The National Freight Company Limited (Hansard, 18 June 1981)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)
My Lords, with the permission of the House, I shall repeat a Statement being made in another place by my right honourable friend the Secretary of State for Transport:
"The House will know that under the provisions of the Transport Act 1980, the National Freight Corporation, comprising British Road Services, National Carriers, Pickfords and other well known subsidiary companies, was wound up and the assets transferred to the National Freight Company Limited. This was done with the intention of selling the shares to private investors as soon as possible. The Act made special provisions to allow me to fund the deficiency in their pension scheme from the proceeds of sale.
"Flotation has not so far proved practicable, but I can now tell the House that I have, within the last few days, been approached by a group of the company's senior managers. They are seeking outside financial backing with the intention of putting together a widely based consortium of managers and employees to purchase the company. Their proposal, which indicated an offer worth in excess of £50 million, is at present at an early stage and there are still a lot of details to be worked out. I have encouraged them to press on with their plans. At the same time, I am considering it with my financial and legal advisers. All this will take a few weeks.
"This is an imaginative and exciting proposal and I have told the managers concerned that I hope it will prove possible to achieve such a sale."

§ Lord Underhill
My Lords, I thank the noble Lord for repeating that Statement, a brief one but one with very wide implications. During our debates on the Transport Act 1980 we on this side strongly condemned the sale of the National Freight Corporation to private interests. During the passage of that measure I and other noble Lords stated that there was general agreement that it was a well-managed business, was very strong on professional standards, had forward-looking ideas and had an imaginative management. It was also recognised that the corporation played a pace-setting role in the road haulage industry. It was emphasised that road haulage was a fragmented industry and that while the National Freight Corporation handled 10 per cent. of the industry's business, and was still the largest unit in road haulage, it was therefore not in any way in a monopoly situation. We on these Benches believe that a substantial unit, of the kind the corporation is, is necessary to the industry, and therefore in any sale we hope there will be no question whatever of the freight corporation and its subsidiaries being broken up.
The possibility, as mentioned in the Statement, of a sale to a consortium of managers and employees 775 opens up a completely new situation and there are a number of questions I wish to put to the Minister. Is there any indication how much will be on offer to employees as distinct from managers; is there a possibility of this being made a genuine co-operative; and will a public holding be retained in the new company? On Second Reading of the Transport Act 1980, the Minister said that to do so would deter some subscribers for shares. One cannot imagine that being the case if the consortium is to be of existing managers and employees. Therefore, will a public holding be retained, and if so of what percentage?
It will be generally agreed that a sale at this time would be in a depressed market; that no doubt explains why it has not been found possible to have a flotation as was envisaged when the Transport Act was passed. The Statement refers to a possible sale at £50 million. Is that a fair price? I see from the recently published report of the corporation, to the end of September 1980, that the balance sheet shows the assets of the corporation and its subsidiaries at £100.8 million, and the final figure in the balance sheet gives net assets of £73.5 million. The Statement also refers to the funding of pensions from the proceeds of the sale. What arrangements will be made for funding pensions until the sale is completed? At the proposed price, allowing for the funding of pensions, what net sum will be realised for the public as a result of the sale?
The Statement says, and we can understand why, that it will take some weeks to carry out discussions with the Secretary of State's financial and legal advisers. I hope sufficient time will be given also to take into consultation the trade unions affected, because they will be interested not only in the well-being of the company and the workforce but, if there is to be the possibility of actual employee involvement in a new company, they will be intensely interested in that possible development.

§ Lord Byers
My Lords, we welcome the fact that the Statement has been made, although we welcome it in principle, because I assume it is far too early for the noble Lord, Lord Bellwin, to be in a position to answer any questions such as we might wish to put to him on matters of detail while negotiations are going on and a consortium is being formed. If this turns out to be a co-operative, it will be an exciting and interesting venture. But if it does not, I take it that it would be a public company in which the public would have the right to invest and that there would be provision for the employees in the company to have a shareholding in it. Bearing in mind the position that the National Freight Corporation has established as a pace-setter and an upholder of high standards in the industry, I would also assume that there would be a strong case for it retaining some kind of stake in the new company or consortium, so that it could insist upon the standards that we wish to see in this country.

§ Lord Bellwin
My Lords, the noble Lord, Lord Underhill, asked whether there was any indication of how the percentage will be broken down between employees and managers. At this stage I have no 776 indication of that at all. However, I understand that the approach was made by a group of senior managers, who had discussed the matter with over 100 other managers, and that the wish, indeed one might almost say the need, will be to involve as many employees as possible. In a way this also covers a point raised by the noble Lord, Lord Byers. It is presumed by those who have approached us that as many as possible of the employees will want to take as big a shareholding as they can. The question of whether it would be a co-operative will depend on the final outcome, and I cannot say more than that at this stage.
Here, I am covering a point raised by the noble Lord, Lord Byers, and perhaps your Lordships will permit me to cover the points raised by both noble Lords as I go along. I understand that it will not initially be a public company. Whether or not in a few years' time there would be an intention to float I do not know, but I think that it is the likeliest objective. But initially, it is to be bought by the managers and the employees; that is the intention. It would not be the intention to retain a public holding as such. With regard to the point about a depressed market, I would say that we are talking of a figure in the order of upwards of £50 million. It is not exactly that figure, but that is what is at present being talked about. But floatation or not, that is the ball park figure—if I may use the term—that we have had in mind for some time.
This is a really important point. After all, we are talking about the country's assets, and I wish to reassure all noble Lords that the taxpayers' interests will be watched very carefully, so that we receive a proper price. This matter is under negotiation at present, and will be negotiated in more detail, subject to it going forward.
The noble Lord, Lord Underhill, asked about the arrangements for the funding of pensions until the sale was completed. The existing arrangements will continue until that time. If the transaction goes forward—I must put it that way, because it is not certain that it will go forward—it will have no effect on Government support for rail-based pensions, but the Government have agreed to fund road-based pension deficiencies from the proceeds of the sale. Indeed, I am told that a major part of the proceeds of the sale will go to doing just that.
Finally, there is the point about consultation with trade unions. I understand that consultation is taking place as of today. I thank the noble Lord, Lord Byers, who welcomed at least in principle what is proposed, and I should like to repeat that this is a rather unusual and interesting development, which could be advantageous to all concerned.