HL Deb 04 June 1981 vol 420 cc1355-63

3.35 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Bellwin.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [Railways Board's powers of disposal]:

[Amendment No. 1 not moved.]

Lord Underhill moved Amendment No. 2: Page 1, line 12, leave out from ("subsidiaries") to end of line 2 on page 2.

The noble Lord said: This is the first of a number of amendments dealing with the provisions relating to British Rail's subsidiaries. It has been stressed—I refer to what the noble Lord, Lord Bellwin, said on Second Reading—that Clause 1 will enable private capital to be introduced into the British Railways Board's subsidiaries. However, subsection (1)(b), to which the amendment refers, provides for the disposal of the whole, or part, of any subsidiaries. That will not merely bring private capital into a subsidiary; it will enable British Rail to dispose of any part, or the whole, of any property belonging to a particular subsidiary. As we shall see in regard to a later amendment, the Secretary of State may even instruct the board to do that.

It has been suggested that it has been contemplated that British Rail will always retain an interest in the subsidiaries and that, if a subsidiary is successful, that will help British Rail. One would have thought that if that were the case, there was a business reason for keeping the subsidiary entirely within the province of British Rail. Moreover, there is nothing in the Bill about British Rail retaining an interest in any of the subsidiaries.

The Government have always argued that in their proposals for disposing of publicly-owned organisations they are following a commercial principle, but it will be seen from this Bill, and I suggest from other Bills introduced by the present Government, that in this direction they are following a piece of Conservative dogma, and, frankly, this makes one question their oft-repeated statement about their belief in a mixed economy.

Time and time again Ministers on the Benches opposite refer to having a mandate for a particular proposal and say that it was included in the Conservative Party's manifesto. But where in the Conservative Party's manifesto for the last election is there any reference to the disposal of British Rail's subsidiaries? This clause neither names any particular subsidiaries, nor limits the subsidiaries that may be dealt with. In fact Ministers have made clear that the subsection could cover all the subsidiaries and that, if desired, all of them could be disposed of. We shall be dealing with this matter in later amendments. This wide-sweeping provision must also be linked to the power of direction given to the Secretary of State under Clause 3—another matter which will be the subject of a further amendment.

Clause 1 provides that the Railways Board may deal with disposal, in such manner as they think fit". But no unfettered power is to be given to the board. The board is not to be left to determine its own commercial attitude. The Government argue—this was stated by the noble Lord, Lord Bellwin, on Second Reading—that these particular subsidiaries have nothing to do with the business of running a railway. We shall deal with that point when we come to some of the other amendments. But the Transport Act 1962 lays down the powers of the Railways Board. Section 3(1) of the Act states that it is the duty of the board to provide railway services, and, in connection with the provision of railway services, to provide such other services and facilities as appear to the Board to be expedient". I would ask whether the Railways Board has stated that it is not expedient for it to retain any of these subsidiaries?

This leads me to a statement that was reported in the press yesterday and which is quoted in the Hansard report of the debate in another place. This was a statement by the Secretary of State about the arrangements for the sale of three British Transport hotels to a new private sector company, with British Rail holding one-third of the shares. I must make the most emphatic protest. On the day before this Bill comes before the Committee of this House, we learn that there has been an announcement about the sale of part of a British Rail subsidiary. The Secretary of State stated that British Rail already has the power to do this under Section 14 of the Transport Act 1962. If that is correct, why bring forward that paragraph of the Bill which my amendment seeks to delete? If the power is already there, why bring forward this provision? This suggests that there may be doubts in the Government's mind as to whether Section 14 of the Transport Act really does cover this particular provision.

When the Secretary of State made his first statement about the sale of British Rail subsidiaries on 14th July 1980, he said that "the Government will introduce the necessary legislation". There was no reference to the fact that legislation was already on the statute book which would enable the sale of subsidiaries to take place before this Bill had even passed through Parliament. Neither was reference made to this fact in your Lordships' House during the Second Reading debate. I feel that the House has been treated with some disdain, that we should learn of this act even before a single amendment has been proposed to the Committee today.

Finally, subsection (3) of the same clause refers to the powers of the British Railways Board to transfer property rights and liabilities to subsidiaries under Section 7 of the Transport Act 1968. On reference to that provision there is an indication that this was intended to relate only to transfers between public sector organisations. In fact, this particular section of the Act is headed, "Redistribution of activities between Freight Corporation and Railways Board or Scottish Group". It was not intended to transfer subsidiaries to facilitate their sale to the private sector.

