§ 9.59 p.m.
§ Mr. Norman Fowler (Sutton Coldfield)
I beg to move,That this House takes note of the National Freight Corporation (Commencing Capital Debt) Order 1976 (S.I., 1976, No. 329).This Order relates to the commencing debt of the National Freight Corporationwhich was formed by the 1968 Transport Act and began business in January 1969. Under the National Freight Corporation umbrella are more than 50 companies in the general and specialised road haulage industry, as well as a number of other companies which were taken over from British Rail. Unlike British Rail, the National Freight Corporation is not in a monopoly position, as it has only 10 per cent. of the "for hire" road haulage market.
The Order lays down the commencing capital debt of £98 million, and doubtless the Minister will tell us why it has taken so long since the inception of the company to agree this total, and to give the commencing debt and total capital debt of the corporation.
The Order raises important associated issues. It is a strong coincidence that we should be debating the affairs of the National Freight Corporation on the same day as British Rail announced a record loss. Regrettably, the National Freight Corporation is in exactly the same position. In a few days it will announce a record loss of just over £30 million. This means that in seven years 586 of existence the corporation has only twice returned a profit. This position must cause concern to this House.
We should be clear on one point. Although an argument can be made out for passenger subsidies on social grounds or other grounds, I see no social justification for subsidising freight, particularly freight when it goes by road. At a time when this country faces the worst economic crisis within memory, there can be no justification for subsidies in this area.
The first question we have for the Government is concerned with the way in which the current loss is being made. My information is that of this loss of £30 million, more than half was made by National Carriers, one of a number of nationalised companies in Britain competing with each other in the parcels and small freight area. The fact that National Carriers should be making this loss is a matter of great concern. When the Select Committee on the Nationalised Industries reported on the National Freight Corporation, it made a number of comments and suggestions about National Carriers. In August 1974 the Government replied to these suggestions, and said that they accepted the proposition that National Carriers could be made into a profitable enterpriseif left to be managed on a commercial basis".The Government added that they accepted that National Carriers should be given a further opportunity to continue the trend towards profitability as a separate organisation.
The fact of the matter is that today that trend—which was one of reduced losses rather than true profitability—has not continued. Therefore, it is a matter of importance that the Government should make their position clear on this issue. Do they accept that the position has now changed? If so, what are their proposals for improving the financial position? What losses have resulted from the expansion of business into France? I understand that legal action on this issue is pending at the moment in France, and I recognise that while the matter is not exactly sub judice, it is sensitive. The position is that at the 587 beginning of last year the NFC purchased two French tanker operating companies for just over £3 million. Both concerns specialised in carrying liquids and gas, and, all told, more than 600 vehicles were involved. Concern over the position here has been expressed both by the Daily Express and the weekly magazine Motor Transport, and I pay tribute to their reporting. They raise an important case. I should like the Minister to give us guidance on two questions. First, can he say what scale of losses is involved in the entry of NFC into France in the last financial year? While the question is before the French courts we in the Opposition will reserve our comments, but we shall want a full and satisfactory explanation once the legal proceedings are concluded.
By statute the NFC is required at least to break even. The Department of the Environment expects more, however. It said in the evidence it gave to the Select Committee that the NFC was expected to make a commercial return on the capital invested. We would value the Government's analysis of the current position and of what is being done to correct that position.
There is an opportunity to put right the financial affairs of NFC. There is no reason why it should continue permanently to make a loss. There are two good reasons for hoping that the position can be changed. First, loss making is not a characteristic of anything like all the NFC companies. Two-thirds of them are in good shape. I refer to companies like Pickfords, British Road Services and British Road Services Parcels, which is now called Roadline and which has achieved a trading profit in every year since its formation in 1957.
In addition, the NFC is not run as some vast over-centralised nationalised industry. The corporation is broken down into a federated structure, and maximum independence is given to the separate companies.
My second reason is that the management in the NFC seems genuinely in no way to wish to avoid commercial realities. The opposite is the case. The approach of the corporation is stated by its chairman, Sir Dan Pettit, to be to achieve a commercially viable company, to invest 588 in success and to disinvest in failure. When we urge that the NFC should pay its way we are, we believe, pushing against an open door, because that represents the aspirations not only of the top management but of the staff. It is therefore against that background that we should turn our attention to the parts of NFC which are the major national loss-makers.
First is Freightliners, which is owned jointly by the NFC and British Rail. The NFC has the majority holding. Freightliners is currently running at a loss, but with the recession here and in Europe generally it should be noted that much of the transport industry is currently facing very difficult times. The concept of combining the best of road and rail, however, seems well worth pursuing.
This is of most value when dealing with long-haul freight, but there are limitations that must be accepted. It is no use believing that there is a panacea here, or that Government policy can miraculously move a massive quantity of goods from road to rail. The Secretary of State dismisses the prospect of a massive shift from road to rail as a pipe dream. However, there is obviously scope for sensible co-operation.
I am impressed with the management of Freightliners. It has the right commercial objectives, and the aims of the company should be pursued. I hope that it remains under the control of the NFC, with its commercial remit, rather than under British Rail—not because I have anything against British Rail, but it has enough problems of its own at present.
The crucial question concerns National Carriers, which was the subject of an inquiry by a Select Committee more than three years ago. There was a remarkable unanimity on the Committee.
The then Chairman of the British Railways Board, Sir Richard Marsh, said:I do not think there can be any doubt that, with regard to the present method of operations, the three public sector organisations —the Post Office, the NFC and ourselves—are together producing a less than optimum result for the taxpayers.The Road Haulage Association made the same point, and a witness from the Department of the Environment said that the Government wanted the public sector parcels services better rationalised, 589 avoiding any wasteful competition between nationalised industries. The Select Committee added that it believed that the public sector parcels operations should be rationalised. Virtually everyone who has examined this question is concerned about there being a number of nationalised companies doing a similar job.
