§ 7.34 p.m.
§ Viscount Goschen rose to move, That the draft order laid before the House on 6th November be approved [5th Report from the Joint Committee].
§ The noble Viscount said: My Lords, I beg to move the Motion standing in my name on the Order Paper.
§ The order will enable the Secretary of State to effect the transfer of assets, rights, liabilities and duties of the Port of Tyne Authority to a company whose shares will be offered for sale. All property, rights and liabilities of the authority, and all functions conferred or imposed on the authority by any local statutory provision, will be transferred to the successor company already set up by the authority when the order comes into force. The most important of those obligations and functions will be those of continuing to operate and maintain the Port of Tyne.
§ It may be helpful if I start by briefly setting this order in the context of the Government's policy on ports. Our objective for the ports industry has been and is that it should be capable, innovative and self-sufficient and we have sought to encourage that by promotion of competition. The Transport Act 1981 provided for the privatisation of the British Transport Docks Board and Sealink. The first became Associated British Ports, and the four former Sealink ferry ports were also transferred to the private sector. Those privatisations, effected more than 10 years ago, have been successful. The Government have therefore removed subsidies, deregulated—notably in abolishing the Dock Labour Scheme—and promoted privatisation. As a result of those policies, port operations across the board in the UK have been greatly improved; efficiency gains have been made in the use of manpower; labour relations have improved; and substantial investments have been made.
§ The Ports Act 1991 was introduced as an enabling measure to provide a simpler and quicker mechanism than the Private Bill procedure for trust ports to privatise themselves and to take advantage of private sector input and practice, such as the investment of private capital. Six ports have used the voluntary privatisation procedure in the Ports Act: in 1992, Tees and Hartlepool, Forth, Clyde, Medway and Tilbury; and in 1995, Dundee. It is too early to comment in detail on Dundee, but it is clear that the earlier privatisations have been successful.1018
§ Tees and Hartlepool achieved an increase in turnover between 1992 and 1995 of over 20 per cent. and an increase in pre-tax surplus over the same period approaching 100 per cent.
Between 1992 and 1995 the turnover and tonnage of the Port of Clyde increased by 33 per cent. and pre-tax profits by 58 per cent. The company has this year acquired an extensive waterfront facility which will provide increased opportunities for expansion and diversification. Commenting on this acquisition, Lloyd's List said:
In 1992 Clydeport considered closing its Greenock operation due to lack of business … now the group is more concerned it will run out of capacity at Greenock and has therefore bought a neighbouring site".
§ At Forth, during the same period turnover increased by 32 per cent. to reach £47.3 million and in 1995 profit before tax was £15.3 million, up from £13.9 million in 1994.
Again, Lloyd's List has recently noted:
At one time damned by an image of crumbling infrastructure and fractious labour relations, Tilbury has re-emerged over the past few years to mount an increasing challenge to its more recently developed competitors".
§ There are a number of such examples. We know that the ports privatisations have been successful, and we should expect similar benefits to follow from the privatisation of Tyne.
§ It is important to note that privatisation does not reduce the responsibilities of port authorities. All their obligations under general law continue, and the Ports Act provides that all functions conferred or imposed on an authority by any particular statutory provision are transferred to any successor company. The Act also specifically provides that the TUPE—(Transfer of Undertakings) (Protection of Employment) Regulations 1981—apply to transfers under the Ports Act.
§ The users of the port will continue to benefit, as do all users of UK ports, from the Harbours Act 1964, which gives a statutory right of appeal to the Secretary of State against unreasonable port dues. The right is rarely used and has never been exercised for any of the former trust ports since they were privatised. The fact that the power is now so little used is closely related to the promotion of competition between the UK ports to which I referred earlier. I should also refer to the provisions in the Act that provide for a clawback levy on all disposals of land in the first 10 years following a Ports Act privatisation.
§ With that background on the Government's ports policy and the Ports Act, I should now like to turn to the privatisation of the Port of Tyne Authority. I acknowledge that the authority has made considerable efforts to adapt the port to the changing situation created by the decline of traditional trades. I note also that the authority has taken steps to remove some of the constraints inherent in the trust status. It is to be commended for that. But I am not persuaded that taking the port into the private sector will undermine what has been achieved; indeed, I believe the opposite to be true.
§ Our intention in seeking the privatisation of the Port of Tyne Authority is to create the opportunity for the port to share the benefits from the entrepreneurial and 1019 innovative approach more generally found in the private sector. The Port of Tyne Authority said, in its response of September 1995 to the consultation about compulsory privatisation, that it welcomed the provisions of the Ports Act that enable voluntary privatisation; and even accepted that compulsory privatisation may be needed in certain circumstances. It did not however consider that its port would benefit.
§ With all respect, and in no spirit of criticism, I have to say that it cannot be disinterested, and it is only natural for it, and others connected with the port, to see the proposed privatisation as a criticism or a threat. It is neither. The general experience, in this country and elsewhere, is that privatisation brings a change of culture that benefits and improves overall performance. Taking the Port of Tyne into the private sector will not undermine what the authority has achieved. Rather, it will open up more opportunities for innovation and entrepreneurial development to the benefit of port users and Tyneside as a whole. Privatisation can be expected to lead to a more dynamic approach to investment, exploiting more fully the authority's financial capacity to the benefit of the region.
§ Some concern was expressed about privatising the port at a time when it is facing uncertainties, mainly due to the decline in the coal trade. It is not surprising that there have been positive and negative developments in the trade of the port in recent years. But all ports have to deal with changes in business and if we had to wait for a steady state, no port would ever be privatised. Potential purchasers and their advisers should have no substantial difficulty in assessing and allowing for any uncertainties in the future business of Tyne. The port has indeed shown that it can adapt to changing trade patterns.
