Transport Research Laboratory (Hansard, 19 April 1995)

§ The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen)
My Lords, the Secretary of State for Transport announced on 14th March 1995 his objectives for the sale of the Transport Research Laboratory, which he aims to complete during 1995. He will be seeking bids for the 484 laboratory from a wide range of interests. He also announced his decision to provide the laboratory with guarantees of future research work for a number of years, subject to the delivery of high quality, independent and impartial research at competitive prices.

§ Baroness Castle of Blackburn
How can the Government justify giving guarantees of future research work for an indefinite period to a private buyer of the Transport Research Laboratory which they have refused to give to the TRL, their own acclaimed centre of excellence, as long as it remains in public hands? Does not that favouritism for private enterprise show that the Government are afraid to allow the public sector to compete on equal terms, as we found in the case of British Rail?

§ Viscount Goschen
My Lords, no. I do not believe that it shows that at all. We believe in a strong Transport Research Laboratory, and we believe that the best future for that institution lies in the private sector, where it will be able to compete and enter new markets. The guarantees will not be indefinite, but because the Government account for a major share of the work commissioned from the TRL—some 85 per cent.—we feel that it is appropriate to give guarantees of future research work in order to transfer that organisation smoothly into the private sector.

§ Lord Dean of Beswick
My Lords, in view of the fact that there has been no criticism of the performance of that organisation in the past, can the Minister now tell us the real reason that it is being sold off—other than political ideology?

§ Viscount Goschen
My Lords, it is not a question of political ideology. The fact is that the Transport Research Laboratory has faced a loss of business. Given the fact that there has been a change and that rather than the laboratory's work being provider-led, departments are now customers, and in view of the fact that the Government's share has declined, we feel that if the research laboratory is to be able to compete properly, to enter new markets, to go for new business and to raise money in the way that it wants, its best future lies in the private sector. We strongly recognise the value to this country of having a strong TRL.

§ Lord Dean of Beswick
My Lords, but what proof does the Minister have that this is the right course to adopt if, once again, the Government are only guessing?

§ Viscount Goschen
My Lords, it is not a question of guesswork. The TRL has lost business. That is the case. We recognise that it is a centre of excellence, but it is constrained by being in the public sector. It cannot, for instance, price its products in the way in which a commercial organisation can. It cannot provide loss-leading products—

§ Baroness Fisher of Rednal
My Lords, why not?

§ Viscount Goschen
My Lords, as a public sector body, it has to reclaim its costs. Therefore, it cannot compete on an equal basis with what will be its 485 commercial competitors. We believe in a strong organisation. The private sector will be the best place for it.

§ Lord Mackie of Benshie
My Lords, is it good commercial practice to get a good price for a saleable object by promising to pay a large income to the same seller?

§ Viscount Goschen
My Lords, I believe that I have covered the reasons that we feel that the guarantees are necessary. The fact is that the Government commission some 85 per cent. of the work of the TRL. It is because the Government are by far and away the largest customer of the organisation that we believe that those guarantees are necessary in order for it to move smoothly into the private sector.

§ Lord Renton
My Lords, when the Government are requiring more work to be done by the TRL, can my noble friend say whether the criterion is to be the public need for such work or whether it will be done without cost?

§ Viscount Goschen
My Lords, my noble friend asks an interesting question. In the past, the Transport Research Laboratory conducted its research as a provider rather than at the customer's request. Now that government departments and others hold budgets for such research, it is demand-led. Departments decide what research they need and they then have the option to commission that research from TRL. The Transport Research Laboratory has a very good reputation as a centre of excellence, and I am sure that government departments will continue to commission research from that body.

§ Baroness Farrington of Ribbleton
My Lords, I wonder whether the Minister could be a little clearer. First, he referred to the TRL benefiting from the fact that in the private sector it would not be required to reclaim its costs. That is what I inferred from the noble Viscount's comments, but it was a slightly confusing statement. Secondly, will the Minister confirm that it is possible for the Government, through deregulation, to allow a public sector body to compete in the open marketplace and that therefore privatisation is not necessarily the answer to such an organisation's inability to compete when that inability is due to government restrictions?

§ Viscount Goschen
My Lords, no. I do not agree with the noble Baroness. However much one deregulates and moves such an agency towards an arm's length position, ultimately it is a public sector body and therefore cannot compete on the same terms as a commercial body with government money behind it. The noble Baroness was confused by my statement about the recovery of costs. A commercial organisation has complete leeway when deciding how to price its products. It might loss-lead, for example, and provide 486 services to its customers at a lower cost than they cost the organisation. That is not possible for a public body because a public body must recover its costs.

§ Lord Elton
My Lords, is it not surprising to hear noble Lords opposite suggest that the privatisation programme springs entirely from political dogma, with no suspicion on their part that their opposition to privatisation may spring from political dogma? Is not the proof of the pudding the fact that the very large sums which taxpayers shelled out in the past to support nationalised industries are now being almost exactly balanced by the very large sums paid by the same industries, which are now in profit, in taxes and back into the taxpayers' pockets?

§ Viscount Goschen
My Lords, my noble friend has hit the nail on the head. For some people, it is occasionally expedient to ignore the very great benefits which privatisation has brought to the country.

§ Lord Carmichael of Kelvingrove
My Lords, does the Minister appreciate that we on this side of the House, not through dogma but for practical reasons, agree with the Select Committee in another place, which included four Conservative Members, which felt that it was wrong that this good and worthy organisation should be broken up? Will the Minister tell us how many serious applications there have been to take on the job of the TRL? Has it been emphasised that if any other body takes on the TRL, it must remain a transparently independent organisation? It is difficult for a purely commercial organisation not to have some tie-ups. The Minister should look at the record of the National Engineering Laboratory and the things that it had to do for outside bodies because it was the only totally impartial group. If there is a proposition from the existing workforce to take over the TRL on a non-profit making distributive basis, will he guarantee it the same amount of work as he has guaranteed to any private body which takes it over?

§ Viscount Goschen
My Lords, I can give the noble Lord two assurances. First, we have not ruled out any type of bid, such as the one he described by the management on a non-profit-making basis. We will of course consider that hid. The second assurance I can give the noble Lord is that the onus will be on bidders to demonstrate that they will be able to maintain independence and that it will be preserved under their ownership. We greatly value TRL's independence and the quality of the research product which it has put out.

§ Lord Ezra
My Lords, despite what the Minister has said, it is not entirely clear why, if the TRL is regarded as a centre of excellence and if the Government intend to continue to use its services, it should be put through the disruptive process of having to change its ownership.

§ Viscount Goschen
My Lords, at the moment, being in the public sector, the TRL is constrained from competing in certain markets, from competing with its direct competitors, and from entering into all sorts of 487 new business, which I am sure it will be able to achieve once it is freed from those constraints and moves into the private sector.

§ Baroness Castle of Blackburn
Is it not a fact that as part of the lead-in to privatisation, the TRL was induced last year to shed over 100 of its scientific, technical and industrial staff at a cost in early retirement and severance pay of nearly £4 million? Is it not also a fact that it has now re-employed 30 of those people whom it sent off with a golden handshake and is advertising for 50 more? Is that not proof that the TRL was never overmanned and that its staff is needed to continue this centre of excellence?

§ Viscount Goschen
My Lords, the number of people working at the TRL has declined. Those are direct operational matters for the chief executive. He must be able to balance the work that comes in, the work that is required, and the orders that come in, against the number of people needed to produce that research product. To do otherwise would be highly irresponsible.