TRANSPORT HOLDING COMPANY BILL

HL Deb 22 February 1968 vol 289 cc597-636

4.50 p.m.

Second Reading debate resumed.

LORD HURCOMB

My Lords, I am well accustomed to waiting for the bus, and if it is not too trivial a matter for your Lordships to return to, I should like to say a word or two about certain aspects of this Bill. I would not dispute the force or importance of many of the points which the noble Lord, Lord Nugent of Guildford, made. But I think there are answers to many of them, and for my part, looking at the matter historically, as I feel bound to do, I feel that the acquisition of the principal remaining private interest in public passenger transport by the already nationalised group, which it is one of the main objects of this Bill to finance, is a logical and, in this direction, almost a culminating step in a long process.

Your Lordships will, of course, have an opportunity of considering the whole question of public passenger transport when the Transport Bill reaches this House. I confess I am not very clear as to what the future of that transport is intended to be. If a huge national bus company is now created, will it again be split up under the various area schemes into a number of component parts? Much of that is not very clear to me. But I should have thought that the difficulties could be avoided if the organisation in the immediate future is kept sufficiently loose.

Perhaps your Lordships will permit me to explain why I regard this Bill as a natural development. Thirty years ago many transport men and many managers of transport undertakings, both private and municipal, were themselves agreed that the time was ripe over wide areas for merging some of the local tramway and bus undertakings in larger bodies. It would have been in the interests of economy and of efficiency, and it would have contributed to the convenience of the travelling public to do so. But the most formidable lion in the path, or at least the lion with the loudest roar, was the acute jealousy which prevailed among adjacent local authorities, and, apart from London, nothing in fact was done.

The Transport Act 1946 provided a machinery whereby areas could be specified and schemes submitted by the British Transport Commission, with a view to establishing new authorities in which undertakings in the hands of municipalities and of the private interests would he merged. Why then did no such schemes come into being? The Minister himself had power to specify areas and to require submission of schemes to him, though I do not recall that he ever made such a request to the Commission. The Commission itself made some moves towards the preparation and submission of such area schemes, particularly in the area of the North-East coast, which looked promising. But the procedures were elaborate; opposition was likely to be strong, and there was always, of course, the possibility that rationalisation of local government boundaries would soon go some way towards rationalising local transport.

We came, however, to the conclusion—and I certainly came to this conclusion—rightly or wrongly, as time went on, that the then Minister, to whom the schemes had to be submitted, and the Government to which he belonged, let alone their successors, would not in the last resort be prepared to coerce important municipalities or to face the Special Orders Procedure in Parliament to which their own orders would have been subject. Whether this was an error of judgment I do not know, and if it was I cannot, as Chairman of the Commission, disclaim my share of responsibility for it, and for not pressing matters to an issue. But it would be a mistake to think that the British Transport Commission did nothing in this field; and this is where our action is closely relevant to the present Bill.

In the review of public passenger transport which they were required to make, the British Transport Commission in their very early days thought it would be a sound initial approach to the problem of reorganisation if they could acquire the whole interest in those privately-owned groups which were willing to negotiate with them and in which they already had a 50 per cent. interest inherited from the railway companies. We quickly came to terms with the Tilling organisation and with Scottish Motor Transport, and had the backing of the Government of the day in issuing the transport stock required for this purpose. The noble Lord, Lord Hilton, said that we had discussions with the British Electric Traction Company. I do not recall that we had any prolonged or serious discussions because, as I said just now, I was anxious to proceed as far as possible by agreement. But it is quite true that at a later stage I did have talks with Mr. Hartley Drayton about a closer association between his undertaking and our own. They were confidential, and I can say nothing more about them. But we took over these two very large groups, Tilling's, which represented most parts of England, and Scottish Motor Transport, which had almost a monopoly in Scotland.

The management of these new interests presented no difficulty. We left management to the local concerns, subject only to the use of common services and such general direction as their previous owners had insisted upon. In effect, the Commission acted as a holding company. We did not try to centralise, and had no wish to do so, and I should have thought that that is part of the answer to the very forcible criticisms Lord Nugent made as to what may happen if the process of taking over the private interests in which the nationalised undertaking already had a 50 per cent. share was completed. I feel myself that those difficulties could be avoided.

But, of course, I cannot dispute the risk that, once an undertaking is nationalised, labour pressures may be increased. It has been said, in answer to that point: what about Midland Red?—that it is not altogether one way. That argument Lord Nugent has pressed. But I think the experience of the last twenty years has shown that a public passenger transport undertaking can be efficiently managed in public hands, can earn satisfactory revenues, and I see no reason myself why that should not be true if the present acquisition is sanctioned financially by Parliament. I said we did not come to terms with the B.E.T., but, for my own part, and speaking for myself—I cannot claim to recall the views of my colleagues at this stage—I did not, and I do not, consider that we were in any way failing in our duty because we did not, or could not, immediately gobble up B.E.T. as well as the other two great private interests.

I knew from my own past official experience and from my own use of their services as a citizen that the B.E.T. companies, like Southdown and Midland Red, were extremely efficiently managed. They were by no means devoid of a proper sense of duty to the public, and they were ultimately under the control of the Traffic Commissioners. I should like to say how much I agree with the noble Lord, Lord Nugent of Guildford, in what he said about the efficiency of that type of administration and control through the Traffic Commissioners. I had a great deal to do with the choice of the original team and I followed their work for a great many years with the closest interest.

On top of all that, speaking of B.E.T., as a 50 per cent. shareholder we could feel satisfied with the return which we received from our investment, and perhaps, again speaking for myself, I thought there might be something to be said for running these two systems of complete ownership and 50 per cent. ownership side by side for a little longer. So, to cut a long story short, we left well alone. But now circumstances have changed. Some of the gilt may be off the gingerbread, and indeed some of the subsidiary undertakings apparently have difficulty in running their rural services any longer at a profit. It is my view, although many of your Lordships will disagree with me, that if they have to be given public money they should, together with their more profitable activities, be in public hands.

I assume, of course, that the price now being paid for B.E.T. is just and fair to both sides; that the Government are satisfied that they are not paying too much and that the company is being fairly treated. In these matters there is always the possibility mat the Government may pay one lot of interests on the profits of the past and another lot of interests on the prospects for the future, with the result that the capitalisation of the Government organisation tends to get overloaded. But here there must have been close bargaining. I think the Government must be assumed to have safeguarded their own interests, and, so far as the company is concerned, surely the answer to any doubts on that score is that they have agreed and accepted the terms.

I hope I have not dwelt too long upon the past, but I submit that, so far as a large part of the financial provisions contained in this Bill is concerned, they represent a logical development in the evolution of the organisation of public passenger transport in this country. There is nothing revolutionary about the proposal. It is not even a 100 per cent. proposal; it is taking only the remaining 50 per cent. of what the nationalised undertaking already has, and in that respect I think there is no alternative but to accept these terms as just carrying further the action taken by the British Transport Commission twenty years ago.

Now, as we know, the Minister has far more ambitious plans. If she gets the authority to proceed with them which she is now seeking from Parliament in another Bill, she will wisely have cleared her path, when she comes to face the municipal lions, by having led captive already the only large remaining non-municipal member of her menagerie. I feel inclined to wish her luck when she comes to face the construction of these future schemes, which, as I said, are really only carrying on a process which many people thought should have been begun thirty years ago and which were carried a considerable way twenty years ago but which have since marked time.

5.37 p.m.

LORD TEYNHAM

My Lords, this is a very small Bill with two clauses, but I suggest it has very great and grave implications. Before referring to these matters perhaps I should disclose that I have an interest, as I am a director of one of the British Electric Traction Companies—Southdown Motor Services Limited—which is, if I may say so, one of the best and most efficient bus companies in the country. Fifty per cent. of it is owned by British Rail, and we get on very well indeed.

