HC Deb 08 April 1982 vol 21 cc1113-8
Mr. Deputy Speaker

I do not think that the hon. Member for Newark (Mr. Alexander) was present when the hon. Member for Sheffield, Heeley (Mr. Hooley) said that he would give up 15 minutes of his time so that the subject of the first debate could be considered at greater length. The hon. Gentleman will therefore not be prejudiced in any way.

12.7 pm

Mr. Richard Alexander (Newark)

I am much obliged, Mr. Deputy Speaker. I do not expect to take very long.

My complaint in this matter is about lack of proper, or possibly any, public accountability by British Rail in the disposal of some of its assets.

No. 24 Glasshouse Street, Nottingham, is an old property in the centre of the city, boarded up against vandals but otherwise in good repairable condition. It is adjacent to the prosperous Victoria Centre, which is the main shopping centre for Nottingham. Although Glasshouse Street is perhaps not prime property, its situation certainly makes it good secondary property, ripe for development. My constituent, Mr. R. M. Stevenson, saw this property and considered that it was indeed ripe for development.

One of the difficulties in this country, as my hon. Friend the Under-Secretary of State knows because he shares the same profession as I, is that one can never really tell who owns property, because there is no register of ownership for all property in this country.

My constituent went to the local council. He went to the planning department and to the rates department. He went to the electricity board. No one could tell him who owned this little property. But a chance remark on 19 March—the date is important—led him to understand that it was owned by the British Rail Property Board. On discovering this, on the following day, 20 March, he telephoned the board at Nottingham and was referred to the Birmingham office, under a Mr. Parton. Imagine his astonishment on being told that, although British Rail owned it and although there was no indication that the property had been for sale, it was being sold to someone—I know not who—for £5,000 and that contracts were out. I repeat that this was practically prime town centre property whose rental value, I am advised—I have no reason to doubt it—would, with a few alterations, have produced that figure annually on its own.

My constituent told Mr. Parton that he had been involved in property in Nottingham all his life, that this was an extremely low price and that in his view it was being given away. He advised Mr. Parton that the property next door was for sale at offers around £20,000 and that the estate agents involved were not even aware that No. 24 was for sale.

My complaint is that those who have conduct of the sale of public property in that city apparently took no steps to advertise the property and no steps to maximise the public investment in it by getting the best price either by tender or at an auction, that the price for which they sold it was so out of line with the price of property next door, and that apparently it was being sold in complete secrecy.

In drawing this case to the attention of my hon. Friend, I am asking him for an assurance that, although both of us agree that public property which is unwanted should be sold, it should be advertised widely and sold at the best price. It should never be sold in secrecy.

The Consolidated Fund has an interest in part of the proceeds of public property, but this case has revealed that apparently there were no instructions and no checks to ensure that the State and the public—the Consolidated Fund—got the best price.

If that had been all, I would have registered a complaint with my hon. Friend and used the case as a warning for future action. But subsequent events and the conduct of one or two of the officers concerned show up in a light which causes me concern.

What happened then was that my constituent made an offer of £8,000. He made it properly and officially through his solicitors, and he sent a deposit. Then he spoke again to Mr. Parton, who confirmed quite properly that the offer had been received. Mr. Parton then advised him that there were three other interested parties, that possibly a sealed tender was the fairest way out, and that the final tender date would be, he was advised, 7 April.

This seemed entirely reasonable. At no time was my constituent told that matters had gone so far that to sell to my constituent rather than to the original purchaser, albeit for a lower price to the original purchaser, would involve gazumping. We all abhor gazumping, even when public money is involved. But that was not the case here.

On 24 March, Mr. Parton went with my constituent, Mr. Stevenson, to see the property, and my constituent took Mr. Parton back to his train. So he had been invited to inspect. Incidentally, he was given a plan of the property and he was also given the final date of 7 April by which to submit his tender. Yet, on the afternoon of 25 March, my constituent heard that £5,000 was being accepted after all.

On ringing up Mr. Parton's superior, a Mr. Butler, my constituent increased his offer to £12,000, all to no avail. He was told that, despite his offer and despite the interest of other people, contracts would be exchanged on 29 March in the sum of £5,000.

Naturally my constituent protested. He told British Rail that he would be contacting me and that no doubt I would raise the matter with the Secretary of State and Sir Peter Parker, the chairman of British Rail—all to no avail. So immune, apparently, were the officers from public accountability, even in the House, that they took no notice and, as far as I am aware, proceeded with the exchange of contracts and no doubt shortly will proceed to completion at a figure £7,000 less than my constituent was prepared to pay.

I raised the matter with Sir Peter Parker and advised him that I hoped to raise it in the House on the Adjournment.

I believe that the way that public funds have been dealt with in this case calls for an investigation. I ask why the property apparently was never advertised. Who was the purchaser—that fortunate mysterious purchaser—who got public property at a knockdown price despite offers being made of more than double that for which he was getting it? I am obliged to ask my hon. Friend to inquire what were the motives for selling to that person rather than getting the best price, and for selling in secrecy.