The Select Committee recommended that a committee of inquiry should be set up to investigate the operation of the public sector parcels service. The Government's reply was less than convincing. They said that they were conscious of the danger that such an inquiry might be inconclusive and might delay a decision. They added that because of the complexity of the issue they were not then in a position to reply substantially to the Committee's recommendation.
The Government have now had a further 18 months to consider the matter, and it would be very strange if a Government who rejected an inquiry on the ground that it might delay decision-making were still not able to give a reply or an indication of their views now.
Many hon. Members on both sides of the House would like to see the position rationalised into a number of different types of businesses, so that one company might go for the specialised flow of textiles and another for a different specialist area. It is surely the supply of specialised services that is most important and where a number of new private enterprise companies have entered the field and, all credit to them, done extremely well.
I hope that the Minister will comment on the proposal of the Select Committee that National Carriers and Roadline should come together. This was originally rejected, on the ground that National Carriers should be given a further chance. Perhaps the company has now had that chance. We should value the Government's advice on this matter.
The National Freight corporation now faces a record loss. That is the sober and depressing fact. At this time above all else we cannot afford this scale of public expenditure. There are some hopeful signs, especially the commercial aims of the management but it must be the Government's endeavour to promote those aims. I hope that the Government will take this opportunity of letting us know their plans and proposals.
§ 10.16 p.m.
§ Mr. Ronald Atkins (Preston, North)
I agree with the hon. Member for Sutton Coldfield (Mr. Fowler) that there is a need to bring together the public undertakings—I include the Post Office—that deal with parcels. The question that concerns me about the National Freight Corporation is whether it is carrying out the duty that it was given in the Transport Act 1968. Under that Act the corporation was created to operate the publicly-owned freight services. It required the corporationto … promote the provision of, properly integrated services for the carriage of goods within Great Britain by road and rail; and to secure that in the provision of those services, goods are carried by rail whenever such carriage is efficient and economic.That should remain the Government's policy as it remains the Labour Party's policy. However, recent decisions by the NCL and Freightliners Limited, subsidiaries of the publicly-owned National Freight Corporation, continue to flout Government policy and the wishes of Parliament as laid down in the 1968 Act. Nevertheless, the NCL and Freightliners appear to have the blessing of the Government in the consultation document on transport policy. For example, in paragraph 8.3 in page 62 the document refers to the road-versus-rail argument as a barren argument. That is true, though we have never considered it in that light in the Labour movement.
We have always urged integration. Again and again we have demanded integration, but it has not been brought about, despite the legislation that has been enacted. The document states that these developments areunlikely to alter radically the distribution between road and rail … rail will normally continue to be more expensive for wagonload traffic except over long distances.Long distances are usually regarded as those above 75 miles. I am by no means satisfied that, even above 75 miles, any advance has been made. In fact, there has been a deterioration.
Paragraph 8.8 in page 63 states:Since the original transfer of National Carriers Limited (NCL) from British Rail to the National Freight Corporation there has, in fact, been some shift away from rail.There has been no massive shift—perhaps we cannot expect one—from road to rail, but a shift has taken place in the 591 other direction. There has been a shift away from railpartly because of increased British Rail freight charges"—because of the removal of the freight subsidy—but more particularly because exclusive reliance on rail would not provide the flexibility of service demanded, especially by the highly competitive small freight market.That statement to some extent condones the movement of traffic from rail to road. As an example of the difficulties that are mentioned, I should like to read part of a letter from the National Freight Corporation. I complained that all the traffic between Glasgow and Preston was carried by road, not by that magnificent electrified line that has been built at great cost. All the traffic goes by road. I asked why, and was told:There are a number of practical reasons why the Glasgow traffic passes by road throughout, quite apart from the economic issue.These "practical", so-called, difficulties are numerous, but it does not mean that they are insuperable hindrances. The paragraph concludes with these words:I am sorry to have to say also that when the traffic passed by rail there were numerous occasions on which the rail transits were seriously delayed".Seriously delayed on this super electrified line!
I have learned from another source that the reason for using road transport was the need to utilise unemployed road vehicles. The same argument applies to unemployed rail capacity. If we get into that situation, I can see more traffic being transferred from rail to road.
A good example, also in the letter, is an answer to my question about the Camden NCL depot and the effective closing of Camden sidings. The letter states that it isone result of a very necessary rationalization".That is a euphemism. It is used frequently when plant is closed.… Camden NCL depot no longer participates in the company's network service, but concentrates on specialised warehousing and distribution activities, with an obvious effect on the amount of trunk traffic moving in and out by rail or road.592 The situation seems to be getting worse. Foreseeing non-economic factors like this in the transfer of rail traffic to road, the 1968 Act provided for quantity licences. That provision has never been implemented, although it was the biggest carrot offered to the rail unions.
Another safeguard was the Freight Integration Council, which the transport policy consultation document admits has not been a success—and how!
The performance of Freightliners has been most disappointing. Beeching placed great reliance on its expansion. It was one of the few good ideas that he had. The extremely damaging cuts that he imposed on British Rail he tried to justify on an estimate of rapid freightliner growth.
Let us look at the position. The Beeching Report of 1963 stated that Freightliners had a potential market of 30 million tons a year rising to 40 million tons in 10 years. What is the position today? It is not 30 million tons or 40 million tons. The 1975 figure was only 3 million tons—less than 10 per cent. of the forecast. Yet a great potential remains. For example, 300 million tons are moved 100 kilometres or more by lorry, and British Rail could capture enough of that tonnage to become economically viable with road haulage, which will continue to grow, hardly feeling the loss. British Rail has failed partly through lack of drive and partly through lack of investment.
