Before I call the next debate, I should like to repeat, for the benefit of those hon. Members who were not here, what I said earlier. I said that we must stick to the timetable because, if we vary it at all, some hon. Members wishing to take part in debates towards the end of the list will not be able to get in.
In calling the right hon. Member for Birkenhead (Mr. Dell), therefore, I must remind him that the debates are timed, and this one must end by 1.15.
The subject I bring before the House in this debate is not a very happy one, but before I proceed further with this sad story, I should like to say, Mr. Speaker, that I am glad at any rate to have this last opportunity, on a day which is in this sense historic, to speak under your chairmanship. I say that to you not because I want to gain any favour under the rules of order. I know that I must not refer in an Adjournment debate to matters which entail legislation. Specifically, I must not refer to the Mersey Docks and Harbour Board (Capital Reconstruction) Bill, which is currently before the House. Nevertheless, I am sure that I cannot be blamed if the existence of that Bill is in the minds of hon. Members—it is not something I can prevent—and inevitably it may be taken by the House as, in a sense, the background to what I am saying.
Nevertheless, I am basing my case on the Government's action in moving for the appointment of a receiver of rates, now granted by the courts, and an issue which is therefore no longer, as it was when we debated the subject on 1st December, sub judice. The object of the Government in moving for the appointment of a receiver of rates was stated by the Minister for Transport Industries on 30th November. He said that it was being done:
… to protect the financial interests of the Government and the other secured creditors."—[OFFICIAL REPORT, 30th November; Vol. 807, c. 905.]
I will argue that it fails to do this adequately, in respect, at any rate, of the other secured creditors.
During the debate on 1st December, when the House considered the situation then facing the Board, the right hon. Gentleman said that
… investors who make mistakes are apt to lose their money."—[OFFICIAL. REPORT, 1st December, 1970; Vol. 807, c. 1096.]
His remark in this context has caused considerable offence to many investors in the Board and in my view is not appropriate to the case—especially perhaps not in the case of the small investors who invested in the Board because they wanted security. They were not going in as a gamble. They were not investing in equities for the purpose of making a capital gain. What they wanted was security and they thought that that security was what they had achieved.
I think that the Government's decision in this matter has been wrong and that they should change their minds. What I am trying to do today is to persuade the Government to change their minds. They have at any rate one precedent for changing their minds on this issue. In an editorial on 1st December, discussing the Government's decision against the background of the Government's disengagement policy, The Times said:
If disengagement is to be a meaningful philosophy, then a start has to be made somewhere and given the Government's declared objectives then the Mersey Docks and Harbour Board is probably as good a place to begin as any.
However, after maturer reflection, which this issue clearly needs, in an editorial three days later, on 4th December, 1970, The Times said something very different:
By the tenets of free enterprise investors in ordinary shares bear the risks and the rewards of business. It is unfortunate, therefore that the first victims of Government policy are investors in fixed-interest debentures and bonds in Mersey Docks. And it is doubly unfortunate that a question mark has thus been raised over the security of semi-official borrowings in the bond market.
In its final few sentences, the editorial continued:
But, if Mersey is a special case, the Government should pay the cost of making it an exception. What they cannot do is to confuse the principles of free enterprise with noncommercial practice—particularly at the expense of investors who have chosen safety rather than risk in the placing of their funds.
The House will agree that that represents a change of attitude to the problem by The Times after considering the implications of disengagement. The Government
should follow the example of The Times and change their mind.
It has been argued that if, some time during the last 112 years that the Board has been established, somebody had read the small print of the Board's statutory constitution, they would not have made the mistake of believing it to be a virtually gilt-edged investment. They would have found that it is less secure than many equity investments and that borrowing by the Board is secured only by the rates, which are not the whole of its income, and not against the assets of the enterprise.