In a fraud case last month involving the Property Services Agency, defence counsel said in mitigation of one of the defendants that he found himself in an environment where there was almost total lack of moral standards. Corruption was rife and not only at his level but above him. I make it clear that I am making no allegation of corruption in this case. That was a case involving the Property Services Agency, but it was said only last month, and counsel was bold enough to say it in open court. That is why I am confident in raising this matter with my hon. Friend.

I believe that the conduct of British Rail in the way that it goes about selling public assets and the conduct and motives of the officers concerned deserve investigation. We know that it happened in the case of my constituent. A possible investigation by me and the possibility of my raising it in the House was apparently a matter of complete unconcern to those involved. I ask that we ensure that it does not happen again and that all sales of public property take place at the very least after full advertisement. Taxpayers' money is involved here and we should do no less.

12.20 pm
The Under-Secretary of State for Transport (Mr. Reginald Eyre)

In a letter to my right hon. Friend the Secretary of State for Transport dated 30 March my hon. Friend the Member for Newark (Mr. Alexander) gave notice that he had applied for an Adjournment debate on the case of his constituent Mr. R. M. Stevenson. I am grateful to him for that notice. With his letter he enclosed a copy of one that he had written on the same day to the chairman of the British Railways Board. My Department was in the process of inquiring about the facts of the case from the British Rail Property Board when notice of the Adjournment debate appeared on the Order Paper. While I can understand my hon. Friend's anxiety to bring his constituent's case to the attention of the House, I regret I have not yet had time fully to consider all aspects of the case and put my comments to him in the form of a written reply to his letter of 30 March.

The case as outlined by my hon. Friend today does not appear to differ in any particular from the details already set out in the enclosures to his letter of 30 March, although there is a matter of fact with regard to the advertisement of this property that I shall come to at a later stage. I believe that my hon. Friend has not been informed of certain facts.

Before I deal with the particular case, I should like to get one or two facts on record. In 1981, the British Rail Property Board sold 1,028 properties bringing in a gross revenue of £42.2 million. That is a considerable number of completed transactions.

We all know that the sale and conveyancing of property is not always a straightforward matter. The number of people interested in acquiring or leasing a property may be large or small. All inquiries involve some work. If there are two or more interested parties one or more of them is likely to be disappointed. What I must emphasise is that the responsibility for handling each of those transactions must rest clearly with the British Rail Property Board, and ultimately the British Railways Board. I hope that my hon. Friend will understand that it is no part of my right hon. Friend's responsibility to determine how each and every employee of those bodies goes about his business or to vet, approve or disapprove of individual transactions.

I think that it might be helpful to my hon. Friend if, before dealing with the specific problem he has raised, I also say a few words about the role of the British Rail Property Board in recent years and its new role in helping to carry forward the privatisation policy that I know my hon. Friend strongly supports.

The property board has, of course, for many years been engaged in selling property at a steady pace. Since 1979 the property board has sold property amounting in total to over £100 million. It has built up within its organisation, a great expertise in identifying suitable properties for disposal, finding buyers and negotiating sales. The figures I have just quoted demonstrate the considerable activity on the part of the property board and I think that this is not widely appreciated.

I should like to take this opportunity to acknowledge the efforts of the board and its staff for its achievements in these years. The figures also demonstrate, I think, the very large scale of the operation on which the board has been engaged and it would be very surprising if, occasionally, transactions did not attract criticism from one party or another. I shall return to that point in a minute.

However, first let me say a word about the new role that the property board will be playing in carrying forward the policy agreed between the Government and the railways board for privatising a number of the subsidiary activities. Last year the British Railways Board established a new company, British Rail Investments Ltd., to spearhead the privatisation policy, tackling not just property but the board's shipping, hovercraft, and hotel interests

The property board's non-operational portfolio, the value of which is currently estimated at £190 million, is being transferred to British Rail Investments Ltd. together with a number of substantial operational properties no longer needed for running the railway. The task of British Rail Investments Ltd. is to ensure the optimum method of privatising that portfolio. At the moment, it is understood that BRIL will continue with and accelerate the existing disposals programme and that the British Rail Property Board will act as agents in organising the bulk of the individual sales transactions. BRIL is, of course, a relatively small organisation. It does not itself have the manpower to carry out a very large number of transactions. I must therefore stress again that the responsibility for arranging individual sales rests not with the Government but with the British Rail Property Board.

The financial responsibility for securing the best return for the public assets involved is the railways board's, not the Government's. I hope my hon. Friend will understand, therefore, that while I shall endeavour to deal with the points he has raised about the particular case, this is a commercial matter for which, ultimately, the railways board must answer. My role in this debate must necessarily be one of explaining the facts as I understand them on the basis of information that I have received from the board.

Mr. Alexander

My hon. Friend said that this is something for which the British Railways Board must answer. Answer to whom? Is this House involved?

