HC Deb 23 July 1991 vol 195 cc1113-30

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sackville]

8.19 pm
Mr. Henry McLeish (Fife, Central)

I am pleased to have the opportunity to discuss the privatisation of the Scottish Bus Company with particular reference to the sale of Fife Scottish, the bus company which covers the five parliamentary constituencies of Fife, including my own.

I regret having to bring this matter before the House because the debate is about the incompetence of the Scottish Transport Group, the insensitivity and duplicity of Scottish Office Ministers, and the intimidation of the management-employee buy-out of Fife Scottish by Stagecoach Holdings Ltd. They were the key players involved in the sale of Fife Scottish and, in a sense, the debate is about the failure of the management buy-out to buy its own future. What began as the sell-off of the best bus company in Britain has become the sell-out of the Fife Scottish bus group and the abandonment of the clear principle of which the Government often talk but on which they rarely act.

It is interesting to refer back to the earlier debate on the Ports Bill because there was much talk about support for management-employee buy-outs but, as the debate ensues, we shall find that, in the Scottish Office in particular, there is no enthusiasm for such a step towards the privatisation of a particular company.

The intimidation, insensitivity and incompetence to which I have referred has left 850 of my constituents very bitter, bewildered and betrayed. They have been frustrated and blocked by an unprincipled and unprecedented set of circumstances and by a coincidence of factors that I should more appropriately describe as a conspiracy by certain groups to kill the hopes and aspirations of a very enthusiastic work force, including the management.

The tragedy is that the employees and management of Fife Scottish did nothing wrong. They had worked enthusiastically for three years to set up the context in which to bid for their company, their jobs and their future. They had invested large sums of money from their earnings into the management-employee buy-out. They had made tremendous gains in efficiency to turn Fife Scottish into not just the best bus company in Britain, but the most profitable. They also brought the skills, enthusiasm and commitment to the service that they deployed for the benefit of the people of Fife. The simple question is, why did they fail when they had everything going for them, and when the Government purported to support the idea of a management-employee buy-out? That is the key issue that I wish to discuss.

Before I get to the technical aspects of the debate, I refer to the Scottish Office. A group of Tory Ministers said that they supported management-employee buy-outs. They invested £50,000 in the quest for the buy-out within the company, but when the bid was made it was rejected out of hand. Of course, that group of Tory Ministers wanted to get the highest price for the company, but when Fife Scottish put in a second bid, the Scottish Office Ministers again rejected it. I hope that the Scottish Office will publish the detailed bids from Stagecoach Holdings to satisfy my curiosity and that of the employees as to whether it submitted a bid that was not heavily qualified by conditions that were dealt with in secret.

The group of Tory Ministers made it quite clear that Fife Scottish could obtain no assistance from public funds, although the Scottish Office was happy to sit and see the Scottish Development Agency invest £500,000 of taxpayers' money in Stagecoach Holdings, thereby giving it a competitive advantage in terms of the security of its equity base. We heard from Scottish Office Ministers that they wanted a quality bus service, so why did they sell out to a company with no track record of services in Britain, a company with an unenviable record of employment conditions and a reputation for tough talking, asset stripping and anti-competitive practices? That was the quality handed down to the people of Fife by Scottish Office Ministers.

The employees, the people of Fife and I might say that this was nothing more than characteristic Tory hypocrisy. We could also say that it was a breach of good faith, but the tragedy is that the charges against the Government go much deeper than that. The story that must be told this evening is about the role of the Scottish Office, the Scottish Transport Group and Stagecoach Holdings.

To set the scene for the details that will follow, I draw the Minister's attention to the private meeting attended by my hon. Friend the Member for Dunfermline, East (Mr. Brown). We warned the Minister at that time that we had heard from Deloitte, which was advising the Scottish Transport Group, that the level playing field was fast disappearing. There would seem to have been no continuing enthusiasm for the management-employee buy-out and it was implied that perhaps there had been too many management-employee buy-outs.

We also heard that the Scottish Transport Group had completely bungled the estimate of sales and proceeds from the privatisation process, so it appears that, as Fife Scottish was well back in the list of sales, Ministers were looking for the highest bid and excluding all considerations of quality, of management-employee buy-outs and a host of other considerations which were important to people whom I represent. We advised the Minister that those concerns had been expressed by the STG and from Deloitte and that in confidence we were willing to exchange our concerns with him.

The Minister said—and confirmed in a letter—that we should have no fears and that it was a level playing field. Of course, the Scottish Office ministerial team was still wedded to the idea of giving management-employee buy-outs a fair wind. We were also reassured two weeks before the bid that there was nothing wrong and nothing to be upset about.

As for the bidding process itself, Stagecoach Holdings had put in a bid almost £2 million in excess of the valuation of the company's assets. We believe the figure to have been £9.1 million—the Minister can correct or confirm that figure. That meant that the bid was, we believe, more that £1 million above the Fife Scottish bid which, in turn, was £1 million more than a realistic valuation of the company's assets. One does not have to be a financial genius to work out that if one bids way above the asset value of a company, it is extremely difficult to get the necessary financial support.

Indeed, the first act of sabotage carried out Stagecoach Holdings was to put in a loss-leading bid. The company had upped its turnover in Britain from about £28 million to nearly £100 million in about two years. It could deploy assets and investment and, at a stroke, put the fledgling management-employee buy-out at a competitive disavantage, so that is what it did.

From the moment of the first bids, known as the sealed bids, it was clear that the company was loss leading in a way that would destabilise the management-employee buy-out. Ministers may say, "That is the marketplace, and if a company wants to loss lead, that is fine." But Scottish Office Ministers have a responsibility not to be carried away by a company with assets but whose record on quality is dubious, to say the least. Some consideration should have been given over and above the final deliberations to the management-employee buy-out, which was a fair bid based on a fair appreciation of the assets. The bid by Stagecoach Holding Ltd. was not that type of bid.