This Bill is closely linked with the Transport Bill which is now in Committee stage in another place and which sets out the establishment of a national bus company, to which the assets and liabilities of the Transport Holding Company will be transferred. Under Clause 50 of the Transport Bill, the Transport Holding Company is going to be dissolved. Therefore we are being asked by the Bill which is before the House to-day to increase the borrowing powers of a company which is already in a shadowy condition. I think it is astonishing that at a time when Her Majesty's Government are pleading for financial restraint in all quarters of the public and private sector they should bring before the House a measure to spend a further £70 million of public money. Some £46 million of this money is to be paid out to shareholders, which will undoubtedly increase inflation in the country.

Does the Minister in charge of the Bill really think, for example, that it is a good thing to cut the road building programme in order to nationalise buses and coaches? The investment of the British Transport Commission, and later the Railway Board, in the British Electric Traction Group of buses has worked well for over twenty years. Why do Her Majesty's Government want to change it? I am afraid I cannot accept that this change is merely a culminating step, as has been suggested by the noble Lord, Lord Hurcomb. It is much more than that, and I would say that the whole conception of the Bill is hostility to private enterprise, and not to increase efficiency.

I suggest it is no argument to say that as 80 per cent. of the bus services are now run by public organisations it would be much better and more efficient to have all of them under public ownership. What we on this side of the House should like to know from the Minister is why he thinks they will run better, more efficiently or more cheaply than by private enterprise? Is there any justification for assuming that public ownership has provided a better bus service? I suggest that Her Majesty's Government so far have failed to provide this evidence. In fact, the right honourable lady, the Minister of Transport, in her White Paper, used these words: The main network of public transport is no longer an appropriate activity for private companies ". What an extraordinary statement to make! And on what is it based? I can see no justification at all for that statement, and I do not think it has ever been proved. Now we are going to have a national bus company which will have no private enterprise against it to keep it on its toes. The Minister of State in another place said: The great advantage is that there will be economies. We will be joining bus companies together and getting a better yield ". Her Majesty's Government must be aware that the head of economic research at the Transport Holding Company, the Company which is to purchase the British Electric Traction shares with this borrowed money, has made it quite clear publicly that he does not agree with the statement in the White Paper which reads: In many of these areas the efficiency of bus operation is hampered by the small size of the undertakings. The head of economic research has stated that: If efficiency is to be measured by costs, there is no evidence that larger undertakings reduce costs. I would ask: How blind can a Government become not to examine more closely the experience and statements of their own specialised people? Have they neglected to study the economic research figures from the Transport Holding Company, indicating quite clearly that with a fleet of 30 buses the average working expenses per car mile is 37d., and for fleets between 31 and 60 buses the figure rises to 39.4d., and at 1,000 buses the figure is 46d. These are certainly very illuminating figures. There is no doubt whatever that an increase in the size of the undertaking will not reduce costs; in fact the evidence available really points the other way.

My Lords, this is not a Bill to provide money for improving the efficiency of our bus transport system. It is a Bill, I must say, based on doctrinaire Socialism and hatred of private enterprise. It is nothing more than that. Her Majesty's Government have frequently said that the whole of the scheme is to be on a commercial basis. I would say that everything points to the opposite direction. Whichever way you look at it, the money under this Bill will have to be raised at a high rate of interest at the taxpayers' expense. Against this, what is the present return on the capital to be invested in British Electric Traction shares? I think it is well known to most of your Lordships that it is approximately 5¼ per cent. I suggest to your Lordships that it is hardly a good commercial transaction to borrow money at 8 or 9 per cent., as interest rates are at the present time, and to receive 5¼ per cent. in return.

I would add that there is a very much more serious aspect to the already agreed purchase of the British Electric Traction shares. I wonder how many of your Lordships are aware that Her Majesty's Government, having done away with investment allowances in 1966, in 1967 negotiated to buy out the largest private bus operator, and then within a few weeks after agreement as to the purchase price announced that investment allowances are to be restored. I suggest that your Lordships consider what would have been the effect on the profitability of the transaction if beforehand Her Majesty's Government had informed the B.E.T. shareholders that it was their intention to bring back the 25 per cent. investment grant for buses. I am afraid I really fail to understand the explanation of this matter by the noble Lord, Lord Hilton of Upton, and I listened most carefully. In the City of London we have a word for such commercial transactions of which your Lordships must be well aware. I would say further only one thing. I think Her Majesty's Government should regret, and I go so far as to say be ashamed, to bring forward such a Bill at the present time of financial stringency, and it should never have reached your Lordships' House.

5.14 p.m.

LORD POPPLEWELL

My Lords, the opposition to this Bill in this House from noble Lords opposite is exactly similar to the opposition put forward in the other place. Noble Lords opposite claim this is a Socialist doctrinaire line of approach. I think your Lordships must be convinced that the only argument advanced against this Bill up to now is Tory doctrinaire policy against public ownership. This seems to stand out a mile. No argument has been put in this House, and, after reading the debate in the other House, I would say no argument has been put forward at all except from doctrinaire private enterprise lines as to why this Bill should not be approved.

I would rather commend your Lordships to the very thoughtful speech of the noble Lord, Lord Hurcomb, who has considerable experience, as we all know, in this line of approach. How true it was when he said the 1947 Act gave powers with a view to developing a publicly-owned bus service; but the nature of those powers was such that it demanded consultation with various areas and various undertakings before a scheme could be produced. I know so well the conversations that took place in the North-East, which it was thought would be a good experimental starting-off point. One of my oldest friends, Alderman Clydesdale, at that time a member of Newcastle City Council, opposed a nationalised public bus service, ardent Socialist though he was, and I know how in his later years he regretted very much the line that he had taken. I think we may take Lord Hurcomb's words that this Bill is a logical development of the principles that were accepted in the 1947 Act as a true statement of fact. It is very regrettable that the principles of that 1947 Act could not be and were not followed up after 1950, with the advent of a Labour Government. But with a majority of only six they had very little elbow room. They were defeated in 1951 and we know what has happened since, with the advent of successive Conservative Governments, who have done their utmost to prevent publicly-owned undertakings, particularly transport, being a success. Everything it was possible to shed from the publicly-owned transport undertakings which was showing a profit was unloaded under the auspices of the Conservative Party Government, and the publicly-owned undertakings were left with the bare bones. This is an historical fact. Wherever we look we see this.

One was not at all surprised to hear Lord Nugent of Guildford's opening remarks that nothing would make this Bill respectable; that it is a partisan measure. The whole of his line of argument against the Bill was partisan. The partisanship is not one-sided, if it exists on this side at all.

LORD DERWENT

My Lords, of course the argument was partisan because we dislike the Bill. It does not necessarily make it Party partisan.

LORD POPPLEWELL

Then that is accepted; the only argument that can now be advanced against the Bill is a partisan argument. It is not a question of merits or logical development or national interest. It is a Tory partisan argument against the Bill. I am grateful to the noble Lord, Lord Derwent.

LORD DERWENT

My Lords, I wish the noble Lord would not misrepresent what I said. I said the Bill is argued against because it is a bad Bill. The argument is partisan in that sense. If that means being partisan, then we are partisan.

LORD POPPLEWELL

My Lords, the words are on record and will, I am sure, be quoted in the future.

LORD DERWENT

Not misquoted, I hope.

LORD POPPLEWELL

The words are on record and will be quoted quite a lot in the future. The noble Lord, Lord Nugent of Guildford, made big play, as he has done on more than one occasion, of a particular reference in a report—he was a member, and I myself way chairman, of the body concerned—drafted in connection with London Transport, because it highlights bad labour relations. There was a sentence in that particular report that referred to labour relations and the difficulty of labour relations. I think it is as well to get this point on record, because this has been used far too often to imply that there were really bad labour relations in London Transport. The particular aspect criticised so much was labour relations at shed level, depot level, regarding rosters. This is not uncommon to London Transport. I agree that there was need for a big improvement of labour relations, in particular in relation to the institution of new rosters at depot level.

LORD NUGENT OF GUILDFORD

My Lords, may I interrupt the noble Lord for a moment? The criticism went far beyond that. It was dealing with the great problem of getting the staff generally to drop their restrictive practices in order to push on with the modernisation of the services. This was the major problem.

