§ 7 p.m.
§ The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin)
My Lords, I beg to move that this Bill be now read a second time. The purpose of this Bill is to provide statutory authority for the Government's financial assistance to the Port of London Authority. Two years ago, the last Government promised the authority some £60 million of aid, and on 7th December 1979, my right honourable friend the Minister of Transport announced in another place that we were prepared to continue that assistance at essentially the same level in order to restore the PLA to profitability. The Bill marks, therefore, the acceptance by this Government of an inherited obligation towards the PLA, although, as I shall indicate, our approach is rather different from that of the last Administration.
1195 First, I should like to outline the changes in the ports industry, and particularly in London, which have made this Bill necessary. As the House knows, the ports industry has seen dramatic changes over the last 10 to 15 years. These have been due mainly to changes in freight handling technology, which have meant changes from traditional and labourintensive methods, to mechanical cargo-handling, generally referred to as the container revolution.
This change has had two major consequences. First, there has been a dramatic reduction in the demand for labour in the ports. In London, the number of registered dockworkers has fallen by over 70 per cent. since 1966, from 25, 000 to 6, 500, yet the port still has a manpower surplus. The second consequence of the container revolution, and the growing use of bigger ships, is that a great deal of traffic is being handled at specialised facilities, including container terminals, rather than in the old enclosed docks. In London, traffic has moved out of the Upper Dock systems, into facilities down river at Tilbury, to specialised river wharves, and in some cases it has left London altogether and gone to other ports. This is illustrated by the fact that the amount of general cargo handled by the PLA, most of which comes into the Upper Docks, has fallen from 6 million tonnes in 1970, to about 2 million tonnes in 1979.
As the United Kingdom's largest traditional port, London has suffered more than others from these changes. The dramaticdecline in manpower requirements of the port have made it necessary for the PLA to reduce the size of their own workforce, both registered dockworkers and staff. There have also been successive closures of dock systems in London, and the failure of most of the private stevedoring companies which worked from them. Under the arrangements which govern conditions of service in the ports industry, the Port of London Authority has, since 1973, had to take on nearly 5, 000 surplus registered dockworkers from other employers who have gone out of business, at a time when the authority itself has surplus manpower. Finally, London suffered a reduction from 16 per cent. to 12 per cent. in the 1970s in its share of Britain's port traffic.
1196 Since 1975, the authority's financial position has deteriorated rapidly, mainly because of the slump in world trade, and the changes in traffic which I have mentioned. In 1976, the last Government appointed Price Waterhouse and Company to provide an independent report on the authority's financial position and prospects. Subsequently, in June 1977, they agreed to stand behind medium-term loan facilities of £15 million, made available by Lazard Brothers, as agent for a consortium of banks. This loan was intended to help the PLA pay for the severance of surplus staff, and to refinance certain short-term borrowings.
But the PLA's financial position continued to deteriorate, and in July 1978, the then Secretary of State for Transport announced further assistance, in the form of £35 million in grants towards severance costs, and backing for a further £10 million of commercial borrowings. He also insisted that, contrary to the PLA's own proposals, the Royal Group of Docks should be kept open. But grants towards severance costs were made conditional on agreement with the trades unions of specific targets for manpower reductions. In October 1978 the PLA and the trades unions submitted a jointly-agreed Short-Term Trade and Manpower Plan, covering the period May 1978 to June 1979, which provided for manpower reductions of nearly 1, 500, divided about equally, between registered dockworkers and staff. In the event, about 1, 100 severances were achieved. Under a second short-term plan, submitted in June 1979, a further 1, 000 severances have been achieved so far, and more are in the pipeline.
Last June, the PLA submitted its strategic plan for the five years 1979–83 to the Minister of Transport, and again Price Waterhouse were asked to review the plan. Copies of the strategic plan and the Price Waterhouse report on it are in the Library. Price Waterhouse said that the PLA's preferred strategy, which it called the "concentration option", for the retention of a reduced level of cargo-handling facilities in both Upper Docks, did not appear to chart a course to viability. The other option presented in the plan was for the transfer of operations out of the Royal Docks, to the India and Millwall Docks, and Tilbury.