Now we come to the heart of the matter. There were two sealed bids—one for about £8.1 million and the other, we believe, for about £9.1 million. Because Fife Scottish had bid realistically it found, to its amazement, that it had been outbid by Stagecoach Holdings and was apparently being given short shrift by the Scottish Transport Group, Deloitte and, it would appear, by the Scottish Office.

Despite that financial pressure at an early stage, Fife Scottish obtained a commitment for the extra £1.1 million from the Bank of Boston and put in another bid to the Scottish Office. That bid was competently submitted—there was never any doubt about that. Indeed, I quote from a private and confidential letter from Mr. M. S. Roxburgh, commercial and planning executive to Mr. Stuart of Fife Scottish Omnibuses Ltd.: If prior to completion a new competitive offer is made, STG is obliged to make the contents of such an offer known to the Secretary of State, and there may be no alternative but to consider that offer. It is therefore in your interest"— that is, in the interests of Fife Scottish— to be able to complete the transaction as soon as possible. STG will not be obliged to recommend to the Secretary of State acceptance of the highest or any hid. The STG itself then reneged on the principles that it had agreed with the Secretary of State for Scotland, and which were part of the legislation that went through the House.

I will tell the shabby tale of incompetence that ensued after the second bid was received, but first I shall give the details of the technical background to the bid. Following submission of the formal offer by Touche Ross on behalf of Fife Scottish on 24 April, Touche Ross was engaged in discussions and correspondence with the STG. The question of increasing the price in the management-employee buy-out's former offer was discussed. The important aspect was that the STG did not reply to letters dated 24, 28 and 29 May from Touche Ross.

Consequently, Touche Ross wrote to the Parliamentary Under-Secretary of State, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) on 7 June 1991, and Henderson and Jackson, the solicitors acting for Fife Scottish, wrote on 10 June to the STG, with a copy to the Secretary of State for Scotland. Again, no replies were received.

I will spell out what that shabby process meant in practice. Fife Scottish timeously submitted a bid on 24 April. On 9 May it got in touch by telephone with the Scottish Transport Group. On 24 May Touche Ross wrote a letter to Mr. Roxburgh of the STG: I refer to our telephone conversations today and on 9 May when I explained that it might be possible for the management team to consider an increased offer for Fife Scottish if that became necessary. I understand that you will have advised the relevant parties of this and it may now be helpful to provide you with further information. The telephone call of 9 May was not passed on to the Scottish Office. I ask the Minister to confirm or deny that when he replies. The letter went on to suggest that a new offer of £9.1 million was being submitted, and to offer to meet representatives of the STG that week. Again, that was not done, because there was no response to the letter. Finally, Touche Ross's letter said: I should be most grateful if you would ensure that this information is conveyed to the Scottish Office and I trust that I shall hear from you prior to any final decision. No action was taken; there was no response.

After the letter that referred to 9 May and 24 May, another letter was sent on 28 May, again to Mr. Roxburgh, referring to telephone conversations on 24 and 9 and a previous letter sent on 24 May: regarding an increase in the offer from the MEBO team at Fife Scottish … I find this surprising when the offer from the MEBO team is close to the rumoured £9.1 million from Stagecoach, particularly in the light of competitive issues surrounding East coast bus services. There has been no attempt whatsoever to negotiate acceptable terms with the MEBO team and I must ask you to give further consideration to our request for a meeting". Again, no action was taken. The letter was not even acknowledged.

Exasperated, Touche Ross again wrote to Mr. Roxburgh, who was obviously an avid reader, but not so good at sending letters on to the Scottish Office or replying to the people who had sent them, as follows: I refer to our telephone conversations on 9 May, and 24 May and my letters dated 24 and 28 May, to which there has been no response. I have heard indirectly that these approaches have not been properly considered as they did not represent a formal offer. If this is indeed the case. I find it astonishing that you have been unable to advise me of your position, to enable the offer of the management and employees to be properly considered. I should like an explanation as to how your approach can be compatible with the requirements of the relevant legislation. The letter ended: I must insist that this offer is communicated to the Secretary of State for Scotland without further delay and that you acknowledge receipt of this letter. The House has guessed it in one—no action was taken, and no response was given.

The company had intimated on 9 May that it wanted to submit a formal bid and to have further discussions. Yet between 9 May and the time that the Scottish Office was willing to make a formal announcement on 29 May there was no reply to eight representations to the STG. That is disgraceful. It may involve a great deal more than a Fife Member of Parliament heaping disgrace upon the STG. We must ask what the role of the STG is. That is simple— it is handling the privatisation. Taxpayers are paying Deloitte hundreds of thousands of pounds to advise the STG and for it in turn to advise the Scottish Office.

Will the Minister tell the House whether, before 29 May, he knew of any of the representations made to the STG, and to Mr. Roxburgh in particular? More specifically, was the hon. Gentleman aware that on 9 May, a few days after the sealed bids were submitted, Fife Scottish, as was allowed for in the privatisation document, wished to discuss a new way forward and to meet either the STG officials, Scottish Office officials or Ministers? These points are crucial to my argument, and I hope that the Minister will deal with them in his reply.

The Minister may want to comment on another interesting point. This whole shabby process continued until the Fife Members received letters dated 28 May confirming that the Scottish Office would be making a formal announcement on 29 May. It is now quite clear that Stagecoach was given preferred bid status on 23 May; indeed, we believe that a deposit was lodged with the Scottish Office on 20 May. So in essence, we were to be given a formal announcement nine days after the debacle unfolded, and after the whole process had been sewn up by Ministers and the Scottish Transport Group.

At 9.20 am on the day on which I received the letter from the Scottish Office, I telephoned the Minister and asked whether he had received any further representations regarding a bid. My judgment was that the Minister had not received any further representations and I asked him to contact the Scottish Transport Group to ascertain what had happened to the formal bid which had come in by telephone on 9" 24 and 28 May and which had then been faxed to the STG on 29 May and conveyed to the Scottish Office on the same day.

