HC Deb 14 July 1980 vol 988 cc1054-66
The Minister of Transport (Mr. Noman Fowler)

With permission, Mr. Speaker, I should like to make a statement on the future of British Rail's subsidiaries.

I told the House on 17 March that I intended to find ways to involve private risk capital in the major subsidiary companies of British Railways and that I would make a further statement in the light of a joint examination of the prospects that I have been carrying out with the chairman of the British Railways Board. The Government and the chairman have now completed a preliminary examination of the opportunities for involving private risk capital to a significant extent in financing these subsidiaries. We both believe that it will be to the advantage of British Rail, as a significant element in the economy, its work force and the public using its services to take advantage of these opportunities. The businesses involved are Sealink UK Ltd., British Transport Hotels, British Rail Hovercraft Ltd. and British Rail's property holdings.

The Government and the board recognise that these subsidiary enterprises will not secure essential commercial freedom unless private capital is attracted in sufficient volume and unless private investors are assured of sufficient control through their shareholdings to ensure that the enterprises will be able to operate on equal terms with competitors in their respective markets.

We are satisfied that the important existing trading relationships between British Railways and the subsidiary enterprises can be sustained by commercial contracts. These arrangements cannot but work to the advantage of British Railways and the subsidiary enterprises. We are also convinced that it is only by maximising the opportunities for profitable services to the public that the work force at every level in these enterprises can look forward confidently to sharing in improving returns.

I intend, therefore, to seek the approval of Parliament at the first opportunity for the changes necessary in British Railways' present powers in order to secure the potential advantages to the fullest extent and from the earliest moment.

The board will propose the steps which will be necessary to achieve the purpose as quickly as possible, and will agree them with the Government. The Government will introduce the necessary legislation to ensure that any foreseeable obstacles are overcome.

I believe that the policy that I have outlined will provide significant new opportunities for the subsidary companies to develop and expand their businesses.

Mr. Booth

Can the right hon. Gentleman tell us whether British Rail will retain ownership of any or all of the four subsidiary companies that he mentioned in his statement?

Will the money obtained by selling to private shareholders part of the interest in the profitable public undertakings be made available to British Rail to finance its investment programme, in electrification, replacement of stock, or any other British Rail capital scheme?

If British Rail can maintain a majority holding in any of those subsidiaries, will the capital account of the subsidiary remain part of the public sector borrowing requirement?

Will the Minister force British Rail to sell off holdings in subsidiaries in order to finance essential rail interests? How is British Rail to cope with a situation in which it will be selling the means of financing many important operations? I draw the Minister's attention to the £13.7 million operating profit made by Sealink and the £29.4 million profit made by British Rail's property board. Surely this is a matter of eating the seedcorn of British Rail.

In the last analysis, how can it make sense to any nationalised industry, and its contribution to this country's economic strength, if a Conservative Government insist upon its selling off its profitable sections at the very time when it needs the wealth that they can create to sustain its essential business—in this case, the running of railways?

Mr. Fowler

The one point that the right hon. Gentleman ignores from beginning to end of his questions is that my statement was an agreed statement—agreed between me and the chairman of the British Railways Board and his col leagues. [Interruption.] I know that Opposition right hon. and hon. Members do not like proceeding with consent and with agreement, but let me tell them what we have agreed on. We have both agreed on the need for private investment. We have agreed on the subsidiaries concerned. We have agreed to get the advantage of having a number of public sector undertakings out of public sector controls, provided that control in the subsidiaries passes. We have also agreed on the need for legislation. It is vital for the right hon. Gentleman to understand what has been agreed, and, in relation to that, what his own position is.

British Rail will certainly be able to maintain an investment in the subsidiaries, but they will not have the opportunities of the private sector if they remain under public sector control, so it would not be a majority interest.

The proceeds will go to British Rail. We have made that absolutely clear.

As to the powers that would come hack to me—the power of direction, and so on—those are matters that I would retain, but I repeat that we intend to proceed by agreement and consent.

