§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kenneth Carlisle.]11.40 pm
§ Mr. Allan Roberts (Bootle)
First, I thank the Chancellor of the Duchy of Lancaster for coming to reply to this Adjournment debate. However, a statement should have been made to the House about the privatisation of Girobank before now. It should not have taken an Adjournment debate to bring the Chancellor of the Duchy of Lancaster here. There should have been a debate in Government time on the Government's proposal—a major privatisation proposal—affecting the 6,000 people who work for Girobank and all those who work in sub-post offices throughout the country which are mostly dependent on Girobank for their business. It also affects pensioners, the unemployed and everyone who receives cheques from Girobank. It is a major privatisation that does not need legislation. Therefore, the Government should report to Parliament on a regular basis, explain what is happening and enable debates on their proposals to take place.
Girobank is very successful. Since 1968, when it was established by a Labour Government, Girobank has grown into a successful banking arm of the Post Office. It now has about 2.5 million customers, and in 1986–87 it made a profit before tax of £23.1 million. It is a successful financial institution in the public sector. As I have already said, it employs 6,000 people—5,500 in my constituency.
Most EEC countries have a public sector Girobank. It provides competition in those countries in the same way as it does in Britain, where it offers customers a real alternative to the major clearing banks, and it has enhanced competition. As well as creating jobs on Merseyside and keeping the local community alive, Girobank has created jobs in Edinburgh, Leeds, Ashford in Kent, Birmingham, Bristol, Belfast and London. Girobank pioneered free banking and brought banking to the doorsteps of many rural areas about which many Conservative Members are concerned.
Labour Members see no reason why Girobank should be privatised and why the Government should have made the proposal to sell off Girobank in the first place. It will not increase or enhance competition, and the way in which it is being done will not extend share ownership in any way whatsoever. If it is kept in public ownership and further developed, competition will continue.
However, in June the Secretary of State for Health, the right hon. and learned Member for Rushcliffe (Mr. Clarke), when he held the post of Chancellor of the Duchy of Lancaster announced that Girobank would be privatised—for doctrinaire reasons, presumably, as there were no other grounds—that it would not be a flotation, but that it would go out to tender, and certain conditions were set down. On 7 June, the Minister said that Girobank was a successful bankwith a particular strength in money transmissions and handling deposits of corporate cash.He said,Girobank … needs to expand vigorously".Indeed, it is in the process of doing so in the public sector. The right hon. and learned Gentleman said that the Post Office had agreed with the Government to privatise Girobank and that Girobank would be offered for sale to 612 a financial institution or other suitable company. He said that suitable bidders for the bank would be given the opportunity to tender, and that has happened. He said that in deciding on a buyer the price would be a major consideration in order to ensure a fair deal for the taxpayer. The figure of £200 million was in the Government's mind. He also said:weight should be given to … a purchaser who will widen choice"—that is important—for the general public in banking services.He also said that the purchaser should becapable of developing and expanding Girobank's business.He said that the close links between Girobank and Post Office Counters would be safeguarded and thatprospective purchasers will be invited to propose arrangements to enable management and employees to share … in the future success of the business."—[Official Report, 7 June 1988, Vol. 134, c. 713.]The right hon. and learned Gentleman said that the purchaser would have to satisfy the strict requirements of the Bank of England, and the Government went on to rule out a management buy-out or a consortium bid.
The Government employed a company of merchant bankers, Schroder, to deal with the matter. The right hon. and learned Member for Rushcliffe, then the Minister responsible, wrote to me on 27 June saying that he hoped the sale would be completed before the end of the year. An expected timetable was submitted to all those who expressed an interest in purchasing Girobank which gave the end of September as the deadline for round two bids. The Minister, and a letter I received from the Prime Minister, made it clear that a shortlist would be produced and announced during the recess and that in November the Government hoped to announce the successful bidder.
Although the unions were opposed to privatisation, they met and decided not to take industrial action but to seek some safeguards from the Government about the procedures involved in the sale. They behaved very responsibly. They produced an eight-point plan. They wanted continued investment commitment to the bank; a commitment to the growth of the bank, especially among corporate customers; protection of the bank as an entity and the protection of Bootle as the major operational centre.
