§ 6.5 p.m.
§ Lord Lucas of Chilworth
My Lords, I beg to move that this Bill be now read a second time. It is a simple measure which will relieve the Port of London Authority and the Mersey Docks and Harbour Company of part of their current debt burdens. It fulfils an undertaking given to Parliament by the Secretary of State for Transport on 15th December last year, when he announced the new financial régime for these two port authorities.
Noble Lords may find it helpful if I say something quite briefly about the background to this measure. Although most ports have felt the effects of the recession, London and Liverpool have, in addition, been very severely affected by the changes in the methods of handling cargo which have taken place over the past decade or so, and by the changes in patterns of trade. As a result, by the beginning of 1981 both the PLA and the Mersey Docks and Harbour Company were making heavy losses and had no further reserves to call upon. Each authority had then over 1,000 registered dock workers for whom there was no work, and no prospect of there being any. Urgent action was needed if the two ports were to continue in operation, and the Government therefore stepped in with an emergency measure, the Ports (Financial Assistance) Act 1981, which authorised the provision of funds within a ceiling of £160 million for severances and to enable ports to stay in business while these essential manpower reductions were being made.
Following the preparation of corporate plans for returning the two ports to viability, the upper limit on assistance was raised to £360 million by the Transport (Finance) Act 1982; that is, last year. At the time that legislation was going through Parliament the Government made it clear that the deficit grant which had been paid from the beginning of 1981 would cease at the end of 1982. We also explained, however, that Government funds would continue to be available for severances.
Over the past two years both the PLA and the Mersey Docks and Harbour Company have made considerable progress to reduce manpower and to improve efficiency. So far the Government have provided £215 million in assistance to the two authorities under the 1981 Act to which I have referred. More than half of this sum has been to pay for severances. Nevertheless, despite the massive changes which have been necessary in these two ports over the past two years, both the authorities have had to service large amounts of debt which reflect the time when their operations were on a very much larger scale. Both bodies have argued that in their new circumstances these interest payments are out of line with the revenue they can reasonably expect to earn. The Government have not accepted the case for a complete write-off of their debt, but we have agreed that a limited amount of debt relief is justified in each case, and it is in this Bill that we seek the necessary legislative authority.
The Bill enables the Secretary of State, with the consent of the Treasury, to reduce the debts of the Port of London Authority and the Mersey Docks and Harbour Company to the Government by up to £26 526 million, on the one hand, and £36 million, on the other. The precise amount will depend on the timing of Royal Assent and, in the case of Liverpool, on the results of detailed work now being carried out by the Secretary of State's accountants, Peat Marwick Mitchell and Company.
The Bill also empowers the Secretary of State to pay a grant of up to £22 million to repay a commercial loan—the so-called Lazard loan—which was made to the PLA. The Bill provides for these debt reductions to count against the £360 million limit on assistance to the two ports which was set out in the Transport (Finance) Act 1982.
In announcing these measures last December the Secretary of State for Transport also set out clearly the Government's intentions for the future financial regime which will apply to the two ports. Grants to meet the cost of severance and loans to provide for essential capital projects will be available until the two authorities are in a position to fund these requirements in the normal way. We have guaranteed overdrafts to meet normal trading fluctuations.
But grants to meet deficits which were available during 1981 and 1982 ceased at the end of 1982. This remains the position today. I take this opportunity of emphasising that there is no question of these grants for operating subsidies being resumed. I hope in particular that there is no misunderstanding about this, especially on the part of those engaged in the current and most regrettable strike by dockers at Tilbury. The longer this dispute continues, the more serious will be the effects on the authority's critically balanced finances. The only beneficiaries will be the rival ports to which the ships are being diverted, perhaps permanently. I urge dockers to think long and hard about the harm their action is doing to the future of their port and their jobs.
With this Bill we are establishing a fair framework within which the two authorities can continue their progress towards viability, and it would be a tragedy if those employed in the ports failed to seize the opportunity which the Bill offers to them. I beg to move.
§ Moved, That the Bill be now read a second time.—(Lord Lucas of Chilworth.)
§ 6.12 p.m.