Mr. Higgins

Does my right hon. Friend agree that his proposals should increase competition in these important areas, which are not essential to the operation of British Rail? Is it not important that BR management should be able to concentrate on ensuring that commuter and other services provided by BR are made more efficient? In that context, does my right hon. Friend not also agree that it is right to divorce these subsidiary operations from British Rail so that it is possible to see its true financial position? What will the overall effect be on the public sector borrowing requirement and the need to keep rates of interest high, since we are about to have a debate on unemployment and high rates of interest?

Mr. Fowler

I agree with everything that my right hon. Friend said. The whole point of what we are doing is to encourage the growth of these businesses. There is no question but that, historically, their growth has been disappointing by any standards. We are encouraging the growth of these businesses by encouraging new investment in them. As my right hon. Friend reminded the House, the debate today is on unemployment. In this area, we are providing opportunities for new investment and new opportunities for jobs. What else do Labour Members want?

Mr. Stephen Ross

Will the Minister tell the House clearly and distinctly—did the chairman of British Rail and his board ask the Minister for permission to sell off these assets, or was this policy produced by the Minister's office? Also, what private company invested in the stretched version of the hovercraft, which is now carrying 40 per cent. more passengers from Dover to Calais? That was British Rail, not private enterprise. Has it not been traditional, since the railways were created, to have hotels and steamer services? Was it not a mistake, 10 years ago, to force British Rail to sell some of its hotels?

Mr. Fowler

I ask the hon. Gentleman to consult the Liberal spokesman on transport, who will remember that these talks with British Rail have been going on over the past months. I repeat that my statement—this is significant, because I always thought that the Liberal Party wanted agreement—is a statement agreed between myself and the chairman of the British Railways Board. Anyone who knows the chairman will know that he would not be forced into an agreement of that kind. I ask the hon. Gentleman to consider the terms of the statement and to see the advantages that will flow, including those to Sealink and to British Rail Hovercraft Ltd.

Mr. Adley

Are not the ritual noises from across the Chamber an insult to the intelligence and integrity—[Interruption.]

Mr. Speaker

Order. We will not hear either the questions or the answers unless—[Interruption.] Order. We shall make much better progress and I shall be able to call many more hon. Members if we have quiet to get on.

Mr. Adley

Are not the noises coming from hon. Members opposite an insult to the integrity and independence of Sir Peter Parker, who I believe was appointed chairman of the board by the last Labour Government? Since Mr. Weighell and Mr. Buckton appear, quite properly, to have confidence in Sir Peter Parker, will my right hon. Friend, after the furore has died down, seek a meeting with those two union leaders and Sir Peter Parker so that, around the table, they may discuss quietly what my right hon. Friend said about the increase in job prospects as a result of his announcement?

Mr. Fowler

Of course I will have talks, as my hon. Friend suggests, with the rail union leaders whom he mentions. I have already had talks with Sidney Weighell, of the NUR. I do not claim in any way that he will necessarily agree with these proposals, but I will have talks on this. As I said, the talks with the chairman of the BR board has continued over the past two or three months.

Mr. Walter Johnson

Is the Minister aware that in spite of his honeyed words, the unions concerned will regard his statement as the first stage of hiving off? These are the profitable sections of British Rail, and whether or not there is a short-term advantage, in the long run his proposals will worsen BR's financial position. Does the Minister recall giving me an assurance in the House just a few days ago that there would be full and adequate consultation with the unions? He says that he has met one of the union leaders, but he has not met the other leaders. Is it not disgraceful for him to make his statement today in advance of that consultation?

Mr. Fowler

I have obviously had preliminary talks with the NUR and I will certainly have talks with the other unions concerned, but the subject of what I am proposing today will require legislation, and we shall obviously have talks about the terms of that legislation. The advantages to the railways surely are, first, that the proceeds will go to British Rail entirely, unlike what the right hon. Member for Barrow-in-Furness (Mr. Booth) was saying. Secondly, BR will have a dividend from its investment. I would not rely too much on the success of the subsidiary companies if I were the hon. Member, bearing in mind the fact that the hotels last year made a profit of £328,000 on a turnover of £38 million.