I hope that the Government do not want to go down in history as one in respect of whose actions the small print has to be read. I do not accept that argument. There are reasons for not accepting that argument as a correct interpretation of the Board's position. It was established in 1858 as a statutory trust, and in 1965 there was a Revision Order introduced by the Minister of Transport under the Harbours Act of 1964. Under that, four nominees of the Minister of Transport were appointed to the Board, which indicates, at any rate, some Ministerial responsibility. This is an investment falling within Part II of the First Schedule to the Trustee Investment Act, 1961. For a very long period investment in the Board has been as secure as, one would once have said, an investment in the Bank of England.
There is, however, an additional reason for rejecting this interpretation of the security of an investment in the Board's loan capital, the interpretation that people should have read the small print and understood the real statutory position. The additional argument arises from the impossibility of the situation which occurs if the Board falls into financial difficulties. Under the Statute, the Board has to function: it has to function even if it has inadequate finances. There must have been an entirely justified assumption that, if this impossible situation arose, the Government or Parliament would act to relieve it in a way which would not be at the expense of the holders of fixed interest secured debt. If investors had taken any other view, they would not have invested in the Board other than on very high risk terms. In that event, the Govern- ment would have been compelled, sometime during the last 112 years, either to have given a Government guarantee to investments in the Board or to have found some other way of increasing the security of investments made in it.
The Government's action in this case is an outrage. That is the strongest word which I propose to use, for the simple reason that I am hoping that hon. Member's opposite may find it possible to support what I am saying, and I do not want to make it more difficult.
Hon. Members will have seen letters in The Times and other newspapers from bondholders of the Mersey Docks and Harbour Board, expressing their views on the Government's action, and I am sure that other hon. Members have received similar letters from their constituents. Since it became known that I was to raise this matter, I have received letters not merely from my own constituents but from those of other hon. Members.
I shall quote a few extracts from those letters. I shall not give the name of the writers. A doctor living in Ealing writes:
Last January my mother invested in the Mersey Port and Harbour Board 9¾ per cent loan to be repaid in January, 1972. She was invited to invest money by the Board, having invested in a previous loan.
The doctor continues:
My mother in common with a great many other people, would not risk her money in equities and would certainly never consider the more speculative type of share, as she relies on the interest she receives for income on which she lives. She regarded the Mersey Docks as completely safe, and comparable with the many Local Authority loans offering a similar rate of interest.
I am writing this letter on behalf of my mother, as although she insists on being independent and lives alone, she is elderly and half-blind, and consequently finds difficulty in writing letters.
I quote an extract from a letter which I have received from one of my constituents:
I am not in a position to lose this amount. I will find it very difficult to be without the dividend I have been receiving. I do trust that this Bill that you have to be considered on Friday …"—
the lady evidently does not understand the procedures of the House—
… will to some extent relieve the anxiety of many of us who have money in the Board.
I hope that when the hon. Gentleman replies to the debate he will tell us exactly what the position will be, not merely in respect of the deferment of repayments of bonds but in respect of interest payable on the bonds before repayment.
Lastly, I quote a letter which I have received from a gentleman living in Southport:
I am a holder of a small sum in these Bonds and am therefore interested. The attitude taken by the Government in this matter is, in my opinion, the most shameful action ever taken by any British Government. I have always held the impression that these securities carrying Trustee status and issued by a Public Trust whose borrowing is at all times controlled by the Government, were completely safe, both as regards to capital and interest.
Other hon. Members will have received similar letters and will have been able to judge the reaction of these bondholders, who are aware of what is happening to them as a result of the Government's decision.
Another reason why the Government should reconsider their decision is the effect it may have, and I believe will have, on the cost of borrowing by public boards and even local authorities. I have been in contact with various people who could advise me on that. I should like to quote a paragraph from a letter I have received from a firm of City solicitors which advises one of the bodies involved in this case Again I will not mention the firm. I do not think that it would object to my doing so, but it does not say specifically that I can. Its letter says:
In the light of the foregoing, it has become clear to our clients that investment in the Mersey Docks and Harbour Board and other similar statutory undertakings, though long regarded as a safe trustee investment at fixed interest, in fact involves a very high degree of risk. Investors, in the absence of legislation to improve their security and facilitate the enforcement of their remedies, cannot be expected to provