§ 5.2 p.m.
§ Baroness Castle of Blackburn rose to call attention to the future of the Transport Research Laboratory and other similar research agencies; and to move for Papers.
§ The noble Baroness said: My Lords, I beg to move the Motion standing in my name on the Order Paper. It is very appropriate that this debate should follow the previous one. The Government have shown more emotion than logic in their proposal to privatise the Transport Research Laboratory, which everyone, including the consultants whom the Government appointed as advisers, has declared to be an outstanding centre of research excellence. This is a very important debate on an important issue, and one that is potentially disastrous for the good government of this country. I am sure that we would all agree that the stable supply of expert independent research advice is vital to good government. In no field is that more true than in the field of transport—as I had good reason to know at first hand when I was Minister of Transport, and used to draw heavily on the work of the Road Research Laboratory, as the laboratory was then called. I was in constant, daily touch with it as I evolved my transport policy. I was able to get from the laboratory the proceeds of research into, for example, road construction; the safety of bridges; the design of vehicles, so as to make them less hazardous for those who drove in them; and the specifications of seat belts, which I was then just starting to introduce. As I was about to pass legislation making the fitting of seat belts in new cars compulsory, it was essential to be sure that one could get advice as to which designs of seat belt would do more good than harm to the occupants. I remember the dramatic occasions when I watched the crash tests on vehicles that enabled me to study the effect of particular designs of seat belt on the passengers inside. The Transport Research Laboratory has, as it then had, unique facilities for testing and carrying out research in that transport field. It has a supply of test tracks, simulators and pavement test beds which are unrivalled in any other research agency. It is the future of that complex that we are discussing here this afternoon.
I am afraid that the Government have not approached this question with the objective scientific mind that they should bring to bear. Unfortunately, the Government have an obsession. They have a privatisation mania. According to the Government it is a natural law that anything that is in private hands must be superior to the same thing in the public sector. I do not want to be rude to Mr. MacGregor, the Transport Minister, but he really does remind me of one of the Ugly Sisters in "Cinderella". Noble Lords will remember that when they found that the dainty glass slipper would not fit their feet, they were willing to cut off their toes to make it fit. That is the way in which Mr. MacGregor has approached this matter—not examining first what are 1459 our needs in the research field and then making the machinery fit; he has declared first what the machinery must broadly be.
I should like to remind the House of the history of this matter. In April 1992, the Government announced that they were to turn the Transport Research Laboratory into an executive agency. The Minister responsible for transport at that time was Mr. Malcolm Rifkind. In his document launching the change, which I invite Members 3f this House to read, he paid the following tribute 10 the Transport Research Laboratory:
The scale of its research, the facilities available and the high calibre of its staff have earned the Laboratory a deserved international reputation as a major centre of road and transport research".
It was not in any desire to destroy the TRL that Mr. Rifkind announced that it was to become an agency; rather, he said, it was to strengthen it. As an agency, he declared, it would have greater freedom and flexibility to meet the needs of all its customers. And he paid the following tribute to TRL staff:
A noticeable feature of the Laboratory over the years has been the remarkable way in which its staff have adapted themselves to meet the challenges arising from different requirements and new fields of research. I am confident that the same level of commitment and adaptability will be shown in the years ahead".
The Minister was right. There were some advantages in turning TRL from a government department into an executive agency. The staff seized the opportunities that that change brought them. They proceeded to import a "business culture". That is the phrase that most people are fond of. They agreed to voluntary redundancies to trim down the size of the laboratory. They introduced market testing and new forms of accountancy, which overcame any of the obstacles to progress which the existence of the government department brought about, no doubt because of the restraints imposed by Government, and above all by Treasury, policy.
Staff were told that they would have three years to show how the executive agency could work. But exactly one year later Mr. MacGregor, who had succeeded Mr. Rifkind, answered a Question for Written Answer in another place. He announced that he intended to privatise that effective executive agency and would appoint consultants to advise him on how it could be done. That is the starting point from which Members of this House should consider this issue. He was putting the cart before the horse.
The retention of the executive agency was never an option in the consideration of the needs of our research policy. We now have the consultants' report and I should like every Member of this House to read it. The report of KPMG shows that their terms of reference were to devise an appropriate means of privatising and fixed timetables. They were to examine the likely costs and proceeds and to identify possible purchasers. That is a very unscientific way to approach one's responsibilities. The likely costs and proceeds ought to have been one of the issues in the question of whether it was privatised at all. What are we coming to except to a miasma of emotion in which the Government throw logic out of the window.
The result of those terms of reference is a most curious report. First of all it lists the different aims and 1460 objectives. It stated the needs of the Department of Transport in the following order: first, the need for an impartial source of resource; secondly, the need for a clean break with the public sector. If a clean break with the public sector did not give the looked for impartial advice, that was just too bad. A clean break with the public sector was this Government's overriding priority.
That also took precedence over the other needs of the Department of Transport set out by the consultants: a stable source of research supply and the creation of a centre or centres of excellence. If privatisation meant fragmenting the structure, that was just too bad. Where then were the centres of excellence? There was a centre of excellence as Mr. Rifkind himself admitted.
The consultants KPMG are a reputable firm. They took their job seriously. They therefore gave what I think was a pretty honest analysis of how these things could be achieved under different regimes. The trouble is that the conclusions of the report do not fit the analysis because, as I said, the Government put the cart before the horse. For instance, in the terms of the consultants' report, it seems that the executive agency is the best way to obtain impartiality of advice. That is obvious, is it not? Let me go back to my example of the seat belts. If that piece of research had been in the hands of someone who was involved even indirectly in the manufacture of seat belts, what value would that advice have been to me as a Minister? People's lives would have been put at risk.
So the executive agency wins on one of the major objectives; namely, to have a steady and stable system of research. But one can go further than that. One of the arguments for privatising it is that the laboratory will get a more businesslike discipline. Again I quote the report:
In response to the increasingly market tested environment in which it operates, TRL is taking a number of measures to reduce costs and increase its competitiveness. In particular, TRL is in the process of running a voluntary early retirement programme arid updating its management systems to a more commercial basis'".
So it is doing what the Government said that privatisation would do. It has not been proved—nor has the report proved it—that the only way to achieve the reforms is by privatising that efficient executive agency. So we are in danger of throwing away the great commercial value of TRL's impartiality for changes in business practice which would take place anyhow.
The report also points out that TRL is the best way of having research linked to transport policy. It is not done in a vacuum but as part of the policy decisions of government. Again I quote Mr. Rifkind from the document that he issued when he launched the executive agency:
It is essential for the safe and efficient operation of the UK transport systems that there is a close link between scientific research and transport policy. TRL currently plays a crucial role in achieving this as the primary source of impartial and authoritative research and scientific advice to the Department of Transport".
One cannot have a better testimonial than that. But in the Government's mind it does not count. So much for Mr. Rifkind, and he has been moved on elsewhere.
The report is full of tributes to TRL by the different divisions of the government department for the quality of the work that TRL has done for them. I should like to endorse that from my earlier memories.
1461 The only reason for the sale that the consultants can advance is that it is not very sure what will be the future revenues of the TRL because it is dependent for 85 per cent. of its income on government contracts. But what is going to happen? Are not the Government going to do any more transport research in future years? They have certainly cut it back in the past two years and anything can happen under this Government. So long as the Government have a research programme, TRL has its contracts. But in any case, the report points out that if it is privatised, the people to whom it is sold will want a guarantee of government contracts before they will buy. So once again we are throwing away an asset on a purely dogmatic basis.