1197 In reviewing his policy in the light of the Price Waterhouse report, my right honourable friend the Minister of Transport decided that the Government should not involve themselves in the management of the PLA, but should aim to meet the obligation they had inherited from the last Government at least cost to the taxpayer. Consequently, my right honourable friend announced that assistance to the PLA would be subject to a strict financial limit, equal to the minimum needed to continue with the most rapid possible rundown of manpower, and to plan for the quickest possible return to viability. Subject to adjustments to cope with inflation and the latest forecasts, we have therefore set the limit of financial assistance at the level promised by the last Government in July 1978. Decisions on the retention or closure of docks, or indeed on any other management matters, are the responsibility of the PLA board, which consists of men appointed for their experience in commercial management.
We have every confidence that the authority is determined to achieve viability. As the House knows, it announced on 3rd March, that PLA general cargo-handling in the India and Millwall Docks would have to cease, because it had concluded that it was no longer possible to pursue the concentration option. In making that decision, the main factors it gave were losses amounting to £4 million in the first two months of this year, including about £2 million arising from the two-week strike over pay, and the insufficient movement towards implementing the changes in working practices, which have been identified as essential to the improvement of the PLA's competitive position. The authority therefore concluded that it could not continue to operate both of the up-river dock systems, and, at the same time, stand any chance of staying within its financial limit. Clearly this was a difficult decision. Nevertheless, I am convinced that the approach we have mapped out is the correct one; if the PLA and the unions continue to work together, there is no reason why the Port of London cannot once more become profitable, and play its part in the prosperity of London and of the British port industry.
Turning to the specific provisions of the Bill, the House will see that it provides first for financial assistance for measures to restore the authority's profitability through 1198 a reduction in the number of its employees; and second, for assistance for the carrying on of the undertaking while these measures are being taken. It has been argued elsewhere that this objective is too narrow and that surplus manpower is only one of a number of problems faced by the PLA. While it is true that surplus manpower is not the only factor affecting PLA's profitability, it is the overriding one. As the Price Waterhouse report said:Manpower costs represent about 70 per cent. of the PLA's costs and the continuing surplus has imposed a severe strain on the PLA's financial position. The nub of the PLA's present financial problem is a combination of the uneconomic use of manpower and its inability to divest itself of manpower which is already surplus ".That is why the Bill is directed specifically towards reductions in manpower, as the key to profitability.
The first form of assistance is grants for severance payments, and these fall into two categories. Clause l(l)(a) provides for grants paid by the Department of Transport to the PLA for the severance of surplus staff; Clause 1(3) provides for grants paid for by the Department of Employment to the National Dock Labour Board in respect of registered dockworkers who take voluntary severance. Payments of severance grant were made in the financial years 1978–79 and 1979–80 on the authority of the Estimates, and the confirming Appropriation Acts, pending this legislation. The total grant committed amounts to £35 million promised by the last Government, plus an additional allowance of up to £5 million to take account of inflation. So far, a grant of £19 million towards the cost of severances has been paid, made up of £11.4 million for registered dockworkers and £7.6 million for staff.
Under Clause 1(1)(b), the second form of assistance is for the carrying on of the undertaking, while the measures to reduce manpower are being taken. This is provided by the two commercial loans totalling £25 million which the last Government agreed to stand behind; at present, the Government's liability under this head amounts to £23 million.
I should add that we also agreed last year to stand behind the PLA in negotiating postponement of a £3 million loan repayment due in 1980, and a similar payment due in 1981, but as this does not increase the Government's liability it does not 1199 count against the financial limit in the Bill. Finally, as indicated in my right honourable friend's Statement of last December, we have agreed, if necessary, to stand behind the PLA's existing overdraft facility up to a total of £5 million.
Clause 1(4) also provides that the aggregate of assistance given, whether in the form of grants, loans or guarantees, may not at any time exceed £70 million and, that assistance already given will count against this limit. As the total assistance I have outlined, including that already given, comes to £65 million, plus an allowance of up to £5 million for inflation, the Bill exactly provides for the financial limit we have set, and does not allow for any further increase.
Finally, may I stress, that the acceptance of this inherited obligation vis-d-vis the Port of London does not mean that the Government are embarking on a new policy of financial assistance to the ports of this country. The Government believe that ports should operate in full competition, one with the other, meeting the normal tests of commercial viability of being able to cover operating costs and service capital, without making any call on public funds. The assistance which this Bill provides for the PLA is aimed, therefore, as achieving the quickest possible return to such a position for the Port of London. I hope, therefore, that your Lordships will give this Bill a Second Reading. My Lords, I beg to move.
Moved, That the Bill be now read 2a¤(Lord Bellwin.)
§ 7.14 p.m.