If privatisation threatens the centre in Bootle, the entire area will be devastated. It is an area of high unemployment where Girobank, the flagship of public enterprise at work, is one of the major employers. The unions also wanted the siting of the contingency centre in close proximity to the Bootle centre. The proposal is that it should go ahead in Wigan. We hope that that will be safeguarded. The unions wanted protection of the commercial relationship between Post Office Counters and the bank; protection of conditions of service such as pension rights and continued trade union recognition. They wanted staff involvement in the development of the bank. Those are all reasonable requests made by the work force and those involved in making Girobank such a success.
Since the statement in the House and since Girobank was put out to public tender we have heard nothing from the Government except rumour, speculation and leaks from Schroder and the Department of Trade and Industry. Despite the fact that I have asked questions in the House and that my hon. Friends have tabled questions for written answer, the Government have not told us what has happened. We have passed the deadline that the 613 Government originally laid down for the publication of the shortlist. We were told that it would be published in November and that the unions and the work force would have an opportunity to have discussions with those wishing to purchase. We have heard rumours that Westpac, the Australian company, and the Bank of Scotland have withdrawn their bids and that the bids were well below £200 million. The shortlist that the Government hoped to publish was depleted to such an extent that they could not publish it. There were insufficient bidders for Girobank and the Government faced the dilemma of whether to go ahead with the privatisation.
That is authoritative speculation that has appeared in the press over the past two weeks and no Minister has denied it. The Department of Trade and Industry suggested that there never was a deadline so one could not be expected. The Government hoped that a deadline would be met and a timetable was sent out by Schroder. The Government's proposals for Girobank have not stayed on course. I hope that the Government will be able to answer my questions because I am concerned about the future of Girobank and its employees. The current uncertainty must be brought to an end.
The Labour party and the majority of the work force at Girobank are completely opposed to privatisation. The employees are aware that if privatisation goes ahead their future will be at risk, and they are aware of the risks of asset-stripping. Girobank is competitive and successful in the public sector, but my main concern is for Girobank, whether or not it stays in public ownership.
Why have not Parliament or Girobank's employees been told of the shortlist of bidders? Why have the Government relaxed the conditions governing the sale of Girobank? I hope that the Minister will say that the Government have not relaxed the conditions and that they want to ensure a secure future for the bank. Will the Government still insist on a sale price of about £200 million, or will they sell it at a knock-down price? In that regard, we have had the Royal Ordnance fiasco and the BP sale. In many instances, asset-stripping has resulted as a consequence of privatisation and the taxpayer has suffered.
It is feared that if someone buys Girobank at a knock-down price the business will be asset-stripped and sold at its true price. If a second sale took place shortly after the first, the conditions and guarantees that the Government have given may be lost. If it is sold at a knock-down price, those concerned about the interests of the taxpayer and those concerned about the future of Girobank will be angry because the centre of Bootle may disappear.
Is a management or part-management buy-out ruled out by the Government? Will a consortium bid be allowed? The Government implied, if not stated categorically, that that would be ruled out. Are the Government still excluding bids from British clearing banks or the larger building societies? If a bank with a clearing house facility or a large building society buys Girobank it would be more likely to run down the centre of Bootle. It would also be more likely to asset-strip Girobank, because it would have 614 the same facilities and would be buying it to get its customers, its business and the Post Office outlets or to buy out the competition, about which we are very worried.
Have the Government abandoned their commitment to more customer choice in the market? They said that that was one of the purposes of privatisation. If a major clearing bank or building society purchases Girobank, that will not happen.
What has been the response so far by way of Girobank bids? Will the Minister come clean and answer that question? If a satisfactory buyer is not found or if an acceptable bid is not submitted, will the Government withdraw their proposals for privatisation? Any other reasonable vendor—a householder putting a house up for sale or somebody selling a business—would take the view that if the asking price cannot be realised, the house or business should be withdrawn from the market, rather than leave it there with all the insecurity and uncertainty that must result.
What is the Government's timetable for the sale of Girobank, if the sale is to go ahead? As I said, I am totally opposed to its privatisation and hope that the Government will not proceed with the sale. But if they are intent on going ahead, I hope that they will guarantee to all concerned that Girobank will be maintained as a viable business with a successful future.
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. Does the hon. Gentleman have the consent of the hon. Member for Bootle (Mr. Rogers) and the Minister to take part in the debate?
§ Mr. Stott
I congratulate my hon. Friend the Member for Bootle (Mr. Roberts) on raising this important issue. I must record, speaking from the Opposition Front Bench, that this is a most unsatisfactory procedure by which the House may have an opportunity at least to debate this issue—in a few minutes—on a Thursday at just before midnight. After all, we are discussing the employment prospects of 6,000 people in Bootle and elsewhere and an important banking institution. This is a most unsatisfactory way of dealing with this important subject.
