§ 11.40 a.m.
§ Lord Brabazon of Tara
My Lords, I beg to move that this Bill be now read a second time.
The Bill concerns the privatisation of the trust ports. The trust ports form an important sector of our ports industry. This is therefore an important Bill, not only for the ports industry itself but also for the national economy because of the role which our ports play in it.
The Bill is the product of two important factors. First, it represents the next stage in the Government's longer-term strategy of progressively opening up the ports industry to market forces. There have long been some ports in the private sector, but in 1981 the Government took a further step in this direction when they privatised the former British Transport Docks Board ports, now Associated British Ports, and the Sealink harbours. These enterprises have been successful in their own right and they also serve as examples to us in considering the present Bill that ports in the private sector can successfully discharge their duties and functions as harbour authorities.
In 1989, a further major step was taken through the Dock Work Act which abolished the Dock Labour Scheme, which had become almost a caricature of restrictive practices and which had hindered and distorted developments in much of the ports industry for many years. The results of its abolition in terms of the improvements in labour relations, the restructuring of labour in the ports, increases in productivity and reductions in ship turnround times, are already a considerable success story. With the dock labour scheme still in place, the scope for further revitalisation of Britain's ports would have been limited. Its removal has opened the way for further opportunities which the Government are now seeking to take, through this Bill.
But the Bill is not just the result of the Government's initiative alone. A number of the largest trust ports have made clear their enthusiasm for privatisation and, as many noble Lords will know, two of them—the Tees and Hartlepool and the Clyde 1286 port authorities—have gone so far as to introduce Private Bills for that purpose; efforts which unfortunately have not yet met with the success which their initiative deserves.
However, the desire among a number of the trust ports themselves for the greater freedoms and opportunities which privatisation will offer is clear and this Bill, which is primarily an enabling measure, is a response to those aspirations, as well as a further step in the Government's own strategy. This Bill will give those ports the opportunity to enter the private sector without the need to bring forward private legislation.
It may be helpful at this stage if I say something by way of background about the trust ports themselves, which are the category of port to which this Bill applies. First, there are over 100 of them and, although many of them are very small, they form a major component of the ports industry. They include many of the largest ports in the country; such as London, Medway, Forth, Dover and Tees and Hartlepool. It is towards the larger trust ports that this Bill is chiefly directed, although some smaller ones may also wish to take advantage of it.
All trust ports whether large or small are independent statutory bodies each established under its own local legislation. Like the trustee savings banks before they were privatised, they are not owned by anybody except the state; nor are they accountable to anybody. Their status is in a strange limbo which makes them neither properly public nor properly private, answerable neither to shareholders nor to the Government. In some cases the chairman and board members of the harbour trusts, or some of them, are appointed by my right honourable friend the Secretary of State, while in other cases the appointments are entirely in the hands of others; but there is no particular pattern to this patchwork quilt of arrangements which have emerged over many years.
Nor is there any overall pattern to the scope of, or the restrictions on, their powers and duties, which differ from port to port. The Government see the benefits of privatisation as being primarily the removal of those restrictions, which will open the way to important benefits. Privatisation will enhance the prospects for the development of the ports by given them access to share capital as well as loan capital, and making them more attractive partners to industrial users of ports and to property developers. It will stimulate the development of surplus land, since most trust ports are restricted to development for port purposes only. It will make it possible for port undertakings to diversify their businesses or to develop port activities outside their home territory. It will sharpen performance by bringing about clearer accountability and greater emphasis on profitability; and it will open up the possibility of employees owning shares in their own businesses, building on the new atmosphere created by the abolition of the Dock Labour Scheme.
I have already mentioned the initiatives taken by the Tees and Hartlepool and the Clyde port authorities. I know that other trust ports were 1287 planning to introduce their own Private Bills when the Government took the opportunity of bringing forward this Bill. Other ports are looking very carefully at the opportunities offered by privatisation. I ask any other of the major trust ports which are not already doing so to look very carefully at the advantages of privatisation; and I hope that some of the smaller ports also will consider whether this is an opportunity that they should take. In our view it would be in the public interest for most of the major trust ports to enter the private sector, though we accept that immediate privatisation may not necessarily be right for all of them.
That, very broadly, is the objective of Part I of the Bill. I shall outline its provisions in rather more detail in a moment. I should like first, however, to mention the two other major parts of the Bill. The first deals with the Port of London Authority, which is the largest trust port. It deals with the PLA separately and in a different way from the other ports, which are enabled by the Bill to privatise themselves lock, stock and barrel. The PLA, by contrast, is empowered under Part II of the Bill to sell off its commercial docks at Tilbury, while retaining its conservancy and other statutory functions as regards the River Thames as a whole.
In concluding that this is the right course to take for the PLA we have had in mind three factors. The first is the sheer size of the area for which the PLA is responsible: 150 kilometres of river from Teddingtono Lock to well seaward of the Medway estuary and Clacton-on-Sea. The second is the very wide range of regulatory functions which the PLA undertakes compared with other harbour authorities; including, in particular, the regulation of public passenger traffic on the Thames. The third is the place and role of the river in the capital city; for example, in its use for state occasions and by royalty.
I know that the PLA welcomes these proposals: it is one of the ports that is keen to take advantage of the opportunities which this Bill offers. Noble Lords will also wish to be aware that the proceeds from the sale of Tilbury will go towards repaying to the Government the PLA's outstanding debts and repayable grant.
The remaining major part of the Bill concerns navigational aids in harbour authorities' areas. The provisions in the Bill will correct an anomaly under which some harbour authorities have the financial responsibility for all navigational aids in their area while others do not. Where the harbour authorities do not have this responsibility, it is the general lighthouse authorities which have it. These are Trinity House in England and Wales, the Northern Lighthouse Board in Scotland and the Commissioners of Irish Lights in Northern Ireland, The Bill sets out arrangements for the transfer of these responsibilities to the local port authorties.
I now turn to the detailed provisions of Part I of the Bill, which deals with the privatisation of trust ports apart from the PLA. Clause 1 defines a trust port by excluding other categories of harbour authority. It also excludes the PLA from this part of the Bill. It 1288 empowers trust ports to set up a successor company to which the property, rights, liabilities and functions of the trust port may be transferred.
Clause 2 provides for the transfer of the property, rights, liabilities and functions of the trust port to the successor company on the coming into force of a transfer scheme to be made under this part of the Bill. Part I of Schedule 1 contains supplementary provisions which relate to all transfers under this clause, while Part II of the schedule contains supplementary provisions any of which may be applied to a transfer scheme.
Clauses 3 and 4 oblige a successor company, in consideration for the transfer of the port's undertaking, to issue securities to the trust port as and when the port directs it to do so. The port is then obliged to dispose of the whole of its holding in the successor company at the time and on the terms that it thinks fit. The port is also obliged to pay over to the successor company the bulk of the proceeds of the sale of its holding in the company, after payment of the Government levy and any capital gains tax. I shall discuss the levy when I come to Clause 13.
Clause 5 makes the exercise of the port's powers under Clauses 3 and 4 subject to Ministerial consent. The clause also empowers the appropriate Minister to give the port authority directions about the exercise of those powers. Subsection (3) of this clause provides that, in exercising his powers, the Minister is to have particular regard to the desirability of encouraging the sale of the port to its management and employees.
Clause 6 contains supplementary provisions to the preceding clauses. Clause 7 provides for the Minister to dissolve the authority once he is satisfied that it has discharged all its necessary functions. All remaining property, rights and liabilities of the port authority will then be transferred to the successor company. Clause 8 makes provision for the accounting treatment by the successor company of these net proceeds of sale. Clause 9 lays down the procedure to be followed by trust ports in making schemes for the transfer of their undertakings to successor companies.
Clause 10 gives the Secretary of State a reserve power to direct a port to make a transfer scheme. This is an important aspect of the Bill, and the Government are aware that a number of ports, even among those which are prepared to look seriously at the merits of privatisation, are opposed to a provision of this kind. Noble Lords will, however, see that it has been made subject to a number of constraints.
First, it will not be exercisable until two years after the enactment of the Bill. Secondly, it can be exercised only after consultation with the port authority concerned. Thirdly, it will be applicable only to those ports above an annual turnover threshold of £5 million, and that figure will be index-linked. Fourthly, any order confirming a scheme of transfer resulting from the use of the reserve power will be subject to affirmative resolution procedure, and so debated in both Houses of Parliament. Finally, the Government undertook during the Report stage of the Bill in another place to introduce an amendment in this House to ensure that, if the Secretary of State consults a port after two years about the application of his 1289 power of compulsion, but decides not to apply it, he will not be able to reconsider its application to that port for a further five years.
I hope that these important safeguards in the Bill will reassure my noble friends and other noble Lords that the Government have the clear and firm intention of applying the reserve power in this clause responsibly and carefully. The same will apply to the companion provision in Clause 12, which empowers the Secretary of State to make a transfer scheme of his own where he considers that a scheme which a port authority has been directed to make is unsatisfactory.
Clause 11 sets out the annual turnover threshold to which I have just referred and sets out how it will be calculated. Clause 13 provides for a 50 per cent. levy to be charged on the proceeds of the sale of a trust port's successor company. In my introductory remarks I mentioned that the trust ports have no legal owner except the state. If there were no levy, therefore, the purchaser of a port would, in the absence of any recognisable vendor, receive back the entire proceeds of the sale along with the port itself. We believe that it would be difficult to justify a windfall gain on such a scale.
Clause 14 sets out the arrangements for the payment of this levy and Clause 15 sets out the arrangements for the provision of the information which the Secretary of State will need for the purposes of the levy. Clause 16 makes supplementary provisions relating to the levy and provides that levy paid will be allowable as a deduction against gains for the purposes of capital gains tax. Clauses 17 and 18 empower the Secretary of State to make an order for a levy on any gains from the disposal of land by the successor company within 10 years of the privatisation.
Clause 19 gives a port authority the power to reimburse the costs incurred by a management-employee buy-out team in mounting a bid for the port's undertaking. As I mentioned earlier, these costs are deductible for the purposes of calculating the levy on proceeds. This further underlines the Government's wish to encourage management-employee buy-outs in this privatisation process. Clause 20 is supplementary to Part I of the Bill.
Part II of the Bill is concerned with the sale by the Port of London Authority of the Port of Tilbury. Clause 21 empowers the PLA to establish a company to take over the Tilbury undertaking. Clause 22 provides for the PLA to submit to the Secretary of State a scheme for the transfer of the Tilbury undertaking to that company. The Secretary of State's confirmation of such a scheme, with or without modifications, will be given by means of an order. The statutory functions of the PLA, to the extent that they relate to the undertaking being transferred, will be transferred with it, subject to any exceptions made in the scheme.
Clause 23 and Schedule 2 are supplementary to Clause 22, and set out in detail the provisions that the PLA scheme of transfer may contain.
Clause 24 sets out the provision which the scheme of transfer of the Tilbury undertaking will need to 1290 make to protect the pension rights of those employees of the PLA whose jobs are transferred with the Tilbury undertaking. No similar protection is needed in Part I of the Bill because the pension rights of the employees of other trust ports transfer automatically under Clause 2 of the Bill. Clause 25 makes special provision about works licences for property transferred by the scheme.
Clause 26 empowers the PLA to dispose of the securities of the Tilbury company, subject to the consent of the Secretary of State, who will also be empowered to give the PLA directions concerning the disposal. Clause 27 enables the Secretary of State to direct the PLA to form a company and transfer its undertaking. As in Part I, this reserve power would only become operative two years after enactment; and the other constraints on the reserve power which I have already mentioned in relation to the corresponding provisions in Part I of the Bill will also apply.
Clause 28 contains a parallel provision to Clause 19, and empowers the PLA to underwrite the costs of a bid for the port mounted by its management and employees. Clause 29 empowers the Secretary of State to make regulations about the rateable values of the new Tilbury company, and of the residual PLA undertaking, during the transitional period after privatisation. Finally, Clause 30 concerns the interpretation of Part II of the Bill.
Part III of the Bill contains the provisions about navigational aids in harbour authorities' areas to which I referred earlier, together with some supplementary provisions.