Mr. Eyre

The British Railways Board is ultimately accountable for its stewardship to the Government and the Government are answerable to this House. I hope that those principles will answer my hon. Friend's question.

Now I turn to the case of Mr. Stevenson. My hon. Friend will appreciate that in a matter of this kind I must rely on the facts as given to me by the British Rail Property Board. I have already acknowledged the value of the efforts of the staff of the board, but that is not to say that errors of judgment are not made from time to time. My hon. Friend will know that mistakes can be made in any large-scale organisation. The board's general practice in regard to marketing property for disposal is dependent upon the circumstances of the individual case, its likely value and the nature of the property in terms of investment interest or of interest to potential business occupiers.

Properties of significant value are regularly well publicised in the national press and technical journals that have nation-wide circulation. However, when dealing with a small property that is likely to appeal only to local commercial demand, it would in most cases be advertised in the local papers.

The property at 24 Glasshouse Street, Nottingham, can best be discribed as an old, run-down, back-street shop which had suffered vandalism and needed a good deal of money spending on it. My hon. Friend described the property in similar terms. The valuation of the property carried out internally by the board's staff was within the range of £5,000 to £5,500.

At this point, I should emphasise that my hon. Friend was not correct when he said that the property had been disposed of secretly. The sale of 24 Glasshouse Street was advertised in the local paper, and, while several inquiries were received, only two firm offers were made, one of £2,000 and the other for £3,000 plus costs. These offers were not considered adequate, but following discussion the higher offer was increased to £5,500 plus costs, which was then accepted. Following acceptance of the offer, the prospective purchaser incurred further commitments based on the expectation that the property board would honour the agreed sale. The fact that Mr. Stevenson subsequently showed some interest in the property and indicated a willingness to offer a higher price is not disputed.

It is at this point that, on the face of it, an error of judgment was made. Mr. Stevenson was told that a purchaser had lodged a contract for £5,500 although exchange of contracts had not taken place. As I have said, this figure was reached after negotiation—based on an original offer of £3,000 plus costs, and the prospective purchaser had incurred further commitments based on the expectation that the sale would be honoured and proceed. In effect, my hon. Friend is complaining on behalf of his constituent that the property board did not, at the end of the day, go back on this agreement which it had entered into with the purchaser. An error of judgment was made, I suggest, in all the circumstances of this case, when Mr. Stevenson was given reason to believe that a sale to him was a possibility. He can, I think, quite rightly complain that in the circumstances he ought not to have been asked to view the property or be given plans and a final date of 7 April for a tender if this were to be a total waste of his time and money.

However, I think I can reasonably ask my hon. Friend what advocacy an hon. Member of this House would have presented to the House if he were here on behalf of a constituent who had been led to believe that his transaction was going through, following substantial negotiations and the entering into of an agreement, even an informal agreement, only to be informed later by the board that the transaction was off. My understanding is that the prospective purchaser with whom a price had been negotiated was informed that there had been a higher offer. His indignation at the thought that he was about to be gazumped—I am delighted that my hon. Friend used that word—was no less than that of my hon. Friend's constituent. I submit that the property board acted honourably in retreating from its discussions with Mr. Stevenson—discussions which perhaps ought not to have been started.

My hon. Friend has suggested that the Government should give an assurance that the property board should be under some kind of obligation that at all times the best possible price should be obtained for property, however large or however small and in whatever condition, which it puts on the market. The board already accepts that its task is to manage these public assets to their best advantage. Who is to judge on a particular date in a particular place and on a particular transaction whether the price obtained is universally regarded as the best possible one? I am satisfied that the board's aim is to maximise the total revenue of its total business activities, but as anyone who has dealt with a great number of property transactions will understand, it is not possible to warrant that the highest possible price will be obtained in every single transaction.

I have absolutely no reason to doubt that the board's procedures for dealing with the disposal of its surplus assets are commercially oriented. My hon. Friend has drawn our attention to the circumstances of a particular case and has suggested that more vigorous local marketing and advertisement may have achieved an improved financial return. I am sure that the British Railways Board and the British Rail Property Board will want to take note of what has been said in the debate for, as I have tried to make clear, the responsibility for the proper management of the property is theirs. Against the background of the Government's wish that the realisation of surplus assets should be given greater priority, I believe that the property board will want to examine its procedures to ensure that where, in a particular case relating to this programme for the disposal of smaller properties—I know that my hon. Friend understands all the administrative difficulties that are involved here—there may be evidence that its initial valuation within the organisation is on the low side, an opportunity should exist for a review of the case to be undertaken at the right level within the organisation, so that a decision to proceed at a particular price is one with which the board is fully in agreement.

I am grateful for my hon. Friend's assurance that he is not alleging corruption in this case, as I know he will accept that there is no evidence of such unacceptable conduct. However, I have tried to describe fairly the way in which the transaction proceeded. I hope that my hon. Friend will find what I have said to be reasonably reassuring.