§ 7.3 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, I beg to move that this Bill be now read a second time. The Mersey Docks and Harbour Board owns and manages the world-famous Port of Liver-pool and Birkenhead, and the Board is now promoting this Bill to provide for the reconstruction of the constitution and capital of the business. The need for reconstruction arises out of the very serious financial crisis which came to light last year. This has all been very fully reported in the Press, including the protracted proceedings in another place, and therefore I think it will only be necessary for me now to record the bare facts.
The facts are that in the past four years the Board has been making trading losses, culminating last year, in 1970, in a deficit of some £3 million. In addition to that, and even more serious, the Board has an obligation to redeem bonds to the amount of £6.2 million which fell due for repayment on January 1 of this year. The Board could not redeem them. A firm of independent accountants who were asked to report on the financial position of the Board showed that the net cash deficiency which the Board faced by the 271 end of 1973 was some £20 million-plus. The background picture is also one of great anxiety. Over the five years, 1965 to 1969, there has been declining traffic in the port. While the total shipping tonnage of all British ports increased by about 5 per cent., that of Liverpool decreased by 16 per cent. I state these financial and economic facts to explain the gravity of the port's position and, therefore, the drastic nature of the measures needed to restore solvency.
There has been a disposition in some quarters to blame the Government for the drastic nature of the reconstruction proposed. But I suggest that a monetary consideration of the financial position of the Board which I have outlined makes it plain that nothing less than drastic measures could restore solvency in the circumstances I have indicated. In fact, it should be recorded in passing that the Minister for Transport Industries is providing the whole of the finance for the new Seaforth installation, amounting in total to some £40 million. About half of that sum has already been paid and the balance will be paid over the next year or two as the work is completed. As the port's future prosperity largely depends on the Seaforth container installation, it is evident that the Minister is playing a major part in bringing about the port's recovery.
Turning now to the Bill's proposals for modernisation of the constitution and capital structure, I should first say one word about the existing structure. The Mersey Docks and Harbour Board was set up in 1857 as a public trust authority—there have been some amendments in the interim, but it is substantially the same—with Board membership largely constituted by port users. There was clearly an underlying intention to provide safeguards against the exploitation of the monopoly position which the great Port of Liverpool had during the 19th century. Similarly, the capital structure was designed without equity capital which might have given an incentive to exploit this monopoly. So all the capital is in the form of fixed interest charges, mostly dated. It is only necessary to mention these two major features of the present Board to indicate the wildly unrealistic nature of the structure to-day. There is the port of Liverpool, which has lost 16 per cent. of its trade in five years, and 272 far from having a monopoly of its shipping trade is literally fighting for its existence in a fiercely competitive world. So that the constitution is as obsolete as, I fear, is much of the port installation and reconstruction is long overdue.
Let me turn to the main proposals in the Bill for the new structure. First, the Mersey Docks and Harbour Board will be transformed into a statutory company subject to the Harbours Act 1964, and charged with the principal duty of carrying on the port of Liverpool and Birkenhead, plus port conservancy and pilotage services. Secondly, an interim board will be appointed, the majority of whom will represent the bond holders, plus a minority of Government nominees in recognition of the large-scale Government lending. I should say in passing, my Lords, that of course the old board in no way represented the bond holders and they could not have been worse placed to express their views. Thirdly, this interim board will be charged with the duty of formulating a definitive capital reorganisation scheme by June 30, 1973. I should mention, my Lords, that the Bill originally contained the date of June 30, 1974, that is, a year later, but an Amendment in another place advanced this date by one year in order to speed up the introduction of the definitive scheme. When formulated, this scheme must be submitted to the debenture holders for their approval.
Fourthly, each class of redeemable capital debt in the existing Mersey Docks and Harbour Board will be converted into a class of redeemable debenture stock of the company, with unchanged rights of interest and redemption. Similarly, the annuity will be coverted into irredeemable debenture stock with the same interest rates. Fifthly, these interest rates will be maintained only until this Bill becomes an Act. Thereafter, until the definitive scheme becomes effective, first the debenture stock falling due for redemption will not be redeemed, and secondly, interest will be paid at not less than 70 per cent.; in other words, there is an indication of a cut of up to 30 per cent. in interest rates. Loans made after November 27, 1970, that is to say new Government loans, will rank for full repayment, but the Government have waived this right in respect of some £1.2 million of loan which was promised before that date but paid after. 273 Sixthly, my Lords, the receiver will be discharged so that the new statutory company can proceed to work independently; and, seventhly, there is a special provision in the Bill, in Clause 47, for the repayment of bond holders with £500 or less stock during the moratorium period. This is related to bond holders in receipt of small incomes relief. This Amendment also was added in another place to meet what could be hard cases. This is not an exhaustive account of a lengthy Bill, but I think it covers the main points which your Lordships would wish to hear about.
