§ 6.40 p.m.
§ Lord John-Mackie rose to ask Her Majesty's Government whether, in view of the complexities that have arisen which were mentioned by the Earl of Dundee on 9th March (col. 818), they will now withdraw their plans to privatise the Plant Breeding Institute and the National Seed Development Organisation.
§ The noble Lord said: My Lords, I should like to be as brief as possible in asking this Question, but I must just give some of the history of the situation. In the early spring of 1984, rumours were rife that the NSDO—the National Seed Development Organisation—was to be privatised. I put down a Question in, I think, April of that year and had a reply from the noble Lord, Lord Belstead—as the NSDO is under the Ministry of Agriculture—that that was the case and it was simply because of the Government's privatisation plans. No doubt the Ministry of Agriculture had been asked to look at what it could privatise and it picked on the NSDO.
§ In supplementary questions, the noble Lord, Lord Walston, and I both pointed out that privatising a 342 marketing and development organisation without the material that it sold seemed to be slightly ridiculous. I do not think we put it in those words, but I have the Hansard here. It took the Government till 1985 to discover that that was so and that they could not privatise the NSDO without the Plant Breeding Institute. The noble Lord, Lord Belstead, before my Question was to be answered, very kindly asked whether I would mind if he explained why the Government had decided to include the FBI in the privatisation scheme. It was very nice of him to do that. That Answer was given in 1985 and we were to be told how it would be done.
§ Then in 1986 nothing seemed to be happening, so early in that year I put down another Question to ask what was the situation. I was told that the Government had appointed a body from Lazards of about six high-powered people to look at the matter and report. That report was to be given to us in early May, 1986. Of course, the Department of Education and Science came into the picture as soon as the PBI was involved, because it is under the Agricultural and Food Research Council, which is under the Department of Education.
§ Later in that year, I asked a Question about what was happening which was answered by the noble Earl, Lord Swinton. I asked what Lazard's had reported. The noble Earl did not say that Lazard's had not reported but just that the report would be confidential because of commercial secrecy, which is always said when one wants to avoid answering a question.
§ I now come to March 1987. As the noble Earl knows well, I had a Question down a couple of weeks ago and was told that in a few months the Government were hoping for a memorandum from Lazard Brothers, which would report in that way. The noble Earl was pressed by several noble Lords on this subject and he admitted that considerable complexities had arisen which had caused the delay.
§ I have spoken to various people on the subject and have been told that there have been involved the Ministry of Agriculture, the Department of Education and Science, Lazards, the PBI, the NSDO, the Agricultural Genetics Company and the Treasury. Funnily enough, somebody has suggested that the Department of the Environment also got into the picture, because there is talk—it may be only gossip, but there is no smoke without fire—that the area might be developed for other uses. With all those ministries and the Treasury coming into the picture, the complexities must have been quite fantastic. I do not know how they possibly came to a decision, or will come to a decision—because they obviously have not done so.
Having mentioned the complexities I want to go much further, because that is necessary. I should like to quote the original reply in 1984, which was:
in the context of their general policy on privatisation, the Government are examining the possibility of privatising the National Seed Development Organisation".—[0fficial Report, 21/5/84; col. 1.]
Then in November 1985, when the PBI came into the picture, your Lordships were informed that:
the Government were examining the possibility of privatising the National Seed Development Organisation. However, in the light of the Government's policy to encourage industry funding of research and NSDO's close dependence on plant breeding at the Plant
Breeding Institute, consideration is now being given to the possible privatisation of applied plant breeding at PBI as well as of NSDO.—[Official Report, 28/11/85: col. 976.]
That is all the information that we have been given as to why this should take place. There has been a lot of pressure, but we have no evidence at all that the privatisation of this world famous body will be of benefit to anyone at all.
§ The great thing—I should like the Minister to listen carefully here—is that the evidence the other way is almost perfect. There is no question that in plant breeding in this country the private companies—and I know a lot of them—such as Sir Joseph Nickerson and Miln and Masters have done a good job. But all that they have done together does not add up to what the PBI has done alone, not only in this country but worldwide. The Government must tell us why they are going to privatise this body, with all the evidence against it. We must get more out of them than the answers that we have been getting over the past three years. I have not touched on the whole question of the demoralisation of the staff, because my noble friend Lady Nicol, who is a Cambridge person, will put that point and I know she will put it much better than I can.