Clause 31 confirms that harbour authorities have power to mark and to light their harbours and that they are to be regarded as local lighthouse authorities. The clause also prevents the general lighthouse authorities from installing lighthouses, buoys or beacons in the area of a harbour authority unless they are aids to general navigation.
Under Clause 32 the general lighthouse authorities are to put to the Secretary of State proposals for the transfer of local navigational aids within harbour areas to the local harbour authorities. The Secretary of State may approve such proposals with or without modifications and he may by order appoint a date for the transfer. Clause 33 makes it possible for a general lighthouse authority to transfer to a harbour authority at any time, with the consent of the Secretary of State, a navigational aid in that harbour authority's area. Clause 34 is supplementary to Clauses 31 to 33.
Clause 35 deals with the tax treatment of companies formed under Parts I and II of the Bill. Clause 36 effects certain exemptions from stamp duty. Clauses 37 to 42 make various supplementary provisions, including the extent to which the Bill will apply to Northern Ireland. With the exception of some of the provisions about navigational aids, the Bill will come into force on Royal Assent.
That is the Bill which is now before your Lordships. It was of course thoroughly debated in the various stages of its progress in another place and important additions and changes were made to some parts of the Bill to meet points which were then raised. I shall need to bring forward a handful of amendments during our 1291 Committee stage, but I do not expect these to give rise to any great controversy. The Government believe that the Bill which they have now brought to this House is a well-balanced measure which deals fairly with the ports industry, and those who are concerned with it, in pursuing the privatisation of trust ports. It will hell) our ports to adapt to the changing needs of the economy and will give them the scope and freedom for development which they will need to face the challenges of the single market. I commend the Bill to this House.
§ Moved, That the Bill be now read a second time. —(Lord Brabazon of Tara.)
§ 12 noon
§ Lord Clinton-Davis
My Lords, I begin by thanking the Minister for his detailed explanation of the Bill, though his speech contained some significant omissions on which I propose to alight in the course of my remarks.
We oppose this Bill and even though, as the Minister- said, it is true that certain concessions were wrung out—and I use that phrase advisedly—of the Government during the Committee and Report stages in another place, the fact is that the Bill still remains substantially flawed. The Minister's claims for its potentia1 success are unlikely to be realised, not least because this Government have little time left to live.
The Minister alighted on the possibility of a management-employee buy-out. That was one of the concessions that was drawn from the Government as a result of defeats that they sustained in Committee in another place. I do not believe that that potential is likely to be realised to any great extent, if at all. That will be sad because we believe that management-employee buy-outs would be an advantage. However, in reality that will not occur.
In Committee we shall represent not only our views but also a variety of interests; for example the trust ports, the shipping industry, trade unions, the National Trust and other environmental bodies and, not least, local communities and authorities all of which have made powerful but largely unavailing representations to the Government. We shall test the Government on those issues.
The Bill has been devised by a department which indulges in piecemeal policies and legislation. It is at present a bits-and-pieces department; it has no coherent or cohesive policies. The Bill is not a transport Bill. It has nothing to do with ensuring that port undertakings are seen to be operating as a critical part of a national integrated transport system. The Minister says that he does not understand the meaning of that phrase. No doubt he has failed as yet to educate himself on the point. Most people understand its meaning although the Minister does not.
The Bill is about as relevant to port interests as a report that I once read in a newspaper. It stated:Last night a mini-car swerved off the road and crashed into a lamp-post in Magdalen Road, Bexhill. No casualties were reported but communications on the 155-mile railway, the only link between Addis Ababa and Djibouti, have been disrupted".There is no relationship between the two issues.
1292 The Bill is not relevant to ports and I shall tell the Minister why. It relates to one of the most significant omissions from his speech. The Bill is truly preoccupied not with securing a viable national ports policy but with adding £500 million to the Treasury coffers. It is about the encouragement of land speculation in order to achieve that objective. The Bill takes no account of the widely differing operating practices that have emerged in the trust ports, often to the benefit of the community as a whole. The Government are anxious to be able to sustain the poll tax which they say must remain with us for another three years, although they will not have the opportunity to do so. It has already cost the country approximately £10 billion and the Government must scrape around wherever they can to find money to sustain that and the tax cuts that they wish to make. The Bill is about selling assets to which frequently the Government can lay no claim.
The Bill is not about local communities and it ought to be. It divorces the closely integrated interests of local communities and the trust ports which have been established for many years. The Minister said not one word about that in his opening speech. The Bill offers local communities no say in the further development of their ports policies. None of the proceeds of sale is to be used in trust for local communities. The Bill may well produce consequences that are inimical to the interests of those local communities. It is all about Whitehall knowing best. Why is it purported that the Department of Transport and the Treasury should know what is in the best interests of the local community? That is the kind of political arrogance that cost the Government so many seats in last week's local elections. There is a streak of authoritarianism about the Bill. That indeed is represented in many of the Government's policies but, happily, it is slightly redeemed by the bungling incompetence with which it is executed.
It is absolutely clear that the Bill is not about advancing the interests of industrial relations. It is another instalment in the vendetta that the Government have waged against trade unions, in particular those in the docks. They have encouraged non-recognition and more de-casualisation. I agree with the Minister that the old system had many flaws and needed to be revised and dealt with afresh. However, it is interesting to reflect that when the Dock Labour Scheme was abolished ministerial estimates considered that the cost would be in the order of £24 million. But what was the true cost? Almost £141 million of taxpayers' money has been spent on the scheme already.
There were not, as estimated, between 1,500 and 2,000 redundancies. By 30th June 1990 4,840 former registered dockers—that is 52 per cent.—were made redundant and there are more yet to come. On that occasion the Department of Trade demonstrated all the true qualities of Treasury forecasting upon which my noble friend Lord Peston has commented from time to time. The truth is that the Department of Transport did not do its homework. I hesitate to say 1293 that it misled both Houses of Parliament, but at the least it did not do its homework. Why has the Minister not commented on that matter? Is it not relevant?
The Bill cannot be associated with environmental protection. Deep anxiety has been expressed by the National Trust, in particular about Poole harbour. However, its anxieties have wider application. The National Trust states:The Trust recognises the importance of economic prosperity, and notes the contribution made to local income by visitors to Brownsea Island and other Trust property in the region. It has supported strategic plans prepared by local and harbour authorities …Our support is a reflection of the Poole Harbour Commissioners' ability to balance commercial, recreational and conservation interests and their willingness to consult with the Trust and other conservation bodies …The Trust takes the view that to place responsibility in the hands of a commercial operator would destroy this balance to the detriment of conservation".That is a powerful charge. The National Trust is also anxious about the disposal and unsympathetic development of surplus land on a major environmental site. It considers that it has been able to influence the harbour commissioners but it has the keenest doubts about whether that can be done under the Bill now before us.
The National Trust wishes to see two amendments which have not yet appeared. It seeks a general environmental duty to apply to relevant Ministers, port authorities and successor bodies, and safeguards for lands of special interest when transferred from a port authority to a successor body. The National Trust is deeply anxious but those anxieties have neither been addressed nor allayed by the Government. No doubt the Royal Society for the Protection of Birds will also have sent a briefing to the Minister. I hope that in reply he will refer to what the society and the National Trust have said.
I turn to the issue of compulsion. Notwithstanding what the Minister said we know that he has been unable to satisfy the grave anxieties of many people who are not normally known for their affiliation to the Labour Party. We side with those organisations and Members of Parliament in another place on both sides of the House in saying that we oppose the element of compulsion. That is notwithstanding the qualifications to which the Government have been induced to agree.
We say that trust ports should not be compelled to be privatised if their turnover exceeds £5 million, taking into account what the Minister said. The figure of £5 million is substantially different from the proposals of the Secretary of State for the Environment, Mr. Paul Channon, in 1988. He said that he would not force smaller ports into privatisation. That is why his threshold was £10 million. In current prices, that figure should be £13 million. Why is there the change? Again there was no explanation from the Minister in his opening speech. Perhaps that too will be remedied later.
The great virtue of trust ports is that they are independent. They operate as trusts, which means that there are no shareholders. Profit goes to reserve or to finance new investment or to reduce charges. Contrary to some assertions, many have been extremely 1294 successful in building up new businesses in preparation for the new single market in the European Community with all that that involves. Normally their activities are restricted to the interests of the ports and the people outside the ports in local communities.
If operating surpluses are insufficient to provide the needs of the trust ports, they are able to raise capital by means of government loan stock and bank loans. They now have to go to the money markets for any new capital needs. They are not able to offer assets as collateral. Therefore the money is offered against operating revenue and a borrowing limit is set in each Ports Act. Such limit is perfectly capable of being revised to the advantage of the trust ports without having to go through the paraphernalia that the Government seek to impose. I suggest that if that were so, there would be less enthusiasm for this measure by the trust ports. They are concerned about those restrictions.
With such a Bill, the House is entitled to know what a trust port is. How many trust ports are there? Surely those trust ports which are likely to be affected should be mentioned in a schedule to the Bill. The trouble is that the Government either did not know or deliberately declined to give either those statistics or definitions. The best estimates indicate that there are about 111. How many are commercial? It appears that 23 had a turnover in excess of £1 million in 1989. Of those, 14 had a turnover of more than £5 million. Those are not figures volunteered by the Government. Why have the Government been so shy about providing Parliament with those details?
I now refer to major areas of anxiety that will need to be addressed as we proceed with the Bill. Concern has been expressed by the General Council of British Shipping that charges for users will increase. There is worry that exploitation by ports of their monopoly position over captive port users is likely to occur more frequently in particular where their own cargo handling operations directly compete for other traffic with nearby ports or private wharfs. There is anxiety that there could be excessive concentration of port ownership, and that some port users will become port owners and abuse that position to the detriment of competitors. Those are serious worries which the Minister has not begun to address today.
There is anxiety that employment in the ports and activities connected with the ports will decline further. Another point is that ports will come under the gaze of predators avid to develop land rather than ports. The Select Committee of this House on the Tees and Hartlepool Port Authority Bill was heavily indicted by one Member in another place. I shall not repeat the insulting words that were used. I do not think that they will affect the members of the Select Committee of this House. The Select Committee on the Tees and Hartlepool Port Authority Bill said—and it has a wider application—that,There can be no restrictions on the control of the company when it is eventually floated on the Stock Market … the promoters acknowledged that this was not the only possible method of sale and there is no guarantee that the original shareholders will not sell to a predatory outsider. We acknowledge that such risks are acceptable in the private sector. But we believe that exposing the holding company to such risks could endanger the successor company's ability to 1295 fulfil its statutory obligations and to carry on its core business of running the ports. That could have a detrimental impact on local industry and on the local economy".I quote that passage from the special report of a Select Committee of this House.
There is disquiet that maximising profits will take priority over safety. As I have already indicated, there is worry that conservation will take second, third or even lower place. Concern is felt that the local community receives nothing while half the proceeds of privatisation will go to the Government and the remainder to the port, with management encouraged to keep a keen eye on diversification rather than intensification of investment in the ports.
Concern has been expressed that consultation with the trade unions will be confined to those ports where trade unions are recognised. I know that mention of trade unions often produces something of a knee-jerk reaction in Ministers these days. However, the port industry is a hazardous industry. It is an industry where c very worker needs protection, and is entitled to protection, which a trade union can help to provide by going beyond wage bargaining, dealing with safety and help with recovering from the effects of injury. Another anxiety relates to the power of compulsion, to which I have already referred.
Those are matters to which we shall return in the course of our debates. I refer now to Part II and the Port of London Authority. It is dealt with separately. As the Minister said, that is because it is a residual authority. However, the significant matter omitted by the Minister today is that the Government made substantial loans and grants to the Port of London. A significant element of those were the payments that had to be made to the dockers who were laid off when the dock labour scheme was abolished. They did not pretend to have any real knowledge of that situation as it developed.
What are the consequences for the Port of London Authority? The Government will take all the proceeds of sale of the commercial docks at Tilbury, but the PLA remains responsible for its statutory duties to which the Minister referred.
There is an extensive navigational area remaining with the Port of London Authority. The anxiety of the General Council of British Shipping is that higher levies on shipping may well have to be imposed. Our merchant fleet has declined alarmingly over the past 12 years It can do without running additional hazards as a result of this measure.
