National Freight Company Limited (Hansard, 18 June 1981)

§ The Secretary of State for Transport (Mr. Norman Fowler)
With permission, Mr. Speaker, I should like to make a statement on the National Freight Company Limited.
The House will know that, under the provisions of the Transport Act 1980, the National Freight Corporation, comprising British Road Services, National Carriers, Pickfords and other well-known subsidiary companies, was wound up and the assets transfered to the National Freight Company Limited. This was done with the intention of selling the shares to private investors as soon as possible. The Act made special provisions to allow me to fund the deficiency in its pension scheme from the proceeds of sale.
Flotation has not so far proved practicable, but I can now tell the House that I have, within the last few days, been approached by a group of the company's senior managers. They are seeking outside financial backing with the intention of putting together a widely based consortium of managers and employees to purchase the company. Their proposal, which indicates an offer worth in excess of £50 million, is at present at an early stage and there are still a lot of details to be worked out. I have encouraged them to press on with their plans. At the same time, I am considering it with my financial and legal advisers. All this will take a few weeks.
This is an imaginative and exciting proposal and I have told the managers concerned that I hope it will prove possible to achieve such a sale.

§ Mr. Albert Booth (Barrow-in-Furness)
Does the Secretary of State recall that on other occasions, when Labour Members have suggested that worker cooperatives were imaginative proposals, he has not responded to them with anything approaching enthusiasm?
Does the Secretary of State appreciate that my hon. Friends and I are totally opposed to the sale of yet another efficient, well-managed, profitable public service to the private sector, in a part of industry which is highly fragmented already and needs all the well-run large units that it can get in order to provide efficient road haulage in this country?
Does the Secretary of State conceive it possible to sell at anything but a distressed price in the present state of the road haulage industry? Is he suggesting to the House that this is his only alternative and that he cannot find private buyers now?
Will the Secretary of State tell us how the pension fund of the NFC is to be funded? Since the Transport Act cut off the other source of funding, how will those pensions be funded until such time as a sale is made?
How much will the public realise from the sale of this valuable asset, bearing in mind the fact that its net asset value at the time of the last annual accounts was £73.5 million, and that he has to find from the sale the cost of pension funding?
Finally, how is the holding proposed to be distributed between managers and employees if the sale arrangement goes through? Can he give us a complete undertaking that those unions representing NFC employees will have time to consider the proposal fully and to make representations to him before any decision is reached?

§ Mr. Fowler
I am very disappointed at the right hon. Gentleman's response. The proposal has been put forward 1185 by a group of senior managers. Last week there was a conference of 120 other senior managers in the National Freight Company, and they gave enthusiastic support to the scheme.
With regard to the right hon. Gentleman's point about union response, I am told today that the railway unions were consulted and that they are also enthusiastic about the plan. I do not, therefore, understand the right hon. Gentleman's opposition. Before he takes too firm and intractable a line, I ask him to consider his position with a little more care.
The offer is worth more than £50 million. It is about the same as expected from flotation, but that flotation could not have taken place until next year. That is the advice of our advisers.
There is no effect on the Government's support for the rail-based pensions, and the Government have agreed to fund the road-based pension deficiencies from the proceeds of sale.
Here we have the clearest possible vote of confidence in the company's future from those best placed to make a judgment. I should have thought that that was something the House could support.

§ Mr. Speaker
Order. I shall call the six hon. Members who have risen, and then we shall move to the next business.

§ Mr. Stephen Ross (Isle of Wight)
Is the right hon. Gentleman aware that we on the Liberal Benches welcome the proposals as far as they go? Will he ensure that all workers have the opportunity to purchase shares if they are marketed? Will he accept that the National Freight Company is regarded as a natural leader in transport? It has been responsible for worthwhile innovations such as BRS Rescue and also performs maintenance work. Will he ensure that those functions continue in any sale?

§ Mr. Fowler
I am grateful to the hon. Gentleman. Making shares available to all employees in the National Freight Company is very much what the Government and the management consortium want. It underlines the importance and uniqueness of what is proposed in a move from the public to the private sector. I confirm what the hon. Gentleman says about the businesses. There are some extremely good businesses.
The business is not highly profitable, as the right hon. Member for Barrow-in-Furness (Mr. Booth) appears to believe. There are some difficult situations from which recovery will be necessary. There are, however, some good businesses, which form a good foundation on which to build.

