TRANSFER OF OPERATIONS OF THE Bus COMPANY TO THE PRIVATE SECTOR (Hansard, 22 May 1985)

§ Mr. Matthew Parris (Derbyshire, West)
I beg to move amendment No. 62, in page 39, line 38 after `undertaking', insert `with not more than 49 per cent, thereof being transferred to any party'. If one has a complaint about the Standing Committee procedure that we adopt in the House, it is that we tend to alternate between questions of the broadest principle and legal questions of the minutest detail without sometimes giving proper attention to the middle ground —those important aspects of the Bill where it may be made to work better or not to work at all. For reasons of the striking of political attitudes, questions of broad principle tend to be dwelt upon, and for reasons of delaying the progress of the Bill, questions of the minutest detail tend to be dwelt upon. Sometimes both sides of the Committee do not look at the Bill itself and how it might best be made to work.
The motivating force behind the Bill is competition policy. Central to that policy is the proposition that the Government should divest themselves of the National Bus Company. The form in which the NBC is privatised and the timing of that privatisation could be absolutely essential to whether competition policy is effectively stimulated or inhibited by the Bil.
My amendment, if taken literally—it is not intended to be—would oblige my right hon. Friend the Secretary of State to divest the state of the NBC in at least three separate companies. I have discussed the matter with the National Consumer Council, and the purpose of my amendment is to introduce a short debate on the form of privatisation. I invite the House to recommend my right hon. Friend, when deciding how many companies to break the NBC up into, to favour a large number of small companies rather than a small number of large companies.
My hon. Friend the Member for Hereford (Mr. Shepherd) knows better than I, but I know too, that it was the monopoly, the monolithic power, of the Midland Red West Company, that all but jeopardised the experiment undertaken in Hereford and Worcester, although in the end competition won through. Should we divest ourselves of the NBC as one large monopoly organisation, the competitive threat that that would present to other bus companies, existing and putative, throughout the country, would be so great that the conditions of free competition for the customer-passengers that we hope to establish through the introduction of the Bill might never be successfully set up.
In deciding how to privatise NBC, my right hon. Friend the Secretary of State will have taken and will take advice 1016 from many different sources. He will have spoken to representatives of the NBC itself. Naturally, they will have told him that the more closely that the form in which the company is privatised resembles its present form, the more that will suit them and the easier it will be. I imagine that the last thing the present management wants is that the company should be fragmented before sale into many small and unfamiliar companies.
My right hon. Friend the Secretary of State will also have spoken to the trade unions involved. I am sure that they too would prefer to deal with one large organisation or a small number of large organisations than with a large number of small organisations.
My right hon. Friend will also have spoken to the local authorities. No doubt they too would prefer to carry on working with companies of more or less the same size and type of management as those with which they are familiar, so I imagine that they would also not wish the NBC to be broken up into a large number of small, unfamiliar units.

§ Mr. Martin M. Brandon-Bravo (Nottingham, South)
Does my hon. Friend agree that breaking the NBC up into companies of similar size to the present main constituent companies — for instance, Trent Motor Traction in my area—would allow the possibility of management buy-out and employees having a stake in the company employing them, thus providing the same opportunities to advance as in the case of the National Freight Consortium? Does my hon. Friend agree that it might be better to proceed in that way rather than by having very large companies which could not possibly offer opportunities for managment buy-out?

§ Mr. Parris
Yes, I entirely agree with my hon. Friend. If my right hon. Friend the Secretary of State were minded to break up the NBC into something approximating to the current pattern of constituent sub-companies I believe that that would be the right decision. I am familiar with the operations of Trent Motor Traction and I believe that a company of that size and form could operate effectively and properly, but it is not for me to say that every one of the constituent companies now under the NBC umbrella is in the same position. Certainly, anything larger than that would be too large, although anything very much smaller might be too small provide the management structure, the number of buses or the facilities to stand alone in the market place. Nevertheless, in my view it stands to reason that the NBC should be broken up into a number of much smaller companies. That is the purpose of my amendment, and I commend it to the House.
Finally, my right hon. Friend the Secretary of State has no doubt also spoken to my right hon. Friend the Chancellor of the Exchequer, who, I imagine, will have concluded that, the larger the company to be sold, the better the immediate proceeds to the Treasury. In the short term, that is true. In the long term, however, I believe that the establishment of a proper competition policy will benefit future Chancellors, as it will be possible to reduce subsidy because the companies will be able to provide a good service without it. I am sure, too, that the draftsmen and accountants at the Department of Transport will have told my right hon. Friend the Secretary of State that it is much easier to sell one large company or a small number of large companies than to sell a large number of small companies.
All those considerations are important, concrete aspects which bear heavily in the immediate term. Competition 1017 policy is an abstract, long-term matter which does not bear heavily in the immediate term, but it is the motive behind the entire Bill and I hope that my right hon. Friend and the House will not lose sight of it in considering the form in which the NBC should be privatised.

