HL Deb 09 March 1992 vol 536 cc1181-7

3.46 p.m.

Lord Brabazon of Tara

My Lords, with the leave of the House I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Transport. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement about the progress which has been made on the privatisation of the trust ports since the Ports Act 1991 received the Royal Assent in July of last year. The main objective of the Government in promoting this legislation was to enable the major trust ports to bring themselves into the private sector.

"On 28th January I announced that I had given my consent to the sale of the Tees and Hartlepool Port Authority's undertaking to Teesside Holdings Ltd, and that sale has been completed; and the Forth Ports Authority intends to seek the privatisation of its undertaking on 12th March by floating it on the Stock Exchange. The boards of the Clyde Port Authority and of the Medway Ports Authority have now put to me their recommendations concerning the sales of their ports; the board of the Port of London Authority has put to me its recommendation concerning the sale of the port of Tilbury.

"Different objectives were agreed for the sales of the three ports, but in all three cases they included encouraging the disposal to managers and employees of the whole or a substantial part of the equity share capital; seeking the best open market price subject to the other objectives; and continuing the port operations of the undertakings.

"I am satisfied that in all three cases the boards conducted the sales in a fair and proper manner. In particular I am satisfied that each of them carefully assessed the bids for their ports against the agreed objectives of sale.

"The Clyde Port Authority board concluded that the bid made by Clydeport Holdings Ltd, a management and employee buy-out team, satisfied most appropriately and fully the objectives of sale. It was also the largest bid in monetary terms. Under the terms of the bid at least 60 per cent. of the equity share capital of the company will be held by managers and employees. The Clyde port authority board has accordingly recommended to me that its successor company should be sold to Clydeport Holdings Ltd.

The Medway ports authority received only one final bid for its undertaking. This was from Medports Mebo Ltd, also a management and employee buy-out team. The board considered that the bid fully met the agreed objectives of sale. Under the terms of the bid 51 per cent. of the equity share capital will be held by managers and employees of the company and an employee share ownership trust. The Medway Ports Authority board has recommended that its successor company should be sold to Medports Mebo Ltd.

"The Port of London Authority board concluded that the bid by International Transport Ltd, also a management and employee buy-out team, best met the agreed objectives. It was also the largest bid in monetary terms. Up to 50.1 per cent. of the equity share capital and 7.5 per cent. of preference capital will be available to managers and employees of the company. The board of the Port of London Authority has recommended that the port of Tilbury should be sold to International Transport Ltd.

"I have considered carefully the recommendations of the three port authority boards. I am satisfied that in all three cases the recommended bids meet the agreed objectives of sale. I have noted the provisions made in each case for managers and employees of the company to hold a substantial part of the equity share capital of the companies. I also consider the bids to be satisfactory in monetary terms.

"I am therefore writing to the chairman of each of the three port authority boards giving my consent to the sale of their ports to the three bidders whom they have recommended, subject to the completion of satisfactory contracts of sale. I am delighted that today's announcement means that three more major British ports are now moving into

"I commend this Statement to the House".

My Lords, that concludes the Statement.

3.50 p.m.

Lord Clinton-Davis

My Lords, first, I thank the Minister for repeating the Statement made by the Secretary of State in another place. Will he confirm that out of the 111 British ports there have been only four cases of privatisation, despite the great claims made by the Government during the passage of the Bill?

I welcome the management/employee buy-out. That was the position taken by the Opposition. I am glad that three of the cases have resulted in such a buy-out, but we have heard little about the terms. The House should have a little more information than the Minister has been prepared to give thus far.

With regard to Tees and Hartlepool, does the Minister agree that there seems to be a considerable disparity of treatment? In the Tees and Hartlepool case one had a management buy-out which was evidently in excess of the tender that was ultimately accepted. Does he also agree that, notwithstanding the investigation undertaken by the Secretary of State, there remains considerable concern about that venture? It lacked transparency. It is also remarkable that in that instance, compared with the others, the management buy-out failed. Why?

Will the Minister give the House some estimate of the price that applies in each of the four cases to which he has referred? To what extent has the Treasury benefited from those issues shortly before a general election?

Perhaps I may turn to a question affecting the Port of London Police Authority. Does the Minister agree that it very much opposed the way in which it was treated? Its representations came to nothing so far as concerns the Minister. The police authority's anxieties about the powers it had exercised being transferred to a private police authority remain unsatisfied. What assurances is the Minister able to give?