§ Lord Underhill
My Lords, the House will be grateful to the noble Lord, Lord Lucas of Chilworth, for explaining what he calls a simple Bill. From these Benches we give the Bill a general welcome in so far as it is essential for the wellbeing of the PLA and the Mersey Docks. But this is the fifth occasion in the past four years on which there has been legislation dealing with these docks and the docks position in general. The noble Lord referred to the Ports (Financial Assistance) Act 1981 and to the Transport (Finance) Act 1982, but we also had the Port of London (Finance Assistance) Act 1980, which provided for grants to the maximum of £70 million and which was repealed by the 1981 Act because the figure had to be raised to £160 million within a period of 12 months or so. Then we had the Transport Act 1983, which was passed by your Lordships' House just before the Easter Recess, Section 11 of which provides for £23.8 million 527 to be written off from the debt of the National Dock Labour Board, borrowed from the Secretary of State as part of the limit under the Ports (Finance Assistance) Act 1981 and representing the cost of the severance scheme in London and Liverpool in 1981. So there are four Acts, and now we have this fifth Bill brought forward today.
We are naturally concerned that there is no further decision on either the actual amount or the make-up of the write-off for the Mersey Docks. We can hope that this will not be long delayed. The noble Lord said that this will be determined soon after Royal Assent, but we hope that will not be so long because the Minister has made it clear in another place that until the write-offs are agreed the two authorities will have to make repayments of principal as these payments fall due. Therefore, we should like to know a little more about when a final decision on the amount and make-up of the write-off for Mersey Docks will be determined.
The noble Lord the Minister has repeated the statement that there is no intention of revising subsidies; that is, grants to meet the deficits to cover any operating losses. Questions were asked during the Committee stage in the other place with respect to alleged subsidies that are being made in some EEC countries to ports which are in fact potential competitors, if not competitors now, to some of our own ports. References were made to Rotterdam and Hamburg. Allegations were also made that help is given by local authorities and central Governments to subsidise some of the costs of ports which are possibly our competitors. As far as I can see there was no clear reply given in another place to those statements.
Similarly, on three occasions in another place—on Second Reading, in Committee and on Third Reading—references were made to what is termed the grid pricing system, whereby goods which are directed to a particular port because of the convenience of the shipping company are transferred to another port and subsequent land charges are met by the shipping company. I should like to know whether that is extensive and to what degree that operates. The only reply that was eventually given, on Third Reading, was by the Under-Secretary of State in the other place, who said that he would write to the Member who had raised this question at three stages of the Bill. I am certain that your Lordships will want to know the answer that was given, and will not just leave it to this information being given to one Member of Parliament.
There is, as the Minister said, these recurrent crises which have affected, in particular, London and the Mersey Docks in Liverpool. We are apprehensive as to whether this Bill is yet another stop-gap measure. We have already had four since 1980, as I mentioned. This raises the question of what is the Government's policy for the ports in general. Dealing with Section 11 of the Transport Act in Standing Committee in the other place, the Under-Secretary of State said on 25th July, when speaking of the write-off of some £23.8 million to which I have already referred:But this measure is introduced because it is part of a larger scheme of things, and is only part of the measures necessary to see our ports through revolutionary conditions in the best possible way. It is a part that requires legislation, and that is why it is in the 528 clause."[Official Report, Commons, Standing Committee "A", 25/7/82; col. 1039.]We opposed the abolition of the National Ports Council under the Transport Act 1982. On what authority does the Minister, the Government, receive their present advice on what should be ports policy? The Labour Party will propose a National Ports Authority when we return to Government in order to ensure that there is adequate development where required. Referring to the statement from the Under-Secretary of State which I quoted, what is the larger scheme of things which the Government are proposing? It is not in this Bill, and there was no indication in the Minister's speech that there is any larger scheme of things proposed for the docks.
There are suggestions—and these were made in the other place—that there are other ports in urgent need of financial help. Bristol and the Clyde Port Authority were particularly mentioned. If that is the position, what assistance do the Government propose? The Minister has suggested in the other place—I just paraphrase his words—that the London and Mersey docks will remain major ports for a long time to come. Apart from the financial measures, what are the Government's proposals to ensure that that happens? I share the concern of the noble Lord, Lord Lucas of Chilworth, that the dispute at Tilbury should be settled soon, although in the context of this Bill I do not propose to discuss the nature of the dispute.