§ Lord BOSTON of FAVERSHAM
My Lords, as the Minister the noble Lord, Lord Bellwin, has said, this Bill fulfils a commitment, which was entered into by the last Government, to provide funds so that the Port of London Authority can give severance pay to those who lose their jobs, and to carry on its operations during the period in which the port becomes profitable. So far as the provision of money under this Bill is concerned, I believe that the only change, compared with the amount envisaged by the last Government, is that it has been increased to take inflation into account. Therefore, I would welcome the provision 1200 of financial help and would offer support to that. We are grateful to the Minister the noble Lord, Lord Bellwin, for having introduced the Bill and for the explanation which he has given.
However, I am sorry to say that we, on these Benches, are not at all happy about the terms by which financial assistance is being provided by the present Government under the Bill, for there are¤as the noble Lord suggested¤substantial differences of approach between us. I am bound to say¤and I share the views strongly expressed by my right honourable and honourable friends in another place¤that we very much regret that the Government have not attached certain conditions to the provision of these funds.
I would suggest that the terms in which this financial help is being made available are, to say the least, odd. They are spelt out at the very beginning of the Bill, in fact, in its Long Title, which says that it is a measure:… to provide financial assistance for and in connection with measures taken by the Port of London Authority to restore the profitability of their undertaking by reducing the number of persons employed by them ".I emphasise those last words. What is odd about that is the underlying assumption that the reason¤indeed, the only reason¤why the Port of London Authority's operations are unprofitable is that its labour force is too great. Certainly, few would deny that that is, of course, a factor, but that is a very long way from saying that there are not other major factors as well. I believe that it is a pity that the assertion about over-manning is the one factor singled out by the Bill. Not even, for example, in its Explanatory and Financial Memorandum is there any acknowledgement or recognition of the many major factors that have played their part in bringing the Port of London Authority to its present financial state. I am thinking¤and I know that some of them have, indeed, been referred to by the noble Lord, Lord Bellwin, in moving the Second Reading of this Bill¤of such matters as the revolutionary changes, the technological developments, including the ones to which the noble Lord has referred, which have occurred in cargo handling; notably, of course, the container revolution, something which has enormously 1201 affected the Port of London in its role as a prime handler of general cargo; and also something which is not acknowledged in, I would suggest, the over-simplified assumption on which the Bill is based. It fails to acknowledge the extent to which this port has been affected by the changes in specialised cargo handling.
It also fails to recognise the extent to which London has been affected by the competition policy between ports, not only here in the United Kingdom but also between our ports and other ports in the countries of the European Economic Community. Then there are such other important factors as work practices, the way the port has been managed in recent years and, not least, the world slump. I do not want to go over all these matters again in detail today, but they need to be mentioned; because, in my submission, it would be quite wrong to suggest, to imply or to give the impression that the only thing that needs to be dealt with and that the only matter in which it is proper for a Government to be involved is the size of the workforce in the Port of London. Dealing with that alone will not produce a profitable port.
Therefore, one of the points about which we, on this side of your Lordships' House, are most concerned is that the financial assistance¤the money being provided under the Bill¤is being provided on the one and only condition that the workforce shall be run down. The Government do not appear to have sought any assurance at all in making this aid available that there will be any restructuring or co-operation between them and the Port of London Authority and, for example, the area's local authorities to seek to recreate a profitable operation. No question at all seems to have been raised about the desirability of maintaining any particular part or parts of the port's operations in, for example, the upper docks. The Minister has said today that the Government believe that it is not for them to become involved in matters of this kind. That is one point on which we would differ fundamentally from them.
But it is not only we on these Benches who would say that the Government ought to have imposed further conditions or sought further assurances. It is well known that my right honourable friend the last Secretary of State for Transport, Mr.
1202 William Rodgers, made it a condition of providing this financial assistance that operations in the upper docks should be maintained at least for the time being; that is to say, that both sets of upper docks¤the Royal group and the West India and Millwall Docks¤should be kept open for the time being. He was not alone in that view.
The most recent of the three Price Waterhouse reports on the Port of London also took the view that the time had not yet come to close down either or both sets of docks, and said it was right to examine further whether there was a sound basis on which to keep the upper docks running. The report said:it is too early to determine whether there is a totally viable basis on which those docks could operate ".In the light of that, we believe it is regrettable that the Government do not appear to have sought any assurances, let alone laid down any additional conditions, about the possible future operations of both sets of docks, the Royals and the West India and Millwall, or indeed either of them. The decision of my right honourable friend Mr. Rodgers was based on two main considerations, both to ensure that in the end the best possible solution for the port itself should be found and because he recognised, as the last Government recognised, the devastating effect that complete closure of the two sets of docks would have on the lives of the workers and their families there and indeed the life of the surrounding areas, for we must bear in mind that for every person employed in the docks there are estimated to be three or four jobs outside the docks but in the general area which are dependent upon them.