There is therefore a sorry tale at the end of the report about the position of a possible sale. I feel that it is important to read it to the House because this is what the Government are selling off. Paragraph 1.4.2 states:
Of the principal privatisation options, privatisation through a public offer has been ruled out due to TRL's small size and lack of a suitable track record. A management/employee buy-out is not regarded as a feasible privatisation option on its own (although a degree of management and employee participation is desirable) due to difficulties in attracting funding for such a buy-out given the lack of a credible exit route and the lack of significant earnings growth in the medium-term. A trade sale is a possibility although a number of potential trade purchasers would probably be unacceptable [Why?] due to concerns over potential vested interests affecting the perceived impartiality of TRL's research".
Privatisation therefore threatens to take away one of the saleable commercial assets of TRL—its overseas reputation, because it does a lot of work for overseas developing governments.
The report concludes that there must be a non-profit distributing company. It is left with nothing else. It says that that is the only way in which the reputation for impartiality can be preserved and therefore the viability of the whole enterprise. But there is a drawback in that. The Government would receive less revenue from the sale, and is it not revenue that the Government are after? They want to sell all the family silver, including the family's intellectual property.
I hope Members of the House will read the report and form their own judgments as to whether the case for privatisation has been made out. The Government commissioned the report. They will not like its conclusion. Are they prepared to set up a non-profit distributing company as KPMG suggest? If not, what is the alternative? There are rumours that Mr. MacGregor is still clinging to the hope of a trade sale. If he does so, he will ruin one of Britain's great centres of excellence. My Lords, I beg to move for Papers.
§ 5.23 p.m.
§ Lord Rodgers of Quarry Bank
My Lords, the whole House should be grateful to the noble Baroness, Lady Castle of Blackburn, for raising this important subject. I am very much in her debt. I was familiar with the laboratory from my own days as Secretary of State. But I confess that I have not kept up with its development in recent times nor, does it seem, have I kept up with the evolving mind of the Government. I even missed the Secretary of State's Statement of May 1462 1993 in regard to privatisation. As the noble Baroness said, it is not long since the laboratory became an executive agency. The Government certainly moved on with great speed, having made that change, to propose another.
I confess—this is a political weakness in me—that I continue to underestimate the ideological prejudice with which the Government approach issues of this kind, particularly their ideological prejudice in favour of privatisation. The noble Baroness referred to logic rather than emotion being the proper way of determining the future of the laboratory. She referred to a government mania for privatisation. I never believed in doctrinaire nationalisation and perhaps in that respect I sometimes differed from the noble Baroness, Lady Castle. But I do not believe in doctrinaire privatisation either. What might have been good for steel, telecommunications, gas or electricity is not necessarily good for the Transport Research Laboratory. Certainly on the evidence available to us—we wait to hear what is said to us later this evening —it would be against the public interest to privatise the laboratory; there is nothing to be said for that on the merits of the case.
Many years ago I recall the appearance before the estimates committee of the House of Commons of a distinguished Permanent Secretary to the Department of Transport—Sir Gilmour Jenkins. It was a Select Committee of 1952– 53,40 years ago. He was asked a question and replied,The best kind of research is experience on the job".That was a rather original but odd definition of "research". When asked whether his department had ever urged the Treasury to make funds available for research he said,"No, certainly not". It may be that the wheel now comes full circle. If the laboratory is privatised it will certainly be true that within a reasonable period of time there will not be the facilities available to governments and others which have been available in the laboratory with all the qualities that it brought to its work.
The noble Baroness referred to the KPMG report as, "most curious". I should like to see the full report. At the moment I believe we are merely seeing an edited version. I hope in that respect that the Government are not being economical with the truth; while that may win the approval of Mr. William Waldegrave, I doubt that it will be acceptable to this House. It would be interesting to see the full report because I believe it contains some working of the figures which would enable us more clearly to judge what the outcome would be.
KPMG were not asked "whether" the TRL should be privatised, but "how". In any case, like all consultants, they would bear in mind what was expected of them by their clients. Despite that—and this is the important point, and a point made by the noble Baroness—the report is far from a resounding endorsement of privatisation. I confess that, given some simple editing, reversing of sentences and putting "however" in a different place, we may obtain a different result. Perhaps I may explain to the House what I mean by that.
Paragraph 2.3.6 of the report says,It is clear that no single consultancy company even approaches TRL's breadth of expertise in a very broad spectrum1463of transport research. However, consultancies could, and increasingly do, compete successfully for DoT transport research and consultancy services in virtually all areas".If I turned that round it would say,consultancies could, and increasingly do, compete successfully for DoT transport research and consultancy services in virtually all areas. However, it is clear that no single consultancy company even approaches TRL's breadth of expertise in a very broad spectrum of transport research".Indeed, if noble Lords look at other sentences and paragraphs they will notice that reversing the order of paragraphs 2.2.3 and 2.2.4 makes the report read in a very different way from the way it does at present. As I say, it is a long way from a simple endorsement of what the Government want to do.
The report is interesting when it talks of risks, and I hope that I shall be forgiven for quoting from it again. Paragraph 1.4.1 states,In our view, retention of TRL in the public sector would risk it being unable to respond adequately to changes in its market and runs the considerable risk of TRL going into a cycle of cumulative decline".The key word there is "risk". Paragraph 5.8.2 states,Our judgement is that retention of TRL in the public sector may be unsustainable beyond the short term".I thought that "risk" was what all businesses lived with; that it was the nature of competitive enterprise. I do not see why the fact that there is a risk that TRL may be unable to respond adequately, should of itself be a reason why it should be privatised. The question the Government should be asking themselves is whether that risk is worth taking. My provisional conclusion is that it is.
There is a reference to TRL being,unsustainable beyond the short term".Let us accept that warning. Let us take it for what it says. It may be,unsustainable beyond the short term".But that is a warning to us to set about preparing to survive; it should not be an excuse for deciding to privatise.
The report sets out very clearly the key strengths of the laboratory: impartiality, quality of staff, knowledge of customers, continuity and flexibility. The first two —impartiality and quality of staff—show most clearly where the public interest lies and so I shall refer very briefly to them. I have been looking at the Government's response to the report of the Select Committee on Science and Technology of this House in December 1987. The report was entitled Innovation in Surface Transport. Paragraph 7 of the Government's response states:The Government shares the Committee's view that TRRL commands esteem both at home and abroad by the excellence of its work, and is; resolved to maintain this".We have to ask whether it is still the Government's policy to maintain the excellence of its work. Given the dangers as a result of privatisation, can it be said firmly and clearly and without reservation that the Government are satisfied that the undertaking given to this House in 1987 will be fulfilled if privatisation goes ahead?
As for the quality of staff, which is the second most important point made in the report, the report itself makes clear that privatisation will mean the loss of quality staff from the laboratory. So on the face of it, judging by the Government's previous commitment and by the report itself, privatisation will not result in better 1464 research facilities for the Department of Transport and others who want to use its facilities. It will be impossible to maintain something which we have been able to take for granted for very many years.
The noble Baroness, Lady Castle, has made a plea for the acceptance of one of the alternative recommendations of the KPMG report. I would not go as far as she has gone. The right course—and here I make a constructive proposal—is a very simple one. The laboratory has existed as an agency for only two years. I suggest that three steps should be taken. First, the full KPMG report should be taken as a starting point for the laboratory looking at how far it can meet the standards, in so far as it falls short, particularly commercially, of what KPMG has recommended. Secondly, the Government should give the agency up to 1st January 1995 to produce a three-year business plan for the laboratory with it still within the public sector. Thirdly, the Government should ensure a level playing field for competition for the laboratory and for the private sector with which it might compete. If the Government were to give the agency a chance on that basis we should see what it could achieve and I might be prepared to be persuaded in three years' time, if it has failed, that privatisation is the only course. But that chance must be given to the laboratory because there is nothing available to us today in the evidence of the report that justifies privatisation.
§ 5.33 p.m.
§ Lord Lucas of Chilworth
My Lords, it is interesting to see the noble Baroness, Lady Castle of Blackburn, back on the transport trail, if I may put it that way, with as much vigour as she displayed when she was Minister. Her taking up the point this afternoon clearly demonstrates that element of consistency of hers which made such a significant contribution in the time that she was Minister.