The overwhelming majority of ports have not been privatised. Will the Minister give some indication of the progress, or lack of it, that is being made in that regard?

Lord Ezra

My Lords, I too express appreciation for the information that we have been given today on the progress of privatisation under the Ports Act. The steps taken to privatise the three ports referred to seem to be in line with what is proposed; namely, that preference was given to management buy-outs and that in every case the bid was either the only bid or the best bid.

However, like the noble Lord, Lord Clinton-Davis, first, I wish to refer back to the Tees and Hartlepool case. I asked the noble Lord, Lord Brabazon, a Question on that issue on 17th January. It appeared from the information then available that the favoured bid was not the highest price and nor did it represent the interests of the management. Since then the Secretary of State has apparently accepted the proposition put forward by the company in question. It seems that the principles which have applied in the three cases brought to our attention today were not applied in that case. We are entitled to know a little more about why that decision was taken despite those considerations.

Secondly, are the Government still determined to persevere with the privatisation of trust ports of the size specified in the legislation which may not wish to be privatised? The noble Lord, Lord Brabazon, will recall that anxiety was expressed on all sides of the House about that. There are certain ports—Poole is a notable example—which consider that they are run effectively as trust ports and which in no circumstances wish to be privatised. Do the Government still intend to persevere along that route?

Lord Brabazon of Tara

My Lords, I am grateful to both noble Lords for their reception of my repetition of the Statement. It is good that we have been able to make the Statement today and that three more ports have gone along the road of privatisation. The noble Lord, Lord Clinton-Davis, referred to 111 ports. I do not believe that we ever envisaged that all 111—some of which are extremely small—would ever necessarily go along that road.

Together with Tees and Hartlepool, the ports that I have announced today—and the fourth port authority which, as I stated, is going for a flotation very shortly—represent four of the five largest ports in this country. That is surely the criterion against which we ought to measure the issue rather than sheer numbers—the noble Lord, Lord Clinton-Davis, referred to 111.

The noble Lord, Lord Ezra, asked what we would do with our power of compulsion under the Ports Act. Those powers will not be available until July 1993. They will apply not to the whole 111 but to some 13 ports on the turnover criterion which is laid down in the Act. Five have already sought privatisation and I hope that it goes ahead smoothly. As I said, those ports are four of the five largest trust ports. As I stated at the time, each case will be examined on its own merits. There is no reason why Poole—the noble Lord, Lord Ezra, specifically referred to it—should not be able to make its case one way or another when the time comes. We shall just have to wait and see.

Both noble Lords referred to Tees and Hartlepool and the apparent disparity of treatment between what was decided in that case and what has been decided in the three cases that I have announced today. My right honourable friend made his Statement on Tees and Hartlepool on 28th January. I cannot add more at this stage. I am very happy that the three sales announced today are management and employee buy-outs — MEBOs, if one can put it that way. In fact the Tees and Hartlepool MEBO was neither the largest bid nor the bid recommended by the board. We base the decision not on our own judgment in the first place but on the recommendation of the port authority board. It is not a matter which the Government decide on their own. However, in answer to the noble Lord, Lord Clinton-Davis, the fact that we did not choose the largest bid with regard to Tees and Hartlepool proves that we are not in it just for the money.

The noble Lord, Lord Clinton-Davis, also asked what was in it for the taxpayer. The consideration being paid for Tilbury is £32 million. That is slightly different from the rest because it is not the sale of the whole of the PLA but merely the sale of Tilbury as a part of the PLA. The consideration for Medway is £29.7 million and for Clyde it is £26 million. Of course, that is not the consideration for the Government but it is the price being paid.

The noble Lord, Lord Clinton-Davis, asked in particular about the case of the PLA police. They have transferred to the Tilbury company on their existing terms and conditions of service and with their existing powers. There would be little sense in them remaining with the PLA, which would have no function to give them.

I believe that one way and another this is a satisfactory Statement and will he of great benefit to the ports industry.

4 p.m.

Lord Taylor of Gryfe

My Lords, I am delighted that the promotion of privatisation by the Clyde port authority has now been resolved. As the Minister will recall, private legislation was initiated some time ago to accomplish that, at considerable expense to the Clyde port authority. The Minister mentioned £26 million as a consideration in respect of the port. I wish to ask him about the structure of the company.