§ The powers of compulsion in Section 10 of the Ports Act enable the Secretary of State to compulsorily privatise any trust port with a turnover exceeding £5 million at 1991 prices, following consideration of the responses to a succession of consultation exercises, and with the consent of Parliament. The previous Secretary of State consulted the Port of Tyne Authority in June 1995 to ascertain its views on privatisation. The authority was opposed, but the present Secretary of State was not convinced by its arguments. He therefore wrote to the chairman on 15th November 1995 to direct the authority to form a company and to prepare a transfer scheme to enable the authority to transfer all its property, rights, liabilities and functions to that company. A model transfer scheme was provided to the authority.
§ The authority set up the company and submitted a scheme. That scheme, although based on the model provided, included a number of additional provisions which would have been likely to constrain the operation and development of the port and which the Secretary of State therefore did not feel able to accept. Since, in his view, it would not have been possible to amend the scheme so as to accord with the advice he had previously given, he considered making his own scheme, as provided for in Section 12 of the Act. He 1020 consulted the authority and considered its views before advertising and inviting representations on his proposed scheme.
§ Following his consideration of the representations he then received, he is still minded to proceed with his proposed scheme, which forms the schedule to the order which is before the House today. It follows closely the transfer schemes used in previous privatisations and the model provided to the authority. The omission of the additional provisions proposed in the authority's scheme was the main focus of representations on the scheme proposed by the Secretary of State.
§ Those provisions raised an important and difficult issue. A transfer scheme is to do with the transfer of property, rights, liabilities and statutory functions of the port authority to a successor company. It is not appropriate for such a scheme to contain provisions which are not directly connected with the transfer itself, but are instead intended to impose new on-going commitments on the successor company. There is even a question whether such on-going provisions would be intro vires. Those doubts, and the difficulty and inappropriateness of each of the proposals, led the Secretary of State to omit those provisions from his own scheme and he was therefore unable to accept them as modifications.
§ Pension and employee rights is an important subject. The authority's proposals covered aspects of pension and employee rights. There is general protective legislation in these matters which will apply to the successor company, and there is no case for imposing further legal obligations on that company. I do though understand that those matters can be of concern and the Secretary of State indicated that he will be prepared to consider with the authority what might be included in the sale objectives to allow prospective purchasers' intentions to be considered in the evaluation of bids.
§ There was no justification in the Government's view for the authority's proposed consultative committee with its wide range of powers. It would have shackled any new management in a totally unacceptable way. That committee, under the authority's proposals. would have held a special share in the Port of Tyne plc—the new company. Subject to parliamentary approval of this draft order, we shall direct that the relevant article, Article 30, be deleted from the company's articles of association, that other consequential amendments be made, and that a few minor amendments, to bring the company documents into line with Companies Acts regulations, also be made.
§ Subject to the House's approval today of this draft order, the sale of the port will be undertaken by the Port of Tyne Authority and its advisers. We intend therefore to discuss straightaway with the chairman the process and the timetable. We will want to cover the desirability of encouraging a management employee buy-out offer—a MEBO—with substantial employee share ownership.
§ I hope that, following the detailed explanation that I have given of the Government's reasoning and desire to effect the privatisation of the Port of Tyne, the House 1021 will be able to accept that this will be a beneficial measure not only for the port but also for the whole area. I commend the order to the House.
§ Moved, That the draft order laid before the House on 6th November be approved. [5th Report from the Joint Committee].—(Viscount Goschen.)
§ 7.49 p.m.
§ Lord Berkeley
My Lords, the Minister spent more than three-quarters of his time defending privatisation of ports. There was little justification of the necessity for the scheme and why the Port of Tyne's own scheme was said to be less good. It is a sad story of a government who have lost their way and who are drowning in a sea of dogma. The Government are committed to consultation, but do not listen to those whom they consult.
I shall give a little bit of history. The 1991 Ports Act established a number of trust ports to be privatised voluntarily—Tees and Hartlepool, Forth, Clyde, Medway, Tilbury and, later, Dundee. In June 1995 the then Secretary of State wrote to the Chairman of three more trust ports, Tyne, Dover and Medway, to consult on whether the Secretary of State should issue directions to privatise those ports.
The port of Dover, assisted by Her Majesty the Queen Mother and Vera Lynn, objected. There were too many problems with forecasting traffic with the Channel Tunnel. One could say the same about Tyne and the coal traffic. So the Government withdrew it, allegedly because they were frightened that the Port of Dover would be sold to Calais. They are quite happy to sell off two passenger rail companies to the French, but apparently not Dover. I would like to ask the Minister to explain the difference between selling a port and selling two railway companies.
In July of the same year the noble Lord the Minister set out in a speech some policy objectives for the development of ports under privatisation. I shall list them briefly: to enable ports fully to develop their potential in a commercial environment; to give them access to share capital as well as loan capital; to make them more attractive to companies looking at joint ventures; to enable them to stimulate the development and/or disposal of land surplus to their requirements which, under current legislation, they are sometimes unable to do; to make it easier for them to diversify their activities, thereby ensuring their viability in years to come; to make them more accountable;, and to introduce the prospect of employee share ownership.
Those were the Minister's objectives. The Port of Tyne responded that it did not see any benefit in moving to privatisation because it already met the above objectives. It operates successfully in an intensely commercial environment, it has been successful in attracting new business, such as the Nissan car terminal, and it continues to develop against the difficult background of the collapse in the coal trade. Its financial position was such that it had no need to obtain share capital. In fact, it has commented that the size of the authority's reserve is thought to be a reason why potential bidders may have sought to persuade the Government to force through privatisation. That point is interesting.
1022 The authority had already been given by Parliament, in 1989, the widest powers of any trust port to join in joint ventures. So that is under control. The authority had already successfully taken steps to secure regeneration of virtually all its developable surplus land, and Parliament had already given the authority wide powers to allow it to diversify into non-port related activity. The authority is already accountable to its customers, which, many people believe, is more important than being accountable to shareholders.
