HC Deb 03 June 1981 vol 5 cc912-3
4. Mr. Prescott

asked the Secretary of State for Transport what current statutory provisions permit the sale of British Railways subsidiaries in whole or in part; whether his instruction or consent is required; and what conditions he has required for any sale now under consideration.

Mr. Fowler

The British Railways Board has certain existing powers under section 14 of the Transport Act 1962 to dispose of assets without my consent. I can now tell the House that under these powers, the board plans to transfer to a new private sector company as going concerns the Gleneagles hotel and the Caledonian and North British hotels in Edinburgh. Two-thirds of the equity would be placed with private investors. The board wishes to acquire a one-third shareholding in the new company so that it will retain a continuing interest. A shareholding of this kind, however, requires my consent and on the material available to me, I am ready to consent to such an acquisition. I welcome this step for bringing private capital into the development of the board's subsidiaries. I hope the plan will be to the benefit of its customers, its staff and the tourist industry in Scotland.

Mr. Prescott

That reply was substantially a separate statement. Will the Minister make it clear that the estimated five-year investment of £7½ million could be raised by mortgages or leases without the ideological requirement of private shareholding? Will he assure the House that this rushed deal was not the decision of the company or that the company was not pressurised by the Government? Is it true that the company's advisers have stated that a sale now will be at a discount price of £4 million and a loss of income of £1½ million a year to the company? That may be good for the Tory city gents or for the Tory Party conference, but it is bad for the taxpayer and the company concerned. It is worthy of investigation by the Public Accounts Committee of the House.

Mr. Fowler

The hon. Gentleman should calm down a little. First and foremost I stress that the proposals have been produced by the board on the advice of British Rail Investments Ltd. and British Transport Hotels. The proposals are at the board's initiative because it sees clear advantages of this course for the hotel business. Therefore, there is no question of my having pushed the board. My role is confined to consent for the shares purchase which is taking place. Anyone who knows anything about British Transport Hotels will confirm this. The reason why this course has been taken is that, not just over the last two years, but over the last 25 years, hotels in the British Transport Hotels group have been starved of investment. This is a practical and constructive way of dealing with that situation. Given that the board supported the plan, I should have expected that the Opposition would do so also.

Mr. Ancram

Is my right hon. Friend aware how warmly welcomed his decision will be in Scotland? However, has the Scottish Tourist Board been consulted? What has been the procedure of sale to ensure that the sale takes place to the best advantage of Scottish tourism?

Mr. Fowler

I confirm that the plan will be an asset to Scottish tourism. One of the main objects of the exercise will be to bring badly-needed investment into the North British hotel. British Rail wants to see Scottish institutions taking part in that investment. I believe that the plan is to the benefit not only of Scottish tourism, but of those who work for the hotels.

Mr. Cowans

Is the Minister aware that by giving his consent to the sale at this time he has deprived British Rail of at least £5 million, which is the asset value compared with the price? Will he confirm, as he said during the passage of the Bill, that all the money from the unfortunate sale will be reinvested in British Transport Hotels and will not be hived off when he makes grants to British Railways, as that would gainsay his argument that the money would go to British Rail? Can he give that categorical assurance and will he stand by it?

Mr. Fowler

The proceeds of the sale will go to the owners—the British Railways Board. Part of the purpose of the sale is to enable the board to use the money to invest further in the hotel business.

Mr. Russell Kerr

It has no initiative in the matter.

Mr. Fowler

The hon. Gentleman is quite wrong. I repeat that the initiative comes from the British Railways Board. As I understand the figures provided for me by the board, the proceeds will be over £10 million, part of which will be used to pay for shares in the new company. The board will not only have a capital sum but a continuing one-third interest in the new company. It is a good deal for the board and for those working for British Railways.