§ Mr. Jim Lester (Beeston)
Does my right hon. Friend accept what I am sure will be a warm welcome from all Conservative Members for his excellent announcement? Far from being against worker co-operatives, we are very much in favour of co-operatives where the workers have a chance. This is very different from the worker cooperatives set up by the right hon. Member for Bristol, South-East (Mr. Benn) into which workers put their savings and their pensions and lost the lot. The announcement by my right hon. Friend is worth while and much to be welcomed.

§ Mr. Fowler
I am grateful to my hon. Friend. I am sure that he is right. The management is seeking to raise £5 1186 million to £6 million of its own money. That underlines the confidence of the management in the future of the business.

§ Mr. Frank Dobson (Holborn and St. Pancras, South)
Will the Secretary of State confirm that the transaction that he has outlined will involve a loss to the taxpayer? The £50 million he has quoted is less than the 1968 valuation of the land and buildings of the National Freight Corporation.

§ Mr. Fowler
No, I shall not confirm what the hon. Gentleman says. I assure the House that one of the factors about which we shall want to be satisfied is that we get a proper price for these assets. This is an important concern of the Government. Our advice is that if this company were floated next year, this is the kind of price that we would get.

§ Mr. Roger Moate (Faversham)
Is it not appalling that there should have been such a sour, grudging and gloomy response from the Opposition to one of the most imaginative and forward-looking proposals that the Government have introduced? Is it not a classic example of ideal worker co-operation, representing a wider share ownership, that all hon. Members should want to encourage?
Will my right hon. Friend confirm that, far from being a highly profitable concern for taxpayers in the past and much as we might admire the operation itself and believe in its prospects, the National Freight Corporation was funded by the taxpayer for many years? The £50 million that the company will receive will be a net benefit to the taxpayer.

§ Mr. Fowler
I confirm what my hon. Friend says. When the right hon. Member for Barrow-in-Furness talks about this highly profitable business, it confirms to what extent he is out of touch with the facts. I believe that the 28,000 employees of the National Freight Company will greet the response of the right hon. Gentleman with dismay. That is why I believe that the right hon. Gentleman should think again about his response, which was too quick and too inflexible.

§ Mr. Matthew Parris (Derbyshire, West)
How does my right hon. Friend reconcile the concern and interest that Opposition Members seem to be showing in the road haulage business with the hostility to road haulage of every sort that many Opposition Members showed in the debate last night?

§ Mr. Fowler
That is yet another of the funny, strange and curious anomalies of the Opposition's transport policy.

§ Mr. Booth
How does the Secretary of State reconcile his remarks about this not being such a profitable business with the facts? The trading profit in 1980 was £10.3 million. The trading profit in 1979 was £12 million. Those are profits on a business that the right hon. Gentleman now says is valued at little over £50 million. On what basis does he claim that there is a favourable union response? Has the Transport and General Workers Union, many of whose members are involved, been consulted at any time before this morning? If so, what was the response?

§ Mr. Fowler
I must ask the right hon. Gentleman to look again at the balance sheet. It is true, as he says, that there was a trading profit. In the first nine months, however, we find a net loss of £7.6 million. Last year, 1187 there was a net loss of £4 million. No one who knows anything about the business would accept the suggestion that it was highly profitable.
On the question of union consultation, I understand that the National Freight Company, which is obviously handling the matter itself, has already consulted the rail unions concerned. I do not think that by this morning it had been able to consult the Transport and General Workers Union. [Interruption.] The Leader of the Opposition should wait. This was not because the management did not want to meet the union. It did wish to meet the union but the union was not available for consultation. It goes without saying that, in a proposition of this kind, the NFC clearly wants to take the unions and the work force with it. I believe that this is important for the company and that it is backed by those who are a long way down the company.

§ Mr. Speaker
Order. I think one hon. Member remains to be called of those I undertook to call because they had already risen in their places.

§ Mr. Gerry Neale (Cornwall, North)
I echo the congratulations accorded to my right hon. Friend for his positive attitude. Conservative Members are delighted by his announcement. Will he confirm that the announcement is consistent with our election manifesto pledges that we should seek success for this type of industry by assisting in every way possible to vest the ownership of these businesses in the people who have the greatest incentive to make them succeed?

§ Mr. Fowler
My hon. Friend is right. The proposal is right in providing for future investment needs. It is also the best way of motivating management and staff in meeting the business challenges that undoubtedly lie ahead.