It is difficult to disagree with the noble Baroness on some of the facts. But I totally disagree with her with regard to the philosophy which she espoused as being the reason for the Government's decision to take this course of action. Equally, I cannot recall the noble Lord, Lord Rodgers of Quarry Bank, during his time as Secretary of State extolling the virtues of what was then the Transport and Road Research Laboratory, which was always short of funds and which, always had great difficulty in meeting the commitment that was demanded of it. I cannot go along with the noble Lord on his suggestions that we should try this for a couple of years and have another review later on. We have to make up our minds.
I do not like the way the mind has been made up but I suspect that that is because I am fairly sentimental about the laboratory. It started life in 1933. It has had three changes of name. I have great affection for the old familiar one, the TRRL, but so that no one is confused this afternoon, I shall merely refer to it as the laboratory. We all know the significant contribution that that laboratory has made in recent years and over all this time in a number of areas. It has an international reputation, more particularly for long-term research on a variety of topics.
1465 The noble Baroness mentioned seat belts. If ever there was a crying need for a piece of long-term research, it is into the area of seat belts in buses and coaches, notably brought to our attention by the tragic accidents of recent times. I know of no one who will take this up. It means a fundamental look at the design of coaches themselves. How many coach-builders are there across Europe putting their bodies on different frames? Is it in their commercial interests, one against the other? Has the Bus and Coach Council the resources? The answer to that must be no. Where is that resource to be found? In the universities? Again, the answer is no, because it is a long-term project. The problem of seat belts in coaches and buses will not be solved in two or three years. It is probably a 10 or 12-year project and it can only be funded by an organisation set up to deal with long-term research.
The laboratory has an international reputation in the field of traffic management. It was the laboratory which designed, researched and developed the traffic management system which we know by the name SCOOT. What would London's traffic be like and what would the centres of major conurbations be like if that work had not taken place? Perhaps my noble friend the Minister will say that that kind of traffic management research is taking place in direction-finding techniques with Siemens. But those are companies doing a piece of research wholly and solely for gain. There is not the wider impact that a governmental research laboratory would undertake.
The success of the laboratory at Crowthorne, where it has been since about the mid-1960s, has been in large measure because there was in place a secure piece of funding by the Government. I shall not argue this afternoon whether that funding was large enough or right or proper, but its success was that that piece of funding was in place. Its return to an agency will enable it to secure competitively other contracts. I firmly believe that without that funding which the Department of Transport now controls, there will be a major loss in two particular areas. The first is road safety, about which we are pre-occupied daily. We are exhorted about not drinking and driving, going slower for children and so forth, and those policies are all quite properly promoted by the Government. The other area is the environment in so far as transport and the roads are concerned. All those provisions are promoted by government. It is simple logic to say, "If that is what you want, government, then you must put your twopennyworth in".
It is no good saying that as a privatised laboratory it can compete for the contracts which are to be let. It will not compete for the long-term contracts because they are too insecure. The commercial research laboratories compete for the short-term contracts and what I believe are called the near market research projects. That is what we shall lose if the research laboratory goes that way.
I have had a look at a summary of the report. I hope the noble Lord, Lord Rodgers, will forgive me if I say that I did not have the wit to use his rather amusing ability in turning the words around to make something different, although I understand what he means. As I 1466 read the summary of the report, I have some doubts. It does not to my satisfaction identify a buyer who will have the long-term interest at heart, and that is fundamental. If that team were to be broken up in any way at all—the members may very well go to university-based research laboratories which are very good, and the Government support those research endeavours—that fundamental unit would be lost.
I do not believe that the laboratory is unique in the world, although it is certainly unique in this country. There is another in Germany and one in America and they look at these matters through similar eyes, although the problems may be somewhat different. It cannot be claimed that here is something which is so unique that it must not be destroyed. It is not like a work of art. The laboratory could be put together again somewhere else by somebody else, but what a waste of effort and of 50 or 60 years of endeavour. How much would such a delay cost?
If the laboratory at Crowthorne is hived off, I do not believe that a great deal of the more valuable but less exotic work will continue anywhere else. I cannot identify any laboratory or commercial operation with the capability of doing that kind of work. Therefore, I should like to see it retained in some form or other. I am quite happy for the department to control costs and to direct the area in which research and further development should be undertaken. I have given just one example—that is to say, bus and coach seat belts. There are others such as traffic calming methods, new road surfaces and so on.
All those aspects have had a pre-eminence in the work of the laboratory. They are internationally accepted. The reports were used frequently by myself, by the noble Lord, Lord Underhill, and by other noble Lords and Baronesses in this House over many years as a source of original and good information. I would not like to see that destroyed and put aside. I believe that there is life left for the laboratory, but it may be that I am just a little sentimental about it.
§ 5.45 p.m.
§ Lord Carmichael of Kelvingrove
My Lords, that was a most remarkable speech by the noble Lord, Lord Lucas of Chilworth. I hope that the Minister for Transport takes time to read it. The House should also be grateful to my noble friend Lady Castle for initiating this debate not just because it is important that the future of TRL should be discussed, but because she is probably the best person to raise this matter. She was a very senior Cabinet Minister and a most innovative Secretary of State for Transport.
She mentioned her work with seat belts. They are very important. She may remember me as a very junior minister in her department, but from the Back-Benches later on I managed to get a Bill through the other place concerning seat belts which was ultimately brought to this House and which was passed. The most important single thing which my noble friend did was the introduction of breath tests. She took me with her to a meeting on the South Bank where she introduced this appalling, new restriction on freedom. I cannot remember whether it was in The Times, but a sketch 1467 appeared on the people who were there in force including butch motorists in duffel coats screaming at my noble friend. The complaint was that the new measure would totally ruin country life because no one would ever go again to a country pub. The important factor was that she had the courage to see ahead and the problems involved. Now, the whole climate has changed and people are very conscious about travelling in a car having had too much to drink.
I agree with the noble Lord, Lord Lucas, that we have to continue to look at the question of coaches. There was an investigation concerning recorders in coaches because of a number of accidents. I do not know how far that has progressed. I am sure that we shall get around to seat belts for coaches, which is a big job. We should be grateful to my noble friend for raising these issues.
Everyone says that the TRL gives absolutely independent information to the Minister when required and to the depart rent generally. The reliance on the important work of the laboratory by the Ministry of Transport is very great. The laboratory has a genuine world reputation. I am not saying that there are not other good laboratories in the world, but ours is one which has gained certain respect. The sad thing is that the Government are searching for ways to privatise it. The consultation report of KPMG Peat Marwick looks at many combinations and permutations about the way to privatisation. It was not an easy report to read if one does not have a strong financial background. I gained the clear impression that the consultants found it hard to make up their minds about what should be done. They felt that this was yet another privatisation too far. It is true that the report uses the phrase that the laboratory needs a "clean break" from the Department of Transport.
I must also congratulate the noble Lord, Lord Rodgers of Quarry Bank, on recognising the way in which reports can be written. The skill that is involved in writing a report is almost as important as carrying out the research. That has been well illustrated. When one reads that the report states that a complete break is needed, one begins to wonder whether that was the view of the consultants or whether they had been told that it would make life easier if a break was established because it would then be easier to go ahead with the privatisation.
For commercial reasons, the report contains no financial details, but surely there must be some figure in the Government's mind for the transfer from the public to the private sector. They must have some idea of what they will gain from it.