LORD POPPLEWELL

My Lords, the Report is there for anyone to read, and the evidence is there for anyone to read; and while in all modernisation schemes, whether they be public or private, there are certain difficulties that arise on both sides, this is the normal sequence. Because these difficulties arose with London Transport so far as the institution of a new type of service is concerned, that is not uncommon to London Transport. It is part of an industrial development that has been taking place for many years, as the noble Lord knows.

The main criticism centred on the labour relations on this depot and rostering business. This is indeed common to bus services as a whole throughout the country. Midland Red, which I have quoted, has had considerable difficulty about this; the Northern General has had particular difficulty; Ribble have had particular difficulties. This is an automatic development, and not only those undertakings, but most municipal undertakings from time to time have considerable difficulties about these rostering developments which take place. Therefore, I think this should be taken in its correct perspective.

The noble Lord, Lord Nugent, also twitted the Government for cutting down on the road programme by something like £90 million in the next few years. At the same time, your Lordships must be fully aware that the road programme, even with these cuts, is running at the highest level it has been at any time—roughly £270 million a year. This is nearly double what the Conservative Party left us when the Government took over in 1964. These things must certainly be taken in their correct perspective.

Now if I may turn to the Bill, first of all let me say how much I welcome it. It is most refreshing to receive what, in effect, is an additional borrowing powers Bill in which permission is asked to borrow additional capital to develop a publicly owned undertaking. Particularly since 1953 we have been used to the Minister of Transport repeatedly coming to the House and asking for additional borrowing powers in order to meet a deficit which had been created by Conservative Party policy. Up to 1953 the British Transport Commission, as envisaged by the noble Lord, Lord Hurcomb, and the Government of the day, was able to show a complete profit. From 1953 onwards the deficits commenced, and the Conservative Government of the day had repeatedly to come to the House to ask for additional moneys, to go into the open market to borrow money at a high percentage to pay the interest on money borrowed at a low percentage. It was a question of paying up to 6⅞ per cent. on money previously borrowed at 3½ per cent. Therefore, it is indeed refreshing for a borrowing powers Bill of this description to come before Parliament with a view to seeking a development of the publicly owned undertakings.

Instead of those undertakings being the whipping boys, as it were, on behalf of the sacred name of private enterprise, and private enterprise getting all the profits, for the first time we are now asking Parliament to approve this additional £70 million in order that the Transport Holding Company may develop still further its policy. This is most refreshing, and it highlights decidedly the differences there are between both sides in this Chamber.

No matter what may be said, I think events have proved that there is no competition. There is no private enterprise competition in so far as bus services are concerned. Attempts have been made by the noble Lord, Lord Teynham, and other Conservative speakers, to assert that there is this element of private enterprise in bus services. Where exactly is it? Before bus services can charge their fares they have to go to the Traffic Commissioners; they have to prove the need for the route; and objections take place on both sides before a monopoly, as it were, is given to a certain undertaking to run on the particular route. This having been done, the fares are then decided; and any bus service company wishing to increase its fares has to approach the Traffic Commissioners before they can do so. Is there any competition in that? Where does the competition lie? Many different bus groups are running in certain areas, and your Lordships must be well aware that there is no "competition" as I understand the word. When my noble friend Lord Shepherd asked where competition came in, of course members of the Opposition were not able to give any reply.

Remember, my Lords, bus services are not an industry. Buses and transport comprise a service. I think the nation has to realise more and more that it is a service as distinct from an industry; and if it is a service it has to face up to the needs of the country as a whole. Where private bus services are running on uneconomic rural routes to-day, we see the services being withdrawn as quickly as possible. There are repeated appeals to the Traffic Commissioners to be allowed to give up a service because it is not profitable. The Traffic Commissioners have difficulty in trying to maintain a service in these areas. Surely, this does away completely with the old idea of competition in that particular direction; but it highlights the service nature of transport. I am delighted that the Transport Holding Company is extending the logical development, as the noble Lord, Lord Hurcomb, said, of the principles accepted by the 1947 Act. Although considerably mutilated by the Conservatives when they were in power, the principles still remain.

In regard to the question of the £35 million, I was delighted to hear that the assessment in the agreement with B.E.T. regarding the compensation to be paid to them, is based upon the actual value of assets, with just £1 million for compensation. The question of the good will, and the question of different values where previous payments of compensation have been made, appear to have gone by the board. I much prefer this question of payment according to a reasonable assessment of values. With these words, I thoroughly welcome this Bill, and sincerely hope that it will go on the Statute Book as quickly as possible in order to allow the Transport Holding Company to complete its negotiations with the B.E.T.

5.30 p.m.

THE EARL OF KINNOULL

My Lords, the noble Lord, Lord Popplewell, I think accused some of my noble friends on this side of the House of not producing any new arguments in relation to this Bill. Perhaps I could say that I did not detect any new argument in Lord Popplewell's speech. In fact, we heard many of the arguments in his last major transport speech. But, worse than that, most of his arguments did not seem to appertain to this Bill at all.

I should say at the outset, as other noble Lords have said, that I am wholly against the proposals of this short financial Bill because at present, when the country's economy is so strained, it is foolish, reckless and imprudent to ask Parliament to approve the raising of a further £70 million to control bus services which are at present doing neither harm to the community nor harm to the economy. I believe that this proposed public investment, whose terms we all knew were agreed even before it came before the other House, will prove a bad investment and is no more than a narrow, idealistic political decision equal in its wastefulness only to the groundnuts scheme.

I should like to concentrate on just two of the many aspects of the Bill. The first is the concept of integration, and what we understand by it. The term "transport integration", as I understand it, is a system which links up road, rail, water and air services, and which offers a continuity and balance of service for both passenger and freight. For the ordinary passenger this concept means that his travelling connections from, say, rail to bus are so organised that the least inconvenience is caused and the greatest efficiency is obtained. This applies also to the freight services. All too often today one finds this concept not being fulfilled by public transport. It is not an uncommon experience to arrive at a station, to get out of the train, and to hurry to catch a municipal bus, just in time to see its tail light disappearing in the distance, and then to find that the next bus is not due for an hour. It is this type of co-ordination which we went to see improved. It does not need a Transport Bill to do this. One noticeable gap in the Goverment's integration policy for transport is the complete absence of account being taken of air services. I hope that when the noble Lord, Lord Shepherd, replies he can say why this has not been included in the Transport Bill.

I am a believer, unlike perhaps some of my noble friends on this side of the House, in fair competition between the major inland transport services, and that many of the hidden subsidies should be balanced up so that each can play their part. Where I disagree completely with this Government's transport policy is where competitive alternative services are abolished, where freedom of choice is eliminated, and where a bureaucratic dictator is perhaps set up to order how and when passengers may travel. This concept of transport monopoly, like so many other monopolies, will, I am sure, never prove workable or acceptable.

The other point I should like to raise is the matter of rural bus services and the T.U.C.Cs. The noble Lord, Lord Shepherd, and the noble Lord, Lord Hilton of Upton, will know that ever since the bus services were considered as an alternative service to the rail service, and ever since rail closures took place there have been constant complaints from users. But although complaints by users of rail services can go before T.U.C.Cs., complaints by users of bus services cannot. This matter was raised by the T.U.C.C. in their last Annual Report. I should like to ask the noble Lord why the powers of the T.U.C.Cs. cannot be extended to include bus services. Surely, if one were to give T.U.C.Cs. this extended responsibility it would give them a better picture of the transport facilities in their area.

This Bill is the forerunner of the major Transport Bill, and is, I fear, only a taste of what its "big brother" will give us in time to come. The Bill is seeking public money to purchase what is generally admitted to be a diminishing asset, and at a price which one is quite incapable of judging as good or bad. It purchases these assets not in a spirit of friendly negotiations between two completely free parties, but in a spirit of determined persuasion which, if unsuccessful, will lead to the use of the iron glove—compulsory purchase powers. The asset which it is to purchase is already wholly-owned by British Transport Holdings, which has received a reasonable return both in interest and in service for many years. Yet its purpose is to hand over the running of this asset from a tried and trusted management to a totally inexperienced National Bus Company.

With these considerations in mind, I should like to end by asking the noble Lord one simple question which I hope he will be able to answer in his reply. What are the economic assessments which have been made by the Government before they commit this £46 million of public money in buying out the B.E.T. interests and their subsidiaries, and what annual return do the Government expect to make on this investment?