I should just like to make two further general points. The first is that the new chairman, Mr. Cuckney, has stated that the definitive scheme, when it is completed, is not likely to be less drastic than that outlined in his circular to shareholders of last November; that is to say, a write-down to 70 per cent. of the capital and a rolling forward of redemption dates for debentures. I have had the opportunity, my Lords, of discussing this in general terms with Mr. Cuckney and he told me that in his judgment at present the Board is seriously over-capitalised, especially in the light of the obsolescence of much of the port installations. Inevitably this implies the necessity for a substantial write-down of capital if the new company is to recover solvency and pay its way.
Mr. Cuckney told me that he is willing to consider creating equity capital in the new definitive scheme which could be allocated pro rata to the debenture holders as off-set against the write-down of the value of the debentures. This point also was mentioned in another place, and could have some importance. If and when the new company becomes profitable in the future the debenture holders would receive some compensation for their present loss. In passing, my Lords, I would like to congratulate the Mersey Docks and Harbour Board on securing Mr. Cuckney's very expert services as chairman. To be chairman of that Board at the present time is not a job for which there would be much competition, and I think that we may be very grateful to him for taking it on.
There is a second general point I should like to make, and to which I feel I should address some remarks. It is on the question of Government responsibility 274 towards the bond holders of the Mersey Docks and Harbour Board. When I took up this Private Bill, my Lords, I confess that I had some feeling of anxiety on this score and therefore I have looked very carefully at it. These debentures have, as your Lordships will know, been rated as trustee stock, but it is clear to me that the Government have no legal obligation towards the stock holders. This seems to be firmly confirmed by the fact that three banks and Crown Agents joined together and petitioned on these grounds before the Committee in another place; and in substance their petition did not succeed.
The fact that the Government have four nominees on the Board and have lent money to the Board may very well have influenced the Stock Exchange in rating the stock as trustee stock; but it is quite clear that the stock is in no way comparable to Treasury stock, which of course has the unequivocal guarantee of the Government behind it. Therefore, much as I sympathise with the bond holders, I have concluded that Government would be wrong to accept this liability and to saddle the taxpayer with the cost of meeting it. I conclude by commending the Bill to your Lordships in the belief that it will initiate a new era for the great Port of Liverpool, with a modern constitution, competent leadership and substantial new Government finance for the modernisation of the port installation. My Lords, I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Nugent of Guildford.)
§ 7.19 p.m.
§ LORD BESWICK
My Lords, we are all obliged to the noble Lord, Lord Nugent of Guildford, for explaining the genesis and purposes of this Bill. If there is any noble Lord in the House capable of persuading us that this Bill should go to a Select Committee without further comment it is the noble Lord, Lord Nugent. But I am sure that it would be quite wrong to send this Bill to a Select Committee without voicing the deep disquiet that the implications of the Bill have aroused. It is a Private Bill, my Lords, and as I have said, it is introduced into this House by one of the most respected among us. But that does not 275 disguise the fact that it arises from Government decisions as the result of a situation for which the Government have some responsibility, and the Bill ought to have been brought to Parliament by a Minister of the Crown and justified by that Minister on behalf of Her Majesty's Government.
My Lords, the Mersey Docks and Harbour Board is one of the oldest public boards in this country; I think that 1857 was the date the noble Lord mentioned. Until the present Administration took over, the stock of this Board was, as the noble Lord said, trustee stock. It was thought to have all the disadvantages of Government stock, public authority stock, but the advantages of that stock as well; namely, that although there was no dynamism about it, there was no inflation proofing about nevertheless, one could think that the amount was secure.
Now we find this was all a misconception. The stockholders of Rolls-Royce thought that they were reasonably safe, but their grounds for that belief were certainly not as respectable as those of the stockholders of the Mersey Docks. The noble Lord, Lord Nugent of Guildford, said there was no legal liability resting upon the Government. One accepts this if one looks at the absolutely narrow definition of "legal liability". I cannot believe that there was not some ground for the Government being somewhat more involved, interested and, indeed, generous, than they have been.