§ Mr. Malcolm Bruce (Gordon)
As we are now reaching the stage when the Bill is likely to become law whether we like it or not, although its shape may be changed in another place, the amendment moved by the hon. Member for Derbyshire, West (Mr. Parris) is clearly worthy of consideration. I was somewhat concerned at the outset in case he was encouraging fragmentation down to totally anarchic proportions, and I was glad to hear that that was not his intention. If the companies are too small, that is clearly undesirable, but if privatisation is to take place as proposed it seems sensible that the operating companies should be the main constituent components. To the extent that the amendment seeks to achieve that, it has something to commend it.
There is considerable concern that, if the NBC is to be broken up, in view of the experience in Hereford it should not be broken up in such a way as to create a series of local monopolies instead of one national monopoly. The Minister, I know, would agree with that. However, we have to secure circumstances in which competition is fair and equal.
If I may make an oblique reference to circumstances north of the border, what causes me concern is that the Scottish Bus Group, which is to be retained as 100 per cent. Government-owned, will seek to gobble up the services of the passenger transport executive and create, effectively, a national monopoly in Scotland. I regret that the Government tend to regard Scotland as a region of the United Kingdom, whereas it is a distinct national entity. If a monopoly is created, there will be less competition in Scotland. If the consequence of what is likely to happen in England is a series of regional monopolies, real competition will not be improved. I should like the Minister to consider that point.
4 pm
There is genuine and serious concern that the National Bus Company may be broken up in such a way as to create a series of regional monpolies instead of the competition that the Secretary of State for Transport seeks. My hon. Friends and I have expressed reservations about the thrust of the Bill, but I intervene at this point in a spirit of realism, recognising that the Bill will be passed. I urge the Secretary of State for Transport to take account of the genuine concern about the implications of breaking up the National Bus Company. The amendment takes some account of the need to implement the Bill's provisions in a balanced and sensible manner.

§ Mr. Brandon-Bravo
Before the hon. Member sits down, will he explain what kind of size, if the National Bus Company is broken up, the Liberal party thinks it is reasonable for these companies to be, bearing in mind that the smallest of the NBC companies operates 134 vehicles and the largest 1,105? Will he also say a few words about. management buy-outs and employee participation?

§ Mr. Bruce
I am surprised that the hon. Gentleman does not realise that the Liberal party believes that local authorities and local passenger transport authorities should be making the decisions. That is why we oppose the Bill. 1018 They would be able to determine what is the right balance. Given that the Secretary of State for Transport intends to implement the Bill, I am suggesting that he should ensure that local circumstances in each region should be taken properly into account. That is the point of the amendment, and that is why it deserves consideration.

§ Mr. Ted Leadbitter (Hartlepool)
Although this amendment appeals to hon. Members, one has to remember that clause 45(8) makes it abundantly clear that the Secretary of State has reserve powers. Therefore, if he discovers that defective proposals are put to him, or if he does not approve them, he will be empowered to draw up his own. In Committee, it became clear to me that. the attitude of the Government borders upon obduracy and that hon. Members have therefore formed the view that the only salvation, minor though it may be, will be found in the House of Lords. Therefore, the hon. Member for Derbyshire, West (Mr. Parris), whose amendment appeals to the House, should consider the attitude of the Secretary of State for Transport. Even if the House agrees to the amendment, the Secretary of State will quickly find a means by which to have his own way.

§ Mr. Colin Shepherd (Hereford)
I wish to underline the point made by my hon. Friend the Member for Derbyshire, West (Mr. Parris). The National Bus Company has learned from the Herefordshire trial area that the effectiveness of Midland Red West as an operating company was immensely improved by direct communica-tion between management and garages and drivers. The management of Midland Red West would, I believe, endorse that point, because it has made it to me.
It leads me to believe that more and smaller operating companies, with no more than 200 buses at most, would be most responsive to the market. It would also meet the point made by my hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo). Management or worker buy-outs would become even more possible, which could only be to the good. When those who are employed in the great state monoliths have a direct interest in their companies, their attitude changes. I want the attitude of these workers to change. I want them to be responsive.
In particular, I wish the label "the friendly bus service" to be returned to Midland Red. It used to be a friendly bus service before it was nationalised in 1968. Since then, the friendly bus service has been lost sight of. Those of my constituents who have spoken to me believe that Midland Red has become a distinctly unfriendly bus service.