What is the policy regarding the "second generation" freightliner, using smaller containers, which have been developed by British Rail research staff, to capture new traffic? About £6.5 million would be needed as capital to start a pilot project.
Management and trade unions have been blamed for the rail problem—in the main, wrongly. The Conservatives blame nationalisation, their favourite Aunt Sally. However, the problem is the same throughout the world. When the hon. Member for Sutton Coldfield speaks about losses and how they can be met, he overlooks the fact that in every part of the world competitors. the big industrial nations, have similar problems in trying to balance their railway accounts.
Does the hon. Gentleman deny it?
§ Mr. Norman Fowler
I should have thought that the hon. Gentleman would concede that there was a great difference between freight operations and passenger operations.
§ Mr. Atkins
I am speaking about the total of the railway accounts, both passenger and freight. There is increasing difficulty, even in the United States, with long-haul traffic, which is normally profitable and especially so when it is mineral traffic. The problem exists throughout the world.
The problem is due, as many recognise, to the different costing as between rail and commercial road haulage. I emphasise the word "commercial". The American Association of State Highway Officials—at a cost, at the time, of about $28 million—carried out tests on various roads in the late 1950s. The results showed, as we can see from page 121 of Volume 2 of the Consultation Document, that on a road theDamaging power was related to the axle load in proportion to the 4th-power of the axle load with a higher power for the thinnest pavements.On this ratio, 1,000 12-ton lorries damage the road as much as 160 million motor cars. If taxation were on that ratio, I am sure that rail freight would come into its own. If road vehicles were taxed in this proportion, the majority of heavy, long-distance lorries would be priced off the roads. So rail freight suffers from the cross subsidy to commercial road users received from the taxation of ordinary motor cars.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
Is the hon. Gentleman aware that the total paid in taxation on road vehicles is more than twice the total cost of repair and maintenance of roads and construction of new roads? How can he possibly maintain that argument?
§ Mr. Atkins
I am merely referring to proportions, but I challenge the hon. Gentleman's figure. I know that the Road Haulage Association puts these figures forward, but it conveniently forgets that there are many other costs. For instance, it usually gives the gross figure of tax, from which should be deducted tax remissions. We must remember that half of the cars registered this year were company cars, all receiving tax remission. I am sure the hon. Gentleman understands 594 business undertakings. But it would be fair to charge road users with the original capital cost of the roads that were built before the motor age. Moreover, there is no reason why roads should not be rated as any other business. The railways were rated until fairly recently.
§ Mr. Ridley
The hon. Gentleman is talking arrant nonsense. Does he suggest charging the railways with the capital cost of the construction of the railways? He knows perfectly well that the railways receive as big a subsidy as the road industry pays heavy taxation to subsidise them, but still they cannot compete. How can he possibly put that construction upon the figures? He is talking absolute bilge.
§ Mr. Atkins
It is a great pity that the hon. Gentleman is not better informed in these matters. I was not suggesting that roads should be rated at all; I was merely using the kind of language that I hear from Opposition Members, especially the hon. Gentleman, speaking about true costs.
There is no reason, for instance, why roads should not be rated like any other business. If they were, the cost would be enormous. They are not charged for the cost of accidents which, on the basis of the estimation of the chief constable in one of the Home Counties, cost £1,000 million a year. The cost of congestion is £1,000 million and, in addition, the cost of lighting and policing is very considerable. Social costs, too, are very great indeed. All these are not taken account of in the figures that the hon. Gentleman offers.
§ Mr. Atkins
The kind of remarks the hon. Gentleman is making do not contribute to our debate at all.
If I may go on, I repeat that rail freight suffers from the cross subsidy to commercial road users received from the taxation of ordinary motor cars, many of which are run on tax remissions.
In respect of damage to the road, and the cost to the taxpayer and the road user, the Consultation Document states that the conclusions reached by the American Association of State Highway Officials are "pertinent to the roads in the United Kingdom". Indeed, the results of the British Transport and Road.
595 Research Laboratory, confined to one type of road because its researches have been limited, approximate to a sixth power law, which is much more damaging than that estimated by the American highway engineers. In South Africa it is a 4½ power relationship.
In other words, both these studies indicate greater damage than the tests carried out in the United States. These facts are accepted throughout the world, and this results in the difficulty of rail competing with road. These circumstances are recognised throughout the world in the form of generous grants paid by various Governments to their railway undertakings. For instance, the figure in Germany is between £1,000 million and £1,200 million a year. The grant to the French railways is a great deal more than in Britain, and this is one of the factors that account for the greater proportion of goods carried by rail by all of Britain's major competitors.
There is, therefore, justice in the National Freight Corporation receiving all the capital it needs—and, indeed, that applies to the railways themselves—for the purpose of investment.
It is significant that the Japanese railways, with the highest productivity in freight carried, have received most money from their Government—£2,500 million a year. This infrastructure does a great service to Japanese industry. Let us remember that Japan is similar in size to Britain and it is much more difficult to build railways there. However, Japan has modernised its railways to bring them to perfection. Japan is often quoted as "the country with the mostest" in industry. It is one example we could follow, not to mention Germany, France, the USSR, America and, indeed, most of the leading industrial countries of the world.
§ 10.34 p.m.
§ Mr. Peter Fry (Wellingborough)
I would like to make a few remarks in answer to what is the first speech by the hon. Member for Preston, North (Mr. Atkins) in his capacity of Chairman of the Back Bench Labour Transport Committee. We welcome him to our debate in that capacity. He trotted out the age-old arguments that the Consultation Document itself has done so much to dispel by clearly stating that the possibility of a major transfer of freight from road 596 to rail was a pipe dream. I think that many of us on the Opposition Benches would agree with that.