There is another reason why these are considerations which the Government should have had in mind¤which we had in mind¤why Price Waterhouse should be heeded, and why it should not be left solely to the Port of London Authority. I make no accusation about the present management of the Port of London Authority, and to a great extent they are having to live with the effects of past management decisions. As I see the noble Viscount, Lord Simon, in his place, I would say at this point that he was in no way responsible for the sort of decisions we have in mind in discussing the matter here; they arose later. But it is a fact, 1203 and it cannot be ignored, that in the recent past there has been a series of different decisions. At various times recently we have had Port of London Authority plans to close both groups of docks; again, to close the West India and Millwall Docks and keep the Royals open; again, to close the Royals and keep the West India and Millwall docks working; and now, to keep the Royal group open and concentrate general cargo handling there. It has therefore been felt by some that there have not always been all the grounds for confidence there might have been in the management of the port.
One point on which I hope and believe we are all agreed is that the rundown of the Port of London's operations in the upper docks in recent years has been a sad spectacle, a tragedy for those affected and for the areas affected. It certainly is a depressing sight to see, in docks which were once bustling, the silent cranes, the vast empty sheets of water, the deserted warehouses and wharves and the stillness. Anyone who knows those areas knows what that means, and I happen to live in the heart of London's East End docklands. That is why we want to do all we possibly can to prevent any further unnecessary closures and to see that everything possible is done to revitalise these areas.
That is why we feel it is essential to underline what we see as the shortcomings of the terms in which the Bill is brought forward and the fact that, apart from the rundown of the labour force, the money provided under it is completely unconditional. There is no condition about it being dependent on the future operation of the docks concerned or of the port as a whole; it is not dependent on the effects of the overall problems and prospects of employment in the communities of the East End, which themselves have been dependent for so long on the Port of London and whose future is affected enormously by the decisions which are taken by the Port of London Authority; and it is not conditional on keeping open at least one or other of the two sets of docks, either the West India and Millwall or the Royals.
We on this side find it very hard indeed to understand why the Government have not at the very least made the Bill, and the provision of the money under it, 1204 conditional on retaining at least one of the great upper docks. Certainly that is the condition I should like to have seen in the Bill. It is true, of course, that the Port of London Authority has decided to concentrate general cargo handling on the Royal group and to transfer that type of cargo to it from the West India and Millwall docks, but whatever the virtues of the present Port of London Authority management are, it would be wrong of me not to point out that many people have doubts about the strength of the authority's determination to do everything possible to make a success of at least part of the upper docks operations in the long-term. After all, London's upper docks have enormous advantages; their very location alone, here in the heart of the capital city, speaks for itself, with the vast population and market in and around it.
I would say at this point that I take some heart from the fact that the West India and Millwall docks are still open for the special cargoes and the tenants there. So long as that continues, presumably it would not be too difficult if the occasion arose in the future to bring them back into full operation again. Here I would ask the Minister the one question I wish to put to him tonight, and that is if he would confirm that, for the forseeable future, those docks will remain open and continue to be maintained at least for the limited purposes for which they are being used now.
There is one other reason I wish to mention why we feel the Government are wrong not to impose further conditions in providing this financial help, and it concerns the future development of docklands. The last Labour Government, through their new inner cities policy, were helping, with the local authorities, to redevelop and bring new life to this very area¤the area in and around the upper docks¤among others. A significant amount of new development is already taking place there, as anyone who has been there recently will know, and who has seen any of the documents produced by, for example, the borough councils in London concerned. There is a significant reference to the redevelopment of the area in the Price Waterhouse report, on page two in the final paragraph:In reviewing the PLA's general strategy, there are wider issues than the detailed financial analysis. These wider issues, which we have not considered, 1205 include the relationship of the Port of London and the PLA to Dockland's redevelopment, the economic role of the PLA, competition policy between ports and the social consequences of the various courses of action ".Two points arise here. The first is that those are clearly considerations which, in my submission, should be taken into account and which, again, are not acknowleged in the Bill. The second is that it is vitally important that no further closure should take place at a time when extra employment is coming into dockland and when new infrastructure will help to attract more industry. If further closure did take place, especially over the next few years, that would deal a major blow to the efforts being made to bring new life and development to the area through the inner cities policy.