§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
It must have been a very selective cross-section of the hon. Gentleman's constituents.

§ Mr. Shepherd
The hon. Lady, as ever, makes a derogatory remark. My constituents have volunteered this information when I have asked for comments. That view has been expressed too often to be ignored. I want the label "the friendly bus service" restored. It will be restored by means of short lines of communication and small units with the maximum direct employee participation.

§ Mr. Richard Caborn (Sheffield, Central)
The timetable for the disposal of the assets of the National Bus Company could create great difficulties for the passenger transport executives when they are broken up. If the PTEs were to be broken up before the NBC and if tendering were to commence after the PTEs were broken up but before the 1019 NBC was broken up, the NBC assets could be over-valued and the NBC would be in a very good position over tendering. What will the timetable be? Also, how do the Government intend to deal with the problem of the PTE agreements with the NBC?

§ The Parliamentary Under-Secretary of State for Transport (Mr. David Mitchell)
I shall deal first with the point raised by the hon. Member for Sheffield, Central (Mr. Caborn), although it is somewhat outwith the rest of the debate. The National Bus Company will, by D-day, be broken up into operating companies. There is no such pressure upon the PTE. He need not, therefore, be concerned about the PTE. If there is any cause for concern, it is that the PTE is not to be broken up so quickly as the National Bus Company.
My hon. Friend the Member for Derbyshire, West (Mr. Parris) has done a service to the House in moving this amendment and I am glad to have the opportunity to reassure him. I can well understand his concern. He does not want the National Bus Company to be transferred to the private sector in a form which will enable it to dominate the competition and thereby undermine our policy. It is for that reason that clause 46(1) says that the main objective of the NBC in preparing its disposal programme and in running its business until the programme is completed shall be to promote sustained and fair competition. That will be competition between the NBC subsidiaries and former subsidiaries and other operators. The NBC will have to dispose of its operations into a number of units. The objective of promoting competition clearly could not be met if the NBC was privatised as a whole.
My hon. Friend the Member for Derbyshire, West referred to the central purpose of the Bill, which is to introduce competition. Many of our debates have, wrongly, been overshadowed by the failure to recognise that the key point of the Bill is competition, which brings with it the opportunity for efficiency of management, more businesslike organisation and a position in which the consumer comes first.

§ Mr. Leadbitter
We are trying to obtain some notion of the Government's thinking, if there is any. The Minister referred to competition and said that if we privatised the NBC as a whole, we would not have competition. Yet only a week or so ago, the Government decided to privatise the gas industry as a whole to promote competition. Where is the logic in the Government's thinking?

§ Mr. Mitchell
The hon. Gentleman knows that one can relatively inexpensively promote a competitive bus service alongside another bus service, but cannot, for the same relatively low cost, provide a gas pipeline into each household alongside the established pipeline. The hon. Gentleman's point has no validity.
I am delighted that my hon. Friend the Member for Hereford (Mr. Shepherd) is present because the Hereford experiment was enlightening. We made it clear that it was a trial and that we had many lessons to learn from it. One lesson we learned was the way in which Midland Red used its clout in the form of predatory pricing that was anti-competitive—

§ Mrs. Dunwoody
Should we therefore conclude that the Minister believes that, if two or three companies 1020 compete in the same area for the same routes, there will be no attempt at predatory pricing? Has he not heard of one company seeking to use its economic muscle to drive out other companies? It does not need to be Midland Red; it will be typical practice throughout the country.

§ Mr. Mitchell
The hon. Lady knows that Midland Red, which has a large operating area, was faced with competition on a narrow front. It concentrated its resources on seeking to smash that competition. When the Bill is on the statute book and there is competition throughout the country, such companies will face competition on every flank and will not be able to concentrate their resources in that way. I hope that the Liberal party will now return to its traditional belief in opposition to monopoly and support what I am saying.

§ Mr. Bruce
I am concerned that the Bill may inadvertently create local monopolies. Is the Minister aware that the former manager of Grampian Passenger Transport has recently transferred to become the general manager of Alexander's Northern and the Scottish Bus Group on the clear indication that he sees the expansion of the Scottish Bus Group to replace existing local authority services and, therefore, create a monopoly that will provide him with his career prospects?