The important point is that it was a competent bid. The question that must be posed is what level of incompetence led the STG not to bother the Scottish Office ministerial team with any of the discussions and bids until the very day on which the Scottish Office was to make a formal announcement. Was the STG guilty of a dereliction of duty in not consulting its political masters at the Scottish Office? My judgment is that it was.

There is another, more serious, point, however. Did Scottish Ministers know about the discussions, telephone conversations and bids, and, if so, why did they do nothing about them? It seems to me that we need an inquiry into what Mr. Roxburgh, the commercial and planning executive of STG, and Mr. Elwyn, the chairman and chief executive of STG were doing between 9 May and 29 May. Not only was their behaviour disgraceful; it was a gross dereliction of duty not to pass on important information affecting the future of 850 employees. I hope that the Minister will respond to that.

Two weeks later, after the Minister had withdrawn the announcement of 29 May, the Secretary of State confirmed that he was proceeding with the bid after due consideration. Let me quote from the letter of 7 June advising me that, after deliberations, Stagecoach Holdings Ltd. was to be given preferred bid status: I do however wish to emphasise that I am satisfied that the sale process has been properly conducted in accordance with the Disposal Programme and that the objectives of the Disposal Programme in this case will be met by proceeding with the sale of Fife Scottish to Stagecoach. It is obvious, following the three days in the Court of Session, that the STG intimated to the Secretary of State for Scotland on 29 May the existence of the final offer. It is quite clear that the right hon. Gentleman did not exercise his discretion to look at the bid sensibly, because he was swayed by the advice given by STG to the effect that, because it had come in after the sealed bid process, it should not be considered. I believe that the ministerial team at the Scottish Office is in dereliction of its duty because it did not take the new offer seriously and, indeed, because it did not know about it until the eleventh hour. That crucial point is germane to my argument.

Fife Scottish did not lose. It could never win, because there was a conspiracy of forces. The incompetence of the Scottish Office and STG prevailed, and Ministers made the decision regardless of quality of service, of the management-employee buy-out consideration and of the company record of Stagecoach Holdings Ltd.

The whole shabby tale does not finish there, however. I can report to the House that, before the judicial review was heard in the Court of Session, my hon. Friends the Members of Dunfermline, East (Mr. Brown) and for Kirkcaldy (Dr. Moonie) and I had a meeting with the senior management of Fife Scottish on a Saturday evening at which we were told of the company's decision to pull out of the judicial review process.

When asked why, the company's representatives gave a very forthright answer. The bus industry had heard from Stagecoach Holdings Ltd.—in characteristic style—that if Stagecoach lost in the Court of Session, and if Fife Scottish secured the contract, Stagecoach would come into Fife and destroy the newly fledged MEBO operation. Two of the directors decided that they had had enough, and I can understand why. At that point, the Bank of Boston withdrew its funding, with the result that the financial structure of the company nearly collapsed. Following frustration at the incompetence of the Scottish Office, we now have the first signs of intimidation by Stagecoach Holdings Ltd.

Fortunately, the courage of the employees and the finance of the Transport and General Workers Union came to the rescue, and Fife Scottish decided to proceed with the judicial review. The House will understand how the 850 employees felt. For three years, they had done nothing wrong. They had been treated with contempt by the Scottish Office and now, in the marketplace, they found that they were dealing with a predator who would stop at nothing to secure the bid and who was prepared to threaten to come in and destroy their company. I find that sickening in the extreme—but that was part of the process in which Stagecoach was involved.

There is another serious matter that I wish to raise in connection with this affair, and I have written to the hon. Member for Tayside, North (Mr. Waker) to tell him that I am raising it. The Glasgow Herald of 26 February 1990 reported that my hon. Friend the Member for Cunninghame, North (Mr. Wilson) had had a discussion with the hon. Member for Tayside, North in the Committee that considered the legislation: Mr. Wilson said: 'The question which now arises is, when the various parts of the Scottish Bus Group come up for sale, will he'"— the hon. Member for Tayside, North— 'be lobbying for management-employee buy-outs, which is supposed to be the Scottish Tory policy, or will he be lobbying for Stagecoach, because the two will be in direct opposition?"'. It gives me no particular pleasure to say this, and I am not a judge of the activities of hon. Members—there are appropriate Committees for dealing with such matters—but in the Dunfermline Press and West of Fife Advertiser on Friday 31 May, we read: Last-minute bid stops bus sell-off … Tayside North Tory MP Bill Walker who is also a Stagecoach director said he had written to Ministers expressing his concern at the turn of events. He said 'The decision they made originally was the right one.'". How did he know? I do not know whether it was the right decision or the wrong one. Clearly the hon. Member for Tayside, North has extra-sensory perception—or, at least, an unusual insight—into what was happening.

After that article in the Dunfermline Press, the Sunday Mail reported: Mr. Walker expressed his concern about the delay in a letter to the Scottish Office. He said, 'The original decision made by Ministers was the right one.' He was not available for comment last night. The Daily Record reported on 11 June in an article entitled "It's War on the Buses": But last night Mr. Walker, MP for Tayside said"— I want hon. Members to note the next word— 'We stuck to the rules for bidding for Fife Scottish and won fair and square. If anyone is suggesting I have done anything improper, they had better have proof to back it up.' I had a meeting with Mr. Brian Souter, the chairman of Stagecoach Holdings, in Westminster Hall cafeteria. Mr. Souter may be a good businessman, but he has an awfully slack tongue. He said to me, "Mr. McLeish, don't be silly. Mr. Walker has been doing the same as yourself and Mr. Brown. He has been lobbying intensively on our behalf and of course, not only is he a director of Stagecoach (Malawi) Ltd"—which I find an interesting idea—"and Stagecoach International Ltd., but he is a paid consultant." I bow to the greater wisdom of my colleagues in this place, but his behaviour outraged and incensed the people who had fought for three years and then found that there was a conspiracy of interest in the Scottish Office, in this House and within Stagecoach Holdings which frustrated their admirable hopes and aspirations for the future.