§ Mr. Ronald Atkins
When it comes to a major transfer, I do not think that it is possible. A lot would go to rail, but in relative terms it would be a small amount.
§ Mr. Fry
I want to bring the argument back to the National Freight Corporation. The hon. Gentleman will be only too well aware that much of the activity of its subsidiaries has to do with parcels traffic. It takes about 85 per cent. Of it. But many firms in the private sector are charging rates considerably above those currently being charged by the corporation and its subsidiaries, and they are still making a healthy profit. The hon. Gentleman should look into the reasons why they can charge a lot more yet still make a profit. He will then see some of the things that are wrong with the corporation.
The Transport Act 1968 set up this corporation. It was hoped to bring about the kind of integrated transport system so dearly beloved of some of the more doctrinaire Members on the Government Benches. But I want to recall what the hon. Member for Leicester, East (Mr. Bradley) said. He told the House that the Act was doomed to failure. One could imagine those words to have been spoken by the Tory spokesman on transport, but not a bit of it; they were spoken by the hon. Gentleman in the transport debate on 23rd January.
The hon. Gentleman is President of the Transport Salaried Staffs Association and I understand that he cannot be here because, quite properly, he is attending the annual conference of his union. But I am sure that if he were here he would repeat his words. His speech in that debate on 23rd January deserves special consideration.
The hon. Gentleman quoted the obligation under the Act for the corporation to use the rail services wherever they were economic and efficient. He went on to say that this was not being achieved and that, in particular, National Carriers Limited was not co-operating closely with British Railways. He said that there was now intense competition within the nationalised sector—"wasteful", he called it—but he added that NCL was failing to divert traffic to Freightliners Limited, 597 yet another National Freight Corporation subsidiary. He described the small parcels market as "a bear pit", with competition between NCL, Freightliners Limited, British Railways and the Post Office.
The hon. Member for Leicester, East has spent many more years than I have in the transport industry, and I believe that his views, whether one agrees with them or not, deserve respect. The charge he made on that day, and what my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) has said tonight, show clearly the need for this debate. We have to ask ourselves what we know about the present situation.
The first thing we know is what was contained in the Minister for Transport's Written Answer on 21st January, when he said that the National Freight Corporation's losses would amount to about £30 million in 1975 and that he was therefore making a grant of £8 million to help it out of its difficulties. Not only the House but the taxpayer will want to ask the Government one or two question about that kind of policy.
One of those questions is whether the reorganisation set up under the 1968 Act is failing to meet its objectives, whether changes are necessary, and if so, what. After all, the corporation has a statutory duty to break even, and this it failed to do by a very considerable margin in 1975.
The hon. Member for Preston, North said that the corporation had failed to achieve its other obligation in respect of the use of British Rail. He quoted at length from the Government's consultative document, pointing to the movement of traffic from rail to road and emphasising the difficulties in the highly competitive small freight market.
I do not wish to be unfair to senior management in the corporation because I am only too aware of the difficulties under which they operate. It is probably true to say that never since the moment of its creation has the corporation had sufficient investment of capital to pursue the policies that it would like to pursue. In seeking to generate sufficient funds for investment, it has had to cope with almost impossible financial problems.
The corporation began with the millstone of a heavy pension burden obli- 598 gation incurred for previous British Rail employees. Furthermore, when it made a loss, it had to borrow money from the Government and then pay interest on that money. That, in turn, has compounded its difficulties. That certainly caused the corporation difficulties in its early years. That perhaps marred a not unsatisfactory situation from a trading point of view, up to about four years ago. However, there is little doubt that in the last year or so the situation has worsened considerably. The recent recession in this country has been exceedingly damaging. The problem has worsened for this group of companies, because of its size and perhaps because its main subsidiary, NCL, has not been sufficiently readjusted to the size of the market and to the problems we have experienced in these months of economic recession.
I hope that the Minister will give the House his views about the future situation. I trust he will enlighten us about the review of the corporation's activities that is supposed to be taking place. For example, what do the Government think of the various estimates of the size of the market for which corporation subsidiaries are competing? It seems reasonably clear that the reduction in the market, as evidenced by statistics—for example, a total of 530 million parcels carried in 1965 was reduced to a figure of 420 million in 1972—will continue. If the forecast of 386 million parcels in 1981 is found to be true, it would be folly to go on with a structure involving the splitting up of the market into competing units, because the nature of the market is changing. The demands of the customer are much more sophisticated, and the best value may be derived by catering for individual needs.
Does the Minister feel that the various limbs of the corporation or the various constituent companies are being properly co-ordinated? If one visits high streets throughout the country, one sees a succession of vehicles, many of which call at the same premises, all belonging to one or other of the subsidiaries of the NFC. In the light of a declining market and the difficulties involved, this aspect should be looked into. Should not the Minister ask the management of the corporation for the details of its plans for the next few years?
599 The Select Committee in its Report made the point about the need for a corporate plan. If the Government cannot get any details, should not the Minister say that the review that is taking place ought to produce them? I am as pleased as other hon. Members that the corporation has had successes, such as selling expertise in Iran, but, like my hon. Friend the Member for Sutton Coldfield, I am much less pleased about the news of the millions of pounds that have been lost in the French venture.
Although to some extent diversification would be of direct assistance to the profitability of the organisation, one problem is that it is so large that there is always the danger of some of the minor concerns being involved in the losses and problems of the larger companies, particularly National Carriers Ltd. I would have hoped that the Government would realise the problem faced by the National Freight Corporation management and would tell it to produce a plan and a series of targets.