§ Mr. Mitchell
I shall come to that point in a moment.

§ Mr. Eric Forth (Mid-Worcestershire)
Is my hon. Friend aware of the significance of the local election results? For example, in Lancashire the local Labour group spent more than £130,000 to scare people with a misinterpretation of our bus policy, but lost control of the county, while there was a magnificent result in Hereford and Worcester—the Conservatives retained control—where the experiment took place that has been much maligned by the Opposition? Does my hon. Friend draw the obvious conclusion from that?

§ Mr. Mitchell
I am sure that the whole House will draw the obvious conclusion from that. If the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) fears that she will lose the company of my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) in the next election, I assure her that, once the Bill is in operation and there are improved bus services in his area, he will be re-elected with an even larger majority.
My hon. Friend the Member for Derbyshire, West referred to competition as being more important than the maximum short-term yield to the Treasury, and I carefully noted his point. He also said that the units should not be so small that they were unviable or inadequate in management structure. An important point was made by my hon. Friend the Member for Nottingham, South (Mr. Brandon-Bravo) who said that the size was such that a management buy-out would be possible. We have good reason for studying some of the other places where management buy-outs are taking place. Huge advantages have flowed from that, especially in the change in worker attitude — for example, in the National Freight Corporation.

§ Mr. Peter Fry (Wellingborough)
If companies are split into too small units, there is a danger that some of them will not be subject to management buy-outs. Why should anyone bid money for weaker companies? Why not 1021 wait until they go out of business and buy their buses at cheap, second-hand values and refuse to do anything about future pension requirements? Is there not a need to retain a balance to ensure that the scenario I have outlined—which in some areas is as likely to happen as the scenario outlined by my hon. Friend—does not happen? Should not the Government be aware of that danger when considering the amendment?

§ Mr. Mitchell
My hon. Friend is well known for his interest in this area, but he may not have been in the Chamber when I spoke about the purpose entrenched in the Bill—the promotion of sustained and fair competition. Sustained and fair competition will not be promoted, with units of the size that my hon. Friend says nobody will want —units which would therefore go bust. That is not the promotion of sustained competition. Therefore, my hon. Friend's point is fully met.

§ Mr. Fry
Will my hon. Friend bear in mind the danger that large municipal operators — for example, Manchester, with more than 3,000 vehicles—can make mincemeat of any private operator unless the Government are careful to ensure that they are scaled down at the same time?

§ Mr. Mitchell
I take my hon. Friend's point, which has some substance. However, in the bus industry there are diseconomies of scale above a certain level and there is no reason to believe that some of the PTEs will not want to break down into smaller units to make management more economic and efficient.
The hon. Member for Gordon (Mr. Bruce) said that he feared an inadvertent creation of monopolies. I am delighted to welcome him back to the traditional Liberal view that a monopoly is not desirable. I only hope that he will address his remarks to his hon. Friend the Member for Isle of Wight (Mr. Ross) and look at the way in which the Liberal party has approached this Bill throughout its passage. It has sustained the view that local authorities should have the right to decide, which—in the pattern of the knowledge of what many local authorities will do —is to create local monopolies. We believe that that is against the interests of the customer and of the industry as a whole.
It is too early, however, to say exactly what will follow in connection with the break-up of the National Bus Company. We have asked the board to draw up options for privatisation of the company. The company has appointed a merchant bank to advise it, and my Department last week appointed consultant accountants. Until we have seen later in the year the options for privatisation and discussed them in detail with the company, I cannot say in how many units the National Bus Company will be transferred to the private sector. However, I can give my hon. Friend an assurance that I would not agree to any programme for the disposal of the National Bus Company's operations unless I was clear that it would indeed promote the competition which is the cornerstone of our policy.

§ Mrs. Dunwoody
The Minister will accept that the formula that he has proposed is very complicated. He is saying that the units on the one hand must be large enough to be viable but on the other hand must be small enough for anybody considering a management buy-out to take them over. Will he give an undertaking that he will come back to Parliament when he finally reaches some decisions 1022 about the matter, which is fundamental to the future of the transport system, so that we may have the opportunity to discuss the decisions that he takes? If not, will he accept that we are having to take his word that he has no idea at present what he intends to do, but that at some time we can rely upon him to do the best possible thing for the best of all worlds? He will accept that that is a trifle vague, even for him.