I feel very sad that this matter has to be raised. I hope that a Committee of this House which deals with such matters, would want to receive the submission that I will put forward about this matter and that it will be considered once more.

To complete the story of the sell-out of those 850 employees, I refer to another comment made by Brian Souter in Westminster Hall cafeteria. He said that, if they managed to take over Fife Scottish, he would destroy the competition of Rennies and Moffat and Williamson within nine months. He said, "That's the way we operate."

Will the Minister confirm that I sent him a letter on 7 June advising that we had serious information about anti-competitive practices around the country involving Stagecoach and that we had details of transactions in the bus industry which could result in Stagecoach taking over north of England firms which already had an investment in Scottish bus companies? I received a reply to my letter from the Minister on 10 June which was illuminating, but unhelpful. He wrote: With regard to points you make about Stagecoach's competitive activities within areas of their existing operations, I suggest that, if you have any evidence of anti-competitive practice, you draw it to the attention of the Office of Fair Trading. That seemed reasonable, but notwithstanding the fact that in the procedures for the disposal of the companies within the ambit of the Scottish Bus Group, those anti-competitive practices had been mentioned. It was stated that, if there was a hint of any company closing down its competitors, that would be a serious issue which should be addressed. What happened? There was a dismissive letter from the Scottish Office advising that the Secretary of State for Trade and Industry should be contacted for further discussions. That was not done at the time, but it will be done now.

A tragic situation has developed which brings no credit on Scottish Office Ministers for having been involved in such a shabby and duplicitous process. The privatisation of Fife Scottish has been highly irregular and unprofessional in the extreme, and it provides a shocking insight into the tawdry behaviour of what employees in my constituency can describe only as a complete whitewash of their aspirations and a determination to sell to Stagecoach, regardless of whether there was an MEBO involving £50,000 of taxpayers' money and regardless of quality and the £500,000 invested in Stagecoach through the Scottish Development Agency. We have now reached the stage where I cannot trust the Scottish Office to deal with any further privatisations of the Scottish Bus Group, if the experience of the Fife team is anything to go by.

We are looking at some fairly serious accusations of intimidation, incompetence, insider dealing and indifference, on behalf of the Scottish Office, to all the activities around it. I have met the Comptroller and Auditor General, Sir John Bourn, who is interested in an investigation into the matter before he considers the wider aspects of privatisation of the bus group in Scotland. I will pass my material to him after this debate and on the completion of the court case.

I want to refer the activities of the hon. Member for Tayside, North to the Select Committee on Members' Interests. I want an investigation by the Scottish Office into why the STG refused on eight occasions to respond to letters or telephone calls from Fife Scottish and, in turn, did not pass on any of the information to Scottish Office civil servants or Ministers. Of course, I would like the Scottish Office, if it was technically possible, to hold Stagecoach Holdings Ltd. to account for its intimidation, destabilisation of the management buy-out because of the loss-leading bid, and anti-competitive practices which could result in Stagecoach Holdings Ltd. controlling every bus route and service between the north of Scotland, the east coast of Scotland, through the central belt of Scotland and into Glasgow. All that has happened after the Government said that bids would be received from two or more companies and that they could not be on a contiguous basis. What hypocrisy that was when we consider what has happened.

What has happened may be disturbing the conscience of the Scottish Office, but there is nothing much that we can do now. The employees have a new owner, and I wish them well. Stagecoach Holdings has a group of men and women whom it does not deserve. For the benefit of the travelling public in Fife and for the benefit of the employees, I hope that it will go from strength to strength.

I believe that there is enough evidence, however, for a wide-ranging inquiry into the issues that I have raised. The behaviour of STG has been so deplorable and disgraceful that the chairman and chief executive should be suspended until the matter has been resolved. That would be a small price to pay for the betrayal of 850 employees and the best bus service in Britain, which has been passed over to a shady group with no track record and no good employment conditions and which has made hasty promises which I fear will not be kept.

8.57 pm
The Parliamentary Under-Secretary of State for Scotland (Lord James Douglas Hamilton)

The hon. Member for Fife, Central (Mr. McLeish) has used some strong language, but I reject his allegations. The procedures that were adopted followed the disposal programme. I shall refer to the details later on, but four management-employee buy-outs have succeeded, and they have succeeded because they have won. The hon. Gentleman referred to a meeting that we had. I made the position clear at that time. He asked for a level playing field. Of course, preference is given to management-employee buy-outs in terms of the disposal programme.

The hon. Gentleman asked about letters that were received and considered by the Scottish Transport Group. No formal increased bid was received until about 10 am on 29 May. When we received that formal offer from the Scottish Transport Group we agreed that it would be right further to consider the position. I reported that decision to the hon. Gentleman and we discussed it on that occasion. I can assure the hon. Gentleman that all bids received were fully and properly considered. I cannot go further than that. However, in view of the fact that the appeal period relating to the court action which was recently raised has not yet expired, there is not much further than I can say on that point.

Mr. McLeish

That simply is not good enough. I have the private and confidential letters, which I am quite willing to make available to Scottish Office civil servants and Ministers. It was quite clear, as early as 9 May, in the telephone conversation on 24 May, and then in letters on 24, 28 and 29 May that a bid—a higher bid—was being considered and that representatives were anxious to discuss further with the STG or the Scottish Office. Is the Minister telling me that he knew about those conversations prior to the telephone conversation that I had with him on the morning of 29 May?

