer attention has been given to costs and improvements in financial and commercial methods. I believe these are the fruits of the freedom and encouragement that we have given the industry to act on a commercial basis. They are also products of the impetus given by the new National Ports Council and its wider terms of reference. It is because we want to keep up the momentum that this Bill is necessary. It will help the ports to pay their own way.

Mr. James Johnson

Since the hon. Gentleman picked me out for special mention as being a Member for a port that has been discussed tonight, and since I was missing from the Chamber for a few moments, may I ask him whether during that time he gave any answer to the question I asked earlier, whether or not this was the beginning of a Government policy towards the State sector, a policy of giving loans on these iniquitous terms?

Mr. Griffiths

I had sat down, but I will set the hon. Gentleman's mind at rest. I said several times that British Transport Docks Board ports are not included or covered within this Bill.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 14 (Committal of Bills.)

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1. HARBOURS (LOANS) [MONEY] 241 words