Mr. Donald Stewart

Is the right hon. Gentleman aware that few people will believe that his agreement with the chairman of British Rail was anything other than the type of agreement that was made between Dick Turpin and the people whom he waylaid? Despite the eyewash about private risk capital, is this not in fact asset stripping and looting of British Rail?

Mr. Fowler

I should have thought that anyone who knew anything about British Rail—I think that I would exempt the right hon. Gentleman from that—would believe that there were considerable opportunities and advantages in the course, that we suggest. It is absolute rubbish to refer to this proposal as asset stripping. It is not. When the right hon. Gentleman has been able to consider my statement he will see how ludicrous that charge is.

Mr. Neubert

Is my right hon. Friend satisfied that nothing in these proposals will infringe the principle of free competition between British Rail's subsidiaries and private enterprise companies engaged in the same sectors? Wholesale denationalisation is one thing, but with partial denationalisation there are problems if benefits are conferred on private participants which arise from association with the public sector monopoly of the rail network.

Mr. Fowler

That is one reason why it is so important that control in the subsidiary companies should pass. That underlines the importance of what I am saying.

Mr. Spriggs

If it is the right hon. Gentleman's intention to attract private capital to British Rail and its ancillary companies, will he consider the setting up of a holding company by the British Railways Board to operate these four companies so that the profits may be fairly distributed and the board may get its fair share?

Mr. Fowler

I am grateful for that suggestion, because that is what we are doing. That is exactly in line with Government policy here. A holding company will he set up, which will be 100 per cent. owned by British Rail and the profits will go to that company. I therefore welcome the hon. Member's endorsement.

Sir Frederick Burden

Does not my right hon. Friend consider that Sir Peter Parker is an honourable man? If he thought that this proposal was against the best interests of British Rail, would he not resign?

Mr. Fowler

My hon. Friend is, of course, quite correct. Sir Peter Parker sees the advantage of this course, as I am sure many in the railway industry will once they have considered the implications of what I have said.

Mr. Ron Lewis

As the taxpayer is now subsidising British Rail—rightly so—can the Minister estimate how much more the taxpayer will have to pay to subsidise British Rail in order to maintain the present standard of service if his proposals go through?

Mr. Fowler

The answer to that is that there is no implication of the kind that the hon. Gentleman talks about. Railway investment will no longer compete with investment in the subsidiaries. I repeat—and I know of and respect the hon. Gentleman's interest in railways—that there are real advantages for those people working in the subsidiary companies in the policy that we are setting out.

Mr. Eldon Griffiths

I congratulate my right hon. Friend on bringing forward proposals that my right hon. Friends and I wished to bring forward but failed to bring forward in a previous Government. Is it not the case that it can only help the railways, and all who work for them, to be able to mobilise new capital in this way and put it to work for the benefit of the railway system? Will my right hon. Friend not be put off by the inflammatory statements made either by union leaders or by Opposition Members about boycotts and picket lines? My right hon. Friend should get on with his sensible policy.

Mr. Fowler

I am grateful to my hon. Friend. Of course, nothing will put me off the course that we are advocating because I believe, as he does, that it is in the interests of the board. One of the real interests of the board is to obtain access to capital. There is also the continuing interest of British Rail in the success of these subsidiary companies.

Mr. Cowans

It is not significant that the Minister has spoken only about those companies which happen, by pure chance, to be currently making a profit? The Minister had the sheer hypocrisy to move an amendment to the motion on unemployment. Would it not make more sense if he advocated that private capital should put money into those rural lines that are not necessarily making a profit rather than hived off the assets of a profitable company which contributes to rural lines? Without a shadow of a doubt he does not seek to do that. He wishes to hive off only those sections that are making a profit, to the detriment of those employed in the industry.

Mr. Fowler

The hon. Gentleman should calm down a bit. Of the four companies that I have mentioned, Hovercraft undoubtedly makes a loss. Last year hotels made a profit of £328,000 on a turnover of £38 million. I do not believe that the hon. Gentleman can honestly say what he has just said. Both the chairman of British Rail and I are convinced that there are real opportunities for development in these businesses. He knows rather better than most people how those businesses have suffered over the last 25 years because of lack of capital. That is the importance of what we are doing.

