§ 4.1 p.m.
§ Lord Lucas of ChilworthMy Lords, with the leave of the House, it might be for the convenience of your Lordships if I repeat a Statement about Sealink (UK), which is now being made in another place by my right honourable friend the Secretary of State for Transport.
The Statement is as follows:
"I have today given my consent under Section 1(2) of the Transport Act 1981 to the sale of Sealink (UK) by British Rail to a subsidiary of Sea Containers Ltd.—British Ferries.
"The British Railways Board invited tenders, through their advisers, Morgan Grenfell and Co. Ltd., for the purchase of the whole of the board's interest in Sealink (UK). Three proposals were received with conditions attached.
"The chosen purchaser submitted the bid with the highest value, of some £66 million. The British Railways Board have been advised by Morgan Grenfell & Co. Ltd. that the price fairly reflects the value of the business, and this view is supported by my own advisers, Hill Samuel & Co. Ltd.
"Sea Containers, an international seafreight company with its headquarters in London, have wide experience in freight shipping. They have made a number of constructive proposals for improving Sealink's business. They have agreed on firm contractual commitments to maintain rail-linked passenger services. The parties are already in negotiation on new long-term freight contracts for train-ferry and Freightliner services.
"Sea Containers have said, first, that they intend to maintain the existing business and to safeguard the rights of employees, including their pension entitlements, which will be protected. They further plan additional capital expenditure to expand the business and increase its profitability. I know that the company will be seeking early discussions with Sealink's trades unions.
"Sea Containers have stated their intention to obtain a listing for the company on the Stock Exchange in due course, and that they would expect at that time to give employees an opportunity to purchase shares on favourable terms. Meanwhile, they are planning profit-sharing schemes for all employees.
1498 "Arrangements have been made to ensure that the contribution of the Sealink fleet to national defence will not be prejudiced by the sale.
"This sale is a successful end to the policy transferring Sealink to the private sector which we agreed with the British Railways Board in 1980 and debated in this House in 1981. The price is good, and the sale makes good industrial logic. Customers and passengers of Sealink will benefit from the continuation of competition in the ferry market. Above all, it will be good for those who work in Sealink, who will now join a progressive and expanding group, with the substantial resources necessary to make a real success of this important enterprise." My Lords, that concludes my right honourable friend's Statement.
§ Lord UnderhillMy Lords, the House will be grateful to the noble Lord for repeating the Statement which was made by the Secretary of State in the other place. But one's first reaction is that this is yet a further instalment of the Secretary of State's declared intention either to dismantle or drastically to interfere with publicly-owned transport in Great Britain.
The Statement refers to a sale to the highest bidder at a price of £66 million, and it says that the price is good. Reference to British Railways' accounts only a few minutes ago shows the assets of Sealink as being valued at over £170 million. Are the accounts of British Rail being challenged? Is the price good at £66 million for assets which are valued in British Railways' accounts at £170 million? How does that fit in with the Secretary of State's statement only last week that he would not agree to a sale at a price that did not reflect the value of the assets?
There is no reference in the Statement to Sealink harbours. Can the Minister confirm that the purchase includes Sealink harbours, bearing in mind the repeated assurances that have been given in this House that Sealink harbours and the shipping fleet will be sold as one unit? If the sale includes the seven harbours and the 37 ships, being valued at £170 million and sold for £66 million, is that not a knock-down price?
The Statement refers to the purchaser's intention to safeguard the rights of employees. Has the Secretary of State received guarantees from Sea Containers about the jobs of the 9,000 employees, conditions of service and union recognition? I ask that question in view of previous experience with some of the former British Railways hotel groups, where, despite similar assurances, such things have all but disappeared. Will there be discussions with the unions (to which reference is made in the Statement) before the final contract of sale is completed? The Statement says that Sea Containers is:
an international…company with its headquarters in London".Why is there no reference in the Statement to it being Bermuda-based and being a company with no ships under the British flag? Surely such a situation cannot be in Britain's best interests.Finally, what discussions have there been with British Rail's partners—the Belgian, French and Netherlands publicly-owned railways—about the future arrangements that Sealink, together with British Rail, has in that consortium?