If I have read the report correctly, one option, which I am happy to see has not been pushed with any enthusiasm by the consultants, is the idea of breaking up the department. I think that the disciplines that make it up are too important to be split. An organisation such as the TRL has taken a long time to build and separating the units would reduce the true effectiveness of the whole. The consultants' report strongly suggests that potential purchasers are most likely to prefer the option of a single entity rather than a number of smaller, independent laboratories even if they were located on the same site. I do not know whether it would be 1468 possible to achieve complete independence with a number of purely commercial organisations operating on the same site unless they went to extra expense. There is the question of whether they would use the same or different canteens or other such facilities on what is a relatively small site.
I have visited the TRL a number of times and it is remarkable for the cross-fertilisation of ideas. A wide variety of people work there. Those who have the privilege of visiting it learn that there is a great deal more to motoring than they ever thought possible. Knowing some of the work that is carried out there, I hope that its multi-disciplinary atmosphere will be preserved.
The KPMG Peat Marwick report is really a financial appraisal with little real reference to transport. Its purpose is obviously to find some other way of funding such research other than with government money. From the Government's point of view, it is a combination of raising finance and satisfying political dogma. The noble Lord, Lord Rodgers of Quarry Bank—perhaps it was my noble friend Lady Castle—referred to the "family silver". Remembering the wonderful maiden speech of the late Lord Stockton, I think that we have now gone past the stage of selling the family silver and are now taking the Canalettos out of their frames and selling them abroad. I am sure that the noble Lord would have agreed with me on that.
The TRL has been innovative in safety research, vehicle design, safety testing, environmental quality analysis and in almost every other facet of transport, including road design, computerised traffic systems and road surfaces, which is now a subject coming very much to the fore. Transport costs are notoriously difficult to assess, but I have no doubt that during the years of its existence, the work of the TRL has been of such a nature as to far exceed (by its savings to road transport) its running costs to the department.
However, we must not overlook the intangibles. Reference has been made to the TRL's international reputation. I had the privilege of serving for many years as a member of the Select Committee on Transport in another place. One of our investigations related to road repairs because of the difficulty that we always seem to have with repairs being carried out over holiday periods. We travelled to Italy, Austria and Germany where I heard a great deal of praise for the TRL from road engineers and police. Considering our national hobby of moaning—this topic comes up every year —I was amused to find that road engineers in those countries greatly appreciated the advice that the TRL had given them on the use of coning the roads for repairs. They had sent people over here to examine our road coning and were grateful to us when they saw how complicated it can be when one wants to keep the traffic moving. Whenever people in this country see cones, they say that no one is working on the road and that leads to all kinds of arguments. So, even on what appear to be relatively small matters, such as the coning of roads, experts in other countries think that the techniques that they learnt from the TRL greatly speeded up their repairs and resurfacing. That should make motorists think that at least some system is involved.
1469 We shall hear speeches today from noble Lords who have much more expertise in business and finance than I have. I am sure that they will show how the national asset of the TRL can be retained and improved. I submit that the sentiments and observations of the unique group of employees in the TRL should be heard. I shall quote from one of the submissions from one of the unions that is represented there. It stated:We believe there is an approach which could provide the benefits of greater freedom to compete for non-government work while retaining the benefits of remaining in the public sector for our main work for the DoT. TRL would remain in the public sector, its staff would remain civil servants, but with its non-government work separately accounted for in a commercial subsidiary. If our ability to compete commercially really is an important reason for the proposal to privatise us, our proposal would allow this freedom without jeopardising the benefits to the public of our current status".I hope that the Government will keep that highly skilled group of men and women fully informed of the final proposals before we have a Bill foisted on us.
§ 5.57 p.m.
§ Lord Ashley of Stoke
My Lords, I know that the whole House is very grateful to my noble friend Lady Castle for initiating this debate. My noble friend was an outstanding Secretary of State for Transport, among other things, and has proved today that she has lost none of her remarkable qualities. When my noble friend was Secretary of State for Transport her innovations were unpopular at the time among a number of people. I remember a passionate and vehement argument with someone who said that her proposals were idiotic. In fact, they have saved thousands of lives. That is a marvellous achievement for any individual. My noble friend can be very proud of her work in this area. I endorse the points that she made in her admirable speech.
Today's debate affects millions of people because the work of the Transport Research Laboratory has tremendous influence on practically everyone: on travellers, on pedestrians and on the economy. I know that the unions concerned are very anxious about some of the Secretary of State's proposals. As a consultant to the federation which includes the Institution of Professionals, Managers and Specialists, I know that the unions have consistently and persistently expressed their deep concern. They are naturally anxious for their members, but they are remarkably well informed about the TRL. The evidence shows that mutilating the TRL would damage us all. This is a matter of which the House must take grave and serious note. Apparently, despite the evidence presented by the unions and many other people, the Secretary of State intends to press on regardless. That is remarkable. I believe that the Secretary of State is very short sighted indeed.
Like everyone else, I am only too well aware of the Government's obsession with a market economy and their fanatical determination to privatise anything and everything. They wield privatisation rather like a berserk killer uses a shotgun. They fire in all kinds of directions regardless of who is affected. But the difference between someone splaying a gun and the Government is that the Government appear to believe 1470 that privatisation always revives and never kills. They cannot admit the truth that the public interest can be damaged and sometimes destroyed by privatisation.
The Transport Research Laboratory is an example. One of the most deplorable aspects is that the Government have been warned of the dangers by their own consultants. The report of KPMG Peat Marwick was much quoted by my noble friends and the noble Lord, Lord Rodgers of Quarry Bank, whom I still call my noble friend despite his unfortunate disaffiliation from my party. The consultants in their report were obviously anxious about the demand for profit superseding the public interest. They recommended privatisation by means of a non-profit distributing company. That was an ingenious proposition. Having been debarred by its terms of reference from rejecting privatisation for the TRL, the consultants hit upon the idea of privatisation without private profit. That is a pretty good idea really.
KPMG Peat Marwick produced closely reasoned arguments to reach their conclusion. Yet the Government are pressing on, displaying a fanatical dogma rather than reasoned argument. They are incredibly damaging a research laboratory which for 60 years—60 years—has provided a world-renowned, independent, impartial centre for transport research. Its outstanding work has improved safety, environmental quality and efficiency, which are all in the public interest. It is a centre of excellence of which this country can be rightly proud.
What is remarkable about the present situation is that the consultants commissioned by the Government to produce recommendations on privatisation came up with very important points which endorsed the unions' opposition to private profit privatisation. The poacher and the gamekeeper are united.
The independent consultants, working to the Government's privatisation brief, indicate that privatisation will destroy the TRL's reputation for impartial advice and research and its ability to retain long-term expertise. They say that it would restrict the public availability of information, reduce industry-wide co-operative research, reduce staff morale and cause many key staff to seek other work. That from the Government's own consultants is pretty strong meat and I look forward to hearing the Minister's response. It is a devastating catalogue of the consequences, on which the unions and the consultants are in agreement. It is hard to understand why the Government should persist with such a wrong-headed policy.
There has been some speculation of a hidden agenda. It is speculated that the Government may be considering cutting money for safety, economy and environmental quality in transport to finance the development of motorway tolling technology. We do not know and if it is secret we cannot know. However, we can and do suspect. I welcome the Minister's observations. If he wishes to keep secrets, Members of this House will be anxious to probe them as soon as possible.
A distinguished Member of this House, the noble Lord, Lord Weatherill, speaking of attempts to reform this House, quoted the saying: "If it ain't broke, why try 1471 to fix it?". Precisely! That is exactly the point that we must press on the Government and I hope that they will listen and respond.
§ 6.5 p.m.
Lord Bruce of Donington
My Lords, the House will be grateful to my noble friend Lady Castle for introducing this Motion today. She is one of the most distinguished Ministers of Transport that this country has ever had. She did not have to obtain the opinions of outside consultants before she acted. Naturally, she consulted the best advice available to her; but on her own volition and with the support of her colleagues she carried out the policies in which she believed. The country will be indebted to her.