The Minister was good enough to say that 60 per cent. of the equity will be held by the employees and the management. However, I am worried about one aspect of such privatisation management buy-outs. It is the amount of loan capital which is in the company and which is largely dressed up as an employee/management buy-out. The substantial block of cash which goes into such purchases is often bank cash. Therefore, it carries with it a considerable debt burden. Will the Minister enlighten me about the size of the share capital in the company in this case and the extent of the debt burden that has been incurred?

Lord Brabazon of Tara

My Lords, I am not in a position to give the details requested by the noble Lord. I can only repeat what I said in the Statement; that the MEBO team will have at least 60 per cent. of the equity share capital of the company. One must remember that these privatisations are different from ordinary privatisations in that at the moment there is no owner of the trust port. Therefore, any money put into the company is additional capital rather than "paying something away". Perhaps that is not the best way of putting it but the noble Lord will understand what I mean.

The Earl of Selkirk

My Lords, I thank the Minister for his comments, in particular about Glasgow. I am fairly certain that the project there will be a success and will be warmly welcomed when they hear the Minister's message.

I wish to comment on what the noble Lord, Lord Ezra, said about Poole. In some ways Poole is a peculiar place and it is not easily suited to the kind of task which would suit the port of Glasgow. I hope that its position will be cleared up so that it knows where it stands in the new situation.

Lord Brabazon of Tara

My Lords, I am grateful to my noble friend for his remarks about Clyde. He is right in saying that the announcement will be widely welcomed on the Clyde. It is good news for the management and employee team, even though it offered the best price for the port.

As regards Poole, there is little that I can add to what I said to the noble Lord, Lord Ezra, or to what I said during the passage of the Bill. It is now up to Poole to make representations to the department and I have no doubt that it will do so. Included in those representations will be remarks that were made during the passage of the Bill by my noble friend and other noble Lords.

The Viscount of Oxfuird

My Lords, I wish to express to my noble friend the thought that the management of Clyde was frustrated by its own Private Bill being overtaken by the Government's Bill. Subsequently, any help that Scottish industry can contrive to give will be well accepted, in particular the whisky industry; for example, I understand that a vast amount of whisky is exported through Felixstowe. Clyde is not nearly so far away. Therefore, may its future be attended by a fair wind and I am sure that everyone's good wishes go with the noble Lord and his attendants on this venture.

Lord Brabazon of Tara

My Lords, I am grateful to my noble friend for his remarks. I am sure that the Clyde port authority and the management/employee buy-out team will also be grateful for what he said, in particular as regards whisky exports.

Lord Clinton-Davis

My Lords, does the Minister agree that in the light of the Statement none of the cases thus far represents a real test of the Government's bona fides in relation to management/employee buy-outs for the following reasons? First, the bid made by the Clyde Port Authority Board represented the largest bid in monetary terms. Secondly, in relation to the Medway port authority there was only one final bid for the undertaking; namely, the management/employee buy-out. Thirdly, the bid placed by the Port of London Authority Board was also the largest in monetary terms. Therefore, is it not right to say that, as regards the testing of the Government's bona fides in that regard, the jury must remain out?

As regards Tees and Hartlepool, is it not odd that in conflict with the other issues in relation to management/employee buy-outs, the trustees' decision was to award the port neither to the highest bidder nor to the buy-out team? Perhaps that represents a significant indictment of the Government's present position. Finally, does the Minister agree that it is right that there should be far more transparency about such operations than has been the case so far?

Lord Brabazon of Tara

My Lords, the noble Lord asked me a series of questions in addition to those that he previously asked. He asked whether I would agree with him. I can say that, in general, I would not agree with almost anything that the noble Lord said. He said that the jury must remain out as regards management/employee buy-outs—

Lord Clinton-Davis

My Lords, as regards the Minister's attitude.

Lord Brabazon of Tara

My Lords, as regards the Government's attitude to management/employee buy-outs, which comes to the same thing. The Statement that I have repeated today made that clear, as did the announcement that we made about Tees and Hartlepool, where the management/employee buy-out was not the one recommended to us by the board of the Tees and Hartlepool port authority. It was not the best bid nor did the board recommend what was the highest bid in monetary terms. It recommended the bid which in its view—it was the board's view and was accepted by the Government —was the best bid for the future of the port. That is the most important aspect. In the cases that I have announced this afternoon the best bid was from the management/employee buy-outs. I should have thought that that was entirely clear.