Lord James Douglas-Hamilton

I am not saying that. What I can give the hon. Gentleman is the chronology of events. The Department was aware that, on 24 May, Malcolm Roxburgh of the Scottish Transport Group received a phone call from Touche Ross that the MEBO would come up with a further sum. That was followed by a letter from Touche Ross on the same date, indicating a possible increase and a wish to discuss. However, I must stress that the letter which made a formal increased offer was the letter of 29 May, and the hon. Gentleman and myself discussed it on the programme. At the time, the Secretary of State was away. I went into the matter thoroughly and I believe that it was absolutely competent for the Secretary of State to consider the matter further in the light of the circumstances and the facts that the hon. Gentleman had put before me. It was absolutely right that he should follow the best legal advice. That has been done. The disposal programme has been followed and the winner was absolutely clear.

Mr. McLeish

I must again repeat that that simply does not square with the facts. Can the Minister answer the question that I asked? Did he see, was he aware of or was he informed about—any way that he would like to receive this question—the 9 May telephone conversation, the 24 May telephone conservation, the 24 May letter or the 28 May letter? Of course, he was eventually made aware of the 29 May offer. Can he confirm whether he was informed about those previous contacts desperately seeking some discussion of a revised bid?

Lord James Douglas-Hamilton

The hon. Gentleman is suggesting that a formal offer was made on 24 May. That is not the case. A formal offer was made on 29 May. The hon. Gentleman is asking what I knew. I knew very well on 29 May, because the hon. Gentleman had telephoned. I went into the matter very thoroughly. We came to no rushed decisions on the matter. Indeed, an announcement was about to be made that morning, and that announcement was postponed. The circumstances were gone into very thoroughly by all the Scottish Office lawyers and I am glad to say that it was absolutely clear at the end who the winner was.

I have listened very carefully to what the hon. Gentleman has been saying. He is concerned about the privatisation of the SBG, but most particularly concerned about the sale of Fife Scottish. As the hon. Gentleman is aware, my right hon. and learned Friend the Secretary of State announced on 10 June 1991 that he had granted consent to the Scottish Transport Group to sell that company to Stagecoach (Holdings) Ltd., which is based in Perth and owns and operates a number of bus companies in the United Kingdom and overseas. The hon. Gentleman has raised a number of questions relating to that consent, in view of his support for the unsuccessful bid made by the management and employees of the company. He has questioned whether the sale has been properly conducted.

As the hon. Gentleman knows, the sale has been the subject of proceedings in the Court of Session. The management buy-out team submitted to the court a petition for judicial review seeking a reduction of the Secretary of State's consent. That petition was dismissed on 11 July. We have this week received the text of Lord Coulsfield's opinion, but the hon. Gentleman will appreciate that we have not yet had time to consider its terms in any detail. However my right hon. Friend welcomes Lord Coulsfield's decision. I understand that no appeal has been lodged against the court's judgment and that there is unlikely to be one. Nevertheless, the period for an appeal has not yet expired and, in those circumstances, it would be wrong for me to comment in detail on the circumstances of my right hon. Friend's decision.

The hon. Member for Fife, Central has criticised my hon. Friend the Member for Tayside, North (Mr. Walker). I can say only that my hon. Friend made Ministers aware of his interests in all the dealings involving Stagecoach at the beginning of the privatisation programme. I cannot comment on the—

Mr. Brian Wilson (Cunninghame, North)


Lord James Douglas-Hamilton

On this point?

Mr. Wilson

I am grateful to the Minister for giving way. This is interesting. He has said that his hon. Friend the Member for Tayside, North (Mr. Walker) made his interest known from the outset of the privatisation process. Does the Minister mean from the outset of the Bill's consideration by the House?

Lord James Douglas-Hamilton

He made his position absolutely clear to Ministers from the time at which he had an interest. We never had the slightest doubt about that point throughout the process—

Mr. Wilson


Lord James Douglas-Hamilton

No, I have made my position absolutely—

Mr. Wilson


Lord James Douglas-Hamilton

If the hon. Gentleman wants to table a written question, he may do so. I cannot give him the specific date. I have been aware of my hon. Friend's interest throughout the process.

Mr. McLeish

Will the Minister give way?

Lord James Douglas-Hamilton

No, I cannot—[Interruption.] My hon. Friend the Member for Tayside, North is an honourable man and the House should so regard him.

Mr. McLeish


Lord James Douglas-Hamilton

No, I have answered that point and want to go on to the next. The hon. Gentleman can come back later if he wants.

I cannot comment on the detail of the bids, which are commercially confidential, but I do not accept the hon. Gentleman's suggestion that there was anything improper about the conduct of the sale or about the way in which my right hon. Friend the Secretary of State reached his decision. I believe that the work force have said that they will co-operate with the new owners, and I welcome that. I am sure that Fife Scottish will have a strong future as a bus company and will continue to serve the travelling public in Fife very well, as it has in the past.

Mr. McLeish


Lord James Douglas-Hamilton

I should like to answer the hon. Gentleman on one point. He recently visited the Scottish Office with a deputation of employees from the bus company and handed in a petition, containing a considerable number of names. The petition suggested that the present arrangements that are operated by Fife regional council, by which pensioners and the disabled can travel free, will be ended by the sale of Fife Stagecoach. I am glad to confirm that that is not the case. Stagecoach proposes to run Fife Scottish as a bus operating company, providing timetabled services. Fife regional council's concessionary fare scheme will continue to apply to the service as before.

Although I cannot comment in detail on the sale, it may he helpful if I explain the background to the sales of the subsidiaries of the Scotish Bus Group.

Mr. McLeish

The Minister is going off the subject.

Lord James Douglas-Hamilton

I am not off the subject; I am on it. I must again repeat to the hon. Gentleman that we are within the time scale for an appeal, and if he—[Interruption.] I must make it absolutely clear to the hon. Gentleman that if those concerned wish to appeal, they have the right to do so, so I choose my words with great care.

Mr. McLeish


Lord James Douglas-Hamilton

I shall give way to the hon. Gentleman, but reluctantly.