§ I should also like to mention the economics of the matter. The NSDO puts into the Treasury nearly twice what the PBI costs—admittedly in another way; it does not go back through the PBI. Apart from being profitable, and its record as a plant breeder and everything else, 80 per cent. of the wheat of this country is produced by plants from the PBI. I want to give some credit to the Scottish plant breeding stations which market what it produces.
§ I think that the Maris Piper potatoes which it bred account for nearly 50 per cent. of the potatoes in this country. In Aberystwyth, you will find some of the grasses, particularly the leafy coltsfoot, which is produced through the NSDO. People must look at that and the Government must produce evidence that privatisation will be of benefit to agriculture in this country and in the rest of the world. I want evidence and not just the sort of answers we have had in the past. I hope that the Minister has something to tell us tonight.
§ 6.49 p.m.
§ Baroness Nicol
My Lords, we are grateful to my noble friend for raising this matter tonight so that we can once again ask questions about this subject which, as he said, has been going on for so long. In addition to the questions which my noble friend listed, we had a full debate on agricultural research and development in May last year. At that time the noble Lord, Lord Belstead, was not left in any doubt about the anxieties in this House over the whole state of agricultural research and development. In particular, the problems of the PBI and the NSDO were specially mentioned by a number of speakers.
As my noble friend indicated, at that time the Minister said that the report from Lazards was expected before the end of May 1986. Here we are at the end of March 1987 and we still do not know what is happening. These unfortunate organisations are still in doubt about their future shape and for that matter their ownership. They have to be content with 344 rumour. Suggestions are being made that the remaining publicly-owned part of the PBI—nobody seems to know what that part will be, because there is nothing concrete to go on—is to be moved from Cambridge. If that were to happen, it would destroy an immensely valuable and close relationship that the PBI has had with the university over many years and in fact since its very beginning. The value of that relationship has been incalculable to both organisations and, if I may say so, to the world as a whole and not simply to the local effort.
The continuing uncertainty of the past two or three years has led to the loss of even more valuable staff. The situation was bad enough last year at both the PBI and the SDO. We have recently learnt that the head of the PBI is about to go to the United States because of the uncertainty here. He is taking early retirement from the PBI and going to America. Some noble Lords may think that we can afford that kind of brain drain. I do not think that we can, particularly in agriculture, because we are all aware of a newer crisis in the agricultural industry of this country. We rely on the talents of these people to keep us ahead of the world in solving the problems of agriculture. They have done it nobly up to now, and it is a great shame that they are being destroyed in this way.
The Select Committee on Science and Technology submitted a report in November 1986 which was debated in this House on 19th February 1987. That report was on civil research and development as a whole. The conclusions of the committee gave clear guidance to the Government on how it saw the role of the Government in research and development generally, as well as the role of industry. The debate on that report attracted a very impressive list of speakers who were all leaders in their fields. The decisive message coming out of the debate, as well as the message coming out of the report, was that the Government should recognise the crucial importance of R&D to our future and that the Government must take a responsible role in ensuring continuity and funding. As I have said, that applies more at this moment to agricultural research than to any other research in this country.
If the shilly-shallying which has gone on for the past two or three years over these two institutions is typical of the Government's approach to research and development elsewhere in the country, then I truly fear for our future. I hope that the Minister will have for us tonight some positive answers that will put at least some of our fears to rest and give some indication to the two institutions what is to happen to them, and, just as important, when it is to happen.
§ Lord Diamond
My Lords, I apologise that my name was not put down as a speaker. I shall therefore be very brief. The arguments have been put extremely well already. However, I want to add the whole weight of these Benches against this mad proposal. I am not merely asking questions, as has been done so ably by the two previous speakers; I suggest that the Government should think again.