I have a particular debt to her; from 1945 to 1950 I had the honour to be her colleague in the House of Commons. She rapidly became known as one of the leading theoreticians of my party, responsible to a large degree for the policies that were so successfully pursued in those years.
The proposed privatisation of the Transport Research Laboratory will be seen as one of the most squalid steps that even the present Government have contemplated. It is four years almost to the day—notably 8th March 1990 —since the Government introduced in this House the Government Trading Bill. On the basis of a pamphlet introduced by the Government entitled Next Steps it introduced into our organisation in the United Kingdom the executive agencies. I would not normally weary your Lordships by quoting from a speech, but I shall quote what was said on that occasion by the noble Earl, Lord Caithness. He stated:The Next Steps initiative seeks to build on the strengths of our Civil Service. It has a well deserved reputation for impartiality, fairness integrity and propriety. Those attributes will continue to be an essential part of public service. People are the service's important asset. By delegating real managerial responsibility for achieving results along with the right tools for the job, Next Steps aims to provide an incentive for people to give their best; a recipe, I hope, for turning the good into the excellent. Next Steps indicate. the Government's genuine intention to improve the quality of the services it offers to the public within the resources available. All of us at some time or other have cause to use those services, and it is right that we should expect to receive a high standard of service.One of the most important benchmarks of whether this initiative has succeeded will be whether it leads to significant improvements in the standards of service.The measure which we have been debating this afternoon adds to the range of tools available to help us in this task. For those agents for which it is suitable it will, without any loss of accountability to Parliament, be the key to considerable improvements in value for money. I commend it warmly to the House". —[Official Report, 8/3/90; col.1294.]In due course the Transport Research Laboratory was added to the list of executive agencies in fulfilment of the Government's statement of their intentions. I should add that that statement was welcomed in all quarters of the House although there was, as your Lordships will gather, even in those days, a note of slight dissent from me. At that time I was speaking from the Front Bench on behalf of the Opposition in relation to that Bill.
As your Lordships will know, I am sometimes a suspicious character and I asked the noble Earl whether 1472 the proposal was a backdoor attempt at privatisation. I was assured to the contrary. In reply to that the noble Earl said:The noble Lord, Lord Bruce, spoke earlier about privatisation and will mention the matter in detail at a later stage. Before agencies are set up all other options, including abolition and privatisation, are examined. In most cases, the examination leads to the conclusion that the nature of the service provided by the agencies does not make privatisation a feasible or realistic option. That is not to say that some activities might not be contracted out, but generally our expectation is that most mainstream activities of Next Steps agencies will continue to remain within central government in the foreseeable future".—[col.1292.]In the later stages of the debate, after the Bill went to another place and returned, we had a firm assurance from the Government that the Next Steps provisions were not to be used as a prelude to privatisation.
Following what the noble Earl said, all I have to do this afternoon is to refer to the testimonies riot only of my noble friend Lady Castle but also of the noble Lord, Lord Rodgers, the noble Lord, Lord Lucas of Chilworth, and my noble friends Lord Ashley and Lord Carmichael. I shall not repeat what they said but those noble Lords have explained what a success the laboratory has been and how indispensable it is within the original context that the Government stated in commending the Next Steps programme to your Lordships.
Why is there that repudiation? There is not a word in favour of privatisation in your Lordships' House this afternoon; there is not even a muted word. Why is there to be privatisation? The answer is remarkably simple. The Government are stuck for money so they propose to flog off yet another of their assets. They will probably offer a sweetener, forgiving all liabilities. In respect of their privatisation programme, they have already written off £7 billion of private sector liabilities, aside from the sweeteners that they have given to the industries that have been privatised. This is yet another sordid chapter in this Government's wretched history in that regard.
What is really at stake is the desire to take some pressure off the public sector borrowing requirement which their own mismanagement has inflicted on the nation as a whole. That is what it is all about. It is about creating another quango which other companies, possibly—probably—subscribers to Tory Party funds can get on the cheap. That is what it is all about. That is the miserable state to which the Government have brought politics in the United Kingdom at present.
When the matter goes to another place for further consideration and returns here, I hope that noble Lords and Members of another place will treat the whole proposal with the contempt which it deserves.
§ 6.15 p.m.
§ Lord Haskel
My Lords, today the European Parliament is voting on car exhaust rules. Although those rules prepared by the Commission have already been accepted by Ministers, it is not certain whether the standards will be accepted by the European Parliament. It is thought that it wants even higher standards. That is but one indication that we are on the verge of great changes in the transport industry. We are approaching a bend in the road, so to speak. Therefore, I should like to 1473 congratulate my noble friend Lady Castle of Blackburn on her excellent timing in calling our attention to the future of the Transport Research Laboratory and to say how much I welcome and admire her fighting spirit.
I should like to demonstrate that the future of the TRL should not lie in the private sector and that some government Ministers agree with me. I would like to show also that some rather old-fashioned accountancy is an unsuitable way of assessing the value of the TRL to the country and that there are wider considerations and other models. I should like to show that privatising the TRL would strain the partnership between government and industry.
The signs of change in transport are all about us: dissatisfaction with the new roads policy to accommodate more cars; the uncontrolled growth of heavy goods traffic and all the associated environmental considerations; and our commitment to the Earth Summit. The legal requirements in California for the electric car are another sign. The overproduction in the European car and truck industry means that not only will there be changes in the technology of those companies but also that there are implications for their size and for their sub-contractors.
Part of the task of the TRL is to help manage that change by independently researching those products and processes which are less polluting; to find better forms of transport which are in keeping with today's ideas of sustainable development; and to interpret for our transport industry why the Swiss are prepared to build the equivalent of two Channel Tunnels under the Alps to force goods from road to rail.
Perhaps the Secretary of State feels as his predecessor did at the turn of the century, when he was concerned about the overwhelming number of horses and their requirements and the pollution which they deposited on the roads. Change came to him in the form of the motor car. We do not know what will rescue the current Secretary of State.
How fortunate, therefore, we are at this time to have in our science base the Transport Research Laboratory to do longer term impartial, basic and social research into the costs of congestion and pollution and environmental considerations; to research technological change and transport alternatives. The Secretary of State has described the TRL as:the primary source of impartial and authoritative research and scientific advice to the department".The TRL will be a source of knowledge and information for the entire industry: cometh the hour, cometh the institution.
In those circumstances it would seem sensible to nurture and build the TRL. We want to strengthen it and ensure that it can better carry out its work. What do the Government propose? Amazingly, they propose to privatise it. I say "amazingly" because only last Thursday, when your Lordships debated the report of the Science and Technology Committee, a continuous thread through that debate was an underlying feeling of exasperation at the private sector's failure to spend money on basic research.
1474 When replying to that debate, the noble Baroness, Lady Blatch, made clear the Government's position and commitment to basic research. She said:It is industry's job to support short-term research with immediate application; the focus of the science base should be on the long term and on excellence in basic and strategic research". —[Official Report, 3/3/94; col.1164.]That exactly describes the work of the TRL. Yet the right honourable gentleman the Secretary of State for Transport wants the transport industry's basic and strategic research to be carried out in the private sector. Perhaps the noble noble Lord can perform a useful service to us all by getting his colleagues to talk to one another. That mixed message only causes confusion and helps destroy the credibility of government.
I now turn to the consultants' report. For obvious reasons, many consultants' reports set out to tell the client what they want to hear. As previous speakers have pointed out, this report is no exception. The consultants are specialists in corporate finance, and their concern is how best to put the TRL in the private sector at least cost and maximum return. That may well be the objective of the Treasury. The broader concern should be how the TRL may best serve the Government, the local authorities, the transport industry and its other customers in this time of change while maintaining the highest of standards. It is an accountancy-driven report applied to a people-driven organisation. Best business practice today tries to avoid that sort of thing.