I have referred to the need to know what the Government's policies are for the docks industry in general. We have had another piece of ports legislation in recent years. Under the Transport Act 1981 there was provision for the sale of the 19 ports then operating under the British Transport Docks Board, which were renamed under that Act the Associated British Ports. The Government have recently carried through the sale of 49 per cent. of the shares. However, they made it quite clear that, although they were retaining 51 per cent., they would not take any part in policy matters. There is no argument whatever but that the British Transport Docks Board ports were functioning efficiently under sound management, and one of their last balance sheets showed a 15 per cent. return.
Allegations were made during the Second Reading stage in the other place regarding the value at which these shares were sold. In the space of three or four weeks the initial share price of 112p had risen to 143p. It is stated that the sale was over-subscribed some 30 times. We all know that about £80 million was written off before the company was put up for sale. It is suggested that the sale in no way related to the actual assets of those docks. As the whole position of the sale of those docks can affect the very matter which we are discussing in the Bill, I should like to know exactly how much was raised in that sale and whether it in any way became commensurate with the large assets that were available. Strangely enough, although the matter was raised in the other place, the Minister concerned did not reply to these points at all. He referred only to the question of employee shares, which had also been raised; he did not refer at all to these other major matters.
There is one other question which I should like to raise with the Minister. It is a matter which has been 529 raised by the London Wharfingers Association, whose members operate on private wharves alongside the river. They have raised the question of the port dues charged by the Port of London Authority. This, I understand, is a levy charged under the Port of London Act 1908 on all goods passing through the London port. At the time the purpose was to help develop the facilities of the then dilapidated enclosed docks. I am informed that the number of these privately owned wharves has fallen from 145 in 1967 to only 20 at present. But I am reliably informed that they all have substantial facilities with an asset value of around £15 million. The port rates levied by the PLA are on tonnage and vary according to the commodities. These are increased annually by the PLA. There has been no less than a 32 per cent. increase since 1980.
The association states that there is a grave danger of these wharves being driven out of business by virtue of these continually increasing port rates. If this should happen, substantial additional costs would fall on the PLA because of the consequential surplus of registered dock workers until severance was possibly arranged. I think that it will be agreed that it is important that these remaining wharf facilities along the river should continue. The PLA levies these dock rates, but the riverside operators are not provided with any facilities, such as a basic dock infrastructure, in return.
I recognise that if any action is taken—obviously the action desired is the abolition of these dock rates—it would affect the PLA finances. Therefore, it is timely that this matter should be raised in your Lordships' House. The present position cannot possibly be justified on grounds of equity and it certainly cannot be justified on the Government's view of market forces that a body should be charged for port rates when it gets no benefit whatever in return. This position must be taken into consideration when in future the Government are dealing with the PLA finance.
Mr. Reginald Eyre, the Under-Secretary of State, in the Standing Committee in another place on 24th March, stated:I recently had a useful discussion with the London Wharfingers Association about the impact of port rates. The association, as he knows, represents the riverside operators on the Thames. I pointed out that decisions, both on the overall level of port rates and on the charges for particular types of goods, were principally a matter for the PLA".—[Official Report, Commons, Standing Committee E, 24/3/83; col. 54].I am reliably informed this morning that some of these talks took place with the PLA yesterday and have not produced any result on the lines of that which was desired. Therefore, this is an important matter which we are discussing in this Bill for the PLA as well as the Mersey Docks, and this is an issue on which I hope the Minister will be able to give me an answer.
As I said, we are sorry to have this repeated piecemeal legislation but we welcome the Bill in so far as it meets the critical situation both of the PLA and of the Mersey Docks.
§ Lord Brougham and Vaux
My Lords, I should just like to support my noble friend Lord Lucas of Chilworth in what he said about the position at Tilbury Docks at the moment. I would say to the noble Lord, Lord Underhill, that if the dockers carry on 530 there will not be a PLA much longer. I ship into Tilbury and I am reliably informed that the mood of the dockers at their meeting on Thursday is such that they will not go back to work. The strike has been going on for nearly five weeks and to prolong it can only do them more harm.
§ 6.26 p.m.
§ Lord Lucas of Chilworth
My Lords, first may I thank the noble Lord, Lord Underhill, for the general welcome which he gave to the Bill. As I said when introducing the debate, the Bill is a simple measure. It has the quite straightforward purpose of providing the port authorities of London and Liverpool with a capital structure appropriate to their present size and situation. The debt reductions for which the Bill provides are smaller than the PLA and the Mersey Harbour Company would have liked but they offer a real prospect of returning to profitability in the years ahead.