Notwithstanding the view of the authority that it already complied with these criteria, the Secretary of State, as the Minister has said, gave notice of intention to proceed with privatisation and, as we have heard, did so. The authority considered the problems in privatising a port at that time, and the uncertainties about the existing and future business, and felt it was right to give as much protection as possible to the port users, the workforce and the region generally. It produced the scheme which included the provisions which the Minister has listed.
I should like to comment on them in a little more detail: they included the protection of port users from excessive increases in dues within five years of privatisation—that is very important; a requirement for the new owner to maintain the port to at least the same high standards as before and to prevent port profits being siphoned off for non-port purposes; the safeguarding of the terms and conditions of employment of employees; protection of the pensions and pension rights—I shall come back to that—and giving port users, local authorities and other interested bodies a voice in the privatised port through a consultative committee. They feel that they own it and it is perfectly reasonable that they should have a voice in it—as they have said, "a golden share" to ensure that the company's owners cannot act in a way that is detrimental to the port.
On 13th June the Secretary of State rejected the authority's scheme and determined to make his own scheme without any protection for the users, the employees and the region as the authority's scheme had done. This was the first time such a privatisation had been done compulsorily as opposed to voluntarily. Perhaps the Minister will explain why. It is certainly the view of the authority that the Secretary of State has not addressed the particular circumstances of the Port of Tyne, the benefits as well as the harmful effects of privatisation, or how it is possible, in the present circumstances, to find a satisfactory valuation of the port, as he is required to do, before making a scheme under Section 12 of the 1991 Act. Generalised statements about the benefits of privatisation are not sufficient. Can the Minister please explain what was specifically wrong with the authority's scheme?
Turning now to some of the items which appear in the authority's scheme but are omitted from that of the Secretary of State, I should like to go through three examples. The first is consultation. The Government have criticised the approach of the consultative committee proposed by the authority as,
shackling any new management in a totally unacceptable way".1023 Why? The authority's scheme provided for,
local interests with a voice in the Port, following privatisation, thereby ensuring that the privatised company's owners could not act in various ways which could he detrimental to the Port and the region as a whole".It was,
a simple but effective mechanism for ensuring that the interests of the Port and its users cannot be subordinated to the interests of shareholders on matters of vital concern … The only restraint which would be imposed on the successor company would be in respect of activities which are harmful to the Port and its users".I do not think that that is a particularly onerous objective to put on the new company. However, we then move on to other consultations. The consultation on privatisation for the government scheme resulted in 98 per cent. of those who took part opposing the sell-off. The Government even got the consultation wrong itself and, according to the Joint Committee on Statutory Instruments, forgot to advertise for two successive weeks in local newspapers. They were in such a hurry to get this out before the general election that they forgot to advertise in the local newspapers. So much for their commitment to the future Port of Tyne. They could not even get the consultation right. The whole thing is dogged with ineptitude and uncertainty which is hurting the port and is not enhancing its business prospects.
I turn now to pensions, because the Minister has discussed pensions. The inclusion of a special pension provision by the authority has been rejected by the Government. There is a bit of a tacky track record on pensions in privatised utilities. I quote from the Independent yesterday, which referred in respect of privatised regional electricity companies to a ruling by,
the pensions Ombudsman which called for electricity employers to hand back surplus cash removed from their pension schemes".A figure of £44 million is quoted. Perhaps the Minister will explain why the same thing could not happen here. I am no expert on pensions, but I believe that there are significant similarities between this one and many other privatised utilities.
Moving now to the port users, Mitsui, who are one of the major Port users in Tyneside, are very concerned about the privatisation and the lack of certainty about the onward business. I quote:
We firmly believe that the massive inward investment and commitment to the economy of the North East of England by Nissan"—with which Mitsui is tied up?
and other Japanese companies has been dependant on the understanding and mutual trust of all concerned resulting in stable and effective working relationships such as we have built up with yourselves".Mitsui is very concerned. R J B Mining, who are the people who have taken over some of the Coal Board's businesses and are exporting coal, say:
I know that you understand that both the choice of port and the viability of the shipment business remain on something of a knife edge, and that your charges play a significant part in this".RJB is very concerned about the charges.
Mitsui is now using the new container berth and storage compound opened by the authority in 1991 to provide, just in time, services to Nissan and other important users in the region. The major Japanese K line 1024 selected the Tyne as its UK terminal for feeder services to the Continent. The port is now handling 22,000 containers a year.
I shall give one or two other comments from the users, because they are the people who will keep the port going. The managing director of DFDS has stated:
We would not welcome the possibility of a new owner, with the likelihood of increased costs and therefore would hope that the authority will seek to retain the status quo".Keith Jarrow of Banks has stated:
As far as we are concerned the status quo is more than satisfactory and any change would only be to the benefit of others resulting in higher port costs".Mr. Sharp, the managing director of the Northern Rock Building Society, has stated:
It seems self evident to me that at such a crucial time, nothing should be proposed which might destabilise that delicate transition".In summary, what did the consultation process demonstrate? Several hundred members of the public and port employees voted against port privatisation, but, if they had to have it, they very much preferred the authority's scheme to that of the Department of Transport. All the port users who responded—and most of the other organisations—responded in the same way. Even the South Shields Conservative Association recommended that the Minister should have regard to the view of the port users. That is quite an achievement! The only ones who were in favour were the four prospective bidders, presumably because they see the chance of making windfall profits.
The windfall profits constitute one of the crucial factors. With some of the other ports these profits have been mouthwatering. Medway Ports was privatised for £39 million and sold within two years for a reported £108 million. That is an almost three-fold increase in two years. The Port of Forth share price has leapt from 110p to 650p since privatisation. Those are just two examples of the profits being syphoned off to shareholders rather than reinvested in the port to keep the rates competitive. Is it then surprising that the authority, with the unanimous support of its users, wished to include in its scheme for privatisation some protection for the users, employees and the region?
