HC Deb 24 May 1982 vol 24 cc740-4
Mr. David Howell

I beg to move amendment No. 4, in page 3, line 5, at end insert— '(2A) Before making a scheme under subsection (2) above which provides for the transfer of rights and liabilities under contracts of employment, the Bus Company shall consult with persons appearing to them to represent the employees concerned.'. The amendment fulfils an undertaking that we gave in Committee to amend clause 2 to include a requirement that the company should consult employees or their representatives before making changes which could affect their interests. The amendment would require consultation in any case where the National Bus Company proposed to make a statutory scheme which provided for the transfer of rights and liabilities under a contract of employment. For example, the company would have to consult its work force before transferring employees from one of the regional operating companies to a coaching subsidiary in which shares had to be sold.

As we made clear in Committee, we believe that the National Bus Company, as a good employer, would inevitably consult in these circumstances. We would certainly encourage it to do so. The amendment puts the position beyond doubt.

I should like to make two points about the scope of the amendment. First, it applies only to transfers of rights and liabilities under contracts of employment. This seems to us to be a sensible definition of changes which could materially affect employees' interests. Secondly, the amendment does not cover changes in contracts of employment associated with the exercise of the National Bus Company's powers under clause 2(1). Any change to a contract of employment other than under the power to make statutory schemes would require consultation in any event, since it could be made only with the specific consent of the employees.

The amendment improves the Bill by requiring consultation in the theoretical case where the National Bus Company might propose to use its scheme-making power to alter contracts of employment without consent. The amendment is the constructive result of some hard work done in Committee. I hope that it has the support of the Opposition. I commend it to the House.

Mr. Booth

The amendment is a small move in the direction of an aim that we sought to establish in Committee to ensure that trade unions representing employees of the National Bus Company were consulted before any scheme was made which would affect their members. My hon. Friends and I would prefer a right to be granted to unions with negotiating rights rather than, as in the terms of the amendments, leaving the NBC to decide who should represent the employees concerned.

Nevertheless, we accept that the amendment is a step in the right direction. I join the Secretary of State in hoping that it will be accepted by the House.

Amendment agreed to.

Mr. Stott

I beg to move amendment No. 5, in page 3, line 28, at end insert— '(6) The proceeds of any disposal under section 1(1) of this Act shall be made available to the Bus Company for the reduction of capital debt.'. It was clear throughout the debate on Second Reading and the proceedings in Committee that the Opposition were opposed to the provisions in part 1, which set out to sell off the profitable subsidiaries of the National Bus Company. We made our opposition plain on Second Reading and we made it even plainer in Committee. We shall make it plain again this evening.

The amendment seeks to redress the balance of the National Bus Company. Ever since its inception the company has had to operate with substantial difficulties because of capital debt and the interest charges that fell upon it. There would have been no need for the Government to privatise the company, apart from dogmatic reasons, if the Secretary of State had accepted the tenor of the debates in the House since the company's formation.

It is not only the House that has spoken of the capital debt and the interest burden that has been placed on the company. On no fewer than two occasions a Select Committee has examined the capital debt structure of the company and made specific recommendations to the Labour Government and to the present Government. The Committee has drawn attention to the appalling problems that face the company in respect of its capital debts.

During a fairly fulsome debate on the Transport (Finance) Bill on 26 January I outlined in detail the company's capital debts problem and the interest payments that it has been called upon to make. I shall not weary the House by rehearsing the arguments that I advanced on that occasion. However, those problems remain.

When the company was set up in 1969, its financial structure included a capital debt. That must be unique when contrasted with the financial structures of private companies, which are usually launched with a mixture of equity capital, ordinary shares and fixed interest loans. However, the NBC was started with a capital debt that was regarded as entirely repayable. In addition, it had to take over part of London Transport's organisation—London Country Bus Services Ltd.—which had lost £2 million in the year prior to its transfer. It took over that company with a large deficit and declining assets.

In the late 1970s it was asked by the then Minister of Transport to run additional miles in rural areas. Those were routes which, on any objective calculation, would have been withdrawn because of the financial penalties that were being occurred. However, the company adhered to a ministerial directive to run unprofitable services without payment from Government funds.

Against that background the company has found itself in great difficulty over the years. I remind the Secretary of State that on at least two occasions Select Committees have brought to our attention the difficulties which the company has faced.

The Select Committee on Nationalised Industries reported that your committee consider that a change should be made. They recommend: (a) that the Government should write-off entirely those debts of NBC attributable to additional mileage operated during 1975 and to London Country Bus Services Ltd.; (b) that the interest charges on commencing capital debt should be met directly by the Government by direct grant to NBC, and not imposed on individual subsidiary companies or counties. The Select Committee on Transport stated: The Government should now reconsider their attitude to the earlier recommendations of the Nationalised Industries Committee and should consider a possible restructuring of the finances of the National Bus Company by conversion of original and subsequent capital debts, into the Government-held dividends and shares in the Company. On each occasion that I raised this issue on the Floor of the House or in Committee, the Under-Secretary of State for Transport—at that time the hon. and learned Member for Rushcliffe (Mr. Clarke)—dismissed the suggestions as petty-fogging indifference. I have attempted in a serious manner to draw the attention of the Secretary of State to the real problems of the National Bus Company, and the Secretary of State has sought to ignore them. The amendment seeks to rectify that matter in some small measure.