§ Baroness SeearMy Lords, we on these Benches also wish to thank the Minister for repeating the Statement. I should like to ask him whether there is any truth in the rumour that a northern British firm was prepared to offer £80 million for the Sealink purchase. If that is an incorrect rumour, it would be useful to have it dispelled.
Following the remarks of the noble Lord, Lord Underhill, who has just spoken, I should also like to ask the Minister to explain why it was necessary to go to a non-British company for the purchase of Sealink. The fact that a company has its headquarters in the United Kingdom is by no means the same matter as being a United Kingdom company.
I note also that the Statement says that the company has expressed:
its intention to obtain a listing … on the Stock Exchange in due course, and that it would expect at that time to give employees an opportunity to purchase shares on favourable terms".On previous occasions when privatisation schemes have been undertaken, the Government have shown that they recognise the very great importance of allowing employees to have shares in the company. A firm commitment, with rather more detail as to what employee rights would be, would have been extremely welcome. Will the Minister please comment?
§ Lord Lucas of ChilworthMy Lords, I am grateful to the noble Lord, Lord Underhill, and the noble Baroness, Lady Seear, for their acceptance of the Statement which I have just repeated. Noble Lords opposite may laugh when I say that I am grateful to them for their response, but I repeat that. I have little doubt that noble Lords have a number of questions, and I hope that I shall satisfy some of them. The noble Lord, Lord Underhill, asked quite specifically how the sale price of £66 million can be justified when he read in British Rail's annual report that the net assets stood on the books at £170 million. Some £80 million of those assets consist of leased assets, but even allowing for that, it is true that there is a discount on the asset value of the sale price—
§ Lord Lucas of ChilworthMy Lords, perhaps noble Lords opposite will let me finish my answer to the noble Lord, Lord Underhill; then they may have the opportunity of laughing, or not laughing. The value of the company is what the assets can be made to earn, and the company has, on average, made a loss of £2½ million a year for some years. It made profits in only 1979 and 1983, and then they were of only £4.7 million and £4.1 million. Against those facts we believe, with the advice we have had, that this is a fair price. There is no question here of handing over profitable parts of British Rail at a knock-down price. I have said that Sealink is not generally profitable and 1983 was the only profitable year in the last five. I said that to the noble Lord, Lord Underhill, in response to a question that he asked in your Lordships' House as recently as April this year. In terms of the Railway Board's external financing limit, which includes total investment in leased assets as well as cash requirements, Sealink has accounted for well over £100 million since 1979.
1500 The noble Lord asked whether there would be further discussions with the unions before the sale was completed. I have to tell him: no, the sale has been completed, but of course discussions with the unions will take place, as I repeated in the Statement.
Finally, the noble Lord asked me about the pooling arrangements with SNCF, RTM and SMZ. This will be very largely for the new owner to decide. Pooling arrangements exist because all parties derive benefit from them, and that is true irrespective of who might be the owner. But all parties are certainly bound to honour existing agreements while they last and, generally, these agreements have something between a 12 and 18 months' termination notice period.
The noble Baroness, Lady Seear—
§ Lord UnderhillMy Lords, will the Minister comment on whether or not the sale includes the harbours, and also say whether it is true that this is a Bermuda-based firm?
§ Lord Lucas of ChilworthMy Lords, certainly the sale includes the harbours. Again, as I said in April, it was the intention of British Rail to sell Sealink as a complete unit and that, of course, includes the harbours. Sea Containers Limited is registered in Bermuda, but it has its group head office in London. It has interests in Hong Kong and in New York. The new company, British Ferries, is, however, registered in London, and therefore the subsidiary company operating Sealink is London registered.
