Scottish Bus Group

HC Deb 27 January 1988 vol 126 cc309-17 3.30 pm

The Secretary of State for Scotland (Mr. Malcolm Rifkind)

With permission, Mr. Speaker, I should like to make a statement about the future of the Scottish Bus Group.

The Scottish Bus Group is a nationalised industry, providing bus services in Scotland. It has a total staff of about 10,000. In its latest annual report, covering 1986, it showed a turnover of £160 million. The Scottish Bus Group has over 3,000 buses and in terms of vehicle miles is responsible for over half of stage carriage services in Scotland. Through its 12 subsidiaries, it is Scotland's largest provider of bus services.

I have decided that I should now seek powers at an early opportunity to privatise the Scottish Bus Group. [HON. MEMBERS: "Hear, hear."' All nationalised industries which have been privatised have benefited from taking control of their own affairs. I am sure that the Scottish Bus Group will be no exception. Privatisation will allow investment decisions to be made in Scotland, free of the Government's constraints on nationalised industry financing. Management will be free to manage, the travelling public will benefit from the greater sensitivity to the market which a private sector company necessarily has. Deregulation has already achieved much in that field, with increased competition and innovation. I am presently considering whether the Scottish Bus Group should be privatised as a single company or as several regional companies.

Whichever method of privatisation is chosen, there will be benefits to the Scottish economy. It will be strengthened by the addition of one or more new private sector firms providing substantial employment and free to take full advantage of market opportunities. The privatisation of the bus group will complement the major stimulus to be given to the Scottish economy by the privatisation of the electricity industry.

Privatisation should also provide opportunities for the work force, at all levels, to take a stake in the business for which they work. This increased sense of involvement should also lead to improved performance. The work force as a whole should benefit from being part of an organisation which has been set free to operate in a fully commercial way.

This decision will have implications for Caledonian MacBrayne which, together with the Scottish Bus Group, makes up the Scottish Transport Group. Caledonian MacBrayne is responsible for providing ferry services on the west coast of Scotland. I shall be considering the best future arrangements for Caledonian MacBrayne, consistent with our commitment to the provision of shipping services to the islands.

Mr. Donald Dewar (Glasgow, Garscadden)

The announcement that we have just heard will please no one but the placemen and the zealots. I thought that the source of the cheering behind the Secretary of State was highly significant and rather depressing. This measure may earn him some brownie points with the Prime Minister, but it will do very little for public transport in Scotland. It is a remarkable turnabout which has been largely unexplained.

The privatisation of the Scottish Bus Group was specifically rejected in the White Paper of August 1984, yet suddenly the group is now to be sold off in very difficult trading conditions. Does the Minister accept that these are difficult and unsettled times and that many bus companies, particularly in central Scotland, are trading at a loss? Is he not aware of this from the fact that, in the calendar year 1986, the profit of the Scottish Transport Group, at £10.7 million, was over £6 million down on the previous year?

That was specifically ascribed by the chairman, in his report, to the difficulties which attended deregulation. Why, then, the further difficulty of sale now to an unknown buyer on speculative terms? Can the Minister says what impact he thinks that this will have on jobs? That is a highly relevant question, because we all know that there have been difficulties in the Scottish Bus Group. Kelvin Scottish, in particular, has been the subject of reports and of suggestions of a loss of about £3 million. One important depot, Milngavie, has already been closed. With 10,000 employees, is it not important that we know a little more about that side of what the Government propose?

I recognise that we cannot know today whether it is to be one company or 11 or 12 companies. There is a lamentable lack of specificity. May we be assured that the Minister will return to the House at an early date, as soon as decisions have been taken, with information? Will he confirm that primary legislation is needed? I presume that that is the implication of the phrase that he will "now seek powers", but I should like that matter cleared up. Will this be a sale by share tender, or will the Minister be looking for some existing company, possibly in the industry, to buy the Scottish Bus Group? What price does he expect?

Will the right hon. and learned Gentleman note that what happens to Caledonian MacBrayne is a matter of deep concern to the Opposition because it is an essential lifeline to island communities? Does he accept that we have little confidence in his touch in these matters? We, like many people who depend on Caledonian MacBrayne, will remember the fiasco of the Gourock-to-Dunoon run and Western Ferries' pre-emptive raid, with the right hon. and learned Gentleman's assistance. We remember also the sale of MacBrayne Haulage to Kildonan Transport, if I remember rightly at a knockdown price of £450,000. We hope that, if the right hon. and learned Gentleman insists on going ahead mistakenly with this exercise of selling assets, it will be carried out with greater respect for those who depend on the services, and for the public purse.