In this connection, it has been pointed out by the Finance Houses Association that Clause 1(b), which my amendment seeks to delete, introduces an entirely new provision; that a subsidiary may be sold or that part of its assets or liabilities may be disposed of to a private institution regardless of the rights and wishes of third parties—that is, the creditors and beneficiaries of the transferred liability. The Finance Houses Association claims that those who have entered into agreement with British Rail subsidiaries will, if Clause 1 remains unamended, find that the value of covenants in their agreements will become less if the relevant subsidiary is hived off. The association has also raised the important question of insurance. Without taking too much time, I should like to read out just one paragraph of a letter I have received from the Finance Houses Association: The problem is not hypothetical. Our members have entered into hire purchase, leasing, maritime mortgage and other contracts with British Rail and Sealink on terms which would never have been contemplated for a private firm—contracts of a very substantial nature. We are here expressing or implying nothing at all about the policy of privatisation but we do object most strongly on principle if that policy is applied in such a way as to affect adversely and retrospectively the rights of third parties". When the noble Lord the Minister replies to the debate on this amendment I hope that he may be in a position to deal with this matter as well as with the general question of the amendment. If by any chance the noble Lord, the Minister, has not received a letter from the Finance Houses Association I will readily ensure that he is provided with a copy so that he might deal with the matter at Report stage. I beg to move the amendment.

3.44 p.m.

Lord Bellwin

Let me make one point very clear at the beginning of our discussions on Part I of the Bill. The Government and the British Railways Board have agreed what the policy should be. We are clear about the goals for which we are aiming; namely, to put these businesses into the private sector where their future will be determined not by external pressures and constraints but by their own performance. The Government have accepted that the best way to proceed is for the board to take the lead. Advised by the holding company which they have established, British Rail Investments Limited, they will put forward proposals to the Government. For our part we are undertaking to promote legislation, including the full range of powers which the board may need to carry out the policy.

The board are hoping to proceed mainly through the sale of shares in its businesses using the power in Section 1(i)(a). They may sell shares either in the businesses as they stand or in new companies set up to operate parts of the undertaking of existing subsidiaries. For example, Sealink is likely to be dealt with as a whole while the hotels business will probably need to be reorganised in order to put it into a state better fitted for privatisation. Whichever approach the board adopts, the powers proposed would allow the board to retain a stake in the business concerned. It is, however, possible that in some cases the board will not wish to proceed in this way but will want to sell the assets of the businesses outright. There may, for instance, be some hotels for which this is the only sensible solution. This is not especially surprising since British Transport hotels have sold hotels from time to time in the past. The point is that it will be for the Railways Board to decide what approach to adopt, bearing in mind the requirements of the policy, the interests of the business, and the interests of the staff. The purpose of this clause is to give the Railways Board the full range of powers that they may need to do the job.

The noble Lord, Lord Underhill, was very concerned about the sale announced yesterday and he questioned why this provision is in fact necessary in view of the Board's existing disposal power in Section 14(1)(e) of the Transport Act 1962. The answer is that, although that earlier power seems to be sufficient, it was not enacted with the present purposes in mind and in practice has been used in a limited way. Rather than relying on such a power for the implementation of a new policy of much wider scope than anything from the past, it seemed to the Government to be better to put the matter beyond doubt by including in this Bill a new power designed for the present purpose. In this way Parliament's intentions will be quite clear. The new power is, of course, as the Bill says—without prejudice to the Board's existing powers. I see nothing at all sinister in the fact that a transaction took place before this Bill came before your Lordships' House. The fact is that the powers were already there. There have been precedents, and quite clearly it would not be right that matters of this kind, having commercial implications, should be subject to the timing of the bringing forward of a Bill of this kind when, as I have indicated, the powers already existed. We cannot accept this amendment. Like a number of others in this part of the Bill, it is calculated either to water down or—as the noble Lords opposite would probably concede—to wreck this part of the Bill, with which they patently do not agree. I understand that and I understand their position. In turn, I hope that the noble Lords opposite understand the Government's position, which I represent and which is that we are anxious and think it right that we should be carrying out these steps in long-term better interests, not least those of the British Railways Board.

Lord Mishcon

I wonder if the noble Lord the Minister would be good enough to deal a little more fully with the very potent point made by my noble friend Lord Underhill. It is not a question of dealing with policy. It is a question of dealing as a matter of respect with Parliament. If it be a fact that there was some doubt about the utilisation of the previous power, which necessitated for the purposes of clarity and for the purpose of effectiveness a clause in this Bill (which was debated at very considerable length in another place) is the noble Lord the Minister saying that the approach which was made with regard to the sale of these hotels and their purchase, and the formation of a new private company, which was announced yesterday, was so infinitely commercially desirable that it was something that had to be entered into immediately and could not wait for the ordinary performance of parliamentary duties in order to see whether this power should in the end be contained in this Bill?