Mr. McLeish

The Minister can speak freely tonight because he knows that there is no cash available for any appeal in the Court of Session, which would cost thousands of pounds. What we have heard tonight allays none of the fears that have been expressed in this House —[Interruption.] I shall continue despite the involvement of the hon. Member for Eastwood (Mr. Stewart). None of our fears have been allayed, because the Minister has chosen to miss all the essential points. There was never any doubt about the legalities; what we are talking about are the procedures involved. It is clear that the Minister was not aware—this information was not available to him through his civil servants or the STG—that new bids, new telephone conversations and new letters were around and about. Will he confirm that he did not know until the 29th?

Lord James Douglas-Hamilton

The hon. Gentleman must appreciate that he is raising a legal question about whether a properly constituted legal bid was submitted on an earlier date. All I can say to him is that I was absolutely certain in my own mind on the morning that we spoke together on the telephone that I was absolutely correct to consider that bid further, as was the Secretary of State. The fullest possible legal advice was taken and accepted by the Secretary of State before a final decision was arrived at. I think that that was correct.

The Transport (Scotland) Act 1989 provides the Secretary of State with power to draw up a disposal programme for the whole of the STG's undertaking with the exception of its shipping operations for which the Act makes provision for transfer to the ownership of the Secretary of State. That leaves the Scottish Bus Group which, before implementation of the disposal programme began, consisted of 10 separate bus subsidiaries.

The disposal programme was published on 6 February 1990 and copies have been made available in the House. Since it is however now some time since the disposal programme was published, I think it would be helpful if I were to refer to certain passages in it which set out the objectives of the programme.

The disposal programme was prepared by my right hon. Friend the Secretary of State after consultation with the Scottish Transport Group. The programme provides for the disposal of the subsidiaries and the arrangements to be made in preparation for the dissolution of the Scottish Transport Group. Section 2(1) of the Transport (Scotland) Act 1989 set out the main objective of the Secretary of State in preparing the disposal programme. That is the promotion of sustained and fair competition between the SBG companies and between them and other bus companies. That objective is being promoted primarily by offering the Scottish Bus Group for sale as 10 separate undertakings with a view to the establishment of independent companies operating within a competitive framework in the bus industry.

The general approach which the disposal programme requires STG to adopt is to offer the companies listed in the programme for sale on an individual basis. The disposals are required to be effected generally by means of sale and purchase agreements relating to shares in the subsidiaries disposed of. The programme does, however, provide for subsidiaries not disposed of in this way to be wound up prior to the dissolution of STG.

The appendix sets out in detail how the companies will be advertised for sale on a phased basis. They will be placed in the national trade press. All those conditions were followed and an information memorandum would be made available for a nominal charge to prospective purchasers who registered an interest in a company, provided that STG is satisfied that the prospective purchaser has sufficient financial backing or the prospect of sufficient backing.

Prospective purchasers will be invited to submit indicative bids and other relevant information and may be invited to have discussions. Sealed bids—

Mr. McLeish

On a point of order, Mr. Deputy Speaker. Will you make a judgment on the relevance of the wider implications of the matter to the specific issue of the sale of Fife Scottish to Stagecoach Holdings?

Mr. Deputy Speaker (Mr. Harold Walker)

I did not follow the hon. Gentleman. Is he complaining that the Minister is going into matters which are wider than those which he raised?

Mr. McLeish


Mr. Deputy Speaker

That is not a matter for me. The debate on the motion for the Adjournment can be wide.

Lord James Douglas-Hamilton

The hon. Gentleman assumes that there will be no appeal. I am not entitled to make any such assumption. I will proceed on that basis. He is unrealistic if he pursues the debate on any other basis.

Sealed bids will be required to be submitted to STG by a closing date. When seeking the Secretary of State's consent for a sale, details of all bids received for that company together with a statement of its reasons will have to be submitted. Following the Secretary of State's consent, arrangements will be made with the successful bidder for completion of the sale. Clearly, the disposal programme provides that discussions will take place as necessary between prospective purchasers and a negotiator acting on behalf of STG before the submission of sealed bids by purchasers.

STG reserves the right not to invite a formal bid from any prospective purchaser and is not required to give any reason for not inviting any such bid. STG is required to obtain the Secretary of State's consent before deciding not to invite any bid. STG is not obliged to recommend to the Secretary of State acceptance of the highest or any other bid for a particular undertaking. No disposal will take place until a management-employee team has had a reasonable time in which to lodge a bid.

Bidders are required to include all relevant information in their bids, including the following details: names of the principals involved; details of the shareholding and financial structure proposed for the company or group of companies the basis for employee participation, and any limits on the transfer of shares; a statement of their future intentions for the business; the price being offered for the company; and so on.

As I mentioned earlier, the legislation sets out the main objective in preparing the disposal programme as being the promotion of sustained and fair competition in the bus industry. It provides that no buyer of a bus company, including persons connected with that buyer, will be allowed to buy any other bus companies operating in contiguous areas, as defined in the programme. There is also an overall limit of two on the number of companies that one buyer can acquire. These restrictions apply to the nine area-based operating companies, but not to Scottish Citylink Coaches. In order to promote the competition objective, STG is also required to make inquiries of intending bidders to establish what links they have or might intend to have with other companies in future.

I am well aware that the hon. Gentleman sets high store by the provisions in the disposal programme concerning a preference for bids involving employee participation. The Secretary of State has a statutory obligation to have regard to the desirability of promoting the acquisition by the employees of a controlling interest in the companies to be sold. For that reason, preference is given to bids involving the acquisition of such a controlling interest.

Such bids can take the form of a management-employee buy-out, MEBO, or an employee buy-out, EBO. In the case of MEBOs, at least 25 per cent. of the ordinary shares in the company should generally be owned by or on behalf of non-management employees to satisfy the requirement of adequate non-management employee share ownership. It is open to bidders to make whatever arrangements they consider appropriate to satisfy that requirement, and non-management employee share ownership could well be above that figure.