Mr. Speaker

Order. Before I call the next question let me say that it is un-parliamentary for an hon. Member to accuse another hon. Member of hypocrisy.

Mr. Henderson

Is my right hon. Friend aware that his statement will be welcomed, particularly if it means bringing forward, after a long delay, the replacement of the clapped-out multiple diesel units on the East Coast of Scotland line? Can he say whether the privatisation of the hotels operation will be treated as a whole or whether there may be opportunities for individual groups of hotels to be sold to encourage private investment?

Mr. Fowler

There will be opportunities to deal with the hotels in different ways. It does not involve private investment in the hotels as a complete group. That is a matter for the chairman and the individual holding company.

Mr. Stoddart

Does not the Minister's statement, stripped of all its verbiage, mean that what the Government are doing is robbing British Rail to enable City investors to make more money? Is that not the situation? Will the Minister tell me about Swindon? At Swindon we have British Rail workshops that are highly successful and are exporting goods profitably. Does Government policy mean that the more efficient and profitable they become the more likely they are to be sold off?

Mr. Fowler

On his first point I should remind the hon. Gentleman of the disadvantages that these subsidiary companies have had over the past 25 to 30 years. British Transport Hotels has built only one hotel since the war. That is the kind of situation that we are trying to tackle and that is why the chairman of British Rail supports this plan.

That is something that we shall look at. We are looking at the future of British Rail workshops, and I shall make a statement about them in due course.

Sir Albert Costain

Does my right hon. Friend realise that those of us who have Sealink ports in our constituencies are in much closer touch with the subject than are Opposition Members? Does the Minister realise that a deputation came to see me on the question whether the operation could be denationalised, on the ground that seamen have better opportunities in private enterprise? The deputation believed that the Sealink operation had been too restricted by being tied too tightly to British Rail timetables. It would make more profit if" it had more freedom.

Mr. Fowler

I think that my hon. Friend is right. I also think that it is a great mistake to believe that Opposition Members necessarily speak for those employed in the nationalised industries.

Mr. Whitehead

Is the Minister aware that there is all the difference in the world between feeding corn to a work horse and having turkey for Christmas? Is he not aware that this will be widely seen outside as an attempt to ripen up British Rail subsidiaries for sale? If that is the case, how can it be in the interest of British Rail whenever its interests clash, as they will, with those of private investment?

Mr. Fowler

The interests of British Rail, first, will be to get capital investment in the subsidiary businesses, which it will do. That having been done, it will get the proceeds from that sale, but at the same time it will have a continuing investment in the success of those subsidiary companies. I should have thought that that was something that the hon. Gentleman would welcome.

Mr. Aitken

Does my right hon. Friend agree that these subsidiary companies have suffered for many years from low investment and unimaginative management? Does he further agree that his privatisation policy could be an invigorating shot in the arm for job opportunities and commercial activity generally?

Mr. Fowler

It is beyond any doubt that those companies have suffered from low investment. That is, of course, one of the things that this policy is designed to tackle. I agree with my hon. Friend.

Mr. Snape

Why is the Minister transferring private capital into the subsidiary business, bearing in mind that ICI recently had some difficulties with a rights issue? What sort of package will be put together and what kind of compensation will he offer to British Rail for the loss of the subsidiary companies that are to be sold off? Why not consider selling off the outer London commuter services, which his hon. Friends are always bleating about? Does he agree that one of the reasons why the subsidiary companies have experienced low investment over the years is that successive Governments, particularly this one, have starved the railways of capital to run the services about which his hon. Friends complain?

Mr. Fowler

I think that the hon. Gentleman would be fair enough to believe, and to agree, that the problems with the subsidiary businesses go back much further than 12 months. In relation to the timetable, we hope that all four businesses will have private investment provided in the next two or three years. I visualise that Sealink will be the first. I hope that hotels will follow as soon as possible after that. I repeat that legislation is needed to enable the disposal of the subsidiary companies. Clearly we hope to make as much progress, as quickly, as we can.