Additional perils were referred to in an article which I am sure that the Minister will have read because I know that he takes the journal every week: the Tilbury Recorder. It had some rather significant comments to make in an article which stated:The Government has made sure its Bill loads the dice in favour of a management buy-out but the large tracks of land in such an important area of the country must be an attractive proposition for developers.It is by no means certain they would carry on the difficult business of importing and exporting.It would be much easier to sell the land for development, if the figures add up.This, is the crunch. The Government has said it will claw back half the profits of land speculation in the first ten years after privatisation, which may or may not be enough to guarantee that the McNab team will win"—1296 the McNab team being the team in favour of management buy-outs.
Those are real perils. That is the reality about the prospects of success for management or employee buy-outs.
In addition, many questions remain unanswered concerning Tilbury. What real protection is offered against the Government simply accepting the highest bid from a purchaser who then refuses to operate Tilbury as a port, preferring property development in the style perhaps of London Docklands? That is a situation which again the Government have not addressed. What about defining the Port of Tilbury as distinct from the Port of London? That is an important consideration. But it does not appear anywhere in the Bill. What about consultation with and recognition of trade unions? The Opposition are concerned about that. We support the concepts of the social charter in Europe, and consultation is an important ingredient of the social charter.
Our objective is to ensure that ports, docks and waterways developments fit into the wider national transport and economic objectives that we will set for the nation. We want to ensure the improvement and maintenance of high standards of safety, welfare and medical services in employment. We want to secure high levels of environment protection, and clearly that is not being addressed by the Bill. We want to ensure that existing planning powers, which at present are inadequate, are reinforced. We say categorically that a start should already have been made to enhance environmental impact assessment in that regard. The way in which the European directive was watered down, largely as a result of this Government's activities, has meant that it does not cover the situation satisfactorily.
We believe that encouraging sales of land owned by trust ports and expanding commercial activity, which is desirable, could nonetheless have an environmental price. The fair quid pro quo for that is to enhance environmental protection. The trouble is that it is the quids rather than the quos that interest this Government.
I conclude on this note. If the Government had invested as much time and thought in developing a true ports policy as they have in pushing their ideological missions, the ports and the nation would be infinitely better off. It is a bad Bill. It is an irrelevant Bill from the point of view of the welfare of the ports, those that they serve and the nation. Come the general election we shall seek to tackle the problems of our ports in an entirely different fashion.
§ 12.22 p.m.
§ Lord Ezra
My Lords, as the noble Lord, Lord Brabazon of Tara, indicated in his introduction of this Second Reading debate on the Ports Bill, the measure is principally an enabling one. The object is to construct a framework under which any trust port that wishes may become privatised more quickly than through the often cumbersome and costly Private Bill procedure. On that basis we on these Benches feel that the Bill has much to commend it; nevertheless, we shall support amendments at Committee stage to 1297 provide safeguards against some of the points referred to by the noble Lord, Lord Clinton-Davis. Our main anxiety relates to the reserve powers under Clause 10 of the Bill, even as now modified. I shall come back to that if I may.
As the noble Lord, Lord Clinton-Davis, reminded us, there are around 111 trust ports, although in reading the historical background I understand that nobody is quite clear whether that is the right number. They have grown up in a somewhat haphazard way, as the Minister pointed out. They have been constituted in different manners, the one from the other and for varying periods. They have differing responsibilities. However, I am not sure that that need necessarily be regarded as a disadvantage.
Trust ports have been tailored in some sense to fit in with their local communities. I am aware of the pride with which some local communities regard their trust ports. Nevertheless it is perfectly true that some of the trust ports consider that they are constrained by their constitutions and regulations in the proper pursuit of their functions. If they feel that privatisation is the right route for them to take, it is surely perfectly proper that they take it, and this measure would facilitate their doing so. It is equally right that those trust ports—I speak about the larger ones which are caught by the measures in Clause 10—which feel that they can most effectively perform their functions as at present and have the full support of the communities they serve should be able to continue to do so.
Among the larger ports which either wish to continue to operate as they are or have serious reservations about the Bill are Poole, Aberdeen, Lerwick, Dover, Milford Haven and Harwich. Therefore quite a number of the larger trust ports have serious anxieties about the Bill. We must take note of those anxieties. In some cases that anxiety is supported by strong local feeling. A case in point is Poole, to which the noble Lord, Lord Clinton-Davis, referred.
The port of Poole not only operates a port which covers 60 acres of ground; it is responsible also for a further 10,000 acres of land of special scientific interest. Therefore it has a major environmental responsibility. There is grave concern that if the port were to pass into other hands, that environmental responsibility might not be discharged as effectively as it is at present.
The port of Poole can claim to have had a successful commercial operation. Its turnover in the past five years has increased from £4.5 million to £7.5 million and it is showing profits before tax of the order of £1/2 million. It has built up reserves of £6 million. It does not regard the legislative powers under which it operates as in any way constraining its operations and firmly wishes to continue along the successful line on which it has operated hitherto.
Another example of a port which has reservations about the Bill is Lerwick. That is a port which has also succeeded in expanding its port business and effectively developing surplus land. Over the past 20 years its income has grown from £40,000 to over £5.5 1298 million.It has responded efficiently to the needs of the oil and fishing industries, tourism and agriculture. In other words, as a trust port it has done all that might be expected of a successful, enlightened and profitable private sector company. Therefore one might well ask why such a port, if it does not wish to move in the direction of privatisation, should be made to do so. Surely that is a case for leaving well alone and encouraging rather than discouraging it to carry on down the path on which it is so effectively embarked. The port sees no impediment in the way of borrowing money under its existing charter, and its investments in any event are largely financed from its own cashflow. Over £30 million has been reinvested in its activities in the past 20 years. That is a substantial sum for a company of its size.
The reasons escape one as to why there should be any application of the Government's reserve powers under Clause 10 to such an operation. It is true that as a result of the Committee deliberations in another place, and as we were reminded by the noble Lord, Lord Brabazon, a number of modifications to the application of the Government's reserve powers were agreed. We know that those powers will not be exercised for a period of two years from the time the Bill passes. In one way that is a benefit; in another way it is a disadvantage. It means that for that two-year period the equivalent of a sword of Damocles could be hanging over the heads of some of the ports. In conducting their operations they would not know what their ultimate fate might be.
The second modification is that there will be consultation. That is excellent, but quite clearly it is implied that the Minister will finally decide whatever he might be told during consultation. As we know, it is only the ports with a turnover of over £5 million that will be affected. However, it is those trust ports with such a turnover that have been so successful. Therefore, they should be able to decide for themselves which way they want to go. Certainly a beneficial modification, as a result of the deliberations in another place, is that any order made by the Minister will be subject to affirmative resolution.
The Government have stated that they will adopt a responsible attitude. That is fine. I am sure that they will. But the question still remains as to why successful trust ports coming into the larger category should have the threat of being compelled to move in a direction of which they do not approve. I very much hope that amendments will be moved at Committee stage which will enable us to overcome that. If the amendments to remove the powers of compulsion are not successful I hope at the very least that the Government will be prepared to lay down precisely what will be the criteria on which they will decide, at the end of the two-year period, to constrain the larger trust ports that do not wish to go down the privatisation route to do so. For example, would the Government consider as a candidate for that treatment a port which had a consistent profitability over the past five years? Would the Government consider for such treatment a port which had substantially invested from its own reserves into the development of the port? Would they consider that a 1299 port which in addition to discharging its port responsibilities had very successfully undertaken large environmental activities should be subject to that procedure?
The existence of these reserve powers raises very serious questions. I do not consider it right that these larger trust ports should live in uncertainty for two years without knowing what is going to happen to them and the basis on which the Government will reach their decision. While I support the broad thrust of the Bill as an enabling measure, I express the gravest concern about the reserve powers and how they are likely to be used.
§ 12.33 p.m.
§ Lord Napier of Magdala
My Lords, I welcome this opportunity to speak on the Ports Bill. I have been in the ports industry for about 25 years; all of that time in the private sector. I am very interested in the welfare and efficiency of our ports and in the influence that that has on the economy of the country. The Ports Bill is about privatisation of the trust ports, as has been explained. In particular, the issue is whether there should be an element of compulsion for the larger ports.
I am in favour of private industry and, broadly speaking, I feel that the case has to be argued against privatisation in most instances. It is true that there are many different kinds of ports and they have many different responsibilities. Those factors have to be looked at in individual cases. The British Isles are blessed with a number of splendid natural harbours many of which have been developed into excellent ports. There is strong competition in the ports industry, both within the UK and with the Continent. That is one of the main prerequisites to be satisfied for successful privatisation. A competitive environment is very important in this issue.
However, a number of the trust ports have expressed disapproval of the element of compulsion in the Bill. I have heard about Dover expressing doubts about the uncertain prospects due to the Channel Tunnel being completed. On the same day I read in Lloyds' List that the ferry operators are building newer, bigger and faster cross-Channel ferries. I doubt that the activities of the port of Dover will collapse when the tunnel is operating. Aberdeen has said that everything is fine as it is. Its concern is that the cross-subsidy in favour of the fishing industry might be prejudiced by privatisation. Possibly marginal costing benefits to help the fishing industry over a difficult period would be of benefit.
However, for new investment surely the disciplines of capital investment as seen in the private sector provide the best way of weighing up the demands of the different interests such as fishing, shipping, the import and export trade, shipyards, the North Sea supply business and leisure interests. That is all within the scope of the harbours legislation and normal business obligations as regards the Office of Fair Trading And considerations of the environment. I am sure that my colleagues will be disappointed to hear of the implication that the private sector cannot be 1300 responsible for the environment. Let us hope that within the framework the Scottish fishing industry can be put back on its own feet as soon as possible.
There are one or two other situations which need to be mentioned. In estuaries there are circumstances where one port authority which may be private, a trust or a municipal port, has the conservancy authority and controls the whole estuary as regards access to the other ports, commercial wharves and marine terminals. The ports may be competing against others over which the authority exercises some control. Therefore, there is potential for clashes. One such authority is the Thames. That may be part of the reason for the special treatment that the PLA has received in this Bill. The PLA split Tilbury from the river authority a number of years ago for operational and profit-and-loss accounting reasons. Under the Bill that split will be formalised.
The PLA will remain as a trust conservancy authority for the estuary. Included in its area will be not only Tilbury but other terminals on the Thames, the Medway ports and the private terminals in the area. As a controlling authority it can be even-handed in the allocation of charges without the temptation to favour its own commercial port. However, the next main estuary along the coast at Harwich harbour is being treated differently. That is the harbour in which Felixstowe, Ipswich and the Stena-Sealink port of Parkestone Quay and other smaller ports are located.
The Harwich Haven Authority already exists as a trust port for the same purpose of controlling the entrance to the harbour and it has marine and navigational responsibility for the harbour. It is one of the trusts which is under possible compulsion to privatise. It should be noted that there appears to be uneven treatment between the two estuaries. But does it matter? Is there a danger that one of the ports or an outside competitor may buy up the Harwich Haven Authority and squeeze out one or more of the other ports? That is the kind of scenario that the noble Lord, Lord Clinton-Davis, set out.
I do not believe that that is a real danger. First, there are already a large number of private ports in that position. They include many important ones such as the Mersey and the Humber with upper ports separate from ABP, which is the controlling authority. That situation has been in existence for a long time and there has been no serious conflict in that respect. There is also the Harbours Act, which provides obligations, including the requirement that charges in this respect must be reasonable. There is a mechanism under Section 31 to resolve such disputes. I have not heard any concern expressed in the area which I know—namely, the upstream ports—at the prospect of such privatisation.
I should also like to comment on the levy in the Bill. The legislation proposes that 50 per cent. of the proceeds should go to the Government. I accept that the Government should be the recipient as keeper of the public purse. I cannot see any reasonable alternative to that arrangement. The level of 50 per cent. sounds a reasonable sort of compromise, but it actually creates a peculiar situation. Let us imagine that one is at an auction and that the rules of the 1301 auction are such that whatever one bids, and if that bid is successful, one is given back half of the money put forward. One does not need to be a senior wrangler to work out that one can actually afford to bid double what one thinks the item is worth. That seems to me to be a peculiar situation. If tendering for the trust ports is truly competitive the bid price quoted will, in any event, be artificially inflated.