§ Mr. Mitchell
The hon. Lady produces, as if it is some strange new idea which suddenly worries her, the fact that at this stage the negotiations between the representatives of the merchant bank on the side of the National Bus Company and the Department's representatives have not reached a stage at which any conclusion can be brought forward. That is correct. The hon. Lady knows that, and she has known it all along.
We have said that we are setting down the broad criterion upon which those decisions will be taken. That criterion is promoting sustained and fair competition. That does not mean that the patterns will be the same size in every part of the country. Indeed, as some of my hon. Friends have argued, in some areas, larger units may be appropriate because larger units will be opposing them. In other parts of the country there may be more demand for a management buy-out, and the resources available for the management buy-out and the amount that management and workers want to take over may themselves have a profound effect upon the decisions taken. It would be wrong for us to set down now, before advice has been taken on these matters, the precise pattern in the way that the hon. Lady has requested.
She now asks me—it is an unusual concept—that we should come back to Parliament and give it the opportunity to discuss the proposals when the negotiations between the two parties have been completed. There will be nothing hole-in-the-corner about this. The hon. Lady will have public knowledge of what is being done and, if she does not like it, the opportunity of a Supply day will of course be available to her.

§ Mr. Leadbitter
The Minister is as much seized of the issue as any other hon. Member, but in fact he is asking the House to give him a blank cheque. After many weeks considering the Transport Bill, he cannot yet tell Parliament what the apportionment shall be. All he says is that he can assure Parliament that, whatever the apportionment and whatever the break-up, it will comply with the central point of Government policy, competition. The words sound very inviting, but in practical terms I ask the Minister to try to respond to my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) and say whether at some point he will let Parliament know what will arise from the blank cheque for which he now asks.

§ Mr. Mitchell
It is not a blank cheque. If the hon. Gentleman had been in business, he would know that a decision is often taken that an expenditure between X and Y will be permitted. We have set down parameters within which such decisions will be taken. The parameters are that we seek a break-up of the National Bus Company which will promote sustained and fair competition. The criterion is established, and we shall do our best to ensure that it is fairly and properly carried out. On that, the hon. Gentleman can have my assurance. 1023 It is impossible to go further at present, when we do not know which group of management and workers will come forward, what its resources are and how much it wants to take over. Nor do we know the advice of the National Bus Company and its merchant bankers or the advice of our own consultant accountants. I have given the hon. Gentleman a reasonable criterion against which he can judge the success or otherwise of our policies in this matter, and I hope that he will accept that.
I hope, therefore, that my hon. Friend the Member for Derbyshire, West, having drawn attention to a useful point and having had the advantage of a useful debate, will find it appropriate to withdraw the amendment.

§ Dr. John Marek (Wrexham)
I apologise to the hon. Member for Derbyshire, West (Mr. Parris) for not having heard the beginning of his opening remarks.
I wish to speak briefly against the amendment and to bring to the attention of the House the example of Mid-Wales. The company that operates in Mid-Wales is Crosville. Indeed, it operates in the whole of north and Mid-Wales with buses going down as far as Cardigan and Carmarthen in the south and covering the Aberystwyth, Newtown and Dolgellau area of Mid-Wales. I am told that only one bus service in that area makes a profit. If the Bill is enacted, severe problems will arise in the area. Nobody will wish to undertake a management buy-out or to compete because it is not possible to make a profit in the area. Any buses that are run in the area will be run only because the county councils are providing the necessary funds and subsidies. I do not believe that any company wants to run a service that will be wholly dependent upon subsidies.
The area of Mid-Wales has to be tied to a much larger company such as Crosville. It could be contrary to the intention of the Bill to require Crosville to produce plans for the break-up of the company. If a break-up of the company is to be produced, the units must be as large as possible. This means that it is unlikely that any management buy-out would be undertaken in the area. I think that the Minister needs to have as much freedom as possible in order to be able to provide for services in such an area.
With regard to selling off any part of the company, the provision with not more than 49 per cent. thereof being transferred to any party puts additional restrictions on the Minister. In my view, the Minister will have enough trouble trying to privatise the bus service in Mid-Wales. I do not wish him to be hampered further. For that reason, I am not happy with the amendment.

§ Mr. Parris
It is not for us to dictate what should or should not happen in Mid-Wales. The House is at its least effective when it attempts to dictate the detailed structure into which companies such as NBC should be broken up.