If the profitable bits of the NBC are to be hived off to private enterprise—I do not apologise for saying again that we fully oppose that in principle—at least some of the money made from those sales should be given back to the NBC, so that the company can write off its commencing capital debt, and so that it does not have to operate with one arm tied behind its back, as it has to do now. If there is any justice, the Secretary of State will give this problem some thought, and I hope that he will agree to our amendment.

10.30 pm
Mr. David Howell

The hon. Member for Westhoughton (Mr. Stott) addressed himself seriously and with close attention to an issue which I know worries him and which must worry those who follow the financial fortunes of the National Bus Company. I do not dismiss his amendment, but I have to tell him that it is unnecessary, because, on a sale by the company, the proceeds will come to the company and it can use the money to reduce capital debt. Perhaps that is not the hon. Gentleman's intention. Possibly his intention is that the NBC should be forced to use the proceeds of disposals under clause 1 to reduce its capital debt.

The Government are not opposed to the NBC using the proceeds of sale in this way. We made it clear in Committee that it might well be sensible for the company, having disposed of an asset or part of its interest in a subsidiary, to use the proceeds to pay back that proportion of its overall debt which otherwise would have to be serviced from the earning power of the asset or the income from the interest in the subsidiary. That would be a perfectly sensible move, and that option is open to the company. It can do that now. However, to require the company to adopt it—rather than, for example, to use the proceeds in place of borrowing to finance new investment—could lead to a serious loss of flexibility both for the National Bus Company and for the Government of the day.

We have made it clear that the proceeds of disposals under the powers in the Bill would flow to NBC and that we would take them into account as one source of external finance when setting the company's external financing limits. If we were to be more specific at this stage, as the amendment suggests and as the hon. Gentleman argued, by insisting that the proceeds should be used in a particular way, both the company and the Government would have cause to regret that loss of flexibility.

The amendment is therefore not in the interests of the National Bus Company, in the use of funds raised from privatisation, although I understand that the hon. Gentleman's remarks were also aimed at the broader general issue of the capital debt, about which there has been discussion over the years and on which there is a difference between us. We do not accept the argument that the capital debt is an unfair and disproportionate burden.

The interest on the NBC's commencing capital debt and other long-term borrowings represents the cost of the capital used in the business. It is a legitimate part of the cost structure of the industry, just as wages, fuel costs or rates, and it falls to be met in the same way as the NBC's other costs. The cost is met largely by fare-paying passengers, although local authorities also contribute to the extent that they are customers for NBC's services. However, they are paying with taxpayers' and ratepayers' money on behalf of the community.

It has been suggested that we could write off the NBC's debts at the stroke of a pen, but that simply is not true. Writing off the debt would mean transferring the cost of NBC's capital from the people who use its services to taxpayers direct, and the Government see no grounds for doing that.

Mr. Fry

Does my right hon. Friend agree that the problem arises with some of the NBC subsidiaries, especially London and Country Bus Services Ltd., which started with almost no money in the kitty and was transferred insolvent from London Transport to the NBC? Although I follow what my right hon. Friend is saying about other NBC subsidiaries, there appears to be a case for some consideration being given to the difficult beginnings of that company.

Mr. Howell

My hon. Friend raises a valid and valuable point about the distribution of interest on the NBC overall debt as between its subsidiary companies, which is a matter for concern and examination. Last year the Government and the NBC jointly commissioned a report on the distribution of interest as between the subsidiary companies. That report from the consultants Touche Ross and Company has just been received and I shall examine its conclusions closely in co-operation with the NBC. I take the spirit of my hon. Friend's intervention, but it does not alter my broader view that the amendment is not necessary and that to impose on the NBC the sort of requirement that may be behind it would do no good to the future of the company, its customers, the Government, its employees or anyone else.

Mr. Stott

It is almost as though we were witnessing an action replay of the debates that we have had on the matter during the past 18 months. The Secretary of State has said nothing different from what his former Under-Secretary of State said when I raised the matter previously. I must reinforce on the record the fact that I do not accept what the Secretary of State has said. His hon. Friend the Member for Wellingborough (Mr. Fry) was much nearer the point, as a member of the Select Committee on Transport, when he drew the Secretary of State's attention to the problems of the NBC since acquiring the London Country Bus Services Ltd. It inherited a real problem and it has still not discharged the problems.

The NBC stated that the action that it took in 1981 was designed to reduce its stage carriages services to achieve a saving of £25 million. The interest payments during that year were £18 million. Nearly three-quarters of the action taken by the company has been carried out to enable it to service its commencing capital debt—to pay a dividend in a bad year. It is no good the Secretary of State trying to dodge that fundamental and incontrovertible fact.

It would appear that the Government have no intention of resolving the matter in the way that the Select Committee recommended and I am sorry to hear the Secretary of State say that. I recognise that the amendment may be badly drafted but at least it has given the House and I the opportunity to air a hobby horse of mine. Although I accept that the amendment may not necessarily do what I intend it to do, I am grateful for the opportunity to reinforce once again the problems of the NBC. I am glad to have the opportunity to say once again that we oppose the Government's tawdry provisions in part I. However, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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