Again, does it actually matter? Under the Bill as drafted, the cash is deemed to be accumulated profit for the successor company. That does not actually affect the value at which the assets are transferred and therefore the clawback provisions for the sale of surplus land should still work. But, more importantly, the cash should still be distributable—that is, unless it is needed immediately for development—otherwise cash would be tied up unnecessarily and would therefore be unproductive.
The Secretary of State for Transport spoke the day before yesterday at the British Ports Federation lunch. I should like to remind the noble Lord, Lord Brabazon of Tara, and the other noble Lords who were present, of the right honourable gentleman's equivalent of NIMBY (not in my back yard) which he put forward in respect of the reluctant ports. He called them "WIMPs": that is, "Why in my port?". Perhaps I may add my contribution to that. I hope that most of the trust ports—at least, the larger ones—will see the light and that in order to avoid the aggravation of compulsion they will agree to the privatisation plans of the harbour authority; thus making everyone happy.
I thank your Lordships for giving me the opportunity to speak in this House for the first time.
§ 12.42 p.m.
§ Lord Lucas of Chilworth
My Lords, I am sure that all noble Lords will want me to congratulate the noble Lord, Lord Napier of Magdala, on his maiden speech. I congratulate him not only on his declaration of interest, because he brings to this House considerable knowledge of ports and of the shipping industry, but also—and more importantly—on the content of his speech, which was laced with an element of weight and also with a realism and confidence in the affairs of the industry. He supports the Bill. I am especially glad that another noble Lord joins a rather small group of people who take part in transport matters in this Chamber. I am sure that he will agree that ships, shipping and matters of the sea are as much transport as any other mode. If we are to have the pleasure of hearing his future contributions in these areas, I am confident that it will be to our benefit.
I welcome the broad thrust of the Bill which I see as completing the reorganisation of the ports and shipping industry which started about eight years ago with the privatisation of Associated British Ports. A few years later, we had the abolition of the dock labour scheme. I greatly differ from what the noble Lord, Lord Clinton-Davis, said about the Bill. He opposed it, and he gave a variety of reasons therefor. I remember most of those reasons being expressed by speakers from the other side of the House during the 1302 progress of the two measures to which I referred. In my view, it is quite wrong for him to suggest that those two measures have not been successful. Indeed, they have been hugely successful for the undertakings, for those employed by them and also for the nation as a whole.
I was glad to hear my noble friend the Minister give the House an explanation of the Bill and of how certain parts of it were decided. Although I shall make a few comments, I hope that my noble friend will not see them as being in any way critical; they are more of an inquiring nature. I, too, should like to refer to Clauses 10 and 12, as did the noble Lords, Lord Clinton-Davis and Lord Ezra. I listened carefully to what my noble friend said about the reserve powers and how the clauses were drafted. He also described the mechanics and the safeguards. However, although I do not disagree with compulsion, I cannot follow the basic thinking as to why it should be necessary. For example, why should a satisfactorily operated trust change its status against a reasonable desire? I can envisage great advantages in the prospect, but much anxiety has been expressed. Nevertheless, as the noble Lord, Lord Ezra, said, we can discuss the matter in greater detail in Committee.
Stemming from that, regarding privatization—that is, voluntary or by virtue of Clauses 10 and 12—I wonder what kind of company structure is envisaged for the "successor company". There is no indication whether there is to be any direction or any suggestion whether the structure of the company will be left entirely to each authority and merely conform to that which is required under the Companies Act.
I cannot imagine that there need be any kind of a golden share arrangement. However, is it suggested, or thought necessary, to protect the successor companies from foreign predators? I believe that the noble Lord, Lord Clinton-Davis, mentioned that point. Regarding under-utilised assets in some of the trust ports, especially where those assets are not considered to be direct port activities, perhaps I may ask this. Is it thought necessary to ensure that developers from wherever they may come are constrained from forming consortia to create monopolies in certain out-of-the-normal port activities which would arise from a utilisation of the unused assets?
My last point of concern relates to Clause 19. The clause provides for financial support for management and employee participation—what we used to call management buy-outs. I am greatly concerned that such support may encourage an over-exposure to debt liability. We have seen this in a number of other areas where management buy-outs—admittedly not supported in any way under the terms of an Act of Parliament—supported by merchant banking and other financial institutions have brought the companies into dire straits. One has only to read the financial pages of the newspapers to have this confirmed. Such a provision in the clause may encourage that kind of practice.
The imbalance between owner or shareholder-owner equity and loan funding to complete a purchase has always seemed to me somewhat dangerous. The 1303 clause seems to encourage exactly that. Borrowing for expansion and other activities, which the trust ports have not been able to do, is a totally different matter. I welcome the Bill. It complements all that has been done in the industry in the past. I hope that we shall not spend too much abortive time on later stages and that the Bill can quickly be brought to the statute book.
§ 12.52 p.m.
§ Lord Geddes
My Lords, I too declare an interest, albeit an indirect one, in that I am a director of a company that owns small ports. However, I have no connection with any trust ports.
I should like to add my support to the Bill. There is no doubt in my mind that movement to the private sector is the right direction for achieving a successful ports industry which will be competitive in a world market. Privatisation of the trust ports will be an important milestone along that road and one which must be passed if we are to maintain Britain's position in this industry and provide our importers and exporters with the efficient service they need to function properly. However, like my noble friend Lord Lucas, I have some niggling doubts on specific points in the Bill. I should be most grateful if my noble friend the Minister could address himself to them either today or at Committee stage.
Like my noble friend Lord Lucas and the noble Lord, Lord Clinton-Davis, I am concerned at the possibility of excessive foreign control of the ports that are relevant to this Bill. I should much appreciate it if my noble friend could give the House advice as to whether there will be any safeguards in this context. What safeguards exist, if any, or are contemplated against excessive acquisition leading to a monopoly or even a quasi-monopoly situation? What consideration is contemplated to improve the procedure for examining cases of unreasonably high charges after privatisation?
That said, the proof of the more general and the more important pudding is in the eating. As my noble friend the Minister has already said, this particular pudding has been found to be very wholesome. I refer specifically to Associated British Ports. ABP was privatised in 1981 and its holding company was successfully floated onto the Stock Market in 1983, with many of its employees becoming shareholders. Since 1983 the turnover and profitability of ABP has increased significantly and ABP has achieved the highest growth in share price and market valuation of all the previously state owned enterprises now in the private sector. If ever there was an historic illustration of the benefit of privatisation of ports that surely is it.
The Bill provides that all liabilities of the existing trust ports, as well as all the functions conferred or imposed On those ports by any statutory provision of local application, will be transferred to their successor companies. This will—I am sure my noble friend made this point in his opening remarks—naturally include all conservancy and environmental responsibilities, and, by the same provision, all existing port users and amenity groups, including fishermen, will be protected. In my submission the objections raised to the Bill 1304 on these grounds are not well founded. I warmly support the noble Lord, Lord Napier of Magdala, and congratulate him on his maiden speech. I support him particularly in his comment—indeed I would go further and perhaps say that it is an insult to say this —concerning it being said that the owner of a port in the commercial sector does not have strong environmental interests at heart. It is in his own interests to do so, and indeed this is proven.
§ Lord Clinton-Davis
My Lords, my point was not an attack in any sense on those who are involved in the trust ports. However, there is the risk of predatory activities taking place which will have little or nothing to do with the ports. They could be very dangerous indeed for the environmental scene. That is the point made by a number of environmental bodies, as the noble Lord will know.
§ Lord Geddes
My Lords, I imagine that the noble Lord is talking about the exploitation of the land adjacent to the ports rather than the port activities themselves. I am not, nor do I want to be, in a position to defend what has happened in the past. However, I know for a fact that port owners in the private sector are extremely conscious of the whole environmental situation. It is in their interests—I repeat what I said just before the noble Lord's intervention—to have very great regard for environmental impact.
Much emphasis has been put on Clauses 10 and 12, and understandably so. The question of compulsory privatisation of the ports is very difficult. However, the Bill makes clear—indeed my noble friend has made it even more clear—that preference will be given to management and employee buy-out schemes. Even the party opposite, although clearly opposing this Bill, supports the concept of such management and employee buy-outs. On balance it does not seem to me to be right that the employees of a minority of trust ports should be deprived of the right to participate in the running and the success of their authority, especially when they will probably see their colleagues in other adjacent ports across the country doing just that.
Experience has shown that privatisation works. It increases efficiency and profitability and it improves the service offered to its users. If a few ports are left out and begin to lag behind those which have been privatised, the effects will surely be felt throughout the locality, not just by the port alone. Ports are just as much a public service industry as, for instance, the electricity industry, the telephone industry or the postal industry.
I submit to the House that in the interests of the port industry as a whole—and more importantly of the country—it is vital that the Bill should be allowed to proceed. The UK needs a port industry of the highest calibre which can meet the challenge of competition from the rest of the world. We must ensure that the ports are given the opportunity to meet that objective. I believe that this Bill helps greatly in that respect.
§ 12.59 p.m.
§ Lord Wade of Chorlton
My Lords, I strongly support this Bill, which will give the opportunity for those ports in the country which are not fully independent to play their part in developing the export opportunities and growth of industry that will be available as we move into the next century. At present, 92 per cent. of our imports and exports goes through our ports and one-third goes through what are now trust ports. They will have to be more flexible and use their assets more effectively. They will have to become more competitive if our industry and exporters are to make use of the opportunities available.
The noble Lord, Lord Clinton-Davis, said that this was all about, "Whitehall knows best". I appreciate that noble Lords opposite always believe that Whitehall knows best and that the best way to run anything is to plan it centrally and make it conform to rules. In practice, private enterprise and private initiative as well as the ability to be flexible are the most efficient way forward. The Bill is not about, "Whitehall knows best", but about individual businessmen knowing best. We should give them the opportunity to play their part.
I support noble Lords who agree that the best way forward in many instances would be the creation of management buy-outs. I hope that the Government will give every opportunity for that. I know that my noble friend Lord Lucas believes that there must be concern that if some management buy-outs are under financed they will run into difficulties. However, that is one of the dangers of private enterprise. The danger is more than outweighed by the strengths that can be achieved.
I cannot understand why some noble Lords feel that there needs to be a reference to environmental matters in the Bill. This is an enabling Bill to allow certain ports to become independent. It does not deal with planning or environmental matters. Surely a mere change of ownership will not alter the fact that all those ports will come under the same planning and environmental controls as now exist for anyone. I fail to see why it is of concern to a seagull flying along our coast that the land underneath him should be owned on the one hand by a trust port or on the other by an enterprising business. I should have thought it would be in his interests to fly over something that was prosperous and effective.
I also find it odd that it is suggested that workers may not be so well off. I have never yet come across a worker who is not more satisfied in a successful and prosperous business than in a difficult business. In a company such as trust ports now are, where profits and ability to use their assets are restricted, there is clearly a restriction on the company's ability to support its employees. Any employee worth his salt —and most are of that caliber—wants to be in a business that can grow, use its assets, expand and be competitive in the growing world. All workers within such a business will benefit rather than being worse off.
I hope that the House will support the Bill. It is right for the Government to proceed. It is not part of an ad hoc arrangement to raise money but part of a 1306 determined effort by the Government to bring more prosperity to the industry and take away silly controls which are no longer available or applicable in a growing and changing world. I support the Bill wholeheartedly.
§ 1.4 p.m.
§ Lord Greenway
My Lords, at the outset I wish to add my congratulations to my noble friend Lord Napier of Magdala on his exceedingly well informed maiden speech. As the noble Lord, Lord Lucas, said, we look forward very much to hearing more of his expertise on maritime subjects in your Lordships' House. We are doubly pleased to have him among us. Speaking as a flag officer of your Lordships' yacht club, I must say that the noble Lord is an ace dinghy helmsman. That will stand us in good stead when we hold our annual dinghy race against the other place.
I must also declare an interest in that I am a director of a company involved in the international port business. I welcome the Bill. As the Minister said, it is a logical step to make our ports even more efficient by better use of their assets. It follows the successful privatisation that created Associated British Ports in 1981 and the abolition of the dock labour scheme two years ago. The Bill has been much improved in the course of its passage through the House of Commons.