The noble Lord asked me a number of questions which I shall do my best to answer. He asked first when would be the time that the final amounts of these two write-offs would be known. All that I can tell him on that is that the decision will be made very shortly and certainly before Royal Assent. He and other noble Lords will appreciate that as these debts are of a rolling nature, certain principal amounts become payable on various dates and the interest charges also become due on differing dates. Until one knows exactly when the whole debt is to be extinguished, it is not possible to make the calculation necessary to determine a final amount.
The noble Lord spoke about competition with European ports. The Government are aware that the level of port charges in the United Kingdom is higher than those prevailing on the Continent. The port authorities themselves are responsible for setting their charges according to their commercial judgment and it is not open to the Government to intervene. The United Kingdom ports are now in very strong competition with each other and especially in present trading conditions they have every incentive to be keen in their pricing. Although there is always room for improvement, major changes have taken place in the United Kingdom ports in recent years. The registered dock labour force is now little more than a quarter of what it was 15 years ago, and only last week the port employers asked for 1,000 voluntary redundancies in order to help match the costs and traffic.
Continental ports such as Rotterdam and Antwerp have the advantage of a much larger catchment area, and with the opportunities that that provides there are further economies of scale. Moreover the continental shipowner has to meet fewer costs than in the case in British ports. Continental ports receive considerable financial assistance from the state, or the municipality, or sometimes both, and the forms of assistance vary from place to place; but it can cover, or contribute heavily to, the cost of dredging, lights, marine works, and capital investment. However, the Government do not believe that they should follow that course in the United Kingdom; and, if I may, I shall in a few moments return to the question of the Government's general overall policy with regard to ports.
531 The noble Lord spoke about the so-called grid system. This is largely a matter as between the shipping companies and the shippers. Certainly the shippers meet the cost of inland transport so far as the nearest base port, and the shipping company bears the rest of the cost of transport to the port that is actually used. Of course we accept that to some extent this system distorts competition between the ports, and in general perhaps the northern and western ports have been the losers, though there have been instances where the system has worked in their favour.
Frankly, I am not able to tell noble Lords very much about the system because I do not have an exact measurement as to its prevalence, and, as I have found, it is very difficult to establish exactly what are the benefits of the scheme and what would be the effects if it were to be withdrawn. How far the system has contributed to the switch in trade to other ports—ports in the south of England and East Anglia—and what would be the effects of changing it are, as I say, matters which are hard to judge.
The pricing structure is principally a matter for the shipping industry, and I confirm that at Third Reading in another place the Parliamentary Under-Secretary promised to look into the question. The only way in which I can respond to the noble Lord, Lord Underhill, is to say that I shall see that his comments are passed to my honourable friend, and that he takes them into consideration when looking into the matter. I shall certainly ensure that replies are given to the comments. The noble Lord will probably accept that to some extent this is a matter for my right honourable and honourable friends in the Department of Trade who handle shipping affairs.
I now wish to return to the Government's policy on the ports industry. While the noble Lord, Lord Underhill, was perfectly right in reminding us that only a few months ago we wrote off £23.8 million by means of Clause 11 of the Transport Bill (as it then was), I am quite sure that he will recognise that the £23.8 million was a payment to meet the national voluntary severance scheme, which has a massive takeup and which was in deficit. There was no way in which the industry would be able to replenish that amount of money. What we are discussing this evening are other matters, and I do not think that it is strictly fair to make a comparison in relation to these amounts of money.
The Government's general approach to the ports industry is that it should allow the ports to compete with one another on the basis of the prices and standard of service that they can offer. We believe this approach to be in the best interests of all those who use the ports, and of the industry itself. Attempts to direct traffic in particular directions, or subsidies to encourage the use of some ports rather than others, are in our view quite unjustified and can lead only to inefficencies from which all would suffer.
The problems of the two major ports—London and Liverpool—in adjusting to the very different cargo-handling business of today have been very much greater than those faced by any other ports, and Government assistance here really has been inescapable. However, all along it has been our 532 intention to bring this assistance to an end as soon as possible, and to insist that the PLA and the Mersey Docks and Harbour Company should once more compete with other ports without benefit of Government subsidy. It is for that reason that last year we set a firm time limit on the availability of the deficit grants; and I spoke about those in my opening speech. These grants finished at the end of 1982, and they will not be reintroduced. There is no question of their being resumed, and I hope that there is no expectation in either port that it can simply turn to the Government for help if it runs into difficulty.