There is a great deal of talk of stimulus, of the freedom of management to manage, but the right hon. and learned Gentleman's statement is the worse sort of padding—specious propaganda bordering on claptrap. No case has been made out for this U-turn. Stripped of the advertising copy, it is nothing more than a bald, unsatisfactory, unacceptable statement of intent, and we will oppose it when it comes to the House in legislative form.

Mr. Rifkind

I bow to the hon. Gentleman's experience of specious claptrap and will respond to the points he raised. I share his view that the ferry services are a lifeline to the islands. That will be a fundamental consideration when determining future arrangements. I point out that Caledonian MacBrayne and the ferry services to the islands have improved enormously beyond all recognition over the past 10 years. If the hon. Gentleman will not accept my word on that, he should speak to those on the islands, who will be happy to confirm it.

As to the reasons for and the background to my announcement involving the Scottish Bus Group, the board of the Scottish Transport Group fully supports privatisation and believes that it will be in the interest of bus services in Scotland, and that this is the right way forward. Our experience since deregulation came into effect has shown that the Opposition's alarms and fears were competely unjustified and that deregulation has been to the benefit of bus services in Scotland. More bus services are available and competition has been to the benefit of those involved.

I confirm that these proposals will require primary legislation. As to the form of flotation, we shall of course seek advice from financial advisers but, in the light of experience elsewhere in the United Kingdom, it is likely that there will be interest among the management and employees as well as others, depending upon the type of structure which is eventually determined.

Given that, over the past 30 years, there has been a decline in bus services throughout the United Kingdom, including Scotland, the increased competition which this decision will ensure will be of great benefit to those who use bus services and therefore very much in the interests of those who work for the Scottish Bus Group. They can only benefit from being part of a successful private sector industry, and that will be the effect of these proposals.

Sir Hector Monro (Dumfries)

Does my right hon. and learned Friend agree that this is the moment for the bus industry to show initiative and enterprise and to go ahead and develop its services, especially on the major trunk routes? Would the Minister also keep in mind during his consultation the issue that has already been raised about employment, and particularly the development of rural services?

Mr. Rifkind

Yes, I very much confirm what my hon. Friend has said. It is factors such as these that we will take into account when determining the precise structure under which privatisation will take place.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

May I bring the Secretary of State back to his rightful acknowledgement of the fundamental concern about the ferry services, not least for the employees but also for the communities and the many others dependent upon them? Referring earlier to the Scottish Transport Group, the Minister said that it had not been decided whether to have one monopolistic concern or to break it up regionally. What is the implication of that thinking for the ferry services? Does the Minister propose to privatise ferry services as one group, or is he looking at individual routes which may be sold off to individual companies which may bid for them?

Would the Minister address himself to the very simple fact that, taking my own constituency, the ferry services to the Isle of Skye and the feeling that, even with a level, of public subsidy, the fares are extremely high, when it comes to considering the replacement of ferry vehicles, it is very difficult to see how something that is economically viable can at the same time serve the public interest?

Mr. Rifkind

My statement today was solely concerned with the Scottish Bus Group. Nothing in it involves any decision having been taken with regard to the future of Caledonian MacBrayne, with the exception that the privatisation of the bus group will mean the end of the Scottish Transport Group as such, because Caledonian MacBrayne would be the only remaining element in it. We have yet to come to a view as to the future organisation of Caledonian MacBrayne and the extent to which either privatisation or some other arrangement would be appropriate for that organisation.

What I have said is that our prime consideration is to ensure that this vital lifeline for the islands, which we have built up over the past ten years, is maintained insofar as it is the necessary transport facility of those who depend on it.

Mr. Alick Buchanan-Smith (Kincardine and Deeside)

Will my right hon. and learned Friend acknowledge that all experience of privatisation so far suggests that the removal of Government interference in management is to the ultimate benefit of both management and the users, the customers, of the services in question?

At the same time, following on what my hon. Friend the Member for Dumfries (Sir H. Monro) said, will rural services be taken into account in my right hon. and learned Friend's consideration? The need for them does not change, whether the service is nationalised or privatised. They are an important social service and for many are the only link with centres of population for shopping and so forth. That is a major consideration.

Mr. Rifkind

My right hon. Friend is absolutely correct in the priority that he identifies. I will simply add that up to now the investment decisions involving the Scottish Bus Group have had to be made by Government in the context of their overall public sector borrowing requirement. That is true of all nationalised industries. In future, these decisions will be taken in Scotland by the management of the new company or companies, and will be taken on the basis of the perceived needs of the Scottish Bus Group.