We are an island nation, and, as other noble Lords have said, we need our ports. The noble Lord, Lord Wade, said that 92 per cent. of our trade passes through our ports. To give a comparison with two of our continental neighbours, the figure is 69 per cent. in France and 76 per cent. in Italy.
Whoever may own the ports, they are a national asset. I hope that the Government will take on board some of the reservations that have been mentioned regarding the future of the ports once they have been privatised. I hope that the Government will not lose all interest, once privatisation has taken place, as is suggested by some of the financial advisers who are rushing round the ports which wish to be privatised like bees round a honey pot.
Compulsion is one of the areas of the Bill that has been mentioned by nearly all noble Lords. It is an element of the Bill that still causes a certain amount of anxiety. It is to be welcomed that during the passage of the Bill through another place the Government stated that the affirmative resolution is to apply in relation to compulsion orders. They thereby give the opportunity to both Houses to discuss the matter.
I suppose that there is just an outside chance that a port may see itself coming into the £5 million turnover band and turn away business in order to stay below the limit. I do not suggest that that will happen, but there is a slight element of worry there. To be fair, the Government have made it clear all along; they have never said that they would privatise all trust ports. The Bill is an enabling measure and it has enough flexibility built into it for each port to put its case to the Government, who need not necessarily say, having seen the scheme put forward, "We think you ought to be privatised". If the privatisation scheme is not 1307 compelled to go through, that port will not be affected for another five years. That is a useful addition to the Bill.
I see that the noble Lord, Lord Clinton-Davis, has left his place. He is implacably opposed to the element of compulsion, as no doubt is his noble friend Lord Underhill. Incidentally, a former trade minister of New Zealand, when speaking at the ports privatisation conference in January this year—I have a feeling that it was a Labour minister—said that he favoured the compulsion element.
Conservancy and conservation have been mentioned by a number of noble Lords. The Government and the Secretary of State for Transport are on record as having said that conservancy will be looked at carefully if a compulsion order is issued by the Government. As my noble friend Lord Geddes said, there is no evidence of Associated British Ports or the Sealink ports having failed in their conservancy duties.
I turn now to management-employee buy-outs. It is welcome that the Government have now stated their willingness to give a measure of preference to MEBOs. Many ports are anxious to get the Government to put a definite figure on how much they are prepared to help in terms of percentage. Some have talked about 5 per cent., others 10 per cent. If any such undertaking is written into the Bill at this stage, it may well prejudice matters against the ports' wishes when they come I o put their individual schemes to the Government, not to mention the fact that too high a preference might also discourage other potential buyers and do away with the competition element entirely. However, I agree with noble Lords who have said that some form of protection against predators in the early years of a MEBO would be welcome. We shall no doubt return to that matter in Committee.
Before I leave MEBOs, I understand there are some guidance. notes on procedure for sale. I hope the Minister will tell the House what the position is as regards any guidelines. Some ports, for example, favour slightly different methods of privatisation. The port of Blyth is quite interested in whether it can adopt flotation. as an option to sale by tender. I should like to hear the Minister's view on that.
I turn now to another matter that has been raised this morning and which was also raised briefly in another place. It concerns the competition element. Monopoly situations could arise in two ways. They could arise either by several ports in one area coming under the control of one company—that may be a company from abroad—thereby creating a local monopoly; or, alternatively, the new owner of a port might well already be involved in some element of the port business. He may well either hinder or exclude others who wish to carry on that same business. However, I take on board the point made by my noble friend that these kinds of practices have not occurred in areas such as the Humber and the Mersey.
There is already a problem on the south coast as regards the competition element in relation to yachting marinas where one company has bought up a considerable number of marinas and is fast approaching a monopoly situation much to the consternation of yachtsmen who are already paying 1308 high charges and fear swingeing increases. I addressed a Question to the noble Lord, Lord Hesketh, on this point earlier this year in your Lordships' House. Although I recognise that it is a matter for the Department of Trade and Industry and therefore I do not expect the Minister to answer me on this point, I urge him to get together with his noble friend and reconsider the whole question of the Fair Trading Act 1973 which specifically excluded ports. As a side effect, such a measure might help some of the smaller ports which are worried about predatory advances being made from their neighbouring ports.
I wish to say a few words about groupings. We already have Associated British Ports which is a fairly large group of ports. Some trust ports have expressed an interest in getting together to form another group. That is certainly not a matter that is covered in the Bill. I should like to hear the Minister's views on whether that might be feasible.
I have already mentioned yachtsmen and charges for moorings. It is an inescapable consequence of privatising harbours that the profit motive will raise its head and will no doubt cause an immediate upward pressure on all harbour dues and mooring prices. I hope the Minister can assure the House that the implied obligation in the harbours Act 1964 to keep charges to a reasonable level will still apply after privatisation. Yacht marinas are certainly a fairly new element of sailing which do not necessarily feature in the ports that are already in the private sector. According to the figures issued by the Royal Yachting Association, we shall need some 80,000 new berths for yachts in the next 10 years. That is quite a large element that must be taken into account when considering the whole business of privatisation.
By and large, this is a well thought out Bill with an admirable element of flexibility built into it to cater for the wide variation that exists among the trust ports. Subject to clarifying one or two points in Committee and seeking further assurances from the Minister to allay some of the real fears that still exist in some of the ports —several have been mentioned such as Dover, Poole, Blyth and others—I am happy to support the Bill's Second Reading. I hope the Bill has a speedy passage through your Lordships' House. Despite what the noble Lord, Lord Clinton-Davis, said—one could almost believe from his remarks that no one wants privatisation—some of the trust ports are exceedingly keen to privatise. Certainly Tilbury, our largest trust port, is keen to privatise as quickly as possible.
§ 1.15 p.m.
The Earl of Stockton
My Lords, I join other noble Lords in congratulating the noble Lord, Lord Napier of Magdala, on a fine maiden speech. His authority leads me to suspect that we shall be hearing a great deal more from him.
Before I turn to the particular case of the trust port with which I have the most intimate knowledge; namely, Tees and Hartlepool, being the mouth of the river on which the town of Stockton stands, a town whose name I have the honour to bear, I wish to welcome the Bill before your Lordships' House today. 1309 The history of Britain's ports is as long and important as the history of the realm. The British have always prided themselves on being a maritime nation. One just has to watch the average Briton on a cross-Channel ferry, binoculars in hand, astride his own personal quarter deck, scanning the horizon, to know how deep that feeling for the sea is in all of us.
Without the ports and harbours of Britain there would have been no trade, no navy, no Empire—in short, no Britain. The development of that trade, even in the early days of the navy, was down to the enterprise and daring of individual subjects of the realm. The exploratory voyages of the 16th, 17th and 18th centuries were more often than not in search of new markets and new products. Enterprise, the readiness to accept risks and the wish to fulfil a dream have always been the hallmarks of our maritime tradition. This Bill gives the trust ports back to that tradition.
My noble friend Lady Carnegy of Lour, whose knowledge of the problems of the port of Dundee is considerable, is sadly unable to be in your Lordships' House today. However, she has asked me to express her support and that of the management and employees at Dundee for the Bill.
On 29th January this year it was my privilege to move in this House the Second Reading of the Bill to privatise the Tees and Hartlepool Port Authority. On the previous night in another place this Bill, the Ports Bill, received its Second Reading. Now it is before this House. I take great pride that it was the initiative of the Private Bill which I introduced into this House which has produced the Ports Bill we are now debating.
Clearly I am disappointed at the treatment of that Private Bill by the Select Committee in this House, and I shall return to that later. Its fate has obliged Tees and Hartlepool Port Authority to review its position and the prospects for securing privatisation under this Bill.
I am sad to note that the noble Lord, Lord Clinton-Davis, is not in his seat. He has claimed that privatisation is not in the interests of the future of any port, as he did during the Private Bill that I sponsored. I am afraid I must inform the noble Lord that he is wrong. I have discussed the situation closely with the port authority and I am delighted to say that it shares my views. The authority remains committed to privatisation and, just as importantly, so do the employees. I have held consultations with employees' representatives and the major customers and users of the port, and I have elicited that they are all in support of this development. The only serious objection came from one group in Cleveland County Council and that was not the largest group in the majority on the council. The Ports Bill is an excellent Bill. Privatisation under its terms is a tremendous opportunity for those ports that choose to take it. Tees and Hartlepool certainly will take that opportunity.
The priority is to get the Bill on to the statute book as soon as possible so that privatisation can get under 1310 way. The competitive map is changing as the benefits from scrapping the dock labour scheme unfold. 1992 is nearly upon us; we must get on with this matter.
There has been much debate on the question of the proceeds, on compulsion and on management and employee buy-outs. The Government have been receptive to amendments in another place. The position on those issues as the Bill now stands is about right, in my view. However, fundamentally those are still side issues. Trust ports which quickly seize the competitive benefits of privatisation offered by the Bill will have an attractive future. Those which do not will come to recognise that long before the question of compulsion arises. The vital issue is to get the Bill onto the statute book quickly.
The Bill will involve competitive bidding. There will be no guarantee of success for the home team. I have discussed that aspect with Tees and Hartlepool, which accepts it. I understand that other significant players also accept it. For the Tees and Hartlepool board the key is whether privatisation will secure its objectives. The Government propose to agree objectives on a port-by-port basis. I welcome that. Tees and Hartlepool's objectives are on record in this House. I put them there on Second Reading of its own Bill earlier this year.
Tees and Hartlepool wants to see its cash resources used to broaden and diversify its undertaking as an independent business. It wants to see the promotion of sustained and fair competition in the UK ports industry. After all, this Bill could well see over a third of the industry change ownership in the next few years. The board looks to the emergence of one or two additional independent port groupings which will provide fair competition to ABP in offering comprehensive services through a range of port outlets. It believes that its objectives will be achieved if the successful purchaser is the present management and staff. It believes that a management/employee buy-out has a splendid chance, but agrees that others must also be given a chance.
The Government are aware of those objectives. The Secretary of State said in another place on 28th January that one of his objectives for the Bill was to enable trust ports to diversify. I have no doubt therefore that he will be able to reach early agreement with Tees and Hartlepool.
The Select Committee of this House which considered the Private Bill also agreed with them. It agreed that the port should be freed from the constraints of its trust Act. It agreed that its cash resources should be freed to be put to more productive use. It endorsed the plans to achieve those objectives through diversification. Notwithstanding, the Select Committee of your Lordships' House put a stop to Tees and Hartlepool's plans. It took the view that Parliament should restrict the powers of that large commercial enterprise because at some unknown future date it might use them to venture into new areas about which it knows nothing. It felt that Parliament should prevent the issue of shares, even to the staff, because at some future unspecified time they might fall into unwelcome hands.
1311 I find that difficult to understand. It ignores the experience of existing private sector ports—Associated British Ports, Sealink, Felixstowe and the Mersey. The Mersey Docks and Harbour Company was once a trust port but has been a plo for many years. The difference between the Mersey and Tees and Hartlepool is simply the result of an historic accident. To persist with the difference, allowing one to develop but not the other, would be a complete failure c f policy, particularly because trust ports are large commercial businesses. Tees and Hartlepool reported a pre-tax profit for 1990 of £10.9 million, larger than that of the Mersey.
The Opposition believe that trust ports should be freed from constraints through an amended harbour revision order procedure. That means keeping their present, unaccountable, trust status. However, mixing wider commercial powers of accountability is, in my opinion, a recipe for disaster. The best guarantee of commercial performance is the accountability of the private sector.
I should like to repeat my encouragement to the Minister to get on with the job of putting this Bill into place. I am glad to say that one port, now the second largest in the UK according to the Government's latest statistics published last week and with which I am proud to be associated, will use it as it stands as quickly as it can. The port's successful privatisation depends on a close degree of agreement with the Secretary of State. I am confident that that will be achieved and that within a year Teesside will boast a major new dynamic private sector company. Both in this particular case and in general I welcome the Bill.
§ Lord Skelmersdale
My Lords, before my noble friend sits down, perhaps I may ask this question. Will he accept that at least some members of the Select Committee of your Lordships' House to which the opposed Tees and Hartlepool Bill was committed take the view that Clause 9(1) of this particular Bill would have precluded the scheme which the Tees and Hartlepool Port Authority put forward in its Private Bill?