If ever there was a people-driven organisation, the TRL is one. If the consultants are to come to a balanced conclusion, they must also look at the morale and ethos in the organisation. Are the staff involved, and will the atmosphere attract the best scientists? Is there enough critical mass to ensure that nothing is forgotten, and is there enough variety for cross-fertilisation? Is there the right atmosphere for people to engage in that very important scientific exercise of having a "hunch"? The noble Earl, Lord Halsbury, referred to that in the debate last Thursday. The consultants considered those aspects only in relation to the financial restructuring, not as ends in themselves. Now that we have a new bench-marking centre in the country—welcomed by the DTI but possibly still unnoticed by the Department of Transport —we have a new tool to carry out that work.
That broader approach of dealing with research institutes is not new. A good example is the Oceanographic Institute in Southampton. A committee of your Lordships' House recently examined the problems of the Marine Institute. The solution was to transfer it to the University of Southampton, which has an excellent marine engineering department and a school of oceanography. All these entities are being combined in a new building, currently under construction, which is a joint venture between the Marine Institute, the university and the National Environmental Research Council. Incidentally, your Lordships may be interested to learn that that building is only three feet above sea level, which says something about the institute's views on global warming. The plan has the advantage of not only creating a centre of excellence and adding to our science base but will also provide good graduates to the marine industry for many years to come. Can the Minister consider that as a 1475 model? Perhaps I may also ask the Minister to compare the cost to the taxpayer of the consultants' report on the TRL with the cost of the report prepared by your Lordships regarding the Marine Institute.
The Motion on the Order Paper refers to "other similar research agencies". Undoubtedly that refers to the four scientific laboratories currently under review; namely, the Laboratory of the Government Chemist, the National Physical Laboratory, the National Weights and Measures Laboratory and the National Engineering Laboratory. Many fine words have been spoken by the Prime Minister and other members of the Government about the Government's support for basic research and the partnership between government and industry in science and technology. I quoted the noble Baroness, Lady Blatch, earlier. Indeed, one of the very few areas where government can assist industry under the rules of the European Union is in the field of science and technology. That makes the partnership particularly important and sensitive. Sentencing those laboratories to the private sector means that those institutions will in future work on short-term, fairly narrow based projects and will, thereby, render meaningless some of those fine words.
I believe that many people in industry will interpret such actions as the Government reneging on their part of the partnership. The place for those laboratories is in the science base—not in the private sector. Therefore, before reaching a decision, will the Minister reflect on the contradictions that I have tried to point out? Is the private sector a suitable home for the TRL and other laboratories, despite words from his colleagues to the contrary? Would it not be a more coherent approach if he used the model of the Oceanographic Institute? Does his decision reflect the stated aims of the Department of Trade and Industry to support the science base to help Britain be more competitive in the 1990s?
§ 6.26 p.m.
§ Lord Williams of Elvel
My Lords, the House will be grateful to my noble friend Lady Castle for introducing the Motion. Indeed, many noble Lords have, justifiably, paid tribute to her reputation when she was a Minister. Today, my noble friend has shown us that she has lost none of her enthusiasm for supporting proper and just causes. We are grateful to her for both introducing the Motion and for speaking to it in such an enthusiastic and impressive way.
I am afraid that the Minister will find himself in something of a lonely position because all speakers in the debate thus far have agreed that the proposals to privatise the Transport Research Laboratory are, by their very nature, absurd. I say "absurd" because the points that have been made by speakers from all sides of the House lead to that conclusion. First, there has been a certain amount of criticism of the consultants' report. It is, perhaps. unfair, but my experience of consultants —and I have a certain amount of experience with them —is that if you give them something that you want them to say, they will, generally speaking, say it. However, in this case, the consultants did not say what they were told to say; indeed, they produced a somewhat ambiguous report which was, I imagine, certainly far from what the 1476 Government had expected. As the noble Lord, Lord Rodgers of Quarry Bank, quite rightly pointed out, if you turn round certain sentences you come to completely different conclusions. So, the consultants were themselves doubtful about the project.
Secondly, the consultants concluded—and, indeed, I would conclude—that no one is really going to buy the Transport Research Laboratory unless there is some form of government guarantee either in terms of a Treasury guarantee as to its financial stability or in terms of business from the Department of Transport, which, after all, provides something like 85 per cent. of the existing business of the laboratory. Therefore, no one will rush in and buy it unless those concerned are satisfied that they will get that business. The only solution under those circumstances would be to break up the laboratory. If we are talking about a consortium buying the laboratory and each taking out of it the individual expertise that it wishes, whether it is for bridges, roads or whatever, then we would be almost completely destroying a centre of excellence.
Finally—and this is all that I have to say about the TRL, because I wish to pass on to other matters—the Government now seem to have decided that they will pay no attention to the impartiality which can only be guaranteed by an operation in the public sector. I have much experience of consultancy work, as I am sure does the Minister and I firmly believe that if the Government wish to have research carried out which will provide results without fear or favour, that work should and can only be carried out in the public sector. For that reason, and for that reason alone, I maintain that what the Minister is proposing is absurd.
My noble friend Lord Ashley asked whether there was a hidden agenda and I believe there is. My noble friend Lord Haskel mentioned some of the other laboratories and research establishments that are at present under threat of privatisation such as the National Physical Laboratory, the National Weights and Measures Laboratory, the National Engineering Laboratory and the Laboratory of the Government Chemist. I would add to that list the Warren Spring Laboratory at Stevenage, which is an executive agency of the Department of Trade and Industry set up under the legislation to which my noble friend Lord Bruce of Donington referred. The Warren Spring Laboratory has an international reputation as an impartial centre of excellence in the fields of process technology and environmental pollution—work which is a vital element in the sustainable development programme to which the United Kingdom subscribed at the Earth Summit at Rio. What is to happen to this essential laboratory? It is to be shut down and the staff will be pushed into part of the Atomic Energy Authority, AEA Technology, and, by the end of March, into something called the New National Environmental Technology Centre, which will then (what a surprise !) be privatised. That is privatisation by stealth. Non-profitable, public interest research—the kind of long-term research that the noble Lord, Lord Lucas of Chilworth, mentioned—which is by nature uncommercial and high risk as one does not 1477 know what the results of it will be, if there are any results at all, will not be carried out by a commercial enterprise. It is as simple as that.
So far I have referred to the Transport Research Laboratory, Warren Spring Laboratory and the other laboratories mentioned by my noble friend Lord Haskel. However, the matter is even more serious. I refer again to the hidden agenda mentioned by my noble friend Lord Ashley. On 2nd February the Government embarked on an exercise to draw up proposals for privatising, contracting out or cutting back at any or all of 49 public sector research establishments. The Government's view, set out in their specification, was that many services currently provided by their research establishments could be carried out in the private sector. The Government's study covers some 49 public sector research establishments employing as many as 30,000 scientists. Will this be a two-year or three-year study, as these are complicated establishments? No, conclu-sions will be drawn from this exercise in 90 days. In 90 days, proposals will be put before the Government to privatise, contract out or cut back on any or all of 49 research establishments. The members of the official team conducting the exercise are in such haste that they have told unions representing staff that they have no time to consult the unions at local level. Therefore they will go ahead and write proposals for the Government without talking to the unions at local level. That, again, is absurd.
What conclusions do we draw from what we have heard this afternoon? I draw three conclusions. First, the Government have abandoned any interest in impartiality of research, which can only be guaranteed if the establishment which is conducting the research is free from commercial pressures. The Government have also abandoned the idea of non-commercial, long-term research. Secondly, the Government do not care about pure public interest research, which is by definition unprofitable and indeed uncommercial. Thirdly, the Government are not bothered about the fate of their own employees. They are only bothered—as many noble Lords have said—with the short-term cash flow of the Treasury. Worst of all, they appear to be locked in a mental time warp. They are not prepared even to entertain the thought that privatisation has run whatever course it had. It is simply no sort of policy just to scrape together whatever is available and sell it off for the sake of a dogma that is becoming increasingly anachronistic.