5.36 p.m.

EARL FERRERS

My Lords, we have before us this afternoon a tiny Bill, but a Bill whose deficiency of size does not reflect its magnitude of effect. It is indeed a Bill of two clauses, one of which is the Title, but it nevertheless enables the Government to borrow £70 million for the nationalised bus companies. I know that noble Lords opposite will not be surprised to know that this Bill has not been received with great acclaim on this side of the House. Indeed, even the gentle words which the noble Lord, Lord Hilton, used to introduce the measure could not have deceived even him that by introducing this measure he had a tiger by the tail.

I was interested in the speech of the noble Lord, Lord Popplewell. He must have pleased his Front Bench, since he at least gave them great support. It must have been encouraging for them to hear at least one lone bird singing their praises. One would have thought that with a Bill of such great magnitude, involving the nationalising of buses, they would have succeeded in getting some other supporters, rather than just one, to support this great cause. However, perhaps they are not quite as enamoured as the rest of their Front Bench. The noble Lord, Lord Popplewell, complained that we on this side of the House were objecting for purely partisan reasons. He said he had read the proceedings in another place in Hansard and had found no arguments put forward why this Bill should not go through. That is a curious argument for suggesting that therefore a Bill should go through. I could not help feeling that the noble Lord must have read the Hansard of another place with his eyes shut, because it was loaded with arguments why this Bill should not go through and why it was unacceptable to many people.

I shall merely keep my arguments down to four this afternoon, and perhaps the noble Lord would like to know at least four reasons why I do not like the Bill. First, I believe that it is unnecessary; secondly. I believe that it is wildly inflationary; thirdly, I believe that the timing of the Bill, if timing means anything at all, is quite disastrous; and, fourthly, I believe it is playing Party politics. I have yet to hear one reasonable and cogent argument to show that the buses at present under private ownership will he run better under public ownership from the point of view of the users, of the community in general, and indeed from the point of view of efficiency.

The noble Lord, Lord Hilton of Upton, very sensibly avoided the pitfall of saying that by nationalising these buses we should be getting economies of scale. As my noble friends Lord Teynham and Lord Nugent of Guildford pointed out, that argument was blown to pieces by Mr. Glasborow, who showed that, on the whole, the larger the undertaking the more expensive becomes the running of the buses. What then is the argument for making an even larger unit, when the Government themselves recognise that this certainly will not make running the buses any cheaper and will probably make them more expensive? The noble Lord, Lord Hilton, said that there would be rationalisation and a tidying-up of routes, and that we should do away with overlapping. But the Traffic Commissioners are here at the moment to prevent just that from happening, and they have always done their jobs very effectively. I cannot believe that it is therefore necessary to spend £70 million in order to achieve that.

LORD SHEPHERD

My Lords, may I correct the noble Earl? It is not £70 million in order to buy out B.E.T.

EARL FERRERS

My Lords, the noble Lord accused my noble friend of splitting hairs. I think he could possibly be accused of doing the same thing. The Bill is for £70 million.

LORD SHEPHERD

My Lords, I must correct the noble Earl. There is a vast difference—it is not splitting hairs—between £46 million and £70 million.

EARL FERRERS

My Lords, the Bill refers to £70 million, but I accept the point of the noble Lord.

I think the noble Lord, Lord Hilton, said something about the value of this large public holding, the Transport Holding Company, being safeguarded from the inevitable changes in the bus industry which lie ahead, and that this Bill would do that. I find that a wholly unconvincing argument. He never said how that would be achieved, and yet that was adduced as being an argument for the Bill. I cannot see that these privately operated companies, which are mostly doing an excellent job of work on slender profit margins, can be expected necessarily to do better or to run more efficiently if they are put into one large national bus company.

If one looks back, as my noble friend Lord Nugent of Guildford suggested—and I think he was right to suggest that —to January 16, which was only a month ago, one realises that it was the day on which the Prime Minister, after searching investigations, announced a whole series of Government cuts because of the dire state of the economy. Your Lordships will not need reminding of the defence cuts, the education cuts, the cuts in the Health Service, the prescription charges, the cuts in the road building programme and so forth. That was at 2.30 p.m., and at 4.30 along came the Government to ask Parliament in another place to give a Second Reading to a Bill to allow them to borrow a further £70 million in order to nationalise the buses. I am bound to say that this kind of thing, and this kind of timing, make people incredulous of the Government's real intention and determination to cut their own spending, and therefore of the need of the general public to cut theirs. When people see the Government embarking on expenditure of this magnitude and spending sums of money which are utterly unnecessary, it makes them feel that the situation cannot be so bad, and they ask why they should pull in their horns.

Everyone knows the huge difficulty which any Government have in curtailing expenditure in fields where policies are already in operation. To stop work on a half-built hospital or a half-built road is obviously ridiculous. But the one thing that a Government can do is at least to delay, if nothing else, the commencement of new policies involving expenditure. Therefore the mere timing of this Bill, irrespective of its merits or demerits, must surely rank as injudicious in the extreme.

I know it can be said that Government expenditure of this type, when assets are being transferred from one source to another, is totally different from that incurred when real calls are being made on capital, labour and materials. I accept that it is different, and that where capital, labour and materials are purchased as a direct result of Government expenditure the effect on the economy is more obvious. But, equally, I believe that it is one of the most dangerous arguments to be used, and one that is used far too frequently nowadays, to say that the Government can embark on expenditure such as this, and of this magnitude, without its really affecting the economy at all. Of course it affects the economy. Where is the £70 million coming from? Does it come from taxation, does it come from printing Treasury Bills, or is it going to be borrowed at 7 per cent. or 8 per cent. to produce a return of only 5¼ per cent., as my noble friend Lord Teynham said? What happens to the difference of 2¾ per cent.? Where is the £70 million going to?—or if the noble Lord would prefer me to be a little more accurate, where is the £46 million going to? It is going to the Transport Holding Company and thence, by devious routes and via the British Electric Traction group, to shareholders.

What do the Government think the shareholders are going to do with this new-found hard cash? The noble Lord makes a yawning expression as if this is irrelevant, but it is not irrelevant. What are the shareholders going to do with this money? They are not going to put it under their beds and take it out of circulation. Presumably it may be used for purchasing other shares, where it will compete with other capital, or it may be used for other general forms of expenditure. But whatever the choices open, and whichever choice is eventually made by the individual shareholders, that sum of money is going to find its way into the economy by one way or another at a time when that is highly undesirable, and, in its way, it can only be inflationary.

One feels that all this is being done in order to fulfil the political ambition which was put forward by the Minister of Transport, that we should have a truly Socialist transport policy. I do not blame her for having political ambitions of this nature; indeed, I think it is right for such political ambitions to be held. I only wish I thought those ambitions were the right ones. But what I believe is wrong is that this Bill, which is not going to result in greater efficiency but is going to involve extra and unnecessary Government expenditure should be introduced at a time when, of all things, Government expenditure should be kept to the absolute minimum.

The only thing I find it possible to commend in this Bill—and this is outstanding and I do commend it—is its brevity. I commend this to the Minister and suggest that she looks at it again in conjunction with the Transport Bill. Perhaps she might be so impressed with the success and the extent of this Bill that she will be minded to put down an Amendment to the Transport Bill to leave out everything after Clause 2.

5.49 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, I do not intend to delve too deeply into the pros and cons of the nationalisation of the buses and coaches, and particularly into the immediate purpose of this Bill which is to enable the Transport Holding Company to complete the purchase of shares in the British Electric Traction bus group. But before I leave the question of the pros and cons of having a nationalised bus company, I should just like to draw attention, as several other noble Lords have done already, since it cannot be emphasised too much, to the paper that Mr. Glasborow, the head of the Economic Research Unit of the Transport Holding Company, presented to the Public Transport Association. Your Lordships had the statement quoted to you so I will not quote it again. But I would just say that the most important point in that statement was that he said that there was no evidence, so far as he could see, that the larger the size of the undertaking the greater the efficiency and the greater the saving in cost. He also went on to say that there was no evidence that, in relation to buses or transport generally, the public preferred a large undertaking. My Lords, we have had the evidence of the railways to bear that out. I would not think that the nationalisation of the railways had been an unqualified success. We have far higher fares; and certainly there is no evidence of greater efficiency. Nor is there any evidence that the public prefer the nationalised railways to the old private companies.