The Earl of Stockton
My Lords, I am happy to accept that and to have learned from my noble friend's experience and judgment.
§ 1.25 p.m
§ Lord Murton of Lindisfarne
My Lords, I wish to add my congratulations to the noble Lord, Lord Napier of Magdala, on a well-composed and informative speech based upon his considerable experience of the port industry. We all look forward to hearing from him again on subsequent occasions on this and on other matters.
I am intervening in this debate specifically in connection with the port of Poole and with Poole Harbour. For me it is a matter of great interest and of considerable concern.
I begin by stating that I am not motivated by any financial interest. However, I had a home in Poole for 27 years. I served on Poole Borough Council for a time and I rep resented the borough in the other place for 1312 nearly 15 years. So my interest in the future of the port and of the harbour stems from personal knowledge and much affection.
Before I discuss the implications of the Bill I hope that your Lordships will allow me a little latitude because of my close connection with the place to make some general remarks about the national importance not only of the harbour but also the port of Poole itself.
The harbour is one of the largest natural harbours in Europe. Local pride, indeed, makes a wider claim and equates it with Sydney harbour in New South Wales. The fact remains that it covers 10,000 acres. It enjoys unusual tidal conditions, shared with Southampton Water, in that the height of water is at or above mean sea level for some 16 hours out of each 24-hour cycle. That is virtually a double tide. That is a natural and valuable facility which helps to make Poole Harbour one of the best and most well-known sailing centres in the country.
The southern and western parts of the harbour are classified as an area of outstanding natural beauty and are heritage coast. The shoreline, islands and hinterland contain 14 sites of special scientific interest. The harbour itself in its entirety is an SSSI. There are also six nature reserves adjacent to the harbour shores. Brownsea Island and parts of the south-western shoreline are owned by the National Trust. The harbour bed is an important commercial shellfish ground. The ecology of the whole area is delicately balanced and contains many listed species of both flora and fauna.
Within the confines of the harbour, apart from the commercial port itself, there is a fishermen's dock with 138 registered craft actively employed, seven yacht clubs, one ship repair yard, seven other boatyards and no fewer than 4,000 swinging moorings.
The harbour commissioners have wide statutory powers covering the whole of the harbour, including conservancy, improvement and regulation, navigational aids and pilotage. Other by-laws have to be enforced not only over an area of inland water with a linear landward boundary of some 95 miles but also covering the seaward area from the harbour entrance through the navigable channel in Poole Bay as far as the extremity of the Hook Sands and the Milkmaid Bank.
The extent of the traffic in the harbour and in the harbour approaches can be gauged from the fact that on a weekday in the height of the summer season there can be up to 12,000 small craft afloat, as well as fishing boats, board sailers and water skiers, while moving in the middle channel at a speed necessary to maintain steerage way there can be cross-channel freight and passenger ferries. A new 18,000 tonne super-ferry is also soon to begin operating a frequent service. Three harbour patrol launches have to be kept in commission to monitor the by-laws.
Within the harbour itself, Furzey Island is part of the Wytch Farm oilfield which has proved reserves, making it one of the largest reservoirs of oil on the United Kingdom Continental Shelf. A project is under consideration to build an artificial island off the Hook Sands in Poole Bay to facilitate extraction. When 1313 built, that island will come within the regulatory powers of the harbour commissioners. I have described the harbour in some detail because I am at pains to show the heavy responsibilities carried by the harbour commissioners both for conservation and for safety.
The port of Poole itself is an ancient port. There are reasons to believe that it was visited by Phoenician traders. Following the Roman conquest it became the port of supply for the Second (Augusta) Legion. Nearly 1,000 years later Canute the Dane in AD 1020 anchored his transports off the port preparatory to laying waste to Wessex. Having wintered in Poole, he sailed off in the following spring to Greenwich from whence he invested the City of London. After an almost equal span of years, there is again an amphibious military presence in Poole, rather better armed and of a much more friendly disposition-the Royal Marines.
Around the time of the Norman conquest, Poole had become quite an extensive settlement and in the next two centuries it had grown into one of the largest and most prosperous ports on the south coast of England. I believe that the first port-reeve or mayor was elected in 1272. By the middle of the 16th century the port and town had reached such significance that Queen Elizabeth I granted a Royal Charter in 1568 making Poole a county corporate in the style of "The county of the Town of Poole". At that time there were only 16 cities or towns in the whole of the kingdom with that distinction. Poole still has its own sheriff.
By the early 18th century Poole had more ships than any other English port engaged in trade with North America. The barquentines and brigantines registered in Poole carried settlers and domestic goods to Newfoundland and returned with stockfish, whalemeat and timber. The arrival of the steamship and vessels of greater draught destroyed much of Poole's importance as a major maritime town. In 1810, well over 90 per cent. of the working population had been engaged directly with the sea or the harbour. By 1900 the figure was down to 20 per cent. Nevertheless, much of the traditional trade continued to be handled through the port: ball clay, stone, timber and grain. Between the last two wars a close relation of mine frequently sent his quite big ships into Poole with timber from the Baltic.
The turn-round in Poole's prosperity came in 1973 when, through the commendable initiative of the chief executive and his commissioners, a roll-on, roll-off freight terminal was brought into use on the eastern side of the port on the Hamworthy Peninsula and Truckline ferries inaugurated its twice daily service between Poole and Cherbourg. The importance of that ro-ro terminal has grown remarkably. In its first year of operation, 4,750 freight units were carried. By last year the numbers moved annually had risen to 96,700.
In the intervening years the commissioners have bought and reclaimed mudflats from the Crown Estate and have constructed two more berths. These are multi-purpose and enable the ferries to handle private vehicles and foot passengers. Truckline, now 1314 operated by Brittany Ferries, a French company, operates a seasonal passenger service as well as the all-year-round freight, while British Channel Island Ferries carries cars and passengers between Poole and the Channel Islands. In 1990, 781,000 passengers used the terminals and 219,000 private vehicles were carried.
The port now has modern facilities for all that traffic, including comprehensive reception and marshalling areas, warehousing and cold storage. There is of course cargo handling elsewhere within the port for those commodities in bulk carried in conventional cargo vessels. There are six berths on the Hamworthy Peninsula and one at the Town Quay. One berth is used for offshore oil support. Good rail communications have encouraged considerable imports of steel, particularly from Rotterdam and destined for the Midlands. Other imports include bagged chemicals and cement, animal foodstuffs, fertilisers, grain, pumice stone, granite and marble chippings.
The commissioners' stevedoring department expect to handle 360,000 tonnes this year. A great success has been the mutual trust engendered with the port employees. Since the repeal of the dock labour scheme, Poole is the only ex-scheme port in the whole of the United Kingdom where no dock worker has been made redundant. Some 200 persons are employed in the port and a further 650 people are engaged in work allied to port business. The port area covers about 50 acres, all of which is in intensive use. There is no spare land on the peninsula. I emphasise that point. The commissioners own no other land capable of early or easy exploitation.
That is a description of Poole Harbour and the Trust Port of Poole and I make no apology if I have dealt with the matter at some length.
I now turn to the Bill before the House. It is readily conceded that to pursue privatisation through the medium of Private Bill procedure can be a lengthy and expensive process and uncertain as to its outcome. I have had some experience of that in another place and here. The fate of the Tees and Hartlepool Port Authority Bill is a good example. It was thrown out by a Select Committee of your Lordships' House in February of this year. As a consequence, the Clyde Port Authority Bill has since been withdrawn, at least temporarily.
It is only natural that, with the abolition of the dock labour scheme and the greater efficiency thereby introduced into the industry's working practices, there should be a desire on the part of some of the larger trust ports to become public companies. In that they have been supported by the Government and an enabling Bill was foreshadowed by a number of ministerial statements made in the course of last year.
We now have the Bill, but, to my dismay, I find that, allied to enablement, there is a strong element of compulsion, certainly as it affects trust ports with turnovers exceeding £5 million in 1990-91. Poole had a turnover of £8.5 million in 1990-91 so it is effectively caught in the net. The Bill has netted 14 trust ports. All those 14 ports above the £5 million threshold are successful and profitable, but they differ in terms of 1315 location, operations, customers, financial structure and their role within their respective regions, some of which are geographically remote and in one case an island. Notwithstanding the introduction of an affirmative resolution procedure into the Bill, the ports industry continues to seek reassurance that the Government will take all those factors fully into account in deciding whether privatisation is appropriate for a particular port.
For example, some trust ports perform a pure conservancy function by providing for the safe passage of ships in harbour. Others are enmeshed with and support the local or regional economy and employment in a way which might be destabilising if privatisation takes place. In some cases ports already have wide powers to function commercially. In each of those types of port, privatisation would not always be considered by the port in question to be beneficial. Regrettably, and in spite of many opportunities to do so, the debates in the other place have yielded little information from Ministers on what the criteria for a directed privatisation might be. The industry therefore ask my noble friend the Minister to provide information and guidance on the criteria so that at least some of the uncertainty surrounding the issue may be removed and ports can continue to plan ahead for their future development.
Some of the ports have declared for privatisation without qualification, but there is a group of eight which either have certain reservations or are totally opposed to the principle of compulsion. I mention seven of them, but only in passing, because I am neither entitled nor qualified to comment further on them. They are Aberdeen, Lerwick, Dundee, Blyth, Tyne—both places that I know well—Yarmouth and Dover. The eighth is Poole.
The difficulty about the Bill in its present form with its reserve powers is that all the ports are lumped together even though they do not form a uniform group. As I said, they all have varying commercial interests and objectives. That being the case, why the compulsion? It is a highly doctrinaire approach, if I may say so. What has happened to the excellent Tory philosophy of freedom of choice? The plain fact is that no one in Poole wishes the port to be privatised. Public opinion is dead against it and I suspect that my noble friend the. Minister is already aware of that.
There are fears for the future of the environment of Poole Harbour in the hands of anyone other than the commissioners. I have read ministerial statements that the trust ports, having been given certain government financial aid in the past, should be required on privatisation to make a financial return to the Exchequer; hence the proposed levy of half the proceeds of sale.
No government subvention whatsoever has been received by Poole, either toward investment projects or in any other form. The development of the port and the improvement of the harbour has been entirely self-financing from—to quote the preamble in the original Poole Act of 1756—"time out of mind". This has been achieved through the product of the income of boomage, wharfage and, in recent times, the dues from freight, cargo and passengers.
1316 All extra finance needed has been borrowed on the open market—in recent years through lines of credit from the clearing banks. The limit of borrowing under the provisions of the Ports (Finance) Act 1985 is £9 million.
It is a situation of some anomaly. The Government do not own these trust ports, nor in the case of Poole has the Exchequer a lien upon it. It has been suggested that there is an analogy with the original trustee savings banks where there were no explicit owners. On the other hand, at least in that case there was a large number of investors. Parliament had to decide at the time of privatisation whether the TSB should surrender any of the proceeds. Parliament decided that the TSB should not do so.
In the case of the trust ports there is no beneficial membership and no investing public. Yet there is to be this levy. It may be an unworthy thought but I wonder whether the financial penalties that the Bill imposes are not an attempt by the Treasury to recoup some of the £141 million expended in winding up the dock labour scheme. If so, it is bad luck on Poole, which always paid its dues, never made a single dock worker redundant and neither needed nor received any government aid under that scheme.
This question of a mandatory change in status from a trust port to a public limited company is causing great concern. People in Poole cannot understand why the issue of privatisation has not been left to the discretion of individual port authorities which, after all, exist to serve the best interests of the local population. In the case of Poole there is a real fear that there could be a predatory approach by a consortium —as the noble Lord, Lord Ezra, pointed out—which might seek to run down the port either to rationalise trade elsewhere or to use the 60 acres of dockland for redevelopment as a high value residential waterfront scheme. I wish that I could envisage a management and employee buy-out. At least that would keep port and harbour secure. From what I have been told, however, I doubt whether it is a feasible option.
If the worst comes to the worst, what public company could or would be either willing or able within the severe restraints of profit-making to protect and maintain the amenities of Poole Harbour? The port puts infinitely more into the harbour from its commercial dues for maintenance than it receives from any other maritime activity. The latter merely contributes less than 10 per cent. of the whole. There is considerable apprehension as to what form any future change would take and what result it would have upon the careful control which the present commissioners exercise over the priceless heritage of Poole Harbour.