Perhaps I may return to the noble Baroness, who asked me about a northern British firm offering a larger sum of money. I have to tell her that I have no knowledge of that matter, and I believe it to be rumour. Certainly, nothing that I know of suggests that it is true. She asked about the company being a non-United Kingdom company, and I think that I answered that question in my earlier response to the noble Lord, Lord Underhill. Again, I confirm that it is the intention of Sea Containers Limited to bring their new company to the stock market and at that time they plan—and I have no reason to believe that they will depart from their plan—to offer the present 9,400 employees of Sealink an opportunity to buy into what will be their own company.
§ Lord MottistoneMy Lords, as a weekly user of Sealink, I view with great pleasure the Government's satisfactory sale. We have been waiting for it for a very long time. It will clear the air, and it seems to me, whatever noble Lords opposite may think, that in view of its past record, it is a good price. I think it is good, too, that the rail ferry linkage is to be continued. I like the sound of shares for employees in due course and profit-sharing in the meantime. I am delighted to hear that any national defence commitments will not be prejudiced. I am also glad to hear that the harbours are included in the sale, so that they will not be operated separately from the ships, which in my part of the world is very important indeed. I look forward to a more flexible approach to the provision of the various services, particularly in relation to the Isle of Wight. I hope that we shall benefit greatly from this sale in the future and I thank my noble friend very much for repeating the Statement.
§ Lord Lucas of ChilworthMy Lords, I am grateful to my noble friend Lord Mottistone for his acceptance of the Statement. We have always believed that to transfer Sealink from British Rail to the private sector would give Sealink the advantage of freedom from certain elements of bureaucracy which, of course, occur in nationalised industries, and I expect that the flexibility to which my noble friend referred will be evidenced very shortly.
My noble friend asked about the defence aspect. Perhaps I may tell him that the Government have taken steps to ensure that Sealink's fleet remains available to assist in a defence emergency, and any future change in ownership of either the company or its assets would not be likely materially to affect defence interests.
While I am here, perhaps I should correct what I said to the noble Baroness in so far as alternative bids are concerned. There were, in fact, three bids offered, but they were with conditions attached, and I think the bid to which she referred from a northern company was higher on face value, but was found to be lower when the deferred payments which were suggested in the terms of the purchase were considered. Both bankers were fairly clear that, on balance, that offer was worth less overall. I beg the noble Baroness's pardon for perhaps unwittingly misleading her earlier.
§ Baroness SeearMy Lords, I thank the noble Lord for that. I take it that that offer was from a British firm? Is the noble Lord satisfied, in view of what he told us, that British Rail's statement of accounts is a correct representation of the position? He has now told us that the assets are worth about half what they were stated to be worth in the accounts.
§ Lord Lucas of ChilworthMy Lords, I did not say that the assets were worth half of what British Rail stated in their accounts. What I said was that market value judged them to be less than the amount which British Rail had in their accounts.
§ Lord Cledwyn of PenrhosMy Lords, in all the long catalogue of Statements made in this House over the last 12 months or so, this is the most deeply disquieting that I have listened to. I regret to say this to the noble Lord, who I respect, though he has no direct real responsibility for it. Is he aware, first, that the disparity between the figure of £170 million given by my noble friend Lord Underhill and the £66 million mentioned in the Statement needs far more explanation than he has been able to give us today in the House? Is he aware that the Sealink's United Kingdom ports with which I am most familiar are clearly the Welsh ports of Holyhead and Fishguard? If the assets include the harbours, it seems inconceivable to me that the ports of Holyhead and Fishguard should not themselves be worth more than £66 million.
I shall be grateful if the noble Lord will say quite clearly to the House that he is satisfied with the advice which his right honourable friend has received. I note that the advisers are two reputable firms: Morgan Grenfell and Company Limited and Hill Samuel and Company Limited. Is the noble Lord further aware that I should be more happy if an independent body could confirm these valuations? Is the noble Lord also 1502 aware that it would have been more satisfactory if Welsh interests, in so far as the two Welsh ports are concerned, had been consulted: if the Welsh Committee on Economic and Industrial Affairs, presided over by Mr. Emrys Evans, had been consulted, and if it could have given advice about this sale, as well as the trade unions, which are deeply concerned about future employment?