Mr. Bowen Wells

When introducing this legislation will my right hon. Friend consider including British Rail engineering in the package for sale? It is a highly profitable part of the system. By selling engineering my right hon. Friend will be able fully to satisfy the Opposition, in that we are engaged in trying to make much more flexible and profitable the subsidiaries now owned by British Rail.

Mr. Fowler

As I said, we are examining the position of British Rail engineering not because it is so profitable but because its performance at the moment is not as good as it might be.

Several Hon. Members


Mr. Speaker

Order. I propose to call only three more hon. Members, because the matter will come before the House again.

Mr. Cook

If the proposal is indeed the result of an agreement between the Minister and the board, will the Minister explain why, in February this year, the deputy chairman of the board was able to say that British Rail had no plans to sell any of its hotels or ferry services? Since the Minister has the figures for the profitability of each of the companies, will he confirm that the British Rail Property Board this year expects to make a profit of 76 per cent.? If hiving that off is not asset stripping, what does the Minister understand by asset stripping? Will he confirm that unless the proceeds from the sales are exempt from external finance limits they will not yield an additional penny for British Rail?

Mr. Fowler

The bulk of the property that we have in mind is non-operational. Some property that is now defined as non-operational, such as office blocks, might be included. I repeat that in discussions over a number of months we have come to an agreement. That is significant, and the hon. Gentleman should take note of it.

Mr. Dobson

Does the Minister agree that it would be closer to the truth to say that he is attempting to attract non-risk capital into the British Rail subsidiaries? Does he accept that there is no risk whatever for any private investment in the British Rail Property Board because the private investor will not be landed with a loss? Will he guarantee that the profits that have accrued to the property board, which so far have been transferred to British Rail, will continue to be so transferred, 100 per cent.?

Mr. Fowler

The British Railways Board, through its 100 per cent. holding company, will get the proceeds from the sales. What the hon. Gentleman says about one subsidiary company cannot he typical of the other three.

Mr. Alexander W. Lyon

If private directors are to control the activities of the individual companies and yet the board is to be the holding company, how can there be risk to private capital? Does the Minister agree that there must always be the possibility of an injection of money from the State if difficulties are encountered? If the Minister is to touch British Rail engineering, will he please keep his dirty paws off the York carriage works?

Mr. Fowler

The hon. Gentleman has misunderstood the proposed structure. The proposal is that subsidiary companies should initially go into a 100 per cent. holding company owned by British Rail. Clearly, after that, if one of the subsidiaries, such as Sealink, is floated, British Rail will retain a holding in that company. It will not be a majority shareholding, otherwise it would not be free of public sector controls.

Mr. Cowans

On a point of order, Mr. Speaker. I realise that you took exception to a word that I may have used. I in no way apologise for the word, but I hope that you realise that it is difficult to find a word to fit—

Mr. Speaker


Mr. Cowans

May I substitute what I said by saying that duplicity of purpose was expressed in the House today? I hope that that phrase fully expresses my sentiments.

Mr. Speaker

I am obliged to the hon. Member for recognising that the other word was out of order.

Mr. Cryer

On a point of order, Mr. Speaker.

Mr. Speaker

Has the hon. Member really a point of order? Whenever I fail to call him after a statement he raises a point of order.

Mr. Cryer

On a point of order, Mr. Speaker. I was elected to raise issues. I understand that there are problems. The Tory Benches are not well attended and, because not many Tory Members stood up, you—

Mr. Speaker

Order. I have to guard the interests of the House as best I can. I have a long list of hon. Members, particularly from the Opposition, who want to speak in the debate on unemployment. Half an hour of the time has gone already. I must guard the interests of the House as a whole. That is why I cut supplementary questions short.

Mr. English

Further to that point of order, Mr. Speaker. Can you explain what you do when a large number of hon. Members from one side of the House wishes to ask questions?

Mr. Speaker

I do what I did today, when I called three extra hon. Members from one side before I moved on.