If the Bill reaches the statute book with the clauses on compulsion intact, it behoves my right honourable friend the Secretary of State to ensure that any scheme submitted for approval not only guarantees to maintain the integrity of Poole as an operating port but also guarantees to safeguard the future of the harbour in its present form, in the interests of all who have the pleasure of sailing in it, working from it or just enjoying its unique beauty. Poole awaits such an assurance and so do I.
§ 1.45 p.m.
§ Lord Norrie
My Lords, I am not averse to the principles of this Bill but equally it will be no surprise to the Minister to hear that what I say today will be confined to green issues. I was particularly pleased that the noble Lord, Lord Clinton-Davis, should mention the environment in his speech. A number of organisations, including the Royal Society for the Protection of Birds (which he mentioned), the National Trust and the Council for the Protection of Rural England, are worried about the potential effects that this Bill may have on land of national heritage value in respect of wildlife, landscape, history and general countryside amenity. I believe that it would be helpful if I explain their concerns this afternoon.
Many trust ports, as part of their harbour estate, hold an interest in land of national, ecological or amenity importance. They can develop that land for port-related purposes without having to apply for planning permission, being exempt under the permitted development provisions of the town and country planning general development orders. Furthermore, they are able to exercise certain statutory powers—for example, powers of dredging —over wider parts of their harbour area. Those activities can seriously affect the ecology or amenity of harbour areas.
Of the ports which are prime targets for privatisation, 10 of the top 14, in terms of annual turnover, own land or exercise statutory powers over areas which include sites of special scientific interest. These are the ports of London, Medway, Poole, Milford Haven, Clyde, Dundee, Forth, Tees and Hartlepool, Ipswich and Harwich. Some of them border on or exercise statutory rights over land which falls within areas of outstanding natural beauty. These statutory ports and many others, some of which are already private or not in line for privatisation, can quite legitimately go about their duty in a manner which damages those interests. There is no general duty laid upon those authorities to take account of the special interest of the land in question.
In recent years Parliament has seen fit to insert environmental clauses in other legislation. There has been a positive trend in that direction. The agriculture Acts of 1986, the Electricity Act 1989, the Water Act 1989 and the Coal Industry Act 1990 are examples. The United Kingdom also has duties and responsibilities towards the protection of the environment under various international agreements. In particular, we must act in keeping with the "wise use" provisions of the Ramsar Convention on the conservation of wetlands of international importance, to which the United Kingdom is a signatory. We must also ensure that our actions comply with the requirements of EC Directive 79/409 on the conservation of wild birds. Of the 10 ports just mentioned, nine harbour areas take in land which should receive special protection under Article 4 of that directive.
Ministers will be aware that they have no express reserve powers to intervene with a port authority to vary an operational scheme on nature conservation grounds alone. Given that those authorities are not subject to any general environmental duty, we do not 1318 even have the most basic cover in the event of litigation in the European Court of Justice for failure to apply the wild birds directive.
For those reasons I believe that an amendment to the Bill is needed to secure a general environmental duty which applies to existing port authorities, their successor bodies and Ministers. The example of water privatisation is instructive. No doubt many noble Lords will remember the Bill with affection. Section 152 of the Water Act 1989 pioneered a welcome safeguard for the transfer by existing statutory authorities of land of national and environmental significance and its subsequent disposal by their successor bodies. The section's purpose is to allow necessary ministerial intervention over the transfer of such land so that its environmental importance can be maintained.
The section establishes the need for an authorisation, specific or general, to be given by the appropriate Minister before disposal of relevant land. It empowers him to direct how that land is to be disposed of and to require prior consultation with the appropriate countryside agency. That sets an excellent precedent. Transfer of much of the land of special interest under the control of trust ports at the time of privatisation or its subsequent disposal for commercial gain would, in most cases, raise questions of national importance.
It would seem to be inconsistent and damaging to the national interest were trust ports to be treated differently from the old regional water authorities. I believe that it would be highly desirable for the Bill to be amended to incorporate similar provisions. I expect the Minister to say that that will be unnecessary. However, if he can respond today with some general comments, that will help me to decide what action to take at the Committee stage of the Bill.
§ 1.51 p.m.
§ Lord Underhill
From the Dispatch Box, I too echo the appreciation and thanks that have been offered to the noble Lord, Lord Napier of Magdala, on his maiden speech. He demonstrated his complete grasp of the subject. I am certain that his knowledge will be valuable to us if he is able—as I hope he will be—to attend all further stages of the Bill in your Lordships' House.
I begin my remarks by asking: what are trust ports? No explanation is given in the Bill. As my noble friend Lord Clinton-Davis said, there is nothing in the Bill to indicate which ports are covered. I have a list—no doubt the Minister has it too—indicating four categories of trust port covering 116 ports. One might have expected some reference to the meaning of trust ports in the Bill and an indication as to which ports will be covered.
I am fortunate to have received a briefing from the British Ports Federation. After explaining how trust ports came into being through Acts of Parliament, it states that their purpose is to provide a service for import and export of goods by sea, to provide navigation conservancy, and to make the best use of their assets. It has been made perfectly clear by various noble Lords today that the motive of a trust port is not, in the ordinary sense of the words, personal 1319 private profit. It has to reinvest any surplus achieved or to use surpluses to reduce charges. Those are admirable objectives. It would be interesting to know the purpose of the Government in bringing the Bill forward. Is it because, to save parliamentary time and to expedite the position of those ports which wanted privatisation, they had to bring forward parliamentary Bills? Was it pressure from the Treasury? The figure given by my noble friend of about £500 million likely to be received from the sale of the ports is generally agreed.
What other incentives are there for the introduction of the Bill? Is there an incentive for the trust ports to carry out the aims to which I referred—that is, to provide services of import and export of goods by sea, to pro vide navigation conservancy and to make the best use of their assets? What attention has been given to preserving the local economy? The noble Lord, Lord Ezra, referred to the value of communities and the communities' problems in that respect.
It is agreed on this side of the House that there is nothing in the Bill which indicates any intention that the Bill shall be part of a national strategy for the ports industry. It is almost hit and miss. No consideration is given to ensure that ports, docks and waterways development is in line with any national economic development. There appears no intention that it shall be part. of a nationwide transport strategy.
I believe that it is generally understood that trust ports are not permitted to diversify. One claim for privatisation is that there will be scope for diversification. The noble Lord, Lord Brabazon, stated today that the fact that most trust ports have a fair amount of land available presents an excellent opportunity for diversification. It depends what one means by diversification. It can mean the opportunity for developers to develop areas completely free of real economic interest.
Who owns the trust ports? There is general agreement that, with the exception of the Port of London Authority, to which reference has been made, most trust ports have received little, if any, money from government grants. Yet a press notice from the Department of Transport of 17th January states that,Trust ports have no owners other than the state".It is difficult to prove that the state is the owner. The Waterfront Partnership appears to support the Bil'ls intentions. In a briefing, it states:The Trust Ports share with the former Trustee Savings Bank the same obscurity about ownership".The briefing received from the Waterfront Partnership and the British Ports Federation represents in general fair comment. It enables noble Lords to grasp some important points. As has been mentioned, The British Ports Federation lists no fewer than 14 trust ports which have an annual turnover of at least £5 million. Those are the ones as to which the Secretary of State may use compulsory powers for a privatisation scheme.
A group of those major ports which may be affected by the figure of £5 million is unhappy about the compulsion aspect of the Bill. It wishes any change to be at the discretion of the port. I refer to some of the major ports which believe in privatisation but oppose compulsion. That is also the view of the British Ports 1320 Federation. It agrees with the aims of the Bill but opposes completely any suggestion of compulsion. It believes that it ought to be left to the discretion of ports.
The Government and the British Ports Federation hold the view that there will be the benefits of competition for the successors of trust ports. However, as my noble friend Lord Clinton-Davis stated, the General Council of British Shipping disagrees completely with that attitude. It is extremely worried about the effects of so-called competition. My noble friend referred to some of the statements that the general council had made and I repeat some of the questions to Government which it asked. First, what criteria will govern decisions on approval of the individual privatisation schemes? Secondly, will the Government ask the Monopolies and Mergers Commission to take a role in preventing over-concentration of ownership? Thirdly, how will the interests of captive port users be protected? They are worried that so-called competition may have a great effect on port users. Fourthly, what is the government view of how remedies against overcharging for conservancy or pilotage services might be improved? That is covered by Part III of the Bill. Those are four questions that the Government have to answer. If the Minister is able to do so today, I shall be grateful. If not, those points will be raised at Committee stage.
Noble Lords will be grateful to the noble Lord, Lord Murton of Lindisfarne, for making the general case for the interests of Poole as a trust port, and for the great support he gave to the tourist industry of Poole. I hope that noble Lords have received the document prepared by the Poole authority. I hope that they will read it carefully because it is important. Poole is a trust port which has an annual turnover in excess of £5 million; it is about £6.4 million. It strongly opposed the compensation and disliked the suggestion of privatisation.
I had intended to deal with certain points arising from the document but the noble Lord, Lord Murton, has covered it so fully that there is no need for me to do so. However, I wish to indicate the powers and composition of the Poole Harbour Commissioners. Their duties were to conserve, regulate and improve the port and harbour of Poole. There are 15 commissioners. The chairman is appointed by the Secretary of State. There is a chief executive. One member is appointed by the Dorset County Council, five by the Poole Borough Council; and one by the Purbeck District Council. Six are elected by the traders concerned; one represents yachting interests; one is appointed by the Transport and General Workers' Union; and one represents fishing interests. One could not find a body of commissioners with a wider spread of interests. They are opposed to the Bill and in particular to the suggestion of compulsion.
In his opening remarks the Minister said that there will be consultation with the port concerns when the scheme is discussed. Why did the Government reject amendments tabled in Committee in another place for greatly widening the degree of consultation? Surely the local authority should be consulted, as should the local users of the port, the trade unions and the 1321 workforce. The environmental and conservation bodies referred to by the noble Lord, Lord Norrie, should also be consulted. However, in Committee in another place the Government rejected all the amendments. The Minister has merely told this House that there will be consultation with the port concerns. I suggest that the consultation should be in two stages —the first when deciding whether a port should be privatised and the second when a scheme is being prepared and proceeded with. The bodies I have referred to should be included in the consultation at those two stages.
Part II of the Bill refers to the Port of London Authority. It is to be treated not only separately but also differently. The Minister said that one reason for that is the significant loans and grants made to the PLA for payments to dockers laid off as a result of the abolition of the Dock Labour Scheme. The report of the Public Accounts Committee of another place has recently been published. I shall be interested to read what it has stated about the scheme. That may be a factor in our discussions about the Port of London Authority.
The Minister has confirmed that the Government will take all proceeds from the sale of the docks at Tilbury. However, the PLA will remain responsible for certain statutory duties. The British Council of Shipping is most anxious about those duties in respect of charging the various shipping interests. The PLA owns extensive land along the river frontage in London, Essex and Kent. Perhaps I may use the Minister's phrase and say that this is ripe for possible development; some would say that it is ripe for possible predators and that development will be encouraged.
We shall have an interesting Committee stage. There will be great differences of opinion. We on this side of the House will oppose the privatisation of these ports. However, our purpose will not be to oppose the Bill but to see how we can make it more tenable and realisable and remove the fear of compulsion. It was said this afternoon that we should avoid having a threat hanging over the ports concerned as a result of not knowing whether they will be compelled. We have had a useful debate. There will be differing views and we look forward to debating amendments in Committee.
§ 2.5 p.m.
§ Lord Brabazon of Tara
My Lords, I am grateful for the interesting and useful contributions which have been made to the debate today. These have ranged widely covering both particular aspects of the Bill before us and also its fundamental objectives. It is on those latter issues that I should like to respond first and to explain more fully some aspects of the Government's aims as expressed in the Bill.
As I made clear at the beginning of the debate, the Bill is intended primarily as an enabling measure. It is therefore cast in a form designed to allow individual ports to take the initiative towards privatisation. It is 1322 for each individual port, if it decides to do so, to form a company, to submit a scheme for the transfer of its undertaking to that company, and so on.