However, what I am really concerned about regarding this Bill is how it affects the economic welfare—the survival, in fact—of our country. Several other noble Lords have drawn attention to this aspect, but I want to quote a few figures. In my speech in the economic debate a month ago, when speaking on the cuts, I drew attention to the fact that to all intents and purposes the first cuts of £320 million planned for 1968 were in fact being swallowed up. As I pointed out at that time, we had just had Supplementary Estimates through Parliament amounting to £120 million. I then went on to point out that for the next year, 1969, when the estimated cuts were £400 million odd, the increase in public expenditure that had already been estimated before those cuts were made was going to swallow those cuts to the extent of £800 million odd. I think that was the figure I quoted at that time.

Since that debate, the Treasury have presented some further Supplementary Estimates for the financial year, and those Estimates, which have been presented during the last four weeks, come to £562 million. I have to be fair, of course. There has been £120 million saved elsewhere, so one has to deduct that. Your Lordships can do the sum yourselves, but it is about £440 million. Now this is a very serious matter, because the £300 million cuts have completely gone. They have vanished, like Alice through the looking glass. They are not there. I quite understand that, in Supplementary Estimates, Parliament is meeting the bill for policies already decided upon, but it is nevertheless a very serious matter.

It is extraordinary that we had all this wailing and gnashing of teeth—with such headlines in the Press as "Cabinet in crisis", and so on—over these cuts of £300 million, but now when we have £440 million increased expenditure added by these Supplementary Estimates nobody raises a murmur. I have not seen or heard it mentioned at all in the Press or anywhere else. It is quite fantastic. Really, the Government's economic policy reminds me of an American barn dance that was rather popular in this country about twelve years ago. I think it went something like, "You take one step forward and two to the rear". The Government's economic policy is akin to that. I would have hoped that, with public expenditure in 1968 of £15,378,000 million—I am sorry; £15,378 million—

LORD LEATHERLAND

My Lords, can the noble Viscount assure us that he has that figure right, after all? He seemed to have some difficulty with it. Perhaps he would repeat the last one.

VISCOUNT MASSEREENE AND FERRARD

Yes, my Lords. It is £15,378 million.

LORD LEATHERLAND

But the noble Viscount said "thousand million". I thought he had gone wrong somewhere. He must be careful with his noughts. If he were to issue bus tickets like that he would soon be in trouble.

SEVERAL NOBLE LORDS

Order, order!

VISCOUNT MASSEREENE AND FERRARD

The Government do not split hairs over a few million. Anyway, it is the astronomical figure of over £15,000 million. I should have thought that, with that astronomical figure of expenditure and with the cuts swallowed up, the Government would have been only too anxious not to embark on any further unnecessary expenditure. But, no. Here we have this proposal to borrow another £70 million. Really, my Lords, the Government remind me of a bankrupt staying in the Ritz Hotel and saying that he owes so much that a little extra on the bill is neither here nor there. This is really the rake's progress: it is not responsible government.

I could have some sympathy with this Bill if it was a viable enterprise, but we have no evidence to support that. I believe my noble friend Lord Teynham said that the current income return on bus companies was 5½ per cent. The bank rate is 8 per cent., so presumably the Government cannot borrow this money under 8 per cent.—at least, not legally, although I suppose that in certain circumstances Governments can do things which private people would perhaps call illegal. Anyway, they cannot borrow it, or I cannot see how they can borrow it, at under 8 per cent. You cannot call that a viable enterprise. Of course, it may well be that the bus companies may increase their returns when they are nationalised. That may well be; but the whole evidence is against it. And, as I have heard other noble Lords say, with the increasing ownership of the motor car it would appear that the bus companies are a declining service.

There is one other aspect of this Bill that worries me, and that is the extra £24 million. Of the £70 million, £46 million is going to B.E.T. and there is, I understand, going to be this £24 million for contingencies and such like. It is the contingencies which worry me, because of course that is a very wide term, and it is obvious that this money is going to be used for the nationalisation of other bus companies. It probably will not stop there because this Bill, in company with the Transport Bill, will give the National Bus Company vast powers. It will be able to have garages, repair shops, taxis, factories for manufacturing cars, and in fact any form of manufacturing that it desires to embark upon. It is just another instance of using the taxpayers' money—money created by private enterprise—to compete unfairly with that sector of the economy, the private sector, which produces the wealth of the nation. The noble Lord, Lord Shepherd, sighs; but it is a completely true economic fact.

LORD SHEPHERD

My Lords, I want to help the noble Viscount. If he had heard the speech of his noble friend Lord Nugent of Guildford, he would have realised that while Lord Nugent said that there was a degree of competition in the sense of the relationship of one management and another, he also admitted that there was no competition between the publicly-owned and the privately-owned bus companies.

VISCOUNT MASSEREENE AND FERRARD

But, my Lords, I am speaking in the wider sphere. As I pointed out, this Bill will give the National Bus Company power to manufacture cars, to have machine shops, and so on. Strictly, of course, it will not happen immediately, but it will certainly happen in the future, because this additional expenditure creates a precedent. This is a partisan measure of the Socialists. I have already said that, in the midst of this economic crisis, I consider it irresponsible.

What are people abroad going to think, those who have lent us money? What will they think when they see another Government measure designed further to increase borrowing and, as has been pointed out by my noble friend on my right, to put more money into the already overheated economy at home? As my noble friend has said, the £46 million that is to be paid to the shareholders is not going to be put under their mattresses; it is going into the economy. This is just another indication that this Government—and I know this is phrasing it strongly—put their Marxist philosophy before the real economic interests of the nation.

6.2 p.m.

LORD DERWENT

My Lords, I will not detain the House for long, because I find this Bill far too depressing to spend much of my valuable time on it. It is ill-timed; it is unduly expensive, and this House can do nothing to alter it. So all I shall do is briefly to recapitulate some of the arguments—which I repeat are not Party arguments, but are partisan because we hate this Bill—that have been so ably put forward by noble Lords on this side of the House. I should also like to ask one or two questions, questions which have been asked before to-day, which were asked in another place, in the hope that the noble Lord, Lord Shepherd, when he comes to reply, will be the first Minister to make any attempt to answer them.

This question of the Bill being ill-timed is important. The Government had asked us, the taxpayers, to try not to spend any money even if we thought it fairly necessary, if we could possibly help it—unless it helped exports. I am absolutely astonished that no Minister has yet got up and used the argument that this Bill will help exports—at least they have not tried that one on us. Yet at the moment when the Government asked us, and rightly, not to spend money, they announced certain cuts, so-called, that they were going to make. They came to Parliament to ask to borrow up to another £70 million for matters which I suggest are not as urgent as all that in the present economic climate. And that is the point, the present economic climate.

I am sorry, but I find this shocking. I was shocked as soon as I heard of it. I know it is part of the Transport Bill; but it is not necessary to do it in this way and it is not necessary to do it at this moment. Parts of the Transport Bill, should it become law (though I hope it will not) will not come into operation for some considerable time. To do this at this moment, in my view is an absolute insult to the taxpayers. It is asking them to do something that the Government are not prepared to do. But worse is to follow. This was a month ago. During this month it has become quite apparent that the figures for the Government cuts given at that time are in large measure "phoney". There will not be any saving at all. The use of the word "cuts" is also "phoney". All it means is that the Government are going to try not to increase their expenditure this year to the same extent as they had intended. That, in this Government's parlance, is a cut. May I go into this question of figures again. The noble Lord got somewhat heated—

LORD SHEPHERD

I did not get heated.

LORD DERWENT

If the noble Lord did not get heated, he at least was deliberately misunderstanding. As I understand it, there are £35 million for the shareholders of B.E.T. I think we are agreed on that figure. But I was somewhat amused by the noble Lord, Lord Popplewell, raising the wonderful question of the value of the assets. I do not know whether I dare say so to the noble Lord, Lord Hurcomb, but I thought he was being a little naïve when he said that this was an ordinary transaction as between willing partners. He did not use quite those words—

LORD HURCOMB

My Lords, I was careful not to use those words. All I said was that the terms had been agreed and accepted.