As a general principle, shares should be available to all management and non-management employees on equal terms. The shareholding arrangements could be by means of an employee share ownership plan ESOP, by arrangements for employees to buy shares, or both. Where a bid, which involves a controlling interest by employees along the lines that I have specified, is otherwise comparable with a third party bid, a price preference will be given to the bid involving employee ownership. Further passages in the disposal programme set out arrangements regarding pensions and travel concessions.

I stress that four of the sales so far have been to management-employee buy-outs: Lowland Scottish, Scottish Citylink, Eastern Scottish and Kelvin Central Buses. Northern Scottish has been sold to Stagecoach. Midland Scottish was sold to GRT Holdings, and Strathtay Scottish to the Yorkshire Traction Company Ltd. Clansman Travel and Leisure Ltd. and Rapsons Coaches have jointly been awarded preferred bidder status in the sale of Highland Scottish.

An important matter to which the disposal programme does not refer is the publication of sale proceeds. The position is that the total proceeds for the sale of all the SBG's subsidiaries and the prices obtained will be made public only after the privatisation process has been completed. Earlier publications of prices realised could prejudice the sale process.

The hon. Gentleman wanted a chronology of events and I shall give him that chronology as it is known to the Scottish Office. On 8 February 1991, the sale advertisement appeared, 11 information memoranda were issued and the indicative bids date specified. On 7 March 1991, indicative bids were due and five were received. In the week commencing 18 March 1991, the agreed purchasers were advised that 25 April would be the final bid date. On 25 April, five formal bids were received. The Stagecoach bid was the highest. On 8 May, the STG board considered the bids and recommended Stagecoach. On 9 May the STG requested the Secretary of State's consent to make the sale to Stagecoach. On 17 May—

Mr. McLeish

Will the Minister give way?

Lord James Douglas-Hamilton

No, just let me finish the chronology. The hon. Gentleman can intervene later.

Mr. McLeish

On that very point. After mentioning the board meeting on 8 May, the Minister moved to 9 May. Was the Scottish Office informed on 9 May of the telephone conversation held between the STG and Touche Ross about the interest of Fife Scottish in readjusting that bid?

Lord James Douglas-Hamilton

To the best of my knowledge, I was not, but I shall have to check that from the papers.

On 17 May, there was a submission to Ministers. On 23 May, the Secretary of State made it clear that he was content and the letter of consent was issued to the STG. On 24 May Malcolm Roxburgh of the STG received a phone call from Touche Ross, as the hon. Gentleman staged, that the MEBO would come up with the further sum. That was followed up by a letter indicating that the increase was possible. The hon. Gentleman is putting a legal argument on whether that constituted a formal offer. It was not recognised as such and was not treated on that basis.

On 27 May Stagecoach signed a deposit agreement. On 28 May the deposit cheque was received by the STG's bank. On 29 May the Touche Ross letter was delivered, the hon. Gentleman telephoned me, and I called off the announcement which was due to be made two or, perhaps, three hours later that morning, in order to look thoroughly into all the circumstances because it was clear that a formal increased offer had been made.

On 25 May, the intended press announcement was cancelled. On 30 May, a letter from the Scottish Transport Group said that its board was still of the view that the sale to Stagecoach should go ahead. On 5 June, there was a submission to Ministers that recommended consent should be granted to Stagecoach. On 10 June, there was a press announcement and a new consent letter was issued. On 13 June, a petition for judicial review was advised and papers were received. On 14 June, a petition was heard in court and the MEBO failed to obtain interim interdict, but an order was made for a first hearing of the judicial review. The first hearing, on 3 July, was adjourned and on 10 and 11 July, the hearing continued and the petition was dismissed. The appeal period expires on 1 August. That is the chronology of events.

However disappointed the hon. Gentleman may be at the outcome, I have to tell him that the advice of the lawyers was followed to the letter, which we believe was absolutely right. If he has any grounds for questioning the judgment of Scottish Office lawyers and Ministers, the proper course is to resort to the courts. The hon. Member's MEBO has done that. If I had been in any doubt, the MEBO would have won. I was in no doubt, and the MEBO lost. That is the reality; this is not a discretionary matter but a matter of fact. Four MEBOs have won and the final sale is now under consideration. In earlier discussions, the hon. Member for Cunninghame, North (Mr. Wilson) said that we were merely paying lip service to the matter, but four of the MEBOs have won, which is a substantial number.

I cannot go further than I have gone tonight, as the matter could conceivably come up on appeal in court. Therefore, I have chosen my words with care.

9.22 pm
Mr. Brian Wilson (Cunninghame, North)

My contribution will be brief, first because I do not want to interfere with the second Adjournment debate, to be introduced by my hon. Friend the Member for Glasgow, Springburn (Mr. Martin), and secondly, because the subject of this Adjournment debate has been set out not only ably but brilliantly by my hon. Friend the Member for Fife, Central (Mr. McLeish)—in contrast with the Minister's performance.

I say without malice that the speech that we have just heard from the Minister—if "speech" is not too strong a word—was a disgrace. I thought that the long passage that he blabbered out while reading from notes was particularly bad—it was clearly written about two years ago. The Minister did not even change the future tense into the past tense. I hope that the Hansard writers will do him no favours. He told us what was going to happen—it was an old speech written when the process was under way.

The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart)

My hon. Friend was quoting.

Mr. Wilson

The Parliamentary Under-Secretary of State says that his hon. Friend was quoting. In that case, we look forward to seeing several columns of quotations in Hansard tomorrow. The Minister's speech was a disgrace with no attempt to address the detailed points raised by my hon. Friend the Member for Fife, Central.