Why is the Secretary of State doing it at all rather than accepting the authority's scheme? After all, Harwich Haven, Aberdeen, Belfast, Milford Haven, Poole, Lerwick, Blyth and of course Dover have turnovers above the £5 million limit and therefore come within the terms of the Act, but privatisation has not been forced on them. What have these other ports done to avoid privatisation? Why have the Government chosen Tyneside?
The Port of Tyne has the widest powers to seek private investment and to participate in joint ventures for the benefit of the port users. Its profits before tax have grown from £3.8 million in 1993 to £5.2 million in 1995, which is a higher percentage increase than that for the Port of Clyde quoted by the Minister. It paid off its last chunk of debt last year and this year announced a £8 million investment plan without recourse to borrowing for capital work to tackle the problem of the decline in traditional trade. If it is to go through the 1025 pains of privatisation, why not accept the scheme proposed by the authority? What is so wrong with encouraging employee share ownership? I seem to remember that the Government were in favour of that at one time. What is wrong with a scheme which is accountable to its customers and staff and which provides for proper pensions for its workforce? What is wrong with a consultative committee with a requirement to locate the registered office locally?
I have not heard one good reason for the Government to reject the authority's scheme in favour of their own. The local community, business and elected members support the authority's scheme if there has to be one at all. They wish to remain involved and they are proud of their port. If the Government do not even listen to their local Conservative Association, there is indeed a problem. I can only assume that they have information that the profit from the sale will be split nicely between the Treasury and the private company, with a consequent loss of investment, confidence and jobs in Tyneside.
I trust that this is the last in a sad list of legislation, without policy, without direction but, luckily, not without end. The Government have given up caring about anything except winning the next election. No doubt the electors of Tyneside will bear this all in mind while they wait during the next few months for the opportunity to express their view at the ballot box.
§ 8.5 p.m.
§ Lord Redesdale
My Lords, we on these Benches oppose the order. The Government have decided to force through the privatisation of the Port of Tyne which is opposed by almost everyone. Indeed, as the noble Lord. Lord Berkeley, has already pointed out, the only people who support it are those who will bid for the Port of Tyne. This privatisation promises little benefit to those who use the Port of Tyne. The short-term prospects of the port have already been damaged by the uncertainties that the proposals have caused. I speak specifically of the change in investment policy brought about through the ferry companies DFDS and Color Lines.
The success of the Port of Tyne is well documented and has taken place in the face of the loss of the coal trade. It is worth remembering that at the height of that trade more than 22 million tonnes of coal were shipped through the Port of Tyne. That led to the phrase "coals to Newcastle". That phrase will become anachronistic very shortly because it is quite possible that within two or three years there will be no coal trade going through the Port of Tyne. The loss of the coal trade has had a significant effect on trade going through the port. However, there has been recent growth. That must be down to the ability of the port to diversify into other areas. The container terminal, which started a mere four years ago, is already shipping 22,000 containers. The upgrading of the ferry facilities cannot be underestimated because it has such an enormous knock-on effect on the economy of the North East. Anyone who lives in the North East and has had to fight his way into the Metro Centre for some shopping cannot 1026 but notice that a large number of Norwegian tourists use the Metro Centre. Indeed, the ferry services are now attracting people from as far away as Germany.
The success of the Port of Tyne has also been in attracting inward investment. The car terminal for Nissan, which was won from other privatised ports, is a good demonstration of that. However, in his introduction, the Minister compared the Port of Tyne to other privatised ports. I notice that he did not mention the figures concerning the Port of Tyne, such as the 172 per cent. growth in pre tax surplus or the £20 million of capital investment. He also failed to allude to the Port of Dover. It should be noted that the Port of Dover is in a Conservative marginal seat. That should not be overlooked. If the Port of Tyne was in a Conservative marginal seat I am quite certain that this order would not be before Parliament today.
I do not think I need go any further into debate on this issue. The Government have already ignored the entire consultation process so I feel that it is very unlikely that the Minister will suddenly see the light as a result of any speech of mine. However, he mentioned other privatisations that took place some time ago. That was in a period when the ports were ripe for investment and ripe for changes in working practices. The Port of Tyne is not such a monolith. The workforce has already fallen from 500 to 200. It will be difficult for any privatised company to make further efficiency gains in that area. It is an efficient and streamlined port.
We have to look at why people would want to privatise it and what the effect will be. The winning bid for the Port of Tyne will have to claw back the money that is spent on the initial bid, and that will have to come through the raising of port charges. That is causing a great deal of concern, especially in the ferry business. If the ferry business is made unprofitable, it will fold. That will have an effect on the whole economy of the North East.
§ 8.9 p.m.
§ Lord Brabazon of Tara
My Lords, I differ from the previous two speakers. I most warmly welcome the order that has been laid before the House this evening by my noble friend. As an island, we are still dependent on 90 per cent. of our trade going through the ports. This Government have achieved unqualified success in their ports policy over the years, as my noble friend outlined. I was privileged to be part of it for a certain time. We started by privatising the former British Transport Docks Board which became Associated British Ports and with that the former Sealink ports. We then moved on to the reform of pilotage, which I do not believe my noble friend mentioned. That also made a distinct difference to the operation of ports. It was followed by what one might describe as the jewel in the crown—the abolition of the dock labour scheme, which had a most significant effect on our ports industry. After that came the Ports Act 1991 from which this order stems.
We now have probably the most competitive ports industry anywhere in the world. But every single one of those measures was, to a greater or lesser extent, 1027 opposed by the party opposite. Tonight's order is absolutely no different. I therefore ask myself: who is right in this matter? Our side or the other side?