We know how this matter arose. If we look at Hansard of 14th April 1986, col. 416, the noble Earl, 345 Lord Swinton, said in the course of a reply to a Question:However, there has been some reduction in the level of funding at the PBI and other institutes and it is sensible to look for ways to make this up".Therefore it is quite clear what we are engaged upon. This is not an exercise in improving research or breeding. What we are engaged upon is an exercise in saving a little money and in trying to add to the cash resources of the Chancellor by selling off an asset, if it is available to be sold or can possibly be sold.
The arguments against that have been put many times. To me, the important arguments are, first, that there is—not will be, but is—a split-up of a most valuable and important research team which will undoubtedly prejudice research effort. Inevitably the future benefit of such research as will be done by the privatised section will be restricted for the benefit of those who own the organisation instead of the present position where the organisation is used not only for the benefit of our country but for the benefit of the whole world and particularly third world countries.
Inevitably there is loss of key personnel as a result of demoralisation and the loss of a sense of purpose held by people who devote their lives to important work. Never mind variations in salaries. A man who believes that he has a mission in life must feel that there is a possibility of his fulfilling it, and he cannot feel that if the wherewithal to carry out the task is destroyed. We know that the director of the institute, Professor Day, is either going or is already on his way to the United States where he will be able to carry out his work.
I should like to summarise the position in the following way. I regard the privatisation of the Plant Breeding Institute—I concentrate on that institute because I can see some arguments both ways so far as the other organisation is concerned—a body which is an internationally renowned centre of excellence in fundamental research, as plainly absurd. Already some of its staff, including the director, are joining the brain drain. Other countries wish to harness their ability, even if the British Government do not. A remarkable heritage in plant breeding has been casually destroyed. This is not merely another example of selling the family silver. Where frontier research is involved, it amounts to selling the family gold.
The Earl of Dundee
My Lords, I have listened carefully to the points made this evening by the noble Lords, Lord John-Mackie and Lord Diamond, and the noble Baroness, Lady Nicol. I am grateful to all of them for contributing to this debate. I should also like to apologise to the noble Lord, Lord John-Mackie, for being a moment or two late owing to the speed with which the previous business was taken.
I recognise the great interest which noble Lords have shown in this privatisation exercise. I am not sure whether that is the most elegant term to use. I do not know whether the noble and learned Lord, Lord Simon of Glaisdale, who initiated our recent debate on the English language, would have approved of that word, regardless of where he might stand on the issue of privatisation. I have also looked closely at the points made by noble Lords in earlier questions to me and to 346 other government spokesmen. I feel bound to say that on some of the issues involved there will remain something of a difference of opinion. But I shall do my best to persuade the noble Lord this evening that there is perhaps rather less ground for concern in our proposals than at present he suspects.
In our previous discussions, and in response to Starred Questions on this matter, perhaps it is hardly surprising that government replies have focused on particular points which have been raised. Before responding in detail to such points this evening, therefore, I hope it may be helpful if I spend a few moments setting out more generally the position as the Government see it. In particular, I should like to explain why the Government have decided to privatise the NSDO and applied plant breeding at the PBI. I shall also describe what stage this operation has reached. Recognising some of the concerns that have been expressed, I shall outline what measures are being taken to provide safeguards where the Government believe these to be necessary. I hope that this will go some way to reassure those of your Lordships who remain in doubt.
What then are the reasons for privatisation in this case? First of course there is this Government's general policy and belief that in suitable circumstances publicly-owned concerns will function better if transferred to the private sector. I know that this general policy is not necessarily subscribed to by all your Lordships. I am also aware that some of your Lordships have deeply held views that the balance in our mixed economy is either about right as it is or else is already insufficiently weighted in favour of the public sector. This is not the time to debate the merits and demerits of a shift in the mixed economy in one direction or another; suffice to say that the Government continue to believe strongly in the advantages of further emphasis on the private sector and that this general belief forms the background to the question in our debate tonight.