§ Mr. David Mitchell
Before my hon. Friend proceeds, may I draw his attention to the nonsense spoken by the hon. Member for Wrexham (Dr. Marek)? He claimed that nobody wanted to run a service that was dependent on subsidy. There are thousands of businesses in Britain which run on the basis of contracting, and a contractor is 1024 delighted to contract to a public body, such as a local authority because he knows that in the end he will get his money. It is, therefore, nonsense to suggest that what we propose is unattractive.

§ Mr. Parris
I am sure that many bus companies will have to depend to a greater or lesser extent on subsidy, and what happens with Crosville and in Mid-Wales will have to be for determination outside this Chamber. It is for us to lay down the broad guidelines according to which executive decisions will be taken. It was with that in mind that I initiated this short debate. The Minister, in responding, has gone further even than my amendment sought to go and, in the light of that, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

§ Mrs. Dunwoody
I beg to move amendment No. 176, in page 41, line 8, at end insert— '(5A) The Company's disposal programme shall also—

(a) specify the parts of their undertaking the provision of which has been financed wholly or partly by any one or more Passenger Transport Executives or local authorities and in respect of which sums are repayable to the Executives or local authorities; and

(b) describe the manner in which such sums are to be assessed.'.

§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
It will be convenient for the House to discuss at the same time amendment No. 175, in clause 47, page 43, line 2, at end insert 'and on the disposal of any part of their undertaking shall make repayment of such sums as are repayable, as mentioned in section 45(5A) of this Act, in respect of that part of the undertaking.'.

§ Mrs. Dunwoody
We are here attempting to achieve an orderly disposal of assets. Over the years, PTEs have been contributing not just to revenue costs but have put considerable sums — remember, we are talking about ratepayers' money — into the creation of assets for a number of companies. That expenditure has covered, for example, vehicles, garages, bus stations and interchanges.
As the Minister admitted when replying to the last amendment, he is not certain how the companies will be broken up or even about the size of the units that will then be created. It seems wrong, therefore, that the ratepayers, who have contributed for years, should not be told clearly what will happen to those assets. We are, therefore, asking in the amendment that The Company's disposal programme shall also— (a) specify the parts of their undertaking the provision of which has been financed wholly or partly by any one or more Passenger Transport Executives or local authorities and in respect of which sums are repayable". We debated this matter at length in Committee. It remains an important and outstanding issue because we are talking of large sums of money. The report on transport aspects of the 1984 public expenditure White Paper said: the fact that the NBC was able … to reduce its capital liabilities to the Secretary of State by £17.7 million in 1983 indicates that the Company is generating substantial cash surpluses after taking account of both interest charges and capital investment requirements. The revenue support payments made by local authorities to the NBC are, therefore, in effect, being used to repay the Company's long-term loans rather than to improve service standards, a situation that we find rather surprising. The Minister will also be aware that the Grieveson Grant report pointed out that a further £23 million of NBC debt had been repaid and had not been replaced by further 1025 loans. We are considering extremely large sums. That money has been paid to NBC and we have no idea of what attempts will be made to repay it and what will happen about the disposal of the assets in relation to PTEs.

§ Mr. David Mitchell
I am not certain what the hon. Lady is after. She said that the NBC made a profit. Any successful, well-run business is likely to make a profit. In this case, out of its profit it has repaid part of its debt to the Government. That has been a proper course for it to take and many businesses do that to their bankers in the course of successful trading periods. She went on to refer to revenue support being given by local authorities to the NBC. That is support to provide services which would otherwise operate at a loss and it is likely to include an element of the cost of depreciation on NBC's vehicles. Over and above that, she may have in mind contributions from ratepayers towards major capital assets such as depots and bus stations. If the hon. Lady will spell out the precise area of her misgivings, I will explain the position.