I am not surprised that several noble Lords—notably the noble Lords, Lord Clinton-Davis and Lord Ezra, and my noble friend Lord Murton—have expressed doubt as to how the reserve power of compulsion contained in Clause 10 fits within the basic framework of the Bill. For the Government's part, we do not see these different elements of the Bill as being incompatible. There is, if I may say so, a tendency to think of the trust ports, perhaps because of the connotations of the word "trust", almost as quasi-charitable bodies whose work is not, and should not be, subjected to any sort of commercial pressure. But that is not the case. These ports—or at any rate the larger ones among them—are substantial commercially-based enterprises operating in an industry more than half of which, in terms of total tonnage handled, is already within the private sector.
The noble Lord, Lord Clinton-Davis, said that the Bill represents the doctrine of "Whitehall knows best" and that there is no place in it for the local communities. Many of the larger trust ports are national rather than local assets, as was said by my noble friend Lord Wade. Furthermore, the relationships between individual ports and their local authorities vary widely from one to another.
We recognise that it would make little sense for many of the large number of small ports around the coast to try to sell themselves into the private sector. But we believe that genuine market conditions and a fully competitive situation will be established in the ports industry only if the major ports are given the opportunities for development and access to equity capital which private sector companies have. We believe, therefore, that the right place for the major trust ports, taken as a whole, is within the private sector. There they will become properly accountable, which they are not at present; and they will be more fully exposed to the disciplines of the market place and able to take advantage of the opportunities which I have mentioned. Our abolition of the Dock Labour Scheme has opened the way for that.
The noble Lord, Lord Clinton-Davis, seemed to hanker back to the days of the scheme. I believe that the abolition of that scheme is one of the best measures which this Government have taken. If it cost a little more than we predicted, that has been money well spent.
§ Lord Brabazon of Tara
My Lords, the noble Lord says that it cost five times more. We should remember also that the ports put up half the cost of the redundancy payments. They thought it worthwhile, as did we.
We know that there are very important differences in the circumstances of each of the major trust ports. It is precisely for that reason that this Bill takes such an unusual form for a privatisation measure. The usual pattern for such a Bill is to privatise the whole of an industry or the whole of its public sector. We have deliberately avoided that by making the Bill 1323 primarily enabling in its operation and leaving it to be decided in individual cases whether a trust port which falls above our index-linked £5 million threshold should be privatised.
§ Lord Clinton-Davis
My Lords, will the Minister explain why the Government changed course so substantially between 1988 and the present time as regards the threshold. That is a major change which has been unexplained.
§ Lord Brabazon of Tara
My Lords, I do not recall the original figure to which the noble Lord referred.
§ Lord Brabazon of Tara
My Lords, I know that the noble Lord referred to that figure, but I do not recall the earlier reference. I believe that the figure of £5 million has been in the Bill since its introduction. I appreciate that another figure may have been quoted at a different time but we are now dealing with a figure of £5 million. That seems to be a suitable figure and it is index-linked.
After the two-year interval, we should compel a port to privatise itself only after considering that port's situation in very close consultation with its board. That applies to Poole and Dover, which have been referred to in particular in today's debate. Poole is one of the ports where we shall look very closely at the arguments put before us prior to taking any decision.
It will be for individual ports to put forward their case against privatisation, if that is what they want to do, and it will be for Ministers to consider whether their arguments are valid. We have, as I explained in my opening speech in this debate, already included in the Bill measures to reassure those ports who are concerned about this issue of compulsion. Some of them were measures introduced during the Bill's consideration in another place specifically to meet the anxieties expressed by representatives of the ports. I have al ready said that I shall be bringing forward a further amendment in Committee which will prevent any move to compel privatisation of a port for a further five years once an initial decision has been made by the Government, after consultation, not to apply the reserve power.
I hope that the House will therefore recognize—as I believe did the noble Lord, Lord Greenway—that we have no intention, once the two years are up, to privatise en bloc all those ports which then fall above our £5 million threshold and which have not by then offered themselves for privatisation.
§ Lord Ezra
My Lords, does not the noble Lord agree that although the two-year period seems to have certain merits, in the case of ports such as Poole that could be a very uncertain period in which there is considerable doubt as to what policies should be adopted in continuing to oppose privatisation?
§ Lord Brabazon of Tara
My Lords, no doubt during the two -year period a port will wish to review its 1324 policies and see what benefits, or otherwise, accrue to the ports which are privatised. I believe that to be a reasonable period of time.
This is too important a matter to leave entirely to those who have been appointed, for the time being, to the boards of those ports. I believe that the boards of the trust ports run their ports effectively and conscientiously, but some of them may be reluctant to expose their ports to the challenges which entry into the private sector will bring. They may not recognise the implications for their own port of bringing the ports industry as a whole onto a more fully competitive basis. As the noble Lord, Lord Napier, said in an excellent maiden speech, there is invariably more than one side to each story. Therefore, I hope that noble Lords will appreciate the importance which the Government place on the inclusion of the reserve power of compulsion in the Bill. Indeed, we see it as an integral part of the Bill.
The noble Lord, Lord Greenway, suggested that some ports may turn away business in order to stay below the £5 million limit. I hope that that will not happen. I am sure that most ports are too responsible to do that. Any port which adopted that policy would not deserve to survive as a commercially competitive port. The £5 million limit is of course index linked.
My noble friend Lord Murton of Lindisfarne spoke strongly in support of the interests of Poole Harbour. I accept that Poole is a special case. However, all trust ports may claim to be special cases. We recognise that in bringing forward the Bill in this form. If we see Poole as a candidate for privatisation in two years' time we shall look carefully at its arguments against privatisation. I give my noble friend that reassurance.
The noble Lord, Lord Clinton-Davis, suggested that one of the main purposes of the Bill was as a money-raising exercise for the Government in order, he suggested—not very appropriately —to bail them out of the troubles and expense of the poll tax. I cannot accept that. If the purpose of the Bill was to raise money for the Exchequer, first, we would have introduced a Bill to privatise the entire trust ports sector; secondly, we would have proposed keeping all the proceeds. The fact that the Bill is in its present form shows that it is not principally aimed at raising money for the Exchequer.
Noble Lords, particularly my noble friend Lord Stockton, mentioned the views of the Select Committee of this House which reported against the Private Bill promoted by the Tees & Hartlepool Port Authority in February. The committee said that its overriding reason for reporting against the Bill was the existence of this Bill. It considered that the issues raised in the Tees & Hartlepool Bill should more properly be considered in the context of the Bill which we are now debating. I personally, as did my noble friend, regret that view which that committee took. The result is that the Tees & Hartlepool Authority now has to wait until this Bill is enacted before it can move forward to privatisation. I do not think that this is a just reward for the initiative that both it and the Clyde Port Authority showed and the expense and 1325 effort which they put into bringing forward their Bills. But of course the committee was entitled to take the view that it did.
Some of the other views which it expressed carry less weight, I believe, when one remembers that half of our ports industry is already in the hands of private sector companies and that this has not resulted in the dire consequences for the operation of its ports which the committee feared. I do not believe therefore that the views expressed by the Select Committee of this House should prevent noble Lords from considering the Bill now before us on its own merits.
One of the concerns expressed today was in regard to the environment. The noble Lord, Lord Clinton-Davis, and my noble friend Lord Norrie spoke particularly on that matter. The majority of trust ports, indeed ports of almost any description, were established in times when concern for the protection of the environment was less widely recognised than it is today. Therefore there is legitimate room for discussion about the environmental duties laid on ports generally. The safeguards certainly exist, as I shall explain in a moment.
I agree with my noble friend Lord Wade that to suggest that the Bill is the right place to impose additional environmental duties is to confuse the type of legislation with which we are dealing. It is essentially an enabling Bill, concerned in many respects with the technical complexities of providing for trust ports to turn themselves into private companies. Other legislation of a different type is used for privatising an entire nationalised industry and establishing new ground rules for carrying out its functions in the private sector. An obvious example of that is the Water Act 1989, to which my noble friend Lord Norrie referred. That is concerned not only with the privatisation of the water industry but with its detailed operations such as the laying of pipelines, the carrying out of works and so on. There is nothing similar in the present Bill and specific environmental provisions would not be appropriate in this case.
Finally, I see no case for applying environmental measures only to recently privatised trust ports within the ports sector. I am not aware, as my noble friend Lord Geddes was not aware, that there is evidence to suggest that company owned ports generally have a worse record than trust or municipal ports. All sectors of the industry should receive equal treatment on a matter such as this. Before placing environmental obligations on the ports industry as a whole we need to look very carefully at all the implications and consequences. That applies also to the conservancy powers in estuaries to which the noble Lord, Lord Napier, referred and particularly to the Mersey, where there are a number of different operators such as Associated British Ports, the Mersey Docks and Harbour Company and the Manchester Ship Canal. There is also the situation of Associated British Ports on the Humber. As the noble Lord said, conservancy powers lie with private companies and have not caused difficulties so far.
My noble friends Lord Lucas and Lord Geddes asked about the potential monopoly situation and the 1326 possibility of foreign control. As regards monopolies the safeguards in the fair trading legislation will apply. The Director General of Fair Trading can refer merger cases to the MMC. My right honourable friend the Secretary of State for Trade and Industry can also do so. As regards foreign control, I see no reason why foreign companies should not be able to bid for ports. We expect to agree objectives with the ports seeking privatisation for the sale of each of them. The ports will have regard to these objectives. They may include future continuity of port operations. I do not see any great risk of foreign companies gaining an undue level of control over our ports.
My noble friend Lord Geddes and the noble Lord, Lord Greenway, mentioned the possibility of unreasonably high port charges being exercised. I remind noble Lords that the Harbours Act 1964 safeguards against excessive charges. That legislation will remain unaltered. There is nothing in the Bill to change that. The scope for appeals to the Secretary of State under that Act will remain intact. The noble Lord, Lord Underhill, said that the General Council of British Shipping intends to propose improvements in the appeal procedure. We shall consider them because we know that the present procedures can be lengthy and cumbersome. They have been effective though slightly cumbersome. There have not been many complaints.
The noble Lord, Lord Underhill, implied that the GCBS was opposed to the Bill. That is certainly not true. As he said, it has some concerns which my honourable friend the Minister for Shipping has discussed with the Council. In general the GCBS supports the broad thrust of the Bill. The noble Lord, Lord Greenway, referred to marina charges. He has raised that subject in the past. It is a matter that I shall look at. It is not something which we need worry about in the context of this Bill.
The noble Lord also asked about various methods of privatisation which ports might adopt. The Government, and those trust ports intending early privatisation, have so far been thinking in terms of a trade sale of the successor companies. There will be nothing to rule out a full flotation on the Stock Exchange. However, such a process is expensive to organise and very demanding of management time for relatively modest-sized enterprises like the trust ports, as well as being an unsatisfactory vehicle for a management-employee buy-out. Therefore, it is unlikely to be a preferred option.
The noble Lord also asked about protection against predatory asset strippers. We expect to agree the objectives of the sale with each port. That may include objections concerning the future operations of the ports. The claw-back levy will also be relevant in that case. Guidance notes have been issued in draft about the procedures for the sale of ports. We are now considering the comments. If there is not a copy of the guidance notes already in the Library, I shall make certain that one is placed there.
The noble Lords, Lord Clinton-Davis and Lord Underhill, said that the Government had not issued any kind of definition as regards a trust port; nor had 1327 they issued a list setting out the ports to which the legislation applied. I believe that the definition of a "trust port" is in Clause I. However, if it is not, that clause contains all the other definitions.
In this legislation we are not concerned with the vast number of smaller ports. However, my right honour able friend made clear the ports falling above the £5 million threshold during the Second Reading in another place. Indeed, he gave a list of them. I could easily produce a copy of that list, although there is nothing secretive about it. In fact it is public knowledge.
I hope that what I have said covers most of the points which were raised in the debate. I am grateful to noble Lords for their patience. I have absolutely no doubt —indeed, noble Lords vindicated this—that we shall have the opportunity of considering many of those points in more detail in Committee. I hope that the speedy passage of the Bill will represent an important further step in the development of our ports. I commend it to the House.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.