§ 6.35 p.m.
§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Mackay of Ardbrecknish)
My Lords, as other noble Lords have already said, the House is, I am sure, grateful to the noble Baroness, Lady Castle of Blackburn, for the opportunity to discuss the important issue of the future of the Transport Research Laboratory. Indeed we have had two preliminary canters round the course at Question Time thanks to the noble Baroness. I am not entirely sure whether, when I replied to the noble Baroness at Question Time on the subject of the 1478 Transport Research Laboratory, that was my maiden appearance for the Department of Transport, but it must have been close to it.
This debate, as a number of noble Lords have pointed out, is particularly timely because my right honourable friend the Secretary of State for Transport has recently announced his provisional conclusions on the future status of the laboratory. I know that he will wish to be informed by your Lordships' view in coming to a final decision. One of your Lordships—I believe it was the noble Lord, Lord Williams, —said that I must be feeling pretty lonely as regards my defence of this privatisation. I can recall that on the occasion of almost every previous privatisation I have been surrounded by the serried ranks of Socialists and I have also felt pretty lonely. However, I have noted with interest that as privatisations have occurred over the past 15 years, each one was described in disparaging terms. For example the noble Lord, Lord Carmichael, used the term "a privatisation too far". On hearing those words, I noted down,"Wasn't every one a privatisation too far?"
It is interesting to note that the Labour Party opposes and complains about privatisations but then says afterwards,"Oh well. We will live with it". The word "renationalisation" no longer crosses the lips of Labour Party members. There was a good example of that just the other day when the party opposite launched its programme to encourage private capital to fund projects such as roads, hospitals and schools. The Leader of the Labour Party suggested—I have the quote before me to ensure that my memory serves me right—Old dogmas and battle lines should be swept aside to attract cash"—from the private sector of coursefor vital improvements to roads, schools and hospitals".It was not that long ago when that policy was anathema to the Labour Party which considered it to be part of the evil conspiracy of this Conservative Government. Therefore I shall treat with a little scepticism some of the over-the-top statements that have been made about the privatisation of the laboratory that we are discussing.
Most noble Lords know the laboratory a good deal better than I. Indeed not only do we have the laboratory's original parent here this afternoon, but also a number of its foster parents down the years. Just occasionally, as I was subjected to verbal attacks from those foster parents, and the parent in the person of the noble Baroness, Lady Castle, I felt that I was about to be accused of being the abortionist of this healthy child which is so dear to the hearts of the various noble Lords through whose hands it has passed.
The laboratory is based at Crowthorne in Berkshire. It has a small satellite unit—I do not think anyone mentioned this—at Livingston near Edinburgh, and it has indeed been responsible for a wide range of significant transport research and development. The noble Baroness can rightly feel proud of her role in establishing the laboratory at its current site. Indeed noble Lords have mentioned some of the other projects which the noble Baroness started and of which she should rightly feel proud, such as the introduction of breath tests and progress over the matter of seat belts. I did not notice the Humber Bridge coming into this 1479 eulogy: nor indeed In place of strife, which I suspect formed a very major roadblock, if I may so describe it, in the noble Baroness's career in the party opposite.
The TRL was launched in April 1992 as an executive agency, operating on Next Step principles. I will come back to the points made by the noble Lord, Lord Bruce of Donington, later on. At the same time—this is important—a proper client-contractor relationship was established between the policy divisions in the Department of Transport which are responsible for buying the great bulk of TRL's output and the laboratory. Responsibility for managing research budgets passed to the customers, who now identify and manage the research they need. Examples range from research into new and improved road materials, construction techniques, through to driver behavioural research, including novice drivers. The driving seat changed from TRL, who devised the research programmes on the basis of what it thought was needed, and came to the Ministry where a budget was suggested. The situation has changed to one in which the policy divisions of the department decide what research they require. Of course that leaves TRL free to concentrate on the specialised research work which is its hallmark. Indeed a number of your Lordships—for example, the noble Lord, Lord Williams of Elvel—were concerned about long-term research work. My noble friend Lord Lucas of Chilworth raised the question specifically of research into safely in coaches and seat belts in coaches. Of course we all accept those are very important.
I point out to my noble friend that TRL is not at the moment working an this issue for the department, but in the future the department's bus safety programme will require some long-term and some short-term research on the subject. It will then go out for bids. It is not guaranteed that it will go to the TRL, but the important thing to remember is that long-term research does not exist in a vacuum: it exists because the customer—in the case of road and transport research, the department —wants it done. Therefore if the department put out contracts for long-term research it is there for this laboratory or any other laboratory or institute to bid for that contract. That will give, whoever wins it—and it is to be hoped that in many cases it will be the TRL—the long-term security of which noble Lords seem to think they are going to be deprived. The customers in the Department of Transport are not suddenly going to want only short-term research. They, like many customers who seek research projects over the whole field, will want many long-term projects as well. Therefore the mix will not be any different from the mix at the moment demanded by the department and so I do not see that this argument that somehow or other long-term research will be sacrificed by TRL being privatised stands up to any logical examination.
The key feature of the role of the customer—in this case the department—is the choice of supplier. Departmental' policy customers were therefore allowed to seek competitive tenders for their projects. My right honourable friend recognised that it would take a little time for the laboratory to adjust to a competitive environment, and so he provided for a transitional period of three years. In the first year,1992– 93, 1480 departmental customers could put up to 40 per cent. of new projects out to competitive tender. The remaining 60 per cent. went as before to TRL by direct commission. In the following year,1993– 94, the proportion of new projects which could he put out to tender rose to 50 per cent., and we had planned for the proportion to rise to 60 per cent. in the coming financial year.
Of course TRL could still bid for Department of Transport work for which competitive tenders were sought. It quickly became clear that TRL, could not compete effectively. It was constrained by its place in the public sector. For instance, like any government agency, TRL is required to cover its costs in full through charges. It would not be permissible to run loss leaders, for instance, in order to attract business. That could end up with taxpayers having to fund any deficits and that would be wrong. It would be wrong for taxpayers' money to be used to market services against private sector competitors.
In the light of the difficulties which TRL faced, my right honourable friend the Secretary of State for Transport considered whether TRL would be able to secure its future more effectively in the private sector, freed from public sector constraints. He concluded in May of last year that in principle TRL should be privatised. Shortly afterwards he appointed KPMG to advise him on options for privatisation and their feasibility. My right honourable friend has been very open with the trade unions about the consultancy study. Their views were invited on the terms of reference arid their suggestions were taken on board. He readily gave a commitment that once the consultants had completed their work he would consult the unions on his provisional conclusions before reaching any final decision. He has also made available to them, as indeed I said he would in answer to the noble Baroness, Lady Castle, as much as possible of the consultants' work.
KPMG completed its work towards the end of last year and copies of the report are in the Library. The report is complete, save for information which is commercially confidential: for example, information given in confidence by outside bodies or material which would be prejudicial to any sale. My right honourable friend has given the KPMG report very careful consideration. His provisional view is that the laboratory should be transferred to the private sector; but I should emphasise that no final decision has been taken. I can repeat the assurance that I gave to the noble Baroness in January, when we last discussed this matter, that we will not take any final decision until my right honourable friend has discussed his view with the trade unions. That said, he is keen to make as early an announcement as he can, as he does not want to extend the period of uncertainty for the staff. Officials in my department have been in contact with the TRL unions in order to arrange a date as soon as possible for a meeting.
Before I comment on the report from the consultants and their conclusions, I want to make it perfectly clear to your Lordships that I join them in their warm tributes paid to the work of TRL. The Government fully recognise the quality of the work there and the important contribution it has made to road safety, the avoidance of 1481 road congestion, traffic management and a range of related areas. The quality of its work, together with the facilities available and the high calibre of its staff, have earned the laboratory a deserved reputation as a major centre for road and transport research. It is rightly held in high regard by industry both here and abroad.