The noble Lord spoke about the assessment—I take it that he meant the viability—of the two ports. In arriving at those parts of the debts which are to be written off by the Bill we had the benefit of the views of the ports, the department and its advisers. Although, as I said earlier, the ports asked for a heavier write-off, we felt that that was not totally desirable. By virtue of the Bill we shall write off an amount sufficient to restructure the two ports to enable them, given good management and a fair opportunity, to prove viable over the next few years.
The noble Lord asked specifically about Bristol. The Government are aware that the port of Bristol is facing some difficulties, and the Secretary of State for Transport considered very carefully whether he could assist in relieving the port's problem, but for several reasons he has concluded that that would not be appropriate. Honourable Members who represent Bristol in another place, together with representatives of Bristol City Council, recently put to my noble friend Lord Bellwin proposals for different treatment of the city's expenditure on docks in the calculation of its grant-related expenditure. At that time my noble friend undertook to have those ideas examined in the Grants Working Group in relation to the 1984–85 RSG settlement. But I must now repeat what my noble friend then said: that he could not promise Bristol that the outcome of the examination would be to its satisfaction.
The noble Lord asked about the proceeds which the Government had received from the sale of Associated British Ports. The Government's net receipts were £46 million. That was made up of just under £22 million from the sale of 49 per cent. of the shares in the holding company, £25 million in cash for two securities issued by the group, and a little over £1 million from interest on one of the securities and on the money subscribed for the shares. The Government's expenses in connection with the sale amounted to £2 million. But, in addition, the Government still hold 48.5 per cent of the company's issued share capital, and I can tell your Lordships that at yesterday's closing price that was worth more than £29 million.
The noble Lord referred to the employee take-up. I can confirm that no less than 91 per cent. of those eligible acquired shares in the company. Admittedly, many of them were only taking up shares offered to them free of charge, but nevertheless 38 per cent.—a very high figure—also bought shares and thus demonstrated their confidence in the business by backing it with their own money.
The noble Lord sought to link the proceeds from the sale with the reduction of the PLA and Mersey Docks 533 debt, but there is no connection whatever between the sale of these shares and the debts of the two ports that we are discussing. The Government decided on the conversion of the British Transport Docks Board into private enterprise long before we were faced at the end of last year with the decisions on the PLA and the Mersey Docks that led to this Bill. The timing of the sale was dictated by two considerations—the docks board's financial position after the long strike at Southampton in 1981–82 and the place of the sale in the Government's overall privatisation programme.
Lastly, the noble Lord asked me about the port dues in London. He was right in reminding your Lordships how this position arose. The port rates have been levied for some 70 years or so, and provide the authority with substantial income. The Parliamentary Secretary in the Department of Transport recently had discussions about the impact of port rates with the London Wharfingers Association. The Government are therefore well aware of the importance of the private sector within the Port of London and of the private sector's feelings in the matter.
Decisions on the overall level of port rates and on the charges for particular types of goods are a matter between the PLA and its customers. Certainly, yesterday, there was a discussion. I am sorry to hear from the noble Lord, Lord Underhill, that the meeting did not provide the wharfingers with a satisfactory outcome. Perhaps, further discussions in the light of what we have been talking about this evening may enable both parties to find some common ground. There is provision under Section 31 of the Harbours Act 1964 for the association, acting on behalf of its members, or for individual wharfingers to appeal to the Secretary of State, who could then set up an inquiry to advise him. It is now for the wharfingers themselves to decide how best to proceed.
I have no wish to get involved in a long discussion on the present dispute at Tilbury. I do not think that that would be helpful. I did, however, note what my noble friend Lord Brougham and Vaux had to say on that matter. Being in the business, he would know of the impact. Indeed, he reminded your Lordships of the impact that a continuation of the dispute would have on the Port of London.
As I have stated, the debt reductions provided for in the Bill give both the Port of London Authority and the Mersey Docks and Harbour Company a fair basis from which they may return to profitability. It is now up to all those who work in the ports of London and Liverpool, both management and workforce, to make good use of the opportunity that the Bill provides. I ask the House to give the Bill a Second Reading.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.