§ Mrs. Dunwoody
I am endeavouring not to delay the House unduly. I specified the items which I had in mind and mentioned garages, bus stations and interchanges—property of various kinds — on some of which large investments have been made. I pointed out to the Minister more than once in Committee the size of the sums involved.
The Minister says that businesses are in business to make profit. That is not the point at issue in debating this amendment. Local authorities are contributing ratepayers' money to the NBC, not to enable the NBC to repay much larger sums but to enable good services to be provided in their areas.
In its report on the privatisation of NBC, Grieveson Grant said: Since the December 1983 year end, a further £23 million (of the NBC debt) has been repaid and not replaced by further loans. In other words, there is no question of money continuing to be spent on the replacement or building of assets of the type to which I referred. Indeed, the Minister pointed out that Midland Red used its older buses, in the Hereford trial area, to run the competition into the ground. The report continued: The repayment of these liabilities in 1983, while maintaining a strong balance sheet, emphasises the company's ability to generate cash … a consistent feature. That cash has come largely from the considerable sums that have been contributed over the years by local authorities. It is not true to say that revenue support grant has recently been given in respect of those contributions. In many instances, the money has been used to create capital assets of the type I mentioned, and in Committee I gave the Minister the figures.
Because it is important for us to deal with other aspects of the Bill today, I will not detain the House on this issue, even though it is important. But answers are required. Local authorities have contributed large sums of money, yet no attempt will be made to repay them for creating those assets when they are sold, and we have no idea who will take over those assets or what will be the profits that such companies make in the future.
Why should local authorities, many of which will be rate-capped, be expected to find large sums of money to make up the difference, for example, on concessionary 1026 fares, from contributions from their ratepayers? They should be told in clear terms what will happen to NBC's assets that have been created by their money.

§ Mr. David Mitchell
The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) has made the position clearer, and it may be helpful if I divide the issues that she raised. There is, first, the issue of revenue support and the repayment of money to the Government. Secondly, there is the issue of the grants that have been made for capital expenditure on garages, bus stations and other property.
As for the profits that have been made and the use to which the board has put those in repaying debt to the Government, that is a normal procedure for a successful business, and the NBC is successful. In other words, it is proper for a successful business to use the profits from its operations to repay debt. There is nothing strange about that.
The hon. Lady went on to raise the different question of substantial grants — she was right to say that sometimes a great deal of money has been involved—in garages, bus stations, property and so on. Some of my hon. Friends will be interested if the hon. Lady is saying to the House that the representatives of the ratepayers, in the form of the metropolitan county councils, have parted with public money to the National Bus Company without any contractual arrangements about what is to happen—[Interruption.] The hon. Lady knows perfectly well that the National Bus Company has always had power to sell subsidiaries if it wished. Is she suggesting that ratepayers' money has been put into companies that could be sold without contractual arrangements to cover what was to happen to that money if the subsidiaries were sold?

§ Mrs. Dunwoody
Is the Minister of State not aware that he is telling the company—not asking it—to sell its subsidiaries? Does he seriously think that local authorities would have entered into an agreement to put up money over many years if they had thought that at the end of the time all of the assets were to be disposed of with no consultation with the people who had put up the cash? He must think that local authorities are more stupid than anyone else.

§ Mr. Mitchell
The astonishing thing that the hon. Lady is trying to reveal to the House is just that. She is trying to say that local authorities have parted with large sums of money to the subsidiaries of the National Bus Company, although she knows that the National Bus company has always had the right — not the compulsion of Government — to sell any subsidiaries it wanted. [Interruption.] No. It has always had that power under existing law. At any time the NBC could have put any one of its subsidiary companies on the market if it judged that to be a profitable and viable way of using its resources. Is the hon. Lady saying seriously to the House that ratepayers have been looked after so badly that their representatives have parted with large sums of public money without any contractual arrangements about what was to happen if the subsidiary company was sold?
It would be a different matter if the National Bus Company was being made to dispose of assets. The hon. Lady and I are talking about money that has already been paid over under existing legislation. The National Bus Company has an absolute right to sell those subsidiaries. Is she saying to the House that the representatives of the ratepayers have been so incompetent and so unable to 1027 protect the interests of the ratepayers that no contractual arrangements were made about what was to happen in the case of the disposal of a National Bus Company subsidiary into which the local authority has put money? If there are contractual arrangements, they will be carried out. If there are no contractual arrangements, it is a disgrace.

§ Mrs. Dunwoody
The Minister is not concerning himself seriously with the problem. He is so naive that he cannot see the difference between the National Bus Company coming to some kind of agreement with the people from whom it is to get its funding and being forced to flog off any saleable asset, including all of its buses and other assets, because the Government have insisted. If he cannot see the difference, he must be more naive than I believed. He and his Secretary of State are forcing the National Bus Company to sell off its assets and to divide itself into tiny units. He is not even sure what size the units should be. He should accept the amendment so that an attempt can be made to protect the investment of many ratepayers over many years.