It is a matter of general principle that my noble friend has raised, and of very real principle, because time and again over the past year in your Lordships' House and in another place protests have had to be made about the lack of respect that was being paid to Parliament generally and to democracy generally because acts were taking place before matters had come to and been decided by Parliament. It is because of the serious nature of the principle involved that I personally would ask (my noble friends also ask it with me) whether the Minister cannot make a fuller statement in answer to my noble friend Lord Underhill and, in particular, deal with the question as to whether he is satisfied, as I repeat, that the commercial expediency, indeed excellence, of this offer was such that it just could not wait for the parliamentary time which might otherwise have been necessary for this Bill to be enacted, if it is to be enacted in its present form.

Lord Donaldson of Kingsbridge

Before the noble Lord answers that question perhaps I may add another, while being in full support of the complaints made from the Opposition Front Bench in relation to the very casual attitude towards your Lordships' deliberations which are going on at this moment. When we were discussing this on Second Reading these deals were presumably three-quarters made, and were known about to the Minister and to the Railways Board. I should like to ask, while we are discussing the rest of these things, whether there are any other deals for which we are today going to give permission to be done and which have already been done.

Viscount Simon

May I, from these Benches, say that we do not object to the principle of the Railways Board disposing on suitable terms of subsidiaries or interests in subsidiaries, but I would feel much happier about this part of the Bill if it was not for the introduction of, first, subsection (2), which says that the Board cannot do these things except with the consent of the Secretary of State, and then later on Clause 3, which says that the Secretary of State can require them to take this sort of action whether or not they want to do so. The noble Lord the Minister said a few minutes ago that it was entirely in the hands of the Railways Board to decide what to do, but that does not appear from the Bill. I am just wondering whether the Government would not consider some amendment to remove this interference (if I may put it that way) by the Secretary of State, which I thought the noble Lord, Lord Bellwin, had said was not what they wanted to happen.

Lord Bellwin

If I may deal first with the point raised by the noble Lord, Lord Mishcon, with great respect I think that this is very much ado, not about nothing but about a matter which is really, as I tried to say in my opening remarks, outside the scope of what we are talking about in this Bill. The fact is that it is for the Railways Board to decide on the scope and use of its existing powers. The Board have decided that they can use Section 14(1)(e) to sell Gleneagles and the other hotels, and that is a matter for them. The Secretary of State's consent is not required, and in those circumstances I do not see where lies the complaint about the Government and their timing in bringing this Bill forward when (if you like) it coincides with the Railways Board's deciding on the scope of what they are doing. As to the point raised by the noble Lord, Lord Donaldson—

Lord Mishcon

I ask the pardon of the noble Lord the Minister for interrupting him. I would not have done it were it not that he said something just now which was extremely serious, and I am sure he did it on information that was before him. I am not able to read from the Official Report—I wish I were—but I am reading from The Times parliamentary report of this morning of what his right honourable friend Mr. Fowler said to another place yesterday. A shareholding of this kind requires my consent and on the material available to me, I am ready to consent to such an acquisition". That runs completely contrary to what the noble Lord the Minister said just now, which was that no ministerial consent was required and none had been given.

Lord Bellwin

I think it would be fair to say that what the noble Lord has read out is indeed what my right honourable friend said in another place, but in fact the Secretary of State's consent is required to the acquisition of the hotels; and I think it is also right to say that the proposal is still the subject of informal discussions between the advisers to British Transport Hotels and the potential investors. I do not want to go into the details of the transaction, and I am sure the noble Lord does not wish me to do so.

Lord Mishcon

I am sorry; I apologise to the Committee, but this is a very important matter of principle. Is the noble Lord the Minister now saying that what he said before—namely, that ministerial consent was not required—was (I am sure inadvertently) inaccurate; and, if not, how does he, please, distinguish between the words "acquisition" and "purchase"? Because in ordinary English I do not know the difference.

Lord Bellwin

The position is that the consent of the Secretary of State is required to the acquisition of the shares, and presumably he can give that consent only when the details are known. So far as I am aware the details of a transaction are not yet finalised, and I am assuming—I say this in good faith—that it is that which (if you like) is the caveat that I use.

So far as concerns the point made by the noble Lord, Lord Donaldson, about other deals (that is the word he used, but "transactions" might be a better word), to the best knowledge of the department I am not aware of any other transactions which are at the moment under consideration. The only other point I want to make is that I did not answer the point that the noble Lord, Lord Underhill, made when he asked whether I had seen the letter from the finance houses. The answer is, No, I have not seen that letter, and if he would care to send it to me I should be glad to have it. I think we come back to the point I made earlier, that this and indeed all the other debates on the amendments to these parts of the Bill will bring out more and more the basic difference between the parties on this matter, and there really is not much further I can add to it.