LORD DERWENT

That is true, my Lords. But under what conditions? The assets were valued by the purchaser. They were not agreed; they were valued by the purchaser. Before the seller was approached the Government were told the price that was going to be offered. All was settled by the purchaser, and the seller was told that that was the price. He was virtually told at the same time that if he did not accept it then there would be a take-over under the Transport Bill. That is the actual position. The noble Lord shakes his head. But he cannot deny that that was the situation. That is quite clear.

I should like to ask a question in regard to the next section of the £70 million, the section for the minority shareholders. I was not quite clear from the noble Lord's opening speech whether the £11 million is the actual figure which is now known or whether it is an estimate. If it is the actual figure, then this is the first time we have heard it. It is remarkable that when this was dealt with in another place apparently no costing had been done as to what prices would he offered for the minority shareholding. That is an extraordinary way of conducting a takeover bid. Let us accept that figure, I am taking it that that is the exact figure. That leaves £24 million, a "floater", a blank cheque, which Parliament is being asked to produce, and I shall have something further to say about the blank cheque aspect shortly.

My Lords, the noble Lord, Lord Popplewell, was very scathing when it was pointed out that to cut the road programme, having postponed much of it last year, was an odd way to behave, when it is agreed in every country—and, I think, agreed on both sides of your Lordships' House—that improved roads are to the commercial benefit of the whole country. I do not know whether any noble Lord is prepared to argue about it, but that is so. Yet there has been a cut. And we are now setting out to nationalise the buses which, I suggest, is certainly not going to be a commercial success for the country. So my noble friend was quite right to point out that this was an odd thing to do at this moment. We all know, of course, that these cuts were not thought out. They were made "across the board" so that no Minister should feel unduly unhappy.

We are going into this business as a country. I say "as a country", because the money is not the Government's money. This business of running all the buses all over the country is coming in the next Bill, at a time when, as the Minister of State said—and I give his own words: The growth of private car ownership has led to a continuous fall in the demand for bus services. That is the time when the country is going into this rather extraordinary business. And, my Lords, what a way to raise the money! Not by taxation, because that would be too unpopular with the taxpayer. But the taxpayer will have to pay for it all the same. It has been pointed out that the current return on these bus services which are being taken over is 5¼ per cent. The money will be borrowed at somewhere between 7 per cent. and 8 per cent., probably nearer 8 per cent., and so there will be a loss. Where is the loss met from? From the Transport Holding Company's profits. Who do the Transport Holding Company's profits belong to? The taxpayer. The profits belong to the taxpayer, however much people may try to disguise it, and so the taxpayer is going to pay for the borrowing at 8 per cent. and the receiving of 5¼ per cent. I must say that in ordinary business that would be an odd thing to do.

There has been a great deal of talk—I am glad to say not by noble Lords opposite to-day, but in the other place from Ministers—about all this making good commercial and operating sense. That phrase cropped up all the time, and we should like an explanation of it. There was a tremendous amount of talk by Ministers about all this making good commercial and operating sense. We have had absolutely no explanation of that phrase from anyone, particularly the reference to "commercial sense". There undoubtedly will be a loss shown in the next few years by operating on this scale with no competition, and I shall have a word to say about competition in a moment. There will certainly not be a great profit, and it cannot be called good commercial and operating sense. I wonder whether the noble Lord will explain to us what that means.

What does the Minister herself know about commerce or bus operating? Yet she has made clear in the big Transport Bill that she is going to be the "big boss". Everything is going to be referred to Whitehall. She says, "The Minister will decide—the Minister will decide". My Lords, as sure as night follows day, in the not far distant future this enormous organisation which she will be setting up will be rigid and run by the Minister's stooges in London. It has happened before time and again. I think that the real question we want to ask ourselves is, why is all this necessary now—"necessary"; I do not mean "advisable"—at this very awkward moment? That is the question which I would ask the noble Lord, because the answer has not been given.

My Lords, may I say a word about this floating credit of £24 million? Apparently, that is included in case the Transport Holding Company wishes to buy up any other bus company. But is not this a rather exhorbitant figure to ask of Parliament at this particular moment? The Holding Company has used—I think my figures are correct—£21 million of its extra loan powers since 1962, when it was set up. I am well aware that it was set up by a Conservative Government, but apart from the fact that anything we do is first-class, this sort of thing ought to be looked at every few years whoever may have set it up. I am advised that £21 million is the figure which has been borrowed since 1962, of which over half, £11 million, has been used since the end of 1966. Now the Holding Company has one year to run, and we are being asked to give it further powers to borrow £24 million, which is more than it has spent in the last six years—and this for one year.

What is this figure, my Lords? There has been no explanation, and I think it is outrageous that the taxpayer should be asked to give these facilities when quite likely the money will be spent without any reason being given at all. This "floater" ought to be cut out of the Bill, and I hope that the Government will still think again. They must have some leeway, but that is far too big a figure for one year, and it ought not to be there. In my submission, the Government have made out no case for buying B.E.T. at this moment. They do not need this very large "floater"; it is simply a figure. This is inefficiency.

If it is of any interest to the Government, I will tell them one of the reasons why at this moment they are so unpopular in the country. I do not think that even noble Lords opposite would suggest that they are riding on the crest of the popularity wave. The explanation is that at last it is sinking into the minds of the taxpayers that this is a spending Government; that the taxpayers are not consulted, and that under this Government taxpayers' money is something to be spent and not to be saved. Here again in this Bill is another example of that.

We are now on the way to the nationalisation of the buses, if the Minister can get the legislation through. When has a nationalised industry ever paid? In the end the taxpayers always pay. Where there is no competition there is no efficiency. In spite of what was said by the noble Lord, Lord Popplewell, competition in management is very important in this industry. In a short time there will be no competition in management. Everyone will be looking after his own job, but it does not go for efficiency. Finally, may I say one word of comfort to your Lordships. If this Bill and the next Bill go through the Minister of Transport, of whom we are all so fond, will be able to say that at last we have a Socialist transport policy. And, my Lords, speaking as a taxpayer, I say, "God help us!"

6.19 p.m.

LORD SHEPHERD

My Lords, seeing the noble Viscount, Lord Mills, across the Floor, I must admit that this seems rather like old times. I am sure that the noble Viscount will remember that he and I crossed swords on this very subject six years ago when he, as the Minister responsible in your Lordships' House, piloted the Bill which set up the Transport Holding Company. I have refreshed my memory about the speeches which the noble Viscount made, and one of the matters on which he placed great emphasis in his speeches, and a very special thing which he, and presumably his colleagues in the Conservative Government of the day, had in mind was the administrative ability of the Transport Holding Company to look after the various companies that were subsidiary to them. Unlike their colleagues in another place, noble Lords opposite have not said one word of praise for the operational management of the Transport Holding Company. Their friends in another place paid tribute, and I should like to pay tribute, to the Company, because what the noble Viscount, Lord Mills, had in mind has come about in fact. They have administered their organisation with the highest degree of commercial ability.

LORD DERWENT

You are doing away with them.

LORD SHEPHERD

If the noble Lord will just be quiet, I am giving praise to a machinery which was set up by a Conservative Government. I should like to spell out what the company has been able to do because this is important in the light of our belief that it is capable of being the holding company of a much larger organisation. Up to the present the Holding Company have b it-rowed some £21 million and have paid interest to the Treasury on all sums they have borrowed, and, on top of that, during the four years for which I have the figures, they made a profit of some £45 million. I should not have thought that such a company could be said to have failed, or that the noble Viscount, Lord Mills, would ever feel disappointed in the Company in whose creation he played such a great part. The Transport Holding Company has proved itself to be a very efficient body.