However, I can see no reason why the quality of its output should change were TRL to be transferred to the private sector. What is important is the reputation of the organisation and the quality of the staff, not whether ownership resides in the public sector or the private sector. That is, I think, in the words of Mr. Robin Cook,a Maginot Line we can do without".Before I turn to the report and refer to one of its paragraphs, I point out to the noble Lord, Lord Ashley, who asked whether the consultants were instructed to consider the retention of TRL in the public sector, that they were appointed to examine the option for privatisation. Their judgment of feasibility was against that background. That is the background against which they produced their report. They looked at the status quo option and came to the view that the retention of TRL in the public sector ran the real risk of the laboratory going into a cycle of cumulative decline. The terms of reference were to examine the long-term commercial viability of privatising TRL. Perhaps I may now turn to paragraph 1.4.1 in the consultants' report. Here they say:We have considered the principal ownership issues of whether it is feasible and sensible to privatise TRL and, if so, which privatisation option should be pursued. Retention of TRL in the public sector as an Executive Agency has been considered as a default option and compared with a range of privatisation options. Invariably, however, retention of the status quo has not proved favourable by comparison to privatisation options. In our view, retention of TRL in the public sector would risk it being unable to respond adequately to changes in its market and runs the considerable risk of TRL going into a cycle of cumulative decline. Privatisation, by removing some of the public sector constraints on its operation, enabling TRL to exploit fully its intellectual property and to develop a more commercial approach will make it better able to respond to its changing environment".I have read out the words carefully. Unlike the noble Lord, Lord Rodgers of Quarry Bank, I have not changed them around. I have read them in the order in which they are in the report.
The noble Lord, Lord Haskel, was concerned about critical mass. I fully appreciate that concern with regard to any research laboratory. On the basis of what the consultants say, if allowed to continue research would suffer a spiral of decline. That would certainly cause it to slip below the critical mass position. As the noble Lord rightly pointed out to the House, it is an important factor.
Lord Bruce of Donington
My Lords, has the noble Lord considered the possibility that when considering the prospect of TRL remaining in the public sector, the consultants probably had in mind the disastrous consequences that might occur were the existing Government to remain in office?
§ Lord Mackay of Ardbrecknish
My Lords, I am not entirely sure what the noble Lord is getting at. If he means, as I suspect he does, that KPMG would not receive any more work from the Government, I 1482 absolutely refute that suggestion. The KPMG consultants were employed for this task and, whatever the result, it would not alter the Government's position on their future role. I am sure that the noble Lord makes the point in jest. But I find it an insulting suggestion both from the Government's point of view and from the point of view of KPMG. I do not believe that they would take that point into consideration when giving their considered view on such an important subject.
As I have just quoted, it is clear that retaining TRL in the public sector is not a viable option. It would risk the laboratory being unable to respond adequately to changes in the market and would lead to a cycle of cumulative decline. That confirms the view that TRL is constrained as a government agency in competition with other research suppliers. KPMG concluded that privatisation would make TRL better able to respond to the changing environment. That must be right. Privatisation would free the laboratory from the restraints it currently faces and enable it to market its services to public and private sector clients alike without any of the red tape of covering each cost pound by pound and penny for penny. It would allow TRL to compete more effectively across a wider market than is currently available to it. The skills and facilities which TRL has to offer mean that it would be in a strong market position in certain areas. Perhaps I may say to the noble Lord, Lord Rodgers, that that is the definition of a level playing field, not one in which TRL is still in the public sector.
The noble Lord, Lord Bruce of Donington, made certain remarks about government promises to keep executive agencies inside the Civil Service. No such promises were made. It is true that we have decided to keep the Driving Standards Agency, the Driver and Vehicle Licensing Agency, the Vehicle Certification Agency and the enforcement functions of the Vehicle Inspectorate in the public sector. What we have done is to review agencies. We are quite prepared to keep them in the public sector where that is appropriate and sensible for their continued long-term health and for the quality of the service they supply to customers. We are equally prepared to move them into the private sector if we think that that is the better option.
In confirming that privatisation was feasible, KPMG examined a number of sales options. They included a trade sale to a single buyer, purchase by a consortium of trade buyers and sale as a non-profit distributing company. Their preferred options were sale to a consortium and a non-profit distributing company. Many noble Lords made the point that perhaps we should have taken their advice entirely and gone for the option of a non-profit distributing company. However, KPMG also made the point that prospective bidders may have been hindered by a lack of knowledge of TRL's business and in such circumstances it would seem sensible to keep all possible options open at this stage.
We are therefore minded towards a competitive sale process in which bids would be invited from as wide a range of possible interests as we can find. But that does not mean —and I was asked this specifically by the 1483 noble Baroness, Lady Castle of Blackburn—that we have taken a final view on the non-profit distributing company idea.
In coming to that final view we shall wish to be satisfied that there are good prospects for a successful privatisation—successful both in terms of transition to the private sector and in terms of my right honourable friend's continuing requirement for high quality transport research and development. Perhaps I may say to the noble Lord, Lord Ashley, that we continue to fund an extensive research programme, costing about £100 million over the next three years. Therefore there is no question of privatisation leading to a reduction in the level of government-sponsored research.
Neither can I see any reason why privatisation should lead to important long-term research being abandoned, as I have already explained, in favour of more short-term commercial work. Policy units within the Department of Transport responsible on Ministers' behalf for specifying research requirements to be met by both TRL and other suppliers will be looking at both long-term research needs and short-term. Privatisation, as I explained earlier, would not affect the nature of the research we require.
It has been suggested that privatising TRL would risk undermining its reputation for independent and impartial research Obviously we place particular value on TRL's independence and the impartial advice that it offers. If privatisation is confirmed, prospective purchasers would need to demonstrate that they were able to meet those requirements of independence and integrity. I do not for one moment prescribe to the philosophy that one only has independence and integrity in the public sector. I also believe that most of the Labour Party has moved away from that point of view, at least so far as concerns its story to the electorate.
Considerations of independence and integrity are important, but they are not the only factors. We also wish to create a competitive supply market for transport research. We would look to prospective buyers to demonstrate an ability to meet obligations to staff transferring to the new organisation. Finally, we would wish to ensure that proceeds from the sale maximised the return to the taxpayer.
As I said when I started, the debate could hardly have come at a more opportune moment. Your Lordships' comments have been, as ever, illuminating and informative. I know that my right honourable friend is keen to know your Lordships' thinking and will be hurrying back from Dresden overnight from a meeting of fellow European Transport Ministers in order to receive my report on your Lordships' thinking in the morning. However, leaving aside that slightly jesting remark, my right honourable friend will indeed be keen to read reports in Hansard of the debate in order to help him to arrive at a firm conclusion on the future of this important facility.
§ Baroness Castle of Blackburn
I am grateful to my colleagues on this side of the House for their contributions to the debate and to the noble Lords, Lord Lucas and Lord Rodgers, for joining in. We have had a succession of telling speeches which culminated in the 1484 brilliant summing-up by the noble Lord, Lord Williams. He widened the debate to the whole prospect of research in this country. I cannot congratulate the Minister on his reply. Of course he is in a difficulty. He seeks to defend a totally illogical case. The barrenness of his argument was reinforced by two factors: first, the total lack of support from the Benches behind him; and, secondly, his compulsion to draw in In Place of Strife as a distraction from his lack of transport argument.
I was particularly touched by the picture of Mr. MacGregor dashing home to receive our comments, and to hear that he would stay up all night to consider them. I am sorry, but I do not find it convincing. I beg leave to withdraw the Motion. But we do not withdraw from the fight.
§ Motion for Papers, by leave, withdrawn.