So far as concerns the point raised by the noble Viscount, Lord Simon—his suggestion that perhaps in this part of the Bill we should be trying (as I think I understood him to say) to remove the power to put limitations on the powers of the Secretary of State because he felt there was some confusion—I wonder whether he might allow us to proceed, because I think that as we go along and debate the various amendments we will see that this comes out rather better in the later amendments, as I recall. If not, I am sure he will have many opportunities to bring us back to that point.

Lord Underhill

I will not go further with the protests which have been made, supported so ably by my noble friend Lord Mishcon and also by the noble Lord, Lord Donaldson. I believe we have made our view emphatic on this. The points raised by the noble Viscount, Lord Simon, are issues which, as the Minister says, can be dealt with on other amendments, and I would hope that we may get the noble Viscount's support when those amendments are considered. I will readily send the Minister a copy of the letter from the finance houses. This is an important amendment, but I believe the position of the Government is now thoroughly made clear. We will not withdraw the amendment, but we will not press it to a Division.

On Question, amendment negatived.

4 p.m.

Lord Underhill moved Amendment No. 3: Page 2, line 3, leave out subsection (2).

The noble Lord said: This is the first of the amendments to which I referred which deal with the power of the Secretary of State. Various Ministers have stressed that one of the objects of Clause 1 and the general policy of the Government towards British Rail and its subsidiaries is to remove what are called public sector constraints. It is claimed that the provisions of this part of the Bill will enable the board and the subsidiaries to act commercially. I have referred to the Conservative manifesto. In that, in its reference to publicly owned-industries, it is stated: 'We will therefore interfere less with their management". Noble Lords will have seen Bill after Bill introduced in this House which increases the interference of the Secretary of State with various publicly-owned institutions. Subsection (2), which my amendment proposes to delete, provides that the board can exercise powers under subsection 1(a) without the consent of the Secretary of State, but that one deals with the powers of disposal of any securities of any of the board's subsidiaries. As I stated in relation to the previous amendment, this clause provides that the board shall have this power of disposal in such manner as it thinks fit. That will give the board the power to take decisions. But that is not so because in subsection (2) in effect this provides that they can act as they think fit but only with the consent of the Secretary of State; that is, as he thinks fit. Mr. Kenneth Clarke, the Parliamentary Secretary for Transport has said that the Railways Board is in the driver's seat. That does not appear to be the situation. I would suggest that it is a dangerous practice to be in the driver's seat with someone else's hand on the steering wheel. That is why we move this amendment. If the Government mean that they intend to take the restraints off British Rail there is no reason why they should not accept this amendment. I beg to move.

Lord Bellwin

Subsection (1)(a) gives the Railways Board a new and specific power to sell shares in their subsidiaries. I have no doubt that the Board will use their power responsibly. It is, on the other hand, a very wide power and the Government have thought it right to propose that there should be some check on its use. That is the purpose of subsection (2), which provides that the board shall not sell shares without the Secretary of State's consent.

As I and my colleagues have in the past explained, the implementation of the policy agreed between the Government and the board will be in the hands of the board and its holding company British Rail Investments Ltd. The Government have acknowledged from the outset that this is the best way to proceed. It is not, I say again, our intention to interfere in the running of the holding company or to try to dictate in detail to the board how private capital should be introduced. Those are decisions which the holding company must take in the light of the state of the market and the opportunities available. We do not intend to tell the board which bids it must accept and which must be turned down. If that had been the intention, it would have been much simpler for the Government to take over the businesses and do the job themselves.

On the other hand, this is an agreed policy and Government have a clear interest in how it progresses. We shall want to be consulted about the proposals and convinced of their merit. We shall want to see that they conform to the objectives which have been laid down for the exercise and which were explained to this House when the Bill received its Second Reading. So it seems to me to be reasonable that the Secretary of State should have an opportunity formally to consider the holding company's proposals and to give his consent to them. That is why subsection (2) is required. It is correct that some proposals could be put into effect without the Secretary of State's consent under subsection (1)(b). But I do not think that these will be the major initiatives and I do not, therefore, see anything surprising in this.

The requirement for consent is not a novel provision—there are many instances in the Transport Acts and legislation applying to other nationalised industries requiring an industry to obtain ministerial consent before exercising a particular statutory power. I see no reason why this provision should cause special difficulty. Nor do I expect the Secretary of State to use his powers in a way that would conflict with the interests of the Railways Board. In our view this amendment is not acceptable, and I hope that in the light of the explanation and assurances which I have given, the noble Lord opposite will agree to withdraw it.

Lord Underhill

The amendment will be withdrawn, but I should like to put to the Committee that when a power is in the Bill—and we have said this time and again—it is in the Bill; and no matter what a present Secretary of State may say, it can be used at any future opportunity. That is why we wish to have this provision taken out. In the light of what the noble Lord has said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Avon

This might be a convenient moment to take the Statement. I beg to move that the House be resumed.

Moved accordingly, and, on Question, Motion agreed to: House resumed.