It has been said that this Bill is a Socialist pipe-dream and that it is being brought about because of Socialist philosophy. I will freely admit that six years ago, from the Benches opposite, I was advocating this very process of development into the field of bus transport. I believe that I was right. I believe that the noble Lord, Lord Hurcomb, was right about the inevitability in the growth of public transport in this field. I think that I shall be able to show that this is not a Socialist pipe-dream. I should like to read to your Lordships from a letter addressed to Sir Reginald Wilson by the Minister of Transport on December 20, 1967, and I would be happy to place this letter in the Library. My right honourable friend said: Earlier this year you told me that your Board considered the circumstances were such that it might be desirable for the Transport Holding Company to seek to acquire full control of the B.E.T. group of bus companies, in the great majority of which the Transport Holding Company already had large shareholdings, equal in fact to that of the B.E.T. The initiative did not come from my right honourable friend the Minister of Transport. It came from this commercial organisation set up by the noble Viscount, Lord Mills. Therefore I suggest that, even though this proposal may be in tune with our Socialist thinking, the origin of it came from this commercial organisation set up by a Conservative Government.

I would now, if I may, deal with the financial position before I deal with some other matters. The noble Lord, Lord Derwent, was closer to the right figures than some other noble Lords. The £21 million borrowed up to the present has been used not only for the purchase of companies, but also to provide new fixed assets, the purchase of new vehicles and other things, which any commercial company requires if it is to develop and go forward. I doubt whether there is any large commercial concern in this country which is not forced to borrow or have an overdraft from the bank from time to time.

LORD DERWENT

I was not criticising it.

LORD SHEPHERD

I am making the point because it was suggested that this was some strange organisation to whom money meant nothing, and I am suggesting that they are operating on a commercial basis. The sum of £35 million is for the purchase from the B.E.T. company of the shares in its subsidiary bus companies; £1.3 million is for the preference shares, and £9.4 million for the private shareholders in the subsidiaries. The noble Lord wanted to know why these figures were not available when the Bill was in another place. They have only just been decided by negotiation.

The noble Lord, Lord Derwent, said that this deal was imposed on B.E.T., that the only people who were concerned to place a value on the shareholdings were the purchasers and that they had more or less put a shotgun to the directors' heads. I know the noble Lord, Lord Teynham, and some more of his colleagues, and I do not believe that any of these gentlemen would have acceded to something for which they were responsible to their shareholders by the shotgun method. The fact is that this was a free negotiation between the management of the Transport Holding Company and B.E.T. They had as their advisers two of the most prominent and respected private banking organisations, who have had great experience in the valuation of property and shares.

LORD NUGENT OF GUILDFORD

My Lords, I thank the noble Lord for giving way. May I remind him that the Minister had already announced last autumn that she was going to give the P.T.A.s power to acquire compulsorily the bus undertakings they needed to reorganise their services, so that B.E.T. knew they were under threat of extinction anyway, and therefore had no alternative but to make the best terms they could.

LORD SHEPHERD

My Lords, perhaps the noble Lord finds himself in the position I find myself in sometimes when I get on my feet too quickly. I have not come to the P.T.A. I will show that the particular reference of my right honourable friend to the P.T.A. might well have no direct reference to the attitude of the directors of B.E.T. The point is that the figures were negotiated by the two boards with two most respected and experienced private banks who had had a great deal of experience in this field.

To return to my figures, there is a balance left of some £33 million. The Transport Holding Company believe that they will need £9 million during this year for capital purchases and for fixed assets such as vehicles, ships and the like. This leaves a figure of some £24 million, which we believe is necessary for contingency planning up to the end of 1969. I believe this is a reasonable sum to meet the likely contingencies. There are certain bus companies which are already making approaches to the Transport Holding Company, offering to sell their shares; and there are also road haulage companies who are of a like mind. It was in 1964 that the Transport Holding Company made their first purchase of private companies, and that, of course, was during the period of office of noble Lords opposite. There was no suggestion then that the Transport Holding Company should not buy private companies.

I should like now to deal with the point that was made as to the possible effect on our economy—although I am bound to say to the noble Viscount, Lord Massereene and Ferrard, that while I have come prepared on most occasions to deal with a wide subject I could not possibly go into a wide-ranging economic discussion about Treasury loans, and the like.

LORD NUGENT OF GUILDFORD

My Lords, would the noble Lord deal with the point that I made: that the Minister had already announced last autumn that she intended to give the P.T.A.s powers to take up all the bus companies they wanted to, so that all these people knew that if they did not agree they would be made to.

LORD SHEPHERD

I hope the noble Lord does not think that I have a repution for dodging an issue. I intended to deal with the P.T.A.s in reply to the noble Lord, Lord Hurcomb. What he wanted to know was the effect of setting up the national bus company, and particularly that of future planning, especially in the conurbations. I was intending to deal with that; but if I should forget, I am sure the noble Lord, Lord Nugent of Guildford, will remind me.

I thought the important point made by noble Lords opposite was that at this very moment of time when we are seeking to hold public expenditure in check we were involved in this scheme. I am bound to say that I find very strange, coming from noble Lords opposite, this sudden urgency to reduce public expenditure. If I did my researches since 1964, I could find many occasions on which noble Lords opposite en masse have all trooped in on issues which would have involved this country in infinitely larger fields of public expenditure than we ourselves would ever dream of undertaking. In fact, I would say to the noble Lord, Lord Derwent, that we have cut public expenditure from the programme planned by noble Lords opposite if they had been returned in 1964. We are very conscious of the effect of public expenditure, and this has been very much in our mind.

To suggest that this particular operation in itself is inflationary really means that noble Lords have not looked at the facts. This sum of money, this £46 million if we refer to the B.E.T. deal, would clearly come from the Consolidated Fund; and every one of us knows that the Consolidated Fund is raised on the gilt-edged market and from National Savings and the like. It is also raised by taxation. All these operations are, in fact, withdrawing free money from the market. We use the Consolidated Fund in the field of public expenditure. This sum, in our view, is being invested to purchase a series of companies.

It is perfectly true that the money returns to what some noble Lords refer to as a sort of open market; to the shareholder. But the noble Lord, Lord Teynham, knows perhaps better than I do the role and field of operation of the B.E.T. He might like to be reminded, if he needs to be, of the statement in the Financial Times, in which the directors of the B.E.T. say: The directors are reported to have said in their letter that over a reasonable period the resources released by the sale can be employed to better advantage in new, business enterprises and in expanding existing interests than if they remain locked up in the bus companies. Those are the words of the directors of the B.E.T., and it is quite clear that in their own particular field of operation this money will be invested to the national good. Is it to be said that it is inflationary if this money were to be available to be used for the purchase of new machinery or for new manufacturing capacity? Certainly it puts pressures on our manufacturing capability. But surely we all realise that what we need is new machinery; therefore, if this money is available for that, clearly it is being used to the best advantage.

The noble Lord, Lord Nugent of Guildford, I thought, indulged in not a partisan speech, but one of sheer knocking. He made a scathing and bitter attack on the management of the London Transport Board and presumably of the other nationalised industries. So far as he was concerned, all the companies that are in private enterprise have clean and virile hands. If that is so, all I can say to the noble Lord is that he knows less about industry and trade than I do. I do not say that nationalised industries are all perfect. I wish to heaven that all our private companies were perfect; but that is far from being the case. It is true that there has been criticism of the London Transport Board management in various fields. I wonder whether the noble Lord, Lord Hurcomb, would agree with me that a lot of the trouble of management in the London Transport Board is a sense of disillusionment in trying to carry out a public transport organisation with pressures all around them that make it pretty well impossible for them to provide fares and services that meet the public demand. I believe that that is one of the basic problems of the London Passenger Transport Board.

If I may say so to the noble Lord, Lord Nugent of Guildford (and perhaps I may then deal with the P.T.A.s), I think that one of the most, I will not say remarkable, but satisfying things is that the Conservative Greater London Council have agreed in principle to take over the responsibility of the London Passenger Transport Board.

LORD NUGENT OF GUILDFORD

My Lords, may I intervene? Could the noble Lord tell us the terms, and if they asked that the whole of the capital structure should be written off first?