The income of the stockholders has now been reduced by 30 per cent. Their position in the future under the proposed scheme, when it is known and applied, apparently is absolutely uncertain. The question is whether any certainty or comfort can be offered to them. I believe that one suggestion that was put forward in another place was that there should be a floor written into the Bill and that they should be guaranteed as to something like 50 per cent. of their previous income. The proposal was turned down, on the grounds that if half their previous income could not be provided then we should be back in square one and other legislation would be needed. That suggests that even 50 per cent. of their previous income cannot be expected. I noticed the noble Lord was most interesting in his explanation that the prospects 276 of the new company were reasonable, that they are now under very capable direction and there is some chance that a fresh start will lead to better financial results. In that case, I wonder whether it would not be feasible to have some sort of cushion, floor or guarantee in the Bill which would give some comfort to the stockholders for whom the noble Lord expressed a good deal of sympathy.
That leads me to this question: can the noble Lord, or the Minister who will speak for the Government, tell us what opportunity will there be if we agree to this Bill going upstairs to the Unopposed Bills Committee, for evidence to be taken from stockholders or their representatives? How can the Committee assure themselves that it is not technically or financially feasible to write into the Bill something of the guarantee that I have mentioned? Will it be possible to take evidence from representatives of the stockholders? Will they be invited to give evidence? Will it be feasible for witnesses to be given the necessary assistance to enable them to appear before this Committee? I have been taught—and nothing that I have known has upset the belief that I have acquired—that the Select Committee on Private Bills in this House functions admirably. I am a little unhappy that this Bill goes to the Committee, unopposed as it is, partly because the stockholders themselves are not in a position to organise and put forward their case. I ask the noble Lord whether he can give us any assurance that their interests are going to be carefully considered by the Committee, if we agree that the Bill should go upstairs to the Committee.
§ 7.25 p.m.
§ LORD SANDFORD
My Lords, this may be an appropriate point for me to make clear the Government's views on certain aspects of the Bill. When the Board were first faced with the financial crisis last autumn, they consulted my right honourable friend, the Minister of Transport, and a series of meetings took place. Having considered the situation following these, the Government were clear that it would be quite wrong, and contrary to their policy, to burden the taxpayer with the Board's liabilities to their security holders. However, they were fully aware of the problems involved and of the hardship caused to 277 many of the small investors who, as my noble friend said, had considered the Board as "safe as the Bank of England". The matter was regarded nevertheless as essentially one for the Board themselves to solve and this the Board accepted. In the view of Her Majesty's Government, it was no solution to bail out the Board.
The effects of the crisis extended beyond the interests of the investors. Her Majesty's Government decided that assistance towards the financing of the new Seaforth Dock, so vital to the Port's future, should continue if at all possible, all the money for the scheme being provided by the Government through grants and loans under the Harbours Act 1964. On the understanding that the Board took all practical measures to ensure the future viability and stability of the whole Port of Liverpool, the Government undertook to make available further loans for Seaforth.
The only course open to the Board was to ask Parliament to enable them to take urgent short-term measures, including a moratorium on capital redemption and interest payments, and also to prepare for the longer term by way of a capital reconstruction. The Board's first Bill, prepared in great haste, proved unacceptable and was withdrawn—this second Bill, recently given its Third Reading in another place, has the Government's full support.
It has been suggested—and the noble Lord, Lord Beswick, has repeated the suggestion—that the Bill should have been a Government Bill. But the Board was created by private legislation. It was responsible for its own finances. In order to deal with the financial situation legislation was required. Clearly it was the Board's responsibility to promote such legislation. It does not follow that because the Board asked the Government for assistance the Government should promote the Bill.
The Government have, of course, been concerned, as the noble Lord, Lord Beswick, was concerned, that all security holders should receive equitable treatment, and they consider that this is provided by the Bill which also ensures—and this, perhaps, will go some way to meet his inquiry—that security-holders 278 will have an important role in the new statutory company.
The Government are also a major secured creditor and it has been accepted that loans made or committed to the Board prior to November 27, 1970, should be treated in the same manner as all other investments made up to that time—these loans will therefore be subject to the terms of the scheme of capital reorganisation which the new Board of Directors will have to prepare under the Bill's provisions.