My hon. Friend raised many issues that are worrying Labour Members and those employed in Girobank, and, I suspect, millions of customers, of whom I am one, of the bank. We want to know what is to happen to the bank with which we have banked since it came into existence. My hon. Friend posed reasonable questions. So far, we have not received satisfactory replies to the letters we have written, to the parliamentary questions we have tabled or to other forms of probing in which we have indulged.
My hon. Friend pointed out that the right hon. and learned Member for Rushcliffe (Mr. Clarke), the Minister's predecessor, made a statement in the House last June about the Government's intentions towards Girobank. I understood that on that occasion he laid down the parameters governing the way in which the bank would be sold. They were drawn in such a way as to 615 exclude the major clearing banks from bidding, to avoid any problem with the Monopolies and Mergers Commission, and I could appreciate that.
Since then, the only information that I and my hon. Friend—and he represents the town of Bootle and those who work in Girobank there—have received is from the newspapers. We read almost daily that the Government are in real trouble over the sale because nobody wants to buy it.
My hon. Friend referred to Westpac. It has pulled out, as has the Royal Bank of Scotland. If such organisations are not showing interest in purchasing Girobank, what prospective purchasers are there? Which organisations are bidding? Is the Minister beginning to move the goal posts, as it were, from where his right hon. and learned Friend put them in June of this year? According to The Independent, the Government are considering entertaining a bid from the Co-operative bank and Unity Trust or a management buy-out. If that is the case, the parameters that his right hon. and learned Friend laid down in June certainly have been shifted.
The Minister is an honourable man and he must come clean on this matter. The House, the people and especially the employees of Girobank have to know whether the ground is changing. We believe that it is, for the simple reason that when the Minister's right hon. and learned Friend came to the House in June we told him that it was a bad idea. We opposed the privatisation of Girobank on ideological grounds. We also said that it was the wrong time to do it. The bank was just about to break into the new era of financial services. I think that we will be proved right. The bidders for Girobank are virtually non-existent.
It is an insult to the House that it must deal with a matter of such importance at this time of night during an Adjournment debate. My hon. Friend the Member for Dagenham (Mr. Gould) and I met the unions from Girobank earlier this evening. The vast majority of those who work in Girobank are employees of the Post Office, and have been for 20, 25 or even 28 years. Their pension provisions are locked into the Post Office pension arrangements. As I understand it, once the bank is sold those pension arrangements will run for only a further 10 months. They will then, under this new liberated Government scheme, have to find other ways to fund their pension scheme. That is disgraceful. Five thousand people who were employed by the Post Office three or four months ago have now been told, following an arbitrary decision by the Government, that their pensions are in jeopardy. If the Minister thinks that they will accept that with equanimity, he is wrong.
My hon. Friend and I have posed a number of questions that the Minister must answer.
§ 12.2 am
§ The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Tony Newton)
In the nine minutes remaining to me I shall do my best to respond to the many questions that have been posed. I hope that Opposition Members will understand if the pressure of time makes it difficult to respond as fully as I would have wished.
I congratulate the hon. Member for Bootle (Mr. Roberts) on obtaining this Adjournment debate, but resist the suggestion that as Cabinet Minister responsible for this matter, coming to the House to answer an Adjournment 616 debate raised by the Member of Parliament with the most direct interest because his constituents are affected, constitutes an abuse of the House. It constitutes an entirely proper response—[Interruption.] I was picking up the comments of the hon. Member for Wigan (Mr. Stott), rather than anything that the hon. Member for Bootle said.
I thank the hon. Member for Bootle for his courtesy in letting me know in advance the specific questions that he would ask, to which I shall reply. I had intended to say a word about the history of the Girobank and about the Government's general attitude towards privatisation. The House is certainly familiar with the latter, and the history was touched on by the hon. Gentleman.
It was against the history of Girobank and the privatisation policy that the Government have successfully pursued in many areas of industry and commerce that we considered the position of Girobank. As the hon. Gentleman said—there is no dispute between us on this —it has been successful in advancing its business. However, the banking market is rapidly changing and is extremely competitive, and we concluded that if Girobank was to achieve its full potential, to sustain its success, and to grow further, it would need to match its competitors in the freedom and flexibility with which it could respond to changing circumstances and new opportunities. It has to be free from the inevitable constraints that go with being a public sector undertaking, for which Ministers are answerable in the ways familiar to the House. Thus, on 7 June the then Chancellor of the Duchy, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), informed the House that the Government and the Post Office had agreed to offer Girobank for sale to a financial institution or other suitable company.