May I also ask the noble Lord whether he is aware that the sale of Sealink to a firm which I certainly have never heard of—I do not know whether that is true of other noble Lords in all parts of the House—and which is based in Bermuda is unacceptable both to me and to my noble friends? The future of these ports and of all those who work in them is at stake. I should be grateful if the noble Lord could tell the House whether anything in the agreement precludes this firm from selling any part of the total undertaking. For example, does it preclude this firm from selling Holyhead and Fishguard separately? Does the agreement bind the new owner to work all these ports for a specified period of time, or could the new owner dispose by sale of these ports at any time from now on? I should be grateful if the noble Lord could give the House some information about that.
Furthermore, will he ask his right honourable friend to be good enough to publish a White Paper or another document which sets out all the details of this sale, together with all its implications?
§ Lord Lucas of ChilworthMy Lords, I recognise the interest that the noble Lord the Leader of the Opposition has in this matter, particularly his interest in the Principality. I am quite sure that he will recall that he raised some of these questions before, in April, and he will no doubt also recall that there is no question of any acquiring company being able to dispose of the harbours. All of the harbours are set up under statute, and legislation would have to be enacted for the sale of the harbours. There is no question, therefore, of the harbours being sold separately.
The noble Lord asked me about having consultations with the economic communities of Wales. We made our intentions abundantly clear in 1980. These were transferred into the 1981 Act when we provided for British Rail to dispose of Sealink. It is entirely for British Rail to abide by their terms of reference and, perhaps rather more importantly, the objectives which my right honourable friend the present Secretary of State set for them in October of last year. There is no question of anything having been sprung upon the country or anybody else. We made quite clear what we were going to do. Therefore, we did not feel that it was either necessary or desirable (I quote the noble Lord, Lord Cledwyn of Penrhos) to go to "an independent body". Two very reputable companies are advising both British Rail and my right honourable friend. Therefore, in accepting the offer of £66 million plus we do not believe that we have acted without proper professional advice.
The noble Lord, Lord Cledwyn of Penrhos, suggested that my right honourable friend should produce a White Paper. For the reasons which I have given with regard to the 1980 statement of intent and the 1981 Act, although it is not for me to say exactly what my right honourable friend may or may not do, 1503 I do not suppose that he would be disposed to agree with the noble Lord about producing a White Paper on this matter.
§ Lord Cledwyn of PenrhosMy Lords, I am grateful to the noble Lord for his reply, but may I follow up one point? Is it the case, therefore, that before this transaction can be completed and before the new owner-designate can run Sealink ports and ships further legislation will be required in order to meet the obligations under existing legislation affecting Sealink ports? If that is the position, when will such a Bill be introduced?
§ Lord Lucas of ChilworthMy Lords, I do not know whether I have understood correctly the question asked by the noble Lord the Leader of the Opposition. If I have not understood him correctly, I hope he will interrupt me. The whole of the group of seven harbours could be sold jointly, but certainly not separately. It would certainly be against the interests of any ferry-operating company to do so because of the long-term contracts and the legal obligations which hang upon the operation of those ports. I hope my answer has made the position clear.
§ Lord Cledwyn of PenrhosBecause, therefore, they could be sold in one block, is the noble Lord saying that there is no need for legislation?
§ Lord Lucas of ChilworthMy Lords, that is absolutely right.
§ Lord UnderhillMy Lords, if the noble Lord cannot tell us now, will he kindly write and let us know what legislation would prevent Sea Containers from disposing of any single harbour? This is not written into the Transport Act. Is there any previous legislation which would prevent it? Perhaps the noble Lord would write to us upon the matter.
§ Lord Lucas of ChilworthI believe I am right in saying that the provision would be written into a number of harbours Acts. If I am wrong, I shall certainly write to the noble Lord, but if I am right I shall not.