The Government should say that rather than having constantly to bail out the Corporation with £8 million, this year, or whatever it is to be next year, they will provide sufficient investment to enable the corporation to re-organise itself on commercial lines, which the management so clearly wants. When the targets are achieved the Government could continue to help until the Corporation was fully viable and able to produce its own investment capital. In that way the Government would be making a constructive approach to the problem of the NFC.
I get the impression that the management of the corporation, like the House, has been waiting for a long time for the Government to make up their mind about what they want to do. The time has come for the Government to tell the corporation that they appreciate that the NFC wants to operate on a commercial basis and that the Government wish to give it every encouragement, so that it may learn from the lessons provided daily in the reports of the many private concerns in the haulage business which point to the fact that it is possible to operate at a profit.
§ 10.48 p.m.
§ Lord James Douglas-Hamilton (Edinburgh, West)
I would like to put before the Minister the case that has been prepared by a committee in my constituency under the chairmanship of Mr. J. L. Rule, who for 25 years was manager in Scotland of BRS Parcels Ltd. It seems that in the case which he has pepared he has gone into the issue in considerable depth, and it could well be of interest to Scotland and the United Kingdom as a whole.
The committee says that in Scotland the parcels and small freight group of the National Freight Corporation operates four companies, namely National Carriers Limited, Roadlink UK Limited, formerly BRS Parcels Limited, Scottish Parcel Carriers and Tartan Arrow Services, each acting in competition, and each of them making losses, except Roadlink UK Limited. In addition, the committee has noticed that these companies also compete with British Rail and the Post Office in the parcels market, and that these latter two publicly-owned organisations make substantial losses in this area.
I refer to the remark made by my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) in his excellent speech, that the National Freight Corporation is expected to make a commercial return on money invested. Mr. Rule's committee argues that there is a case for greater co-ordination in the parcels area and he points out that this has been referred to on more than one occasion by the Select Committee on Nationalised Industries.
Mr. Rule says that each of the companies concerned operates generally throughout the United Kingdom, duplicating each others' services, none of them providing an altogether satisfactory collection and delivery service, and in aggregate incurring substantial losses. The committee claims that considerable savings could be achieved by merging, as a first step, the parcels companies within the control of the National Freight Corporation. It argues that this would bring about economies in staff, in vehicles and probably in premises.
As it is, on 21st July this year, 170 working men will lose their jobs in Glasgow and a further 20 in Dundee as 601 a result of the closure of North British Express Carriers Ltd.—a subsidiary of the National Freight Corporation—which was making substantial losses. The decision was made because of the losses. If the corporation wishes to make great savings, surely there is a case for merging the parcels companies.
Operating after the merger would, the committee considers, have great advantages for trade and industry in the United Kingdom generally and in Scotland. In place of each company operating generally throughout the United Kingdom, directional services could be operated, each company being responsible for a specific area within the United Kingdom. It thinks that information on traffic movements and volume of traffic would be required to assess which company would operate in which part of the United Kingdom allocated to it, but it suggests a rough guide.
Roadlink UK Ltd. could be responsible for all parcels traffic to and from Scotland and the NorthEast, North-West and East of England. National Carriers Ltd. could be responsible for all traffic to and from Scotland and the Midlands, West and South of England. Wales for this purpose would be included in the West.
Third, the committee suggests that Tartan Arrow would be responsible for all traffic to and from Scotland and to the London area, but as its Scottish depots are being closed in July this year, the traffic could be undertaken by either Roadlink or National Carriers, depending on a proper assessment of the traffic position. Fourth, it is reported that the Scottish depots of Scottish Parcels Carriers are also being closed in July and a review of those services should be necessary to allocate those services either to Roadlink Ltd. or to National Carriers Ltd.
I put this case to the Minister tonight because there have been closures in Scotland these two companies have been operating in duplication, and it is difficult to get information about the workings of the National Freight Corporation. I shall be very grateful for any information which the Minister can give which will be of great assistance to my constituents.
§ 10.53 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I, too, should like to 602 ask some questions. I do not understand why the commencing capital debt of the National Freight Corporation—£98 million—has only just been set. It is six or seven years since this odious body came into existence. Why was its commencing capital debt not started at the beginning? How much interest has accrued on the commencing capital debt which has not been levied against it, so to speak, to date? Has it paid that interest, or will it be excused it?
We are told that the National Freight Corporation lost £30 million last year. Why? It is extraordinary that the Minister for Transport—who rolled in about five minutes ago— can treat so cavalierly a loss of £30 million and the granting of a capital debt of £98 million, which may or may not be realistic—I know not, since these figures are plucked out of the air.
What has it cost us, this montrous failure of Socialism, this disgraceful money-wasting extravagance of the nationaliser? What has it cost us? We have a right to know.
If the Minister of Transport were to go round his constituents on a wet November night and ask each person for £1, which is about what it is for each adult in respect of the loss for last year, he would not be quite so smug. He would not sit on the Treasury Bench and smile. He would get things said to him that would be much more robust than what I am saying to him now. Even £1, which is not much under this Government—it has been depreciated in its value—would be enough to produce stinging comments from his constituents about how it came about that £30 million had been lost.
I cite the example of the cold storage activities of the National Freight Corporation—Temco. That has nothing to do with transport or with the glorious, integrated transport plans of the hon. Member for Preston, North (Mr. Atkins), making losses into profits and profits into losses, subsidies into dividends and dividends into subsidies. He stands logic on its head. After his chronicle of gloom about the disastrous failures of nationalised transport, he tries to pretend that black is white and white is black.
The point is that the corporation has not only been in transport: it has been 603 in cold storage. It owns 10 per cent. of the country's cold storage industry, and it has lost a bomb. Why do the accounts not show how much Temco has lost? Why is it not published? We talk about accountability. We do not know how much Temco has lost.