I return to my main objection to the terms of the Bill. It is that it fails to demonstrate that a sound basis for the future of the upper docks is being secured, or even sought, and it fails to show that the associated problems¤the future of this whole important area¤are being taken fully into account. But to the extent that, in providing this money, it fulfils a commitment of the last Government, I would urge my noble friends not to oppose it.
§ 7.28 p.m.
§ Lord BELLWIN
My Lords, the Government understand the concern which the noble Lord, Lord Boston of Faversham, expressed about the future of docklands, and we are indeed fully aware of the importance of the Port of London Authority in this respect, and we are sure they have a significant role to play in the future prosperity of the area. For their part, the PLA must move with the times and adapt to technological changes, mainly by reducing manpower and improving working practices. The new Urban Development Corporation will, at the same time, provide fresh opportunities for investment which have so far been lacking in docklands. I fear that the noble Lord and I will have to disagree as to the fundamental difficulty which faces the PLA. He quoted more than once from the Price Waterhouse report. I wonder, therefore, whether we also are not entitled to rely on that report when it refers to manpower. I quoted it earlier, and will not do so again because I think the point has been made very firmly.
1206 The fact is that manpower accounts for 70 per cent. of the total costs of running the operations. I entirely accept that it is not of course the only factor. There must be other factors¤the noble Lord mentioned some of them¤and who would quarrel with that?¤certaintly not I. However, that it is that percentage is the overriding factor, and I think that we should have to stand by that. That is why Government assistance is being directed towards improving working practices and concentrating on reducing the surplus manpower.
I should say that in doing this we are doing no more than continuing the policy of the previous Government, who insisted that the assistance they were giving was conditional upon the PLA securingthe most rapid possible rundown of surplus manpower ".One could always argue as to what is "surplus manpower", and I am sure that that is where a debate would be, but I should not want to enter into that question at this stage.
I say again that the £70 million limit that we are imposing is essentially that set by the Labour Government, subject to adjustments for inflation and the latest forecasts. It is only fair to all those involved that we should clearly indicate the limit of our assistance. It is a tight limit, but one which the PLA have accepted.
I am glad to be able to confirm one point in particular which the noble Lord mentioned: namely, regarding the position of the India and Millwall Docks. Yes, it is correct, as the noble Lord said, that the PLA have made it clear in their announcement of 3rd March 1980 that tenants' traffic and the PLA's bulk wine operation will not be affected by their proposals to transfer other traffic out of India and Millwall Docks. One has to say that this is their decision, and presumably it would go on being so in the future. However, I think that the noble Lord would be entitled to assume from that statement that, so far as I am aware, that is the position so recently announced. I have no information to indicate that the position is other than that. It is certainly currently the intention so to continue.
I realise that some people would prefer our assistance to be conditional upon 1207 the retention of the Royal Docks, but at a very early stage we concluded that the Government should not be involved in management decisions of this kind. Again, obviously that is an area in which we would differ. But in our opinion it is up to the PLA to decide how to achieve viability within the £70 million limit.
The noble Lord, Lord Boston of Faversham, was concerned about safeguards to avoid future closures, and I would have respectfully suggested that the best safeguard in that respect is to achieve viability. I am sure that it is the hope of the noble Lord, as well as my hope, and that of the Government, that what we are doing now will help them to do just that; and then indeed the problem which concerns the noble Lord, and all of us, would, one hopes, not arise.
It is still up to the PLA to decide how they operate, and it would be inappropriate for us to tell them to close or to keep open any specific part of their undertaking. These are management decisions for them. I repeat¤because I believe that this is important to the workforce concerned¤that encouragement can be taken from the fact that the PLA have recently told the workforce that they want to make the Royal Docks successful and that they will be improving facilities there to take traffic diverted from the India and Millwall Docks.
The sole purpose of the Bill is to provide funds for manpower rundown, and this was precisely the purpose for which the last Government promised aid. As regards the future of the Royal Docks, I repeat that we take the view that this is a question for the PLA. Finally, I want to make our policy quite clear. We consider that ports can and should operate in full competition with one another without help from public funds, and the aid in this Bill is designed to get the Port of London Authority back to such a position as quickly as possible.
§ On Question, Bill read 2a; Committee negatived.