The Bill does, however, provide for all loans made since that date to receive priority ranking, as regards security. It is only right that loans made in the present circumstances should be afforded this measures of protection. However, as my noble friend Lord Nugent of Guildford said, the Government have already made it clear that the priority will be given up when an acceptable scheme of reorganisation has been introduced.
Faced as we are with the Board's present situation, there is nothing at all to be gained—and no noble Lord has attempted to pursue this—from rehearsing all the things that went wrong in the past. Post mortems, and attempts to apportion blame, will serve no useful purpose. The aim of the new Board and of their Chairman, Mr. Cuckney, is to put an end to the uncertainties that have been hanging over the port, and look to the future—a future in which all concerned with the port can work together to ensure its future prosperity. It is clearly essential therefore that the Board should be able to put their affairs in order as the Bill provides. The passage of this Bill without delay is the best way in which the port's future can be secured. It will enable the Government to continue with financial assistance for the Seaforth Scheme, which is vital to the future viability of the port. In that way the livelihood of those associated with the port will be protected and the best interests of the Merseyside region will be served. We believe that this Bill provides the best way of protecting the interests of those who have invested in the Board by giving them a stake in what we hope will be the successful future of this new Company, and a voice in the way in which it is to be run. I therefore ask your Lordships to give this Bill a Second Reading.
§ LORD BESWICK
My Lords, is not the Minister going to comment at all upon the questions I asked about the extent to which the Committee, if we agree that the Bill should go to that Committee, would be able to assure themselves on the basis of the evidence about the financial position of the Company and of the stockholders?
§ LORD SANDFORD
My Lords, the point I was making in response to the question asked by the noble Lord was this. I think that the interests of the stockholders are going to be better secured. The main point is that their interests will be secured by their having a voice in the running of the Company.
§ LORD BESWICK
My Lords, the noble Lord is saying that. What I am asking him is: How are the Committee who are due to consider this Bill going to assure themselves that what the Minister is saying is in fact the position?
§ LORD SANDFORD
My Lords, as the noble Lord said, this Bill will go now to the Committee on Unopposed Bills because there are no Petitions in opposition to it. We have a further stage when it comes back to us on reconsideration.
§ 7.31 p.m.
§ THE EARL OF LAUDERDALE
My Lords, far be it from me to intervene in the procedural wrangle which has just occurred across the Floor of the House. Where the broad ocean does lean against the land it might be said of harbours, as it has been said of sea voyages, that they have many advantages but security is not one of them. My only wish is to be a well-wisher to the new management of a major national asset. I think others would agree that we have lately been living in an atmosphere of Greek tragedy. I personally remember visiting the Port back in 1967, and again in 1968, and one saw then signs of trade decline, notably the fall of imports from Australia, East Africa and the Mediterranean, with signs of labour trouble building up to the point of some 200,000 days lost in a single year. We saw the Mersey Docks Board burdened with an enormous capital debt, with fixed assets put at a replacement value of more than £425 million but fast obsolescent, with a capital debt which soared from something like £80 million in 1968 to £93 million 280 now; and we saw that swallowing up whatever operating surplus there might be, and then we saw that disappear.
Enough has been said in another place about the past, enough at any rate to confirm the Minister of Transport's point that au fond what the harbour needs is not subsidies but management. I should like to support what has been said by the noble Lord, Lord Nugent of Guildford, and I think echoed from the other side, that we should congratulate the Mersey Board in getting Mr. Cuckney as their Chairman meantime.
Two lessons stand out and this is the opportunity to draw attention to them. The first is that advanced provision must be made during the lifetime of the profit-earning period of major assets to take care of the big terminal losses which are bound to arise at the end of their relevant useful life; that is not an easy thing to make provision for in a time of inflation, let alone in a time of inflation like this.
But the second, and I think more general, point does to some extent arise out of and, if I may say so with the greatest respect, impinges on something that was touched on by the noble Lord, Lord Beswick. I come to the question of Government policy. No doubt the Government are doing good in secret and by stealth. Of course, we should hail the Government's decision to continue supporting the Seaforth project. I cannot imagine how they could have done otherwise since much of the investment was already committed. But I am not alone; I believe many people join me in saying that we still await the emergence of a clear, intelligible, constructive, viable ports policy.