We know that it has been investing in France, across the exchanges, in cold stores. My hon. Friend the Member for Wellingborough (Mr. Fry) talked in terms of £3 million, but it has lost a lot more than that, because the cost of closing the French enterprises has been greatly in excess of the original capital investment. May we be told what the French adventure has cost?
This is the proper occasion to ask these questions about accountability to Parliament. I want to ask one more question, and I ask it in all seriousness. Who is to be sacked? Who is responsible? This is a terrible story of failure and the squandering of public money. Who is to lose his job? Who is to be put in his place to manage it better for the future? No private sector company can lose £30 million in a perfectly prosperous sector of industry—freight, cold storage and transport. A haulage company in private ownership would make decent profits doing exactly the same thing. Why has the corporation lost this money?
What defences have the unfortunate taxpayers? What is to happen? What is to stop the corporation losing £30 million or £60 million next year? If that happens, the Under-Secretary will have to come to the House again, late at night on a quiet evening with no vote, to ask for the money, hoping to get it through by stealth.
This is no way to justify public enterprise. This is the way to heighten the suspicions of the citizens that nationalisation is an expensive failure. One would expect the hon. Gentleman to come to the Dispatch Box to tell of the great successes, of his great plans for the future, how this brilliant example of public enterprise is serving the nation, and how the loss will be recouped in future years of profit. Not at all: he hopes just to sneak through this Order.
My hon. Friend the Member for Wellingborough made some excellent 604 points of detail, but is it to be left to me, who does not know much about transport—it is not my speciality—to ask where the money has gone, who is responsible, and whose head will be on the block? The Government cannot do these things and expect not to be criticised. I want to know who is to be sacked for the French adventure in buying Robert Hillaire, which has cost the taxpayer dearly across the exchanges. I want to know who is to be sacked for the Temco venture, which has done great damage to the British cold storage industry. Finally, I want to know who is to pay the price for the £30 million which the corporation has lost by losing his own job.
There is no other discipline in the public sector. There is no other way. We have to pay. I agree that this Order must go through. I do not know to what extent it contains the £30 million loss rolled up in the commencing capital debt or what is the financial situation underlying the Order. It would make no difference to deny the Order, because all we are being asked to do is to take note of the commencing capital debt. It would still be there if we refused to take note of it.
Ministers talk of the greater accountability of nationalised industries, but this shabby little episode, this debate, tucked in late at night after a strenuous day and no vote at 10 o'clock, is an example of the way in which the shining results of nationalised industries are emblazoned by the Government for all to see and hear.
What will be done to stop the rot. No specious arguments about an integrated transport policy, or whether there are duplications in the parcels service or in the provision of freight services, will obviate the need for someone to be accountable for the losses of this corporation
§ 11.2 p.m.
§ The Under-Secretary of State for the Environment (Mr. Kenneth Marks)
This is the first major debate exclusively on the National Freight Corporation since its creation under the Transport Act 1968. The corporation is the largest inter-model freight concern in Europe, employing some 45,000 staff and over 20,000 vehicles 605 and having a current annual turnover of over £300 million.
It is therefore not surprising that some of the matters raised tonight have gone beyond the specific terms of the motion. I intend to confine my speech to points relating to the financial position of the corporation, but I have nevertheless listened with interest to the more general points raised. They will, of course, be taken into account in our consideration of the reaction to the Consultation Document
§ Mr. Norman Fowler
The hon. Gentleman said that this is the first debate on the National Freight Corporation since its formation. The debate has not been tucked away because of Government initiative in bringing it on the Floor of the House; we are discussing the matter because we forced a debate. I hope that the Minister will answer all the questions asked by my hon. Friends
§ Mr. Marks
I shall endeavour to answer some of the questions, but the Government, like the Opposition, I hope, are considering their policy in the light of the Consultation Document. We intend to listen to the views of hon. Members and other interested persons and organisations.
It may be of some help to hon. Members if I go back a little in time and provide an outline of the legislation setting up the corporation. The creation of a National Freight Corporation is the first provision of the Transport Act 1968, while Section 3 of the Act provides for the corporation to assume a commencing capital debt in accordance with Schedule 2 to the Act. This confers on the Secretary of State the powers to make the Order that we are now debating.
Section 4 of the Act provides for various securities, rights and liabilities to be transferred to the Corporation from the then Transport Holding Company and from British Railways. For the purposes of the Order the Secretary of State has adopted the net book value of these assets as determined by independent consultants.
There has admittedly been some delay in arriving at the figure which appears in the Order. This is because it proved to be a task of some magnitude to establish the assets transferred and a formula for their valuation. In particular, the con- 606 sultants only recently completed a review of the physical assets involved in creating the Freightliners subsidiary, which makes extensive use of existing rail facilities. Once this review was complete, however, it was a matter of some importance to make the order immediately, so that the Secretary of State might then require the corporation to begin refinancing tranches of debt. The repayments are to be made in accordance with a schedule designed by the consultants to produce payments of capital and interest corresponding to those on the debt underlying the assets concerned. The House will appreciate—as the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) does—that the corporation would otherwise stand to gain by the difference between the historic average of 5.35 per cent. interest on this debt, which it has been paying on a provisional basis meantime, and current rates well into double figures.
I of course appreciate that for the time being increased interest charges merely increase the need for Exchequer support. There is, however, a well-known principle that Exchequer assistance should in such cases be given overtly and not be disguised behind artificially low rates of interest. I hope therefore that the House will agree that the Order is a strictly proper one for my right hon. Friend to have laid at this time.