§ Lord Brabazon of Tara
The answer is very clear, as history shows. We are clearly right in what has been our ports policy until now. This order is no different. The noble Lord, Lord Redesdale, laughs. He has no experience whatever of the ports industry; none at all. I have been involved in it for a certain number of years. The noble Lord, Lord Redesdale, sits there and grins, but he has absolutely no idea what goes on in the industry. I admit that the noble Lord's party did not oppose the abolition of the dock labour scheme. That was to its credit. However, if I recall rightly, it moved a number of amendments which would have made the abolition quite tricky. But, never mind, it did not.
The order before us tonight will lead to the privatisation of another port; namely, the Tyne. What is wrong with that? Noble Lords opposite say that consultation was wrong and apparently the users do not approve of it. If one is running a port at the moment the users are probably going to say, "We would like to keep in with the operators of this port now. Therefore we won't say anything against them at the moment just in case this order doesn't go through."
§ Lord Brabazon of Tara
I am sure that the users will be happy to operate with whoever happens to be operating the port in the future. We have all heard the old arguments about pensions and so on. They are trotted out time and time again whenever a privatisation is proposed. Yet how much do we hear about them now after the event? Not a lot, really. Obviously, everything works in the end. It is an argument to be used, but it is not one which has much credibility.
My noble friend mentioned what has happened to the five trust ports which have been privatised so far. Is it not the case that profitability has increased dramatically; that tonnage and throughput have also increased dramatically; that turnover has grown; and that capital investment has expanded beyond the wildest dreams of what a former trust port would have been able to achieve? Why should that not happen with the Port of Tyne? Of course it will happen with that port. I believe that I have attracted some controversy from noble Lords opposite. I see some of them indicate that I have. I have reinforced my noble friend's case for the measure.
I shall make one further point. No trust port can achieve what has been government policy in this area, and that is to give employees a stake in the business. Employees' share ownership is a very important issue. It cannot happen within a trust port at the moment. But it can happen with privatisation. If nothing else, that is a good reason to go ahead. I wholeheartedly support the order.
§ 8.15 p.m.
§ Lord Murray of Epping Forest
My Lords, the noble Lord, Lord Brabazon, has invited us to present our credentials for commenting on the port's situation. All I can say is that the national marine, aviation and transport shipping officers, who have an unrivalled knowledge of the port and of the services that it provides—they sail ships in and out regularly—are utterly and totally opposed to this measure on the grounds that it is based on dogma and not on the needs of the port.
I apologise to the noble Viscount for arriving a minute or two late. I am so sorry about that. However, I listened with care to what he had to say. In the maritime industry the Minister has something of a reputation for being prepared to listen to, but not always accept, a reasonable argument and to weigh it in the balance. I fear that he has fallen very short of that in this instance. The proposal before us is in total contrast to his approach on many issues where both of us have been involved. As my noble friend Lord Berkeley said, he has conspicuously failed or refused to listen to the views of the Port of Tyne Authority or—and this was part of the burden of my noble friend's complaint—to the industrial users and the customers. Whatever happened to the injunctions to listen to the market and to let it decide and guide our commercial decisions?
The noble Lord, Lord Berkeley, comprehensively disposed of the order under the generalised arguments advanced by the Minister. They are arguments which in turn were picked up by the noble Lord, Lord Brabazon. They are not directed to the ways in which the port services could, should and would be improved by such a change. That is not my view but that of the people who actually use the port. Four people have put in representations in favour of the Secretary of State's scheme. Almost without exception the rest of the 326 representations oppose privatisation, the departmental scheme, but support the scheme of the Port of Tyne Authority. One might expect that of the 173 employees who sent in representations or of their unions. That would not be surprising. But we find in their number not only Mitsui O.S.K. Lines, but the Institute of Chartered Ship Brokers, the Tyne Port Users' Association, Trinity House, Tyne Pilots Limited, the Chartered Institute of Transport, Fords and the Northumbrian Tourist Board. These are people who have spoken, but to whom the Minister has signally refused to listen. That is the voice of the market and of the customers and users. Regrettably, the Secretary of State brushed our objections aside in favour of a dogmatic approach. The best thing that he can do with this order is to give it exactly the same treatment because of our attachment to a commercial and economic approach.
§ 8.20 p.m.
§ Lord Elliott of Morpeth
My Lords, I begin by declaring a past interest. For eight years I served as a non-executive director on the board of the Port of Tyne Authority, and I was very proud to do so. My appointment was made when I ceased to be a Member of another place. In that other place I worked with a 1029 number of others, some of whom are present this evening, to effect the industrial regeneration of that region.
In the past the port was always looked upon as the engine room of the region's well being, as indeed it was. For many years coal was exported from the Tyne in large quantities. The Tyne is the queen of all rivers. It is interesting to note that in 1923 22 million tonnes of coal were shipped from the Tyne. Last year the quantity was two million tonnes. At that time iron ore was also brought into the Tyne. That is no longer the case.
These changes represent an enormous challenge to the Port of Tyne Authority. I should like to indicate how the port has played its part in the regeneration of the region. In more recent times the port authority has prospered as the region has steadily replaced old industry with new. Happily, comparative prosperity has returned to the North East. As I am no longer a member of the authority I consider that I am free to speak of the considerable part that the port has played in that regeneration. The authority has had an excellent efficiency record in recent years. It has been highly successful in finding new customers. My close association puts me in a good position to describe the authority and its activities. It has officials of the highest quality. In my experience they were dedicated in their various roles. Labour relations, particularly since the repeal of the Dock Labour Scheme, have been excellent. The North's best-known and respected trade union leader is currently vice-chairman of the board. Relations with customers were good when I served on the board, and I am sure that they are very good today.
In my time on the board there were regular and systematic contacts with customers. There were also regular contacts with local authorities in the catchment area.