LORD SHEPHERD

I said that we have agreed in principle. We are now seeking—I do not know what the noble Lord, Lord Derwent, is smirking about. I thought this was a serious debate. Certainly the noble Lord, Lord Nugent of Guildford, asked me a serious question. I said that we have agreed in principle. The details of such a change are tremendous, and it is not done overnight. To me the most significant thing is that there is a recognition by the Greater London Council and by London Passenger Transport Board that until the authority who is responsible for the traffic and the road planning and all those other aspects that have an effect upon the buses is also responsible for the operation of the public transport services, this problem will never be dealt with. I remember arguing this point many years ago when I sat on the other side of the House, because it seemed to me to be so obvious. This is why we have taken the view that we should create the Passenger Transport Authorities, so that there is a direct responsibility on the bodies in the locality which are responsible for traffic and road building to participate in planning and deciding how the public transport services are to be run.

I think this approach holds out the best hope for dealing with the transport problems, not only of London but also of our great conurbations. This has been the view of my right honourable friend the Minister of Transport from the beginning, and I should have thought those who believe, as I do, that the local authorities have a great part to play, would welcome this opportunity and this challenge. The noble Lord, Lord Nugent of Guildford, is quite right: when my right honourable friend said that she intended to pass the transport undertakings in these conurbations to the passenger transport authority and the passenger transport executive, in the vast majority of cases these will be the existing local authority bus undertakings.

It is certainly true, as the noble Lord, Lord Nugent of Guildford, can see in the Transport Bill, that the national bus company, which will be the offshoot coming from the Transport Holding Company, will have a responsibility to cooperate with the P.T.A.s, and there may be at some time an interchange of vehicles and fixed assets between one and the other, in order that there should be a tight yet, on the other hand, flexible transport unit, taking into account not only the conurbations but all those more rural districts surrounding the conurbations. The noble Lord may say that this may have appeared to be a threat to the B.E.T. and to others, but it was perfectly clear, at least to me, that the national bus company, when it came into being, would be more of a partner with the passenger transport authorities than be absorbed into them.

The noble Lord, Lord Nugent of Guildford, said that, apart from the question of labour, this new creation, particularly as we should be bringing together two separate organisations, would have a major effect upon wage rates, and that this would naturally force up fares. Perhaps since he left the other place the noble Lord has lost his touch or lost his connection. The fact is that both the T.H.C. and the B.E.T. busmen are in the company sector of the bus industry. They all receive the same rates of pay, and therefore the bringing together of these two organisations will in no way affect the rates of pay of one set of bus drivers or the other.

LORD NUGENT OF GUILDFORD

My Lords, may I intervene and put another point? I think the noble Lord's excellent memory is failing. One of the principal points made by his right honourable friend the Minister in this connection was that the formation of the national bus company would be giving a greater uniformity of working conditions, not only in wage rates but in a whole lot of other benefits. She made that point strongly. That confirms the point that I was making.

LORD SHEPHERD

My Lords, at present I am dealing only with pay. This was the point made by other noble Lords: that because of increased wages there would be increased fares. There may well be improvements in standards and conditions of work, and I myself should not have thought that that was something one would decry. I think it is a good thing. Perhaps if we brought them closer together many of our present difficulties in regard to labour relations and the like would disappear.

I think the noble Lord, Lord Teynham, drew my attention to the fact that it was in 1966 that the investment allowances were lost and that the investment grant suddenly became available after the agreement between the T.H.C. and B.E.T. The noble Lord will remember that the allowances disappeared under a Finance Act, and it applied to every conceivable organisation in this country. We were looking at new methods of investment stimulation. But, my Lords, we brought in the investment grant to the bus companies for one purpose; namely, to give assistance to at least keeping in check the rise in fares and the like, which could well have come about as a result of the increased salaries paid to busmen and the fuel bill, increased through taxation. There was nothing sinister in this matter. I am sure the noble Lord will accept that.

LORD TEYNHAM

My Lords, would the noble Lord not agree that it would have been more beneficial and more fair to let the shareholders of B.E.T. know before the agreement was made that this investment allowance was coming back?

LORD SHEPHERD

My Lords, even I, as a Minister who usually has his ears fairly close to the ground, do not hear everything that is going on, and in this particular field it is difficult to divulge such information. But I asked my advisers this morning the question whether, if this information had been available, it would have had any effect upon the price that would have been agreed by B.E.T. and T.H.C., and I have been informed that because of the manner in which the value of the company was arrived at, any effect would have been so marginal that in terms of the total figure it would have been very small indeed.

The noble Earl, Lord Kinnoull, at least is with me. He believes in coordination of transport. I am glad to see that he is a convert in that connection, although he regrets that competition is now disappearing. But I think he will now accept that apart from competition in the production of balance sheets and trading accounts there is no real competition in the bus industry. In fact, one can say that the profits which these companies make, whether they be public or private, depend to a certain extent upon their efficiency, but more on the way in which the Traffic Commissioners decide what shall be the fares. This is based upon the view that there should be a reasonable return, and they reckon some 8 or 9 per cent. on capital. This is the way in which the fares have been decided. It is interesting to see—and I hope noble Lords will give credit for this—that B.E.T. have earned some 9 per cent. on total capital employed over recent years, and the Transport Holding Company have earned the same percentage. Although it varies slightly between England and Scotland, on average it is the same.

There is no reason to believe that the profitability of the B.E.T. companies will be lost because of this amalgamation. I suspect, as was the case in the past, that the men who now are the management of the Southdown Bus Company, to which the noble Lord, Lord Teynham, referred, will remain. So far as I understand the position, there is no intention, by this amalgamation, to make larger operating units. I agree with noble Lords opposite that there is an optimum size in a bus operation. There is some informed opinion that it should be 800 to 1,000 vehicles. We had some figures quoted that showed it was cheaper to operate bus companies of 30, but nobody would suggest that we could have such types of companies operating in our big conurbations. Therefore, while we are bringing together these two organisations with some 25,000 vehicles it is certainly not the intention that we should try to operate this as one mammoth organisation, but to operate it as the T.H.C. have operated in the past, through subsidiaries, and they have as much experience of doing this as B.E.T.

The noble Lord, Lord Nugent of Guildford, naturally could not resist bringing up Thomas Cook's. They have done very well. I do not see why, because this organisation is in tourism and banking and is nationally owned, and because it is making us a profit of some £1.7 million a year on net assets of some £5 million—although because of its banking interest naturally it has other great sums available to it—we should suddenly make it available to private industry. Let us hope we have some competition in this field between publicly-owned companies and private industries.

My Lords, I seem to have been speaking for quite some time. I hope I have answered a reasonable proportion of all the questions put to me. I am bound to say I felt very much in tune with the noble Lord, Lord Hurcomb, that this is an inevitable further stage in the development of transport. What we are seeking is the provision of a public transport service that is available at reasonable rates to ordinary people who may decide that they do not wish to use their own private motor car or who may not be able to own a motor car. It has wider aspects because it has a direct impact upon our industrial efficiency and industrial development. I believe this is a commercial operation. As I said at the beginning, this is not just a Socialist pipe dream. It was initiated by businessmen of a commercial organisation which was set up by that very tough businessman, the noble Viscount, Lord Mills.

VISCOUNT MILLS

My Lords, since the noble Lord has been good enough to mention my name, I should like to tell the House why. The reason we set up the Transport Holding Company was because a Commission had been created, it had been running for some time and it had far too much to do. Its mind could not be on the railways, which was the asset which was losing so much money, and therefore we created the Transport Holding Company. What I regret is the timing of this Bill. I think it is the wrong time. I think the public will feel it is the wrong time. That is really all I want to say.

LORD SHEPHERD

My Lords, if the House will permit me, the noble Viscount drew my attention to the one point made to which I did not reply, the question of timing. It is perfectly true that the bringing together of B.E.T. and T.H.C. will make the operation of the Transport Bill easier; that is still, in terms of being implemented, some years away, although the Bill should be passed this year. There had been this agreement with the shareholders, the Board of B.E.T. and also the private shareholders of the subsidiaries. I think it would have been very unfair, and certainly it would not be up to City ethics, if having made an agreement we were not prepared to find the money to carry out that agreement. That is the basis of this timing.

VISCOUNT MILLS

My Lords, I suggest that that has applied to many things to which the Government have set their hand and from which they have had to withdraw.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.