I turn now to the overall financial position of the corporation. In considering this we should bear in mind the very considerable success achieved by the corporation in the early years of its operation. The corporation as a whole recorded a trading profit of £4 million in 1969 which had increased to £8 million by 1973.
When it became part of the National Freight Corporation, National Carriers, formerly the rail sundries portion of British Rail, was losing annually about £20 million on a turnover of £45 million. Within five years this trading deficit was reduced to £4 million, and only £43 million of the £60 million five-year grant provided for NCL under the Transport Act needed to be taken up. This financial improvement meant a considerable rationalisation of services and facilities. but this was achieved with a minimum of industrial disruption. This is a reflection of the good relations between unions and management which have always existed within the corporation. Equally, 607 the corporation has a commendable record in conforming quickly to regulations governing the condition and use of vehicles.
At this point I should also mention the achievement of Freightliners. The development of container train transport is a field in which Britain has led the rest of the world. The number of containers carried by Freightliners each year has increased from 27,000 in 1966 to about 650,000 at present. Since Freightliners has been under the control of the NFC the number of containers carried has doubled. Over this period a particularly important development has been the growth of maritime traffic carried by Freightliners. This has meant that sea containers could be carried direct from the docks, thereby relieving the hard-pressed roads near the docks.
I mention these points because in discussing the corporation's financial difficulties it is easy to overlook its successes
§ Mr. Marks
I cannot give figures now for the various parts of the corporation, particularly as we are almost due to receive the corporation's annual report, but I shall try to provide figures if they are available.
Bearing in mind these achievements, it was with considerable regret that my hon. Friend had to inform the House on 21st January that the corporation's total loss for 1975 was estimated to be about £30 million. As he explained, this loss was due to the effect of the recession and the particular problems that this had brought about in the corporation's rail-linked companies, NCL and Freightliners. It was clear that if there was to be a full and lasting solution to the corporation's financial problems, a careful and detailed study of the situation was necessary. My hon. Friend therefore announced that a review was being undertaken into the ways in which the corporation's deficit could be eliminated. As the Consultation Document on transport policy makes clear, the Government does not believe that there is a case for general long-term subsidy for freight, whether by 608 road or rail. My hon. Friend was, however, prepared to make a temporary grant to meet the corporation's cash flow shortfall while the review was taking place.
The £8 million grant announced on 21st January has now been used up, and I can inform the House that the Corporation will receive an additional temporary grant of £11 million so that it can continue to meet its financial obligations over the coming months
§ Mr. Marks
Preliminary results of the review, which is being carried out by the financial consultants, Coopers and Lybrand Associates, in conjunction with the NFC, have shown that the Corporation's financial problems are very deep-seated. The extension of the temporary grant arrangements will provide further time for full consideration of a difficult and complex problem. I am sure that hon. Members will agree that in view of the size and importance of this organisation, it is right to look for long-term and lasting solutions.
At the same time, the corporation is fully aware of the need to minimise its call on scarce resources, and is doing all it can to reduce its cash flow deficit. The corporation will of course continue its policy of full consultation with the unions concerned.
A supplementary estimate to cover this additional grant will be presented to the House for approval as soon as possible. Sums made available meanwhile will be issued from the Contingencies Fund.
§ Mr. Ridley
Can the Minister tell us how much has been lost on cold storage operations and, more particularly, how much has been lost on the French cold storage operation?
§ Mr. Marks
There is a legal dispute on the French matter at the moment. As far as cold storage generally is concerned, I thought the hon. Member said that in view of what was happening he would not press for information. I am not able to give him details of the loss on the French undertaking.
In this area the National Freight Corporation did behave commercially.
§ Mr. Marks
It cannot be inferred from the overall operation that the cold storage activities are not profitable.
I am grateful to the hon. Member for Sutton Coldfield (Mr. Fowler) for his praise for the National Freight Corporation's management and staff, despite their difficulties and despite their regretted loss this year. As he admitted, much of the transport industry throughout Europe is in difficulties at the moment. These are particularly difficult times. The period is not representative. The hon. Member asked whether we propose that freight in the National Freight Corporation should be on commercial lines. I remind him that in the transport policy statement we said in paragraph 5(11):Given a fair system of taxation on the heavy lorry (and the special assistance for private rail sidings) it is right that British Railway's freight losses should be extinguished as soon as possible. Both road and rail freight should be run on normally commercial lines, carrying the traffic for which they are best suited.The hon. Member suggested that there should be some specialisation within the NCL. NCL has recognised the need for that. In the carriage of clothing, for instance, it has gone in for a different type of vehicle and is linked with important retail organisations for carrying clothing.
A number of hon. Members have raised the question of the parcels side. We recognise that a problem exists here. We have recognised it in the course of the transport policy review. We shall come forward with a policy in this respect after consultations have been held on the review.
§ Mr. Norman Fowler
The Minister is telling us only that he will consider everything that has been said and will in due course come forward with a policy. But a record loss of £30 million is being made and there is to be a further Government loan. All these points were put to the Government 18 months ago. Meanwhile, the losses go on and further public expenditure is made.
§ Mr. Marks
It is only right that we should not announce policies until consultations have been held with all concerned. We have put out a consultative document on freight and road, rail and bus transport. I cannot agree that we should announce policies before the con- 610 sultations on that document have been held.
§ Mr. Ian Gow (Eastbourne)
The Minister said three times in the last five minutes that the NFC must be run on commercial lines. How does he reconcile that with the further announcement of additional subsidy of £11 million during the current year? Are not those two concepts totally irreconcilable
§ Mr. Marks
Not at all. I said that during the review assistance would be given to the NFC in its difficulties surrounding its loss last year. That is what we are doing.