Now, as in the past, board membership is representative of principal businesses and professional life in the region. There has been significant development in recent years. A contract to export Nissan cars has been won. There is also a modern grain-handling plant, and a new container terminal has been opened. The Port of Tyne operates successfully in an intensively commercial environment. Investment has been steady and continues.
What of the proposed privatisation? The authority has not ruled it out. Indeed, it welcomed the Ports Act which enabled voluntary privatisation to occur. I believe in privatisation, which has been very successful wherever it has been introduced, including its introduction into those ports which have already been listed this evening. Privatisation, wherever it is undertaken, brings increased business, profit and investment every time. Privatisation does not and will not reduce the responsibilities of port authorities. After privatisation and the emergence of a new company all obligations under the general law pass to that new company.
I support this order. I hope that the new company that emerges will benefit greatly from what has been achieved by the Port of Tyne Authority and that in future Tyneside will know even greater prosperity than it knows now.
§ 8.24 p.m.
§ Lord Monkswell
My Lords, the House has just listened to a very eloquent tribute to the Port of Tyne Authority. One of the matters to emerge from the debate is the complete absence of criticism of what the authority has done and is doing at the present time. We are not talking simply about the Port of Tyne or one small commercial enterprise. We are referring to a well-run national asset. The Minister looks quizzically at me. I describe the Port of Tyne as our gateway to Scandinavia. He may not be aware of that kind of relationship in shipping terms. We have heard from some of the newer users that it goes wider than that. Not only is it a well run national asset, but it has very strong respect for the local community, including the business community that uses it and, in turn, it is respected by that community.
One of the intriguing aspects of the proposal is that the very object of privatisation which the Government extol is opposed by the authority itself. Its members are good law-abiding citizens of this country and, as a result of the legislation under which this order is proposed, they are obliged to propose a scheme of their own which the Government have torn up and put asunder. It is of interest to ponder the fact that all the non-executive members of the authority are nominees of the Secretary of State. We have heard that the local Conservative association is opposed to it. Even the Secretary of State's own nominees on the authority oppose it.
Given that scenario, we should look at the risks associated with this privatisation. In the Minister's introduction he stated that one of the concerns registered was that privatisation was taking place at a time of uncertainty. I believe that the Minister has got it wrong. One of the problems is that privatisation creates uncertainty. As far as one can gather, that is the signal reason why DFDS has pulled out of the Port of Tyne. There are other risks to the future prospects of other areas associated with privatisation.
Another such risk is that this national jewel may be captured by a foreign power. We heard that the Port of Dover was withdrawn from the privatisation programme because of the risk of it falling into French ownership. As far as one understands it, there is no restriction on the Port of Tyne being owned by a foreign power. Obviously, that foreign power would have no interest in either the region associated with the port or the British national interest. Another risk of privatisation is that, almost by definition, shareholders who invest in the privatised port will want a return on their investment and to take money out of the Port of Tyne. We have also heard that at the moment the port generates its own capital needs from revenue and does not need to borrow outside. All of the money that it raises locally is spent locally. If it is privatised a good deal of that money will go out of the region.
I was interested to hear the comments of the noble Lord, Lord Elliott of Morpeth. He suggested—I do not know whether I heard him aright—that everything was all right in the North East and it had a booming economy. I hope that that is true, but that is not my impression. Surely, to take money out of the economy would not be good for the area.
1031 I am glad to note that the noble Lord, Lord Dormand, is to speak after me. I await his remarks with eager anticipation.
§ 8.30 p.m.
§ Lord Dormand of Easington
My Lords, perhaps I may explain to the House why I am speaking even though my name is not on the list. Your Lordships will know that it is not common practice to issue a speakers list for an order. When as late as this afternoon I saw that a list was in operation I was more than surprised, I was shocked, because I wished to contribute to the debate. Furthermore, I am not "speaking in the gap", as it is called, although it appears so from the list. I am advised by the Table that there is an opportunity for me to make a speech which is not time limited. However, the good news is that I shall make a short speech, which I am sure is the wish of the House.
Any Government, and this one in particular, would seek assurances on a number of criteria before coming to a decision on a matter as important as privatisation. What are those criteria? They are efficiency, profitability, proper and full consultation, adequate investment and innovative diversification when necessary.
As was briefly referred to, there is one other criterion which the Government may not accept; namely, local pride. Tynesiders are very proud of their river and the activities on it, including the way in which the port is managed. Of the criteria that I have mentioned, perhaps I may demonstrate some of the successes achieved by the port authority. It will in part be a repetition of what has already been said tonight, but I believe that in some cases repetition can serve for emphasis.
First, the port authority's financial position is sound. It has had no need to obtain share capital, nor has it had any difficulty in borrowing. Last year the port paid off its debts. Its diversification has been what can be described only as spectacular. Nissan has its terminal there, despite severe competition from the privatised Tees and Hartlepool Authority. As the deputy chairman of the Teesside Development Corporation, I have some idea of the intensity of that competition. The port deals with more than 22,000 containers a year, all developed in recent years. They are only two of the many examples which could be quoted.
As regards consultation, the Government simply cannot argue about what has been revealed. I shall refrain from quoting what was said by the chief executive of Mitsui OSK Lines—my noble friend Lord Berkeley referred to it—and by RJB Mining because the Minister knows their comments. Views do not come any more important than those two. As regards RJB Mining, it is well known that for a long time the port of Tyne had as its main trade the exporting of coal. Of course, the coal industry has disappeared from the North East, but to get the manager, R.J. Budge, to comment in the terms that he has must surely have an effect on the Government and their proposals.
My honourable friend Andrew Smith in another place has said that of the 330 representations made to the Secretary of State only four were in favour and— 1032 surprise, surprise—they came from prospective bidders. All the authority's board members oppose privatisation, as do all the local authorities in the area. Furthermore, most of the region's MPs strongly oppose the proposal.