We have seen the National Ports Council reconstructed. We have seen a banker put in charge. We have seen non-port operators admitted to the Board, and operators removed from it. We can see the logic of that. But what is the Government's broad policy towards the modernisation of our ports? Do the Government now recognise that ports provision is as vital a part of our economic infrastructure as are roads and other facets of the transport service?
I am one who welcomes the latest road improvements announced by Mr. Walker a week or two back to link up the ports of the opposite coasts; and that plan 281 alone suggests that the Government are thinking in a constructive way on this subject. But have the Government yet got a policy—and are they willing to declare it—towards reclaiming land suited to industrial development near deep water for the ports of tomorrow? I am one, and there are others too, who eagerly await the Government's decision on a MIDA on the Thames.
But to return to the Mersey, there are surely plenty of reasons to believe that under Mr. Cuckney and his Deputy Chairman, Sir Matthew Stevenson, the revolution of rising expectations will indeed carry the Mersey in its stride. The Sea-forth Basin, more than 500 acres with a turning circle of 900 ft. or more, will be in use on present form by 1972. This should help. Indeed, it is the key to the whole thing. Already five deep sea shipping interests have declared that they plan to use it, mainly for the Atlantic trade in grain and meat and containers. That should help—and indeed, as it were in brackets, one hopes that some of the falling Australian trade can be recaptured. The new meat berths, with something like a quarter of a million cubic feet of quayside cold store, fed by no fewer than five mobile conveyors and able to fill no fewer than 52 refrigerated trucks, should help also. The new grain silos with a capacity of 85,000 tons, able to unload from grain ships at 2,000 tons an hour, should help. And then finally there is the fast improving hinterland development. The M.62 to Yorkshire is already almost through and it will go through to the Humber by 1976. There is a great opportunity there for further container traffic. That, too, should help.
Above all, there are more hopeful signs on the labour front, and Mr. Cuckney's own report, issued last month, stating that agreement has now been reached to recruit some 700 dockers, is in itself a good sign. But, as he summed up the situation, surely we can take his words, which are these:Provided we can keep our costs under control, provided we avoid the damage of self-inflicted wounds, provided we do not drive traffic away by serious and arbitrary interruptions of service, provided we obtain the reliefs sought in the present Bill, we could begin to turn the corner in 1971".My Lords, the Mersey needs this Bill now. I simply say God-speed to help 282 our fertile land win out against the desert of the sea.
§ 7.39 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, may I say just a brief word in answer to the noble Lord, Lord Beswick, who asked me a specific point. May I also thank my noble friend who has made such a helpful speech about the Port of Liverpool and who has so much information and enthusiasm for our ports, and has spoken so encouragingly about the prospects for the new Seaforth installation. With regard to the point which the noble Lord, Lord Beswick, put to me so persuasively about the position for the future of the bond holders and the possibility of some floor being established for them, some guarantee given to them to limit the measure of their loss or their risk, I do indeed feel my withers wrung by the noble Lord's persuasiveness; but I have to say that in my judgment it would be a handicap to the new chairman and the new Board to ask them to take on any specific commitment here.
In principle, as I see this concern and as my noble friends and right honourable friends in Government see it, it is really a trading organisation and therefore it must stand on its own feet. In my belief it is fatal for Government to be ready to come in to help trading organisations, because when Government do so it is asking the rest of the community to provide extra money. Some firms have to be willing to stand on their own feet and make a profit if we as a nation are to survive. My belief, and our belief as a Government, is that the right policy is to ask everybody to bear his share. That means that this Board, despite its strange constitution and history, must be asked to bear its share the same as everyone else. But there is this consolation for this particular Board: that the Government are, partially by grant and mainly by loan, making this massive new investment of £40 million to modernise this port, because they realise how vitally important the Port of Liverpool is to us nationally and how important it is locally in an area which has high unemployment, so that it is not left to face the wind entirely unprotected. The port is being given substantial support, and there is a prospect that in the new set-up it will 283 become better and viable in the future. It has better things to look forward to. So I hope that your Lordships will feel that we should give the Bill a Second Reading and wish it well in future.
§ On Question, Bill read 2a, and committed to the Committee on Unopposed Bills.
§ 7.43 p.m.
§ LORD SANDFORD
My Lords, I beg to move that this House do now adjourn during pleasure until 8 o'clock.
§ Moved accordingly and, on Question, Motion agreed to.
§ House adjourned during pleasure.
§ House resumed.