Mr. Alistair Darling (Edinburgh, Central)

Is the Secretary of State aware that there is a great deal of concern that control of the Scottish Transport Group or the Scottish Bus Group, when it is sold off, will pass out of Scotland, perhaps to London or even abroad, and that a new owner living in London or the Gulf will care little about when the last bus runs and how much it costs? Is he also aware of the concern that Caledonian MacBrayne has received large sums of public money to modernise its fleet which, by the 1990s, will be very new and that it would be quite wrong for someone to snap up a bargain, into which public money has been poured, at a knockdown price, as has happened elsewhere?

Mr. Rifkind

In answer to the first part of the question, I do not remember the hon. Gentleman complaining when the Perth-based Stagecoach bus company successfully acquired one of the English bus companies after the privatisation of the National Bus Company. I have every faith in the Scottish bus companies being able to make a major contribution to the improved well-being of the Scottish economy. As regards Caledonian MacBrayne, any future decision, if it did involve some form of privatisation, would obviously be subject to the same principles with regard to public assets as has been the case with other nationalised industries.

Mr. Nicholas Fairbairn (Perth and Kinross)

May I congratulate my right hon. and learned Friend on freeing from bureaucracy and Treasury control a service of the greatest importance to people in Scotland, to be run, I hope, by several competing companies—that would be my preference—for the benefit of those concerned? As regards bus provision in the countryside, at the moment only private companies provide the sort of facility that shoppers want, taking them to the places where they can shop at the time they want to do so or, like Stagecoach, giving them the service that they really require. My right hon. and learned Friend is greatly to be congratulated.

Mr. Rifkind

I am grateful to my hon. and learned Friend. I agree that these proposals represent an exciting opportunity for the bus industry and for those who work in it.

Mrs. Margaret Ewing (Moray)

On what basis does the Secretary of State make his confident claim that privatisation will automatically lead to an improvement in services? Has any research been undertaken? Have there been any preliminary soundings among people who might be interested in taking over bus services? I reiterate the point that has been made by other hon. Members —rural communities are dependent on bus services as lifelines. Any company interested in services in rural areas, such as my constituency, should be asked to take full cognisance of the need to offer an efficient and effective service.

Mr. Rifkind

Those who run the Scottish Bus Group believe that these proposals will be in the interests of the bus services that it provides. I would be somewhat puzzled if the hon. Lady and her colleagues were opposed to the transfer of ownership of the Scottish bus industry to Scotland from London, where it presently operates.

Mr. Bill Walker (Tayside, North)

My right hon. and learned Friend should be congratulated on the measures that he is proposing to introduce. Will he confirm that, contained in these measures, whatever they are, there will be a requirement that employees will be given an opportunity to purchase shares in the new company or companies, whatever form they take? Employee shareholdings are an essential part of changing attitudes, which will be required if we are to improve services.

With regard to rural services in my constituency, there is no question but that one of the advantages of deregulation has been competition. It has brought about circumstances that I have never known before. Bus companies have been prepared to divert and re-route their buses for the benefit of people living in small communities. That would never have been achieved before deregulation.

Mr. Rifkind

I am grateful for my hon. Friend's experience of the benefits of deregulation. I agree with his objective of encouraging share ownership. I have no doubt that the people of Scotland and the employees of the Scottish Bus Group will be especially interested in the opportunities that this will present for the greater involvement of the public, including employees, in the ownership of an important industry in Scotland.

Mrs. Maria Fyfe (Glasgow, Maryhill)

Has the Minister considered what the feelings of many Scottish people will be when they hear this news and realise that bus companies will chase profits by concentrating on the most profitable routes and times? Those people will be condemned to stand for long periods in the wind and rain waiting for a bus to arrive.

I notice that the Under-Secretary is smiling. He obviously thinks that it is funny to stand under a draughty bus shelter with small children in the cold. He has probably never had to do so. It is very easy for people such as him who ride around in ministerial cars. This is a piece of vicious class legislation. It will affect those who rely on buses, such as women with young children and elderly people going to the shops or to their doctor. Those people are forced to rely on public transport, and what you are doing—

Mr. Speaker

Order.

Mrs. Fyfe

I beg your pardon, Mr. Speaker. It is clear that we can expect no benefit to services from this measure. Have the Government investigated the needs of the people that I have mentioned?

Mr. Rifkind

As the hon. Lady has been one of the foremost critics of the Scottish Bus Group, which is a nationalised industry, and its attempts to introduce competition in Glasgow, I am rather puzzled by her anxious desire to defend the status quo.