Of the many objectors to the scheme, surely the most important is the Tyne Port Users Association. It has a membership of 37 companies with 8,000 employees. They are at what these days is called "the sharp end". They are the people who see the workings of the port authority literally every day. They see its faults and its strengths and they say:
We are extremely concerned about the Government's privatisation scheme".That view must surely be recognised by the Government.
I always hesitate to use the words "political dogma", because those of us who are members of political parties believe in certain principles which we would like to see implemented. But where there is an overwhelming case against specific proposals, adhering to certain actions is not only ludicrous but unwise, and I believe that it is happening in this case.
Perhaps I may refer briefly to the strong speech made by the noble Lord, Lord Brabazon of Tara, who was a highly respected transport Minister. The thrust of his argument was: why should it not apply to the port of Tyne when it has happened everywhere else? As I have said, the answer is that there are special circumstances which simply cannot be overridden because of the success which was mentioned by the noble Lord, Lord Elliott of Morpeth. That is the reason and the answer to his question, and that is the force of the argument from these Benches.
My honourable friends in another place and noble Lords in this House have demonstrated conclusively that the Government's own criteria have been met and that privatisation in this instance is not only irrelevant but unnecessary. The Tory Party takes pride in saying that it is a pragmatic party. It has comprehensively rejected that description in this proposal. Perhaps I may refer briefly to a comment made by my noble friend Lord Berkeley about the mistake made in the advertising process. He was a little too kind in saying that the Government were in such a rush to get the measure through. That is one ingredient, but another is that they were just incompetent. The group of northern Labour MPs who, as the Minister knows, have followed the matter carefully, found that that was the case, and that should not be forgotten.
As a result of the circumstances that I described at the beginning of my speech I felt it necessary to be much briefer than I had intended. However, I hope that my brevity has not given the impression that I feel any less strongly than the 98 per cent. of the people on Tyneside who protested so strongly about the measure.
§ 8.36 p.m.
§ Viscount Goschen
My Lords, I wish to thank all noble Lords who have taken part in this interesting debate. We all recognise the success that the ports industry has enjoyed in the United Kingdom in recent years. As my noble friend Lord Brabazon so rightly 1033 pointed out in his powerful intervention, our ports are now highly competitive. They are the envy of Europe in terms of their ability to move goods efficiently and at very competitive prices. They do that unsubsidised by the Government, unlike many of our competitors in Europe who pour huge quantities of money into their ports for few results because they cannot achieve what has been achieved in this country.
From some of the contributions we have heard tonight, and the forecasters and prophets of doom, one would not recognise the modern, thriving ports industry which exists in this country. There is no reason whatever to believe that by moving an organisation into the private sector it will be unable to benefit from all the advantages that that brings in terms of the ability to generate increased investment, innovation and so forth.
I understand the concerns that have been put forward. They are entirely natural. When a significant structural change is proposed people are concerned that any departure from the status quo will bring dangers. However, some of those concerns, although sincerely felt, have been overstated and there has to some extent been a campaign to put some thoughts into the minds of users and employees without, I suggest, the equivalent balance that we have heard tonight.
The checks and balances that we have heard have not featured often in the public debate around the issue. For example, on the issue of port charges, in his notable attack on private enterprise the noble Lord, Lord Redesdale, suggested that the first thing which a private sector company does is to seek to price itself out of the market and chase away all its customers and that moving into the private sector means automatic price increases.
§ Lord Harris of Greenwich
My Lords, if the noble Viscount makes a statement which is demonstrably untrue, he should withdraw it.
§ Viscount Goschen
My Lords, I shall in no way withdraw that statement. I listened with very great care to the speech of the noble Lord, Lord Redesdale, and that is precisely what he implied.
However, I make no apology whatever for majoring on the success which the privatised port sector has enjoyed. Those companies have not chased away their customers by instantly whacking up their port charges so that no one wishes to use the ports any more. That is a quite unreasonable suggestion. People who are putting money into ports have every incentive to make sure that they receive a profitable return. That is done by keeping the customers happy. That must be the first lesson of private enterprise.
The second point which was not referred to but which I made in my opening remarks is in relation to the statutory protection which exists in terms of charges and the statutory right of appeal against unreasonable port dues. I mentioned that although that right has been in existence for some time, it has not been exercised by any of the former trust ports since they were privatised. Therefore, a right of appeal exists against excessive and unreasonable charges but that right has not been exercised.
1034 The issue of pensions was raised. That is always an interesting topic to discuss in relation to privatisation measures. I can be quite categoric. The pension rights of former and existing employees are protected by generally applicable pensions legislation, principally the Pension Schemes Act 1993 and the Pensions Act 1995. In addition, at Tyne, the pension fund set up by the port authority is controlled by independent trustees. The noble Lord, Lord Berkeley, had some concerns on the subject. The funds are not and will not be at the disposal of the owner of the port even to the extent that there may be a surplus beyond anticipated requirements. I hope that that explanation and categoric assurance allays the fears of the noble Lord.
Noble Lords had fun on the subject of Dover and there was a lot of speculation. In fact, the Secretary of State has accepted Dover's arguments against privatisation before the impact of the Channel Tunnel can be better assessed. Dover's trade is almost exclusively ferry-based and about 90 per cent. of tonnage is ferry-related. But the important point, which perhaps those who spoke so vigorously on the subject of Dover have not realised or taken on board, is that the Dover board has also undertaken to privatise voluntarily and to bring forward plans in 1997. That categoric assurance must be taken into account.
Some comments were made about the increase in the value of ports since privatisation. The management of newly privatised ports has greatly improved efficiency and profitability, thus contributing to a significant increase in the underlying value of the ports since privatisation. I am sure that when the noble Lord, Lord Berkeley, invests, if he does, in companies from time to time, he would wish them to increase in value. That would be seen as an indication of the success rather than failure of the company.