My hon. Friend the Member for Preston, North (Mr. Atkins) referred to the Glasgow—Preston service. I shall look into that point. The circumstances are strange when the corporation is doing its best to carry out the two aims given to it by the Government. Those are to carry by rail where that is efficient and economic to do so, yet to break even.
The hon. Member for Wellingborough (Mr. Fry) asked whether changes were necessary in the NFC. They may well be needed. That point is being examined by consultants and in the broader aspects of the transport policy review. I note the hon. Member's comment about estimates of the size of the market. I cannot reply to that point. The hon. Member asked whether the various limbs of the NFC were being co-ordinated. The NFC is not alone in its difficulties. These are shared by other concerns in both public and private enterprise. There must be a thorough examination both inside and outside the NFC to decide what can be done.
The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) was kind enough to give me some warning of what he intended to say. Many of the matters he raised and which his constituent raised directly with the NFC and the Department are being considered. The corporation is aware of the proposals. One of the difficulties is that the hon. Member has asked for a great deal of information that is felt to he commercially confidential. I have noted what he said and his constituent's suggestions can be considered in die broader aspect.
The hon. Member for Cirencester and Tewkesbury accused us of doing things 611 by stealth. Very often, decisions are announced in the House but the hon. Member is not aware of them. On 17th March he asked whether the Secretary of State was aware that some people were estimating that the loss would be in the region of £30 million. My right hon. Friend had to tell him that the figure had been announced two months earlier.
The hon. Member wanted to know who was to be sacked —a subject of which he has some personal experience.
I trust the House will agree that it was correct, for reasons of financial propriety, for the corporation's commencing capital debt to be determined in the way it was and at this moment.
§ Question accordingly agreed to.
That this House takes note of the National Freight Corporation (Commencing Capital Debt) Order 1976 (S.I., 1976. No. 329).
§ Mr. Marks
We have considered the overall financial position of the corporation, and it will be clear from what I have said that the Government are aware of the difficulty and complexity of the corporation's current financial situation.
It is right that temporary assistance should be given while the situation is being reviewed. The long-term objective must be a return to viability, and we are determined to make a success of this public sector transport operation.
§ Question put:—
§ The House divided:Ayes 86, Noes 15.611
|Divison No 132.||AYES||11.25 a.m.|
|Archer, Peter||Graham, Ted||Mulley, Rt Hon Frederick|
|Armstrong, Ernest||Harper, Joseph||Murray, Rt Hon Ronald King|
|Atkins, Ronald (Preston N)||Harrison, Walter (Wakefield)||Noble, Mike|
|Bates, Alf||Hattersley, Rt Hon Roy||Owen, Dr David|
|Benn, Rt Hon Anthony Wedgwood||Healey, Rt Hon Denis||Peart, Rt Hon Fred|
|Bishop, E. S.||Hefter, Eric S.||Pendry, Tom|
|Brown, Hugh D. (Proven)||Hooley, Frank||Price, William (Rugby)|
|Brown, Robert C. (Newcastle W)||Hunter, Adam||Rees, Rt Hon Merlyn (Leeds S)|
|Buchan, Norman||Jackson, Miss Margaret (Lincoln)||Roberts, Albert (Normanton)|
|Carmichael, Neil||Jay, Rt Hon Douglas||Robinson, Geoffrey|
|Cocks, Michael (Bristol S)||John, Brynmor||Rodgers, George (Chorley)|
|Coleman, Donald||Jones, Barry (East Flint)||Silkin, Rt Hon John (Deptford)|
|Cook, Robin F. (Edin C)||Kaufman. Gerald||Silkin, Rt. Hon S. C. (Dulwich)|
|Cox, Thomas (Tooting)||Lambie, David||Snape, Peter|
|Cryer,Bob||Lamond, James||Spearing, Nigel|
|Cunningham, Dr J. (Whiteh)||Loyden, Eddie||Stoddart, David|
|Davidson, Arthur||Luard, Evan||Strang, Gavin|
|Davis, Clinton (Hackney C)||Mabon, Dr J. Dickson||Summerskill, Hon Dr Shirley|
|Dell, Rt Hon Edmund||McElhone. Frank||Taylor, Mrs Ann (Bolton W)|
|Dormand, J. D.||McGuire, Michael (Ince)||Thomas, Mike (Newcastle E)|
|Duffy, A. E. P.||Mackenzie, Gregor||Tinn, James|
|Dunn, James A.||Mackintosh, John P.||Urwin, T. W.|
|Ellis, John (Brigg & Scun)||McNamara, Kevin||Varley, Rt Hon Eric G.|
|English, Michael||Madden, Max||Walker, Terry (Kingswood)|
|Foot, Rt Hon Michael||Mallalieu, J. P. W.||White, Frank R. (Bury)|
|Fowler, Gerald (The Wrekin)||Marks, Kenneth||Williams, Alan Lee (Hornch'ch)|
|Freeson, Reginald||Millan, Bruce|
|George, Bruce||Morris, Alfred (Wythenshawe)||TELLERS FOR THE AYES:|
|Gilbert, Dr John||Morris, Charles R. (Openshaw)||Mr. A. W. Stallard and|
|Golding, John||Morris, Rt Hon J. (Aberavon)||Mr.James Hamilton|
|Bain, Mrs Margaret||Penhaligon, David||Welsh, Andrew|
|Douglas-Hamilton, Lord James||Rathbone, Tim||Wilson, Gordon (Dundee E)|
|Henderson, Douglas||Reid, George||Winterton, Nicholas|
|Hooson, Emyln||Rost, Peter (SE Derbyshire)|
|Marten, Neil||Thompson, George||TELLERS FOR THE NOES:|
|Moate, Roger||Wall, Patrick||Mr. Ian Gow and|
|Mr. Nicholas Ridley.|