Mr. Gerald Howarth (Cannock and Burntwood)

Is my right hon. and learned Friend aware that it is only under this Government that the bus industry has been rescued from terminal decline? Will he accept from us that what he has announced is welcome news? It is typical of the whingeing Opposition parties that all they want to do is stick their collective snouts into the public trough.

Mr. Rifkind

For the past 30 years, the use of buses throughout the United Kingdom has declined. The combination of deregulation and privatisation of these bus companies will offer the first serious opportunity for many a long year to reverse that decline in the use of buses, in the interests of the general public.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

The statement that the Secretary of State has made is so vague as to be almost meaningless, and it makes it very difficult for people who are trying to make an objective — not an ideological—judgment about whether this measure is to be supported or not. We are prepared to look at the proposal for the buses, but if the Secretary of State is thinking of privatising the ferries, he will run into stout opposition from Members on these Benches and from Members in other parts of the House.

As to the date, the Secretary of State said that he would take an early opportunity to take powers. What does an "early opportunity" mean? There is worry that the phasing out of public sector subsidies, which are due to end in 1991, will be conterminous with the introduction of the powers that he may wish to take. That will mean that there will be no central Government subsidy, which will leave local authorities to carry the can. That would be unacceptable in rural areas.

I welcome the statement that the Secretary of State has made about the opportunities for management and, we hope, staff buy-outs. Last, but most important, we would favour these proposals only if they are carried out on a regional basis, because otherwise it is impossible to protect individual companies from predatory depredations of companies from out of the Firth of Scotland.

Mr. Rifkind

So far as I could tell, I think that the hon. Gentleman was saying was that he gives a cautious and qualified welcome to the proposed privatisation of the Scottish Bus Group. Unless I am mistaken, I am grateful to the hon. Gentleman for that. As far as Caledonian MacBrayne and ferries are concerned, I have said that we have not yet come to any conclusion about the future organisation or structure of the ferries, including whether and to what extent privatisation would be appropriate. The supreme consideration will be to ensure the maintenance of healthy ferry services to the island communities. There are other ways in which, in theory, it might be possible to do this.

For example, the hon. Member for Orkney and Shetland (Mr. Wallace) will be aware of that support for those islands communities is organised in a different way. The islanders are provided with services mainly by P and O and other smaller companies. There are other options. Therefore, it is important not to come to a speedy conclusion on these matters, but instead to examine all the possibilities that might be available.

Mr. Michael Fallon (Darlington)

Is this not clear evidence that, at long last, after eight and a half years, the fog of political cross-subsidy and bureaucratic Socialism is finally lifting in Scotland? That will be warmly welcomed by bus passengers throughout Scotland. Will my right hon. and learned Friend turn his attention to other parts of the British Scotland Corporation that might benefit from similar freedom of management to run good Scottish businesses without further political interference?

Mr. Rifkind

I am sure that the levels of political support in both Scotland and the north of England are matters that equally attract the attention and interests of my hon. Friend. I am sure that we shall be able to apply similar principles in both parts of the United Kingdom.

Mr. Ron Brown (Edinburgh, Leith)

The Secretary of State and the Government have sold the family silver, no doubt at a knockdown price, to his friends in the business community. Is it not true that, increasingly, within this country and within the Labour party, there will be demands for renationalisation of those public assets without any compensation and under workers' controls? Is that not real democracy, and will that not come in time?

Mr. Rifkind

I can appreciate the hon. Gentleman's aspirations in this matter, but he will expect me to conclude that he is hardly likely to persuade the Government until he has persuaded his hon. Friends.

Mr. Eric Forth (Mid-Worcestershire)

I join my hon. Friend the Member for Darlington (Mr. Fallon) in welcoming this further stage in the journeying of the Scottish Office towards Conservatism. Has my right hon. and learned Friend yet had time to read the proceedings on the Transport Act 1985? During the Committee proceedings on that Act, those of us who have the privilege to be members had to listen to Labour Members telling us of the doom and gloom that would come from the successive privatisations and deregulations of the buses, all of which have been proved wrong. Will my right hon. and learned Friend take heart from this fact and, when he has any moments of doubt, re-read the proceedings on the Act and gain a new confidence?

Mr. Rifkind

I say in the kindest possible manner to my hon. Friend that if he had ended up representing a Scottish rather than an English constituency, the Scottish Office might have approached the Conservative ideal for which both he and I stand that much earlier.

Mr. Tony Worthington (Clydebank and Milngavie)

What is to happen to the rumoured £25 million-worth of reserves of the Scottish Transport Group? How are they to be distributed? Since a consequence of deregulation of buses in the Kelvin Scottish area has been the acquisition of a clapped-out bus fleet, the loss of one garage and £3 million of losses, who will buy that without the consequence being a massive loss in the number of journeys available to constituents in that area?