There was considerable debate on a number of the provisions which the port authority wished to include in the scheme. In my opening remarks I covered the reasons why the Secretary of State felt that it is not appropriate to include those provisions; for example, there is no justification for a consultative committee since the successor company will be just as able as the port authority to continue good relations with local interests. Of course, as I mentioned, it will be in its commercial interests to do so as evidenced by what has already happened in the private sector.
I believe that the noble Lord, Lord Redesdale, in his series of remarks, talked about a 172 per cent. profit increase.
§ Viscount Goschen
My Lords, that huge increase in the surplus must be looked at very carefully. Like must be compared with like. Tyne's pre-tax profit before exceptional items increased by only about 7 per cent. between 1992 and 1994. There was a large exceptional item in the accounts for 1992—£3 million shown as a charge for accelerated depreciation. By quoting an artificially low figure for 1992, it is possible to make subsequent years look very impressive by comparison. That must be taken into account.
1035 Much was made of the representations, and rightly so. We look carefully at all representations made whether or not they are in a standard format. Some one-third of the representations were in a standard format while the remainder made very similar points using very similar words. That must be viewed in the light of the very strong campaign which was mounted by the Port of Tyne Authority. Notwithstanding that, all representations received were carefully considered before a final decision was made to proceed with the laying of the draft order. Much was said about the concerns of port users, heightened, I suggest, by not particularly balanced information on the subject.
I join my noble friend Lord Elliott of Morpeth in commending the authority past and present on its achievements. He was right to draw attention, as did the noble Lord, Lord Monkswell, to the achievements that have been made in Tyneside as a whole and the regeneration which has occurred there. If the noble Lord, Lord Monkswell, is not familiar with it, I suggest that he should make himself familiar with it because it is a very impressive achievement.
§ Lord Monkswell
My Lords, I did not say that I was not familiar. I said that the picture painted by the noble Lord, Lord Elliott of Morpeth, was not the picture with which I was familiar.
§ Viscount Goschen
My Lords, we could argue all night but I believe that most informed commentators recognise that a very difficult situation in the north-east has benefited substantially from considerable regeneration. I believe that the noble Lord, Lord Dormand of Easington, recognised that in his remarks. I know that he has been a strong supporter of the regeneration which has taken place in the past.
§ Lord Dormand of Easington
My Lords, I have said in a number of contributions in this Chamber that there have been improvements. It is difficult to say otherwise. However, the Government always refuse to recognise that the rate of unemployment in the northern region remains the highest in the United Kingdom outside Northern Ireland. That is something which the Government do not really tackle with the ferocity they should.
§ Lord Brabazon of Tara
My Lords, before my noble friend replies to that, I should like to refer to the remarks made by the noble Lord, Lord Monkswell. He is so opposed, apparently, to foreign ownership of the port of Newcastle and yet we see the trade through that port improved considerably by Japanese investment. Does my noble friend have any views on that?
§ Viscount Goschen
My Lords, I do not think that it is ever for me to try to deduce the reasoning behind the intervention of other noble Lords.
Perhaps I may return to the subject. I was very glad to hear the noble Lord, Lord Dormand of Easington, give his endorsement of the situation and 1036 of the progress and improvements which have been made in the north-east. They are recognised widely. We have had exchanges in the past on other matters concerning mining issues on which there has been agreement.
I turn again to the speech of my noble friend Lord Elliott. He recognised the improvements which have been made in the north-east and the part which the Port of Tyne has played in that regeneration. However, my noble friend recognised the protection which exists in the transfer. He recognised that greater investment and innovation will come with the transfer of the port to the private sector. I sincerely hope that the House will recognise the advantages that will come from the transfer of the Port of Tyne into the private sector. I commend the Motion to your Lordships.
§ 8.50 p.m.
§ On Question, Whether the said Motion shall be agreed to?
§ Their Lordships divided: Contents, 56; Not-Contents, 13.
|Division No. 1|
|Addison, V.||Howe, E.|
|Aldington, L.||Inglewood, L.|
|Anelay of St. Johns, B.||Jenkin of Roding, L.|
|Ashbourne, L.||Kingsland, L.|
|Attlee, E.||Lawrence, L.|
|Balfour, E.||Long, V.|
|Blatch, B.||Lucas, L.|
|Bowness, L.||Luke, L.|
|Brabazon of Tara, L.||Mackay of Ardbrecknish, L.|
|Brentford, V.||Massereene and Ferrard, V.|
|Byford, B.||Miller of Hendon, B.|
|Cadman, L.||Milverton, L.|
|Carnock, L.||Monteagle of Brandon, L.|
|Coleridge, L.||Mottistone, L.|
|Courtown, E. [Teller.]||O'Cathain, B.|
|Cranborne, V. [Lord Privy Seat]||Park of Monmouth, B.|
|Crickhowell, L.||Peyton of Yeovil, L.|
|Cross, V.||Renton, L.|
|Dean of Harptree, L.||Sanderson of Bowden, L.|
|Denham, L.||Seccombe, B.|
|Ellenborough, L.||Stodart of Leaston, L.|
|Elliott of Morpeth, L.||Strathclyde, L. [Teller.]|
|Elton, L.||Strathcona and Mount Royal, L.|
|Ferrers, E.||Taylor of Warwick, L.|
|Fraser of Carmyllie, L.||Thomas of Gwydir, L.|
|Goschen, V.||Trumpington, B.|
|Hayhoe, L.||Ullswater, V.|
|Henley, L.||Whitelaw, V.|
|Addington, L.||Thomas of Gresford, L.|
|Geraint, L.||Thomas of Walliswood, B.|
|Harris of Greenwich, L.||Thomson of Monifieth, L.|
|Mackie of Benshie, L.||Tordoff, L.|
|Redesdale, L. [Teller.]||Wallace of Saltaire, L.|
|Russell, E.||Whaddon, L.|
§ Resolved in the affirmative, and Motion agreed to accordingly.