I come now to the particular circumstances of the Plant Breeding Institute and the National Seed Development Organisation. Here we have two organisations, both operating successfully and both performing functions that could equally well be achieved within the private sector. However, let me make clear that this is not just my opinion or that of the Government alone. Before reaching a view that privatisation was the right course we examined very thoroughly the pros and cons. For this purpose we commissioned a leading firm of merchant bankers, Lazard Brothers, to undertake a feasibility study for us. Only after receiving that report, and studying it most carefully, did my right honourable friend the Secretary of State for Education and Science announce to Parliament the Government's intentions. Therefore, it is not only our belief in the private sector which has led to the present decision; it would not have been taken at all had it not been based on professional assessment of the issues involved. If this Government wish to be doctrinaire I dare say they would seek to privatise all plant breeding institutes. The Government have not been doctrinaire. This proposed transfer to the private sector is a selective decision and the reasons for it are soundly based.
347 There are, therefore, very good grounds for holding the view that the NSDO and applied plant breeding at the PBI will be in a better position to flourish in the private sector than they can at present. Not that I am denying them their success—far from it—but I believe we can look forward to yet greater success for these two organisations after the privatisation than would be likely without it. In particular, despite its undoubted success, financial and otherwise, the PBI—with other AFRC institutions—has had to undergo some reductions in scale and operation because of changes in the priorities for science in the UK as a whole. There are of course wider issues involved here that are not for today's debate; but the facts again are clear.
The noble Lord, Lord John-Mackie, is right to question me on where matters now stand. He argues that there has been delay. I recognise that matters have taken a long time; but there are sound reasons for this. Briefly, and as I explained a moment ago, the first step in this operation was to examine the feasibility of our outline plans on the basis of advice from Lazard Brothers. That led to a Statement in July last year by my right honourable friend the Secretary of State for Education explaining the Government's intentions and stating that financial advisers were to be appointed to assist in the process. Once that step had been taken there was then an extensive range of matters requiring careful consideration and decision. Those involved both legal and financial questions of considerable complexity.
These are not matters which can be dealt with in a few days or weeks. If the interests of all those concerned are to be adequately protected, time and care has to be taken. Of course it is unfair on staff to protract the process unnecessarily and it is our concern not to do that; but this proposal in some respects breaks new ground and calls for the resolution of questions that are far from routine—not that that should be a cause of criticism either. However, the noble Lord will be aware that the process of clarifying the relative legal and financial positions of the parties to be involved in the new arrangements—PBI, AFRC, NSDO—has proved to be far from simple. One priority throughout has been the need to maintain and enhance the PBI strategic science which will stay in the public sector; yet I believe the major hurdles are now past.
As my right honourable friend the Under-Secretary for Education said in another place last week, we hope to issue the necessary information memorandum shortly offering the package for sale. Some of your Lordships will already be aware that details of this sale are to be made available to serious prospective purchasers through the issue of a full and detailed information memorandum. Our plan continues to be to complete the whole process of sale during the coming summer.
The noble Lord has raised in the past, and repeated this evening, a range of concerns about possible drawbacks to this exercise, some of which have been echoed by the noble Baroness and the noble Lord, Lord Diamond. Let me make one thing clear straight away. The Government will complete this privatisation only on the basis of an important proviso. That proviso is that it will be in the interests 348 of the future operation of those elements to be privatised and in the interests of UK agriculture and the UK economy generally.
These are necessarily subjective judgments, but they can be taken on the basis of objective assessment of relevant factors; and it is our intention to ask all prospective bidders to submit information about their current marketing arrangements, their future expectations and their plans for the continued operation of the relevant parts of the PBI and the NSDO. The answers to these questions will enable us to judge whether the prospective bidders have the resources and the commitment to develop the business and hence also judge whether it is in the interests of UK agriculture. Yet we approach this process with an open mind. For that reason we shall certainly study carefully the various points put to us this evening and on other occasions about possible dangers of sale to one type of purchaser or another.
Your Lordships will, however, understand when I say that I cannot this evening give categorical assurances in any particular direction other than that the points made will not be overlooked. For example, some concerns have been expressed that sale to a foreign purchaser might not be in the interests of the UK. There may be grounds for that objection in some circumstances. However, there are numerous foreign firms active within UK agriculture—and, indeed, plant breeding—which are both long established and of considerable repute; so we shall not be ruling anyone out at this stage. What we shall be looking for, however, is a commitment to the UK market and to continuing plant breeding relevant to UK agricultural and horticultural conditions.