I wish to iterate some of the perspective on the matter. I spent many long hours in Committee listening to similar feats of eloquence from the Minister. No one doubts the Minister's good will or his integrity. We all knew that, at that time, the Minister was the front man for much darker forces. We did not know the entire details of how the privatisation of the Scottish Bus Group would work out, but we were certain that Stagecoach—unloved, unwanted, but so influential—would end up with two large slices of the action. That is what we knew from day one, and that is precisely what happened. It did not matter too much how that was to be achieved—it was part of the end goal and, by heavens, one way or another it would be achieved.

It is a dreadful story. [Interruption.] The hon. Member for Dorset, North (Mr. Baker) is welcome to intervene if he understands the issue, but if he wants to sit there muttering, that is his hang-up. The case relating to Fife is a dreadful one and the Minister has conspicuously failed to answer the detailed questions posed by my hon. Friend the Member for Fife, Central about the eight representations made between 9 and 29 May. Either those representations were not reported to the Scottish Office, or they were and they were ignored.

How is it that the central figure in the privatisation, Mr. Roxburgh, the solicitor acting for the Scottish Transport Group, could receive such communications from interested parties without responding to them? How could he still be acting within the terms set out for him by the Scottish Office? How could that happen?

The Minister should consider the eight communications that my hon. Friend the Member for Fife, Central has detailed. He should tell us what was done about each of them. He should tell us in what sense Mr. Roxburgh has been called to account for his actions, or lack of them, on the eight representations made between 9 and 29 May.

I want to consider the role of the hon. Member for Tayside, North (Mr. Walker), which has been an issue for a long time. I regret that the hon. Gentleman is not present. I have said most of what I am going to say tonight before, but I would be much happier saying it if the hon. Gentleman were here. It is remarkable that such a diligent director of Stagecoach has not made it his business to be in the House tonight.

I remember the Committee stage of the Transport (Scotland) Bill very well, as does the Minister, I am sure. I remember particularly the performance of the hon. Member for Tayside, North, who was diligent in his attendance. However, the hon. Gentleman did not make many speeches in Committee, but, occasionally, he leapt into action. Anyone who studies the record of the Committee will find that the hon. Gentleman repeatedly intervened to represent the interests of Stagecoach.

On one occasion the hon. Member for Tayside, North nipped out of the Door to telephone the Stagecoach management. He then came back to refer to the interests of Stagecoach. Every time we drew attention to the hon. Gentleman's behaviour, he said, reasonably, that he was acting in his role as a constituency Member. Although Stagecoach is not based in the hon. Gentleman's constituency, he pointed out that some of his constituents worked for it. Those were the grounds on which we were led to believe that the hon. Gentleman took such an active interest in the proceedings in the good name of Stagecoach.

The Committee stage ended in 14 February 1989. Imagine our surprise a few weeks later when we read a reference to the hon. Member for Tayside, North as a director of Stagecoach. Imagine our further interest when we read in the Register of Members' Interests that in April 1989, at most six weeks after the Committee stage and some three months before the Third Reading was completed, the hon. Member for Tayside, North—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. If the hon. Gentleman is implying some impropriety on the part of the hon. Member for Tayside, North (Mr. Walker), who is absent, he is not going about it in the correct way. There is a procedure laid down that he should follow. It is not the procedure that he is following tonight.

Mr. Wilson

I cannot imagine that by reading from the Register of Members' Interests I am attributing impropriety.

Mr. Deputy Speaker

As I understand it, the hon. Gentleman was suggesting that the hon. Member for Tayside, North had expressed certain views in the proceedings on the Bill prior to the entry in the Register of Members' Interests. That carries serious implications, and the hon. Member for Cunninghame, North (Mr. Wilson) must not pursue them in the manner in which he has. He must raise them through the proper procedures laid down.

Mr. Wilson

I am grateful to you, Mr. Deputy Speaker, and I will restrict myself to factual matters. I will not speculate. The factual matter is that the Committee stage ended on 14 February 1989 and the Register of Members' Interests shows that, in April 1989, the hon. Member for Tayside, North—

Mr. Deputy Speaker

Order. The hon. Gentleman is either not listening or is disregarding what I said. The hon. Gentleman is now clearly suggesting some impropriety on the part of the hon. Member for Tayside, North.

Mr. Jimmy Dunnachie (Glasgow, Pollok)

My hon. Friend is reading from—

Mr. Deputy Speaker

Order. The hon. Gentleman must not raise the point in that way. The appropriate way is to write to the Select Committee.

Mr. Wilson

It is difficult to question the Minister without referring to these matters.

Mr. Deputy Speaker

Order. The hon. Gentleman is referring to the conduct of the hon. Member for Tayside, North. That is not a matter for the Minister, but a matter for the hon. Gentleman. If the hon. Member for Cunninghame, North wishes to refer to the conduct of the hon. Member for Tayside, North, he must not raise the matter in the House. He must write to the Select Committee.

Mr. Wilson

I am referring to what was said by my hon. Friend the Member for Fife, Central. He has read reports in the press in which the hon. Member for Tayside, North claimed that he approached the Minister, using the word "we" in terms of Stagecoach, to raise certain concerns about the interests of Stagecoach with the Scottish Office. I ask the Minister directly: did the Scottish Office receive such representations from the hon. Member for Tayside, North?

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman will not persist in disregarding the advice of the Chair. My attention has been drawn to the relevant passage in "Erskine May". On page 389 it says: Where one Member makes an allegation against another Member, he is required to do so in writing to the Registrar, who refers the allegation to the Committee and informs the Member concerned. By implication, the hon. Member for Cunninghame, North is making an allegation against the hon. Member for Tayside, North, who is not here tonight. He should instead follow the procedure that I have described.

Mr. Wilson

I shall leave this subject entirely. My hon. Friend the Member for Fife, Central and I will write to the Select Committee on Members' Interests. I stress that I have made no allegations. The hon. Member in question was advised by my hon. Friend the Member for Fife, Central of his intention to raise these matters on the Floor of the House tonight. I have asked the Minister a direct question, which is germane to the debate: did he receive the representations to which I referred? The whole business stinks to high heaven.