§ Mr. Mitchell
I do not think we need detain the House much longer on this amendment. The point I have made is clear and simple. Revenue support has been for the operating expenses of the National Bus Company, including depreciation; profits on its operations have enabled it to repay the debt to the Government. In regard to grants of large sums of money for garages, bus stations and the like, I doubt very much whether the representatives of the local ratepayers have been so remiss as to part with that money without contractual arrangements about what was to happen in the event of the National Bus Company deciding to sell the subsidiary company into which the money was put. If that were the case, as I said, it would be a disgrace. Therefore, I hope that the House will feel it right to reject the amendment.

§ Mr. Leadbitter
The issue has become unnecessarily heated. To come back to the amendment, what does it seek? It does not matter a tinker's cuss whether the Minister is right. Money has been put into the National Bus Company for certain capital projects. Whether the contractual arrangement did not foresee what the company would be forced to do as a result of the Bill or whether the possibility was foreseen is of no consequence. The amendment does not argue the point. It says that the disposal programme under clause 45 shall specify the parts of their undertaking the provision of which has been financed wholly or partly by any one or more Passenger Transport Executives or local authorities". Why does the Minister not accept the amendment?

§ Mr. Mitchell
In the cold light of tomorrow the hon. Member should consider the debate carefully against the background that the Audit Commission will be examining the accounts of local authorities to see whether they have disposed of money without making contractual arrange-ments as to its repayment. Either there is a contractual arrangement for what is to happen in the event of a subsidiary of the National Bus Company being wound up or being sold, or there should be. I have no doubt that the Audit Commission will consider with great interest what the hon. Gentleman has said.

§ Mr. Leadbitter
I agree with the Minister thus far—

§ Mr. Deputy Speaker
Order. I remind the hon. Gentleman that this is Report stage. He must not keep making speeches.

§ Mr. Leadbitter
I want just to tidy up one point, Mr. Deputy Speaker. I think the House would agree that it would be better to clear it up. I agree with the Minister thus far. I agree also with my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody). What we are asking for is an account in the disposal programme. That is what the amendment seeks. It does not argue the point.

§ Mr. Caborn
Two questions were raised time and time again in Committee. We brought clearly to the Minister's attention the agreement in the Transport Act 1968 on the financial arrangements between passenger transport executives and the National Bus Company. What the Under-Secretary has said in the House this afternoon is misleading. He knows that there is a clear relationship between PTEs and the NBC and that there are financial agreements between them.
No one in the United Kingdom would think that we could have such a stupid Secretary of State for Transport who would bring in such a stupid Bill to take us back 50 years. It is like asking people to make financial agreements to put men on the moon. That is how the Secretary of State is seen in the transport industry.
May we have an answer to the question about the relationship between the NBC and the PTEs under the 1968 Act? Can we be told what the Secretary of State will do about the £40 to £45 million of ratepayers' money that has gone to the NBC? If he is shedding crocodile tears about ratepayers' money, will he return that £45 million to the ratepayers, where it rightly belongs?

§ Mr. David Mitchell
I refer the hon. Member for Sheffield, Central (Mr. Caborn) to clause 57(3) under which termination arrangements for section 24 agreements can be made by order.
In regard to the point made by the hon. Member for Hartlepool (Mr. Leadbitter), it is not for the Government or for the House to interfere in the contractual arrangements that have been entered into between the National Bus Company and local authorities. The parties to the agreements should have drawn them up properly to provide for what is to happen.

§ Mr. Leadbitter
The hon. Gentleman is misleading the House now.

§ Mr. Mitchell
I am not.

§ Mr. Leadbitter
I did not say that it was for the Government to interfere. We have had too much of that already. I am saying as a matter of record that the amounts are known. We are asking in the amendment for them to be included in the disposal programme for information —not to interfere.

§ Mr. Mitchell
The National Bus Company will have entered into hundreds of contracts and agreements in varying forms in the course of running its business. Included in those arrangements will be the financial memoranda and financial terms of agreements under which money has been put into NBC subsidiaries. Even before the company had power to dispose of its subsidiaries, which was long before the Bill was 1029 introduced, it has had the power to sell assets that were not required for the purposes of its business. Having acquired money from a local authority, there could well come a time when the company would dispose of the asset that had been bought with the money so provided. Unless the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) is right, local authorities will have made proper contractual arrangements for the money arising from such a disposal and I see no reason why we should seek to interfere. If the hon. Lady is right in the rumour that she has started this afternoon and there are no contractual arrangements, the Audit Commission should take a close interest.

§ Mrs. Dunwoody
The Minister has treated the House with his normal contempt. He knows what is behind the amendment and he understands its importance. He has chosen not to answer any of our questions and the appropriate responsibility will be his. Amendment negatived.