The noble Lords, Lord John-Mackie and Lord Diamond, questioned the advisability of selling. The noble Lord, Lord John-Mackie, made the point that there was plenty of evidence that what is proposed to be privatised is at present highly successful. I could not agree with him more. However, we believe that a private sector PBI/NSDO has the potential to be even more commercially successful than at present. In addition, it is government policy that the taxpayers' money should not be used to fund areas of work such as the breeding of finished varieties of cereal which the private sector is already funding.
Allowing the NSDO's profits to fund the PBI would be unlikely, to provide the substantial long-term investment and sense of direction necessary to make the most of FBI plant breeding and the NSDO. Making them a fully-fledged commercial organisation will ensure that investment is in line with future production and will bring added confidence and efficiency.
The noble Baroness, Lady Nicol, suggested that there would be various disadvantages affecting the staff who remain after privatisation. Indeed, she questioned the advisability of the move from Cambridge. I reiterate what I believe I said to the noble Lord, Lord John-Mackie, recently when I answered his Starred Question. Any AFRC staff made redundant before privatisation will receive the full redundancy or short service payments to which they are entitled under the AFRC superannuation scheme. Consultation with the trade unions would then take place. NSDO staff would also receive redundancy payments under a recently 349 agreed job security agreement in the unlikely event of any redundancies before privatisation. In due course the staff required for the public sector will move mainly to Norwich but no move is anticipated before 1990.
The noble Baroness, Lady Nicol, also referred to the resignation of Professor Day, who is the director of the PBI, and to the loss of a number of staff. The impression of substantial resignations from PBI is misleading. I understand that the director, who is currently aged 58, has had 16 years' previous working experience in the United States and has now decided to return there to take up a prestigious new appointment. I am told that AFRC greatly regrets the loss of Professor Day who, of course, would have retired anyway within a year or two. During his eight years at PBI, the plant biotechnology programme has expanded considerably, attracting major financial support from industry.
Of the 64 staff who have left PBI in the past three years, half were voluntary premature retirements and redundancies and the others reflect natural turnover in a workforce of some 250 people. Over the same period 54 staff have been recruited to PBI, mostly on short-term contracts. Overall, these changes reflect a relative shift in the balance of work from plant breeding and crop science toward a growth in plant biotechnology.
I have endeavoured to explain the reasons for the Government's general policy and how it applies in the case of the NSDO/PBI privatisation. I realise that I may not have convinced the noble Lord, Lord John-Mackie, and maybe not other noble Lords, but I have done my best. I have explained where we have got to in this matter and how that has been achieved. I have looked ahead to the completion of the sale and to the future operation of the PBI and the NSDO. I believe that this sale, once completed, with hindsight will be seen to have been in the interest of those concerned and of United Kingdom agriculture as a whole. For that reason the Government will continue to press on toward a safe and successful completion of sale.
§ Lord Lloyd of Kilgerran
My Lords, before the noble Earl sits down, may I ask a couple of questions for clarification on the matters that he raised? I should like to know, if possible now but if not later, whether in drawing up their report Lazard Brothers consulted a number of technical advisers or whether this matter was dealt with purely on financial and economic grounds. The noble Lord said in general terms that it was necessary to deal with a number of legal and formal matters and that these questions were far from routine. Can the noble Earl, now or later, say whether, in proceeding toward what seems to me to be a somewhat disastrous conclusion, matters relating to intellectual property, patents and trade marks were considered as some of the legal problems concerned. In my last few words I ought to declare an interest in that I am an honorary Fellow of Selwyn College, Cambridge, and have been associated in a friendly but in no professional way with a number of staff at these institutions.
The Earl of Dundee
My Lords, I am grateful to the noble Lord for raising those points and I shall certainly write to him about them.
§ Lord Lloyd of Kilgerran
My Lords, I am much obliged to the noble Earl and apologise for not having given him notice of these questions.