Mr. Rifkind

On the financial arrangements. I shall shortly be appointing financial advisers to make recommendations to me on these matters. We shall then be in a position to ensure that the best possible method is used.

On the other matters to which the hon. Gentleman referred, he will appreciate that whether the Scottish Bus Group is a public or private sector company, it would do devastating damage to its long-term future if it did not make whatever economic decisions were necessary on the use of its assets and other such matters.

Mr. Neil Hamilton (Tatton)

Does not my right hon. and learned Friend consider it paradoxical that Opposition Members, who are presumably keen to get the best value for money when their own money is involved, have no interest whatever in the principle when they think that we are spending someone else's money'? Is not their concern for jobs bogus? Instead, they seem to be concerned with preserving non-jobs. If jobs are providing services that people want to buy in the market place, they will be as safe after privatisation and competition as before.

Mr. Rifkind

I do not think that Opposition Members' concern for jobs is bogus; it is simply confused.

Mr. Sam Galbraith (Strathkelvin and Bearsden)

As the Minister knows, Kelvin Scottish is an important company in my constituency. It is one of the largest employers and in large parts of my constituency it provides the only form of transport. I have to deal with the problems, as do some Conservative Members, confronting rural areas. In that context, and further to the question asked by my lion. Friend the Member for Edinburgh, Central (Mr. Darling) does the Minister intend to take any steps to ensure that the control of any new companies is retained in Scotland, or will it be possible for that control to move elsewhere?

Mr. Rifkind

As the hon. Gentleman will be aware, there is no legislative provision—under this Government or any previous Government—dealing with the control of a particular company in any one part of the United Kingdom. That is the legal position, and it has not arisen since 1979. It has flowed from the policy of all Governments—Labour as well as Conservative—as we live in a single United Kingdom economy.

Mr. John Marshall (Hendon, South)

Will my right hon. and learned Friend ensure that special concessions are given to employees of the group when the industry is denationalised, so that the workers can have a special stake in the future success of the company under private control?

Mr. Rifkind

I assure my hon. Friend that we shall be giving close and sympathetic consideration to that kind of approach.

Mr. Brian Wilson (Cunninghame, North)

Will the Minister agree that his complete failure to reassure the people of Scotland about the future of services —particularly rural routes and other unprofitable routes—under the arrangements will be noted with apprehension? Will he further agree that his failure to give firm commitments on the future of Caledonian MacBrayne as an integrated unit serving the Scottish islands will be greeted with similar apprehension, not least by the excellent people who maintain the services in conditions that most of us would baulk at working in?

Will the Secretary of State recall the last Scottish Office transport privatisation? It sold off £1.5 million-worth of assets of MacBrayne Haulage to Mr. Billy Walker for £450,000. At that time, Mr. Walker was asked whether he thought that he had received a bargain. He replied: It would be a stupid man who didn't think that. An asset-stripper taking over this firm would have made a fair profit for the money. We have no intention of doing that. Will the Secretary of State consider that Mr. Billy Walker, who was handed this valuable public asset on a plate, is about to sell MacBrayne Haulage —Kildonan MacBrayne, as it now is — to a firm in Yorkshire without a whit of social guarantee for those who rely on the services? Is that the policy that the right hon. and learned Gentleman intends to pursue? If so, can he not easily understand why his party is a discredited rump in rural, as well as urban, Scotland?

Mr. Rifkind

I am not quite clear from the hon. Gentleman's splendid but somewhat empty rhetoric what his conclusions are. If a Scottish company had purchased an English company, would he have condemned that in similar terms, and if not, why not?

Mr. Wilson

What about the knockdown price?

Mr. Tony Favell (Stockport)

Is my right hon. and learned Friend aware that, although we are glad for Scotland, the new wind of free enterprise that is blowing through Scotland is regarded with some apprehension elsewhere in the United Kingdom? It will undoubtedly attract back to the country those entrepreneurs who were so famous in Scotland. Our gain will be your loss.

Mr. Rifkind

It is certainly the case that Scotland's major contribution to the industrial growth of the United Kingdom was based not on Government funds but on the ingenuity of the enterprise and initiative of the Scots themselves.

Mr. Bill Walker (Tayside, North)

On a point of order arising out of questions, Mr. Speaker.

Mr. Speaker

Order. It does not have to arise out of questions.

Mr. Walker

I advise you and the House, Mr. Speaker, that the Billy Walker who was referred to in the question that was asked by the hon. Member for Cunninghame, North (Mr. Wilson) is not me, nor is he a relative of mine.