The announcement of the proposed sale generated a wide response, with many inquiries, and on 25 July a confidential information memorandum was sent to those who had registered interest. To protect the future interests of the bank and the taxpayer, the Government and the Post Office Board outlined certain factors of which account was to be taken in evaluating bids. They covered price, acceptability to the Bank of England, the prospect of widening choice for the general public in banking services, the importance of the link between Girobank and Post Office Counters Ltd., capability to develop and expand Girobank's business, and arrangements to enable management and employees to share directly in the future success of the business. Those who expressed an interest in buying the bank were informed that the Government and the Post Office Board would also be concerned—I ask the hon. Member for Wigan to take note of this—to ensure that proper regard was paid to the interests of the employees.
When bids were sought, it was indicated that they should be submitted by the end of October. The current position—this answers some questions—is that the Post Office has informed me that the sale of Girobank by tender has not produced, within the hoped-for time scale, a buyer able to meet the requirements set for the sale. However, it remains the case that the Government and the Post Office Board are committed to transferring Girobank to the private sector through the sale of the bank to a suitable purchaser. Therefore, the Post Office and the financial advisers for the sale are holding further confidential discussions with potential purchasers, taking into account the factors set out by my right hon. and learned Friend the 617 Member for Rushcliffe in his statement on 7 June. This process is likely to take some time. I will, of course, continue to keep the House informed.
Before coming to the other questions raised by the hon. Member, it may be helpful if I say something about the factors that we think have contributed to the position I have described.
Although it provides all the services that a modern bank provides, Girobank has a number of distinctive features. It uses the 20,000 or so outlets of Post Office Counters Ltd. Counters are open six days a week, and over longer hours, compared with high street banks. On the other hand, the staff are not employed by Girobank, as the hon. Gentleman said, and provide services to others in addition to Girobank. Over the past three years—another factor to be borne in mind—Girobank has further developed a distinctive telephone and mail banking system.
Having given the matter careful consideration, we now think that for selling a specialised bank like Girobank the time scale indicated in July was too demanding and may not have allowed prospective bidders adequate time for assessing and understanding the special features of Girobank, the potential to which those features give rise, and how that potential might fit their future strategy. For that reason, we considered it right to allow more time.
Let me now refer—I hope fully—to the specific questions of the hon. Member for Bootle to which I have not yet responded. He asked why we had not published the names of shortlisted bidders. The simple fact is that several bidders asked that their bids should be regarded as entirely confidential unless they were selected as the purchaser. They are entitled to ask that, and, in my view, entitled to have their wishes respected. In those circumstances, the Post Office Board is not in a position to release any names.
The hon. Gentleman asked me about what he described 618 as a "relaxation of the conditions" of the statement of 7 June. My right hon. and learned Friend said those factors would be taken into account in evaluating bids. As I have said, those same factors will continue to be taken into account in the further confidential discussions with potential purchasers.
I was also asked about the price. That is one of the factors which the Post Office has set which will be taken into account. The sale is by tender, and no fixed price is, or was, set in advance. There has never been any question of insisting on a particular price. The point is that we must be satisfied that it represents an acceptable deal for the taxpayer.
I have been asked whether a bid from a clearing bank or a large building society would be acceptable. As my right hon. and learned Friend said on 7 June, no one is ruled out from putting in a bid. We would judge a bid from a clearing bank or a large building society in the light of the same factors as a bid from anyone else.
I have also been asked the same question in respect of a management buy-out. As I have said, no proposal is ruled out, but we doubt whether a management buy-out would be likely to satisfy the factors set out by my right hon. and learned Friend. A bid from a consortium is certainly not ruled out just because it is made by a consortium. It would be judged on its merits.
The Government remain convinced that the bank would benefit from the freer and more competitive environment of the private sector. Both we and the Post Office Board remain committed to transferring Girobank to the private sector through the sale of the bank to a suitable purchaser. Although the objective has not been secured as quickly as we had earlier hoped, we are continuing to work with the Post Office Board to achieve it, because we believe that it is in the interests of the bank and those who work in it that we should.
§ Question put and agreed to.
§ Adjourned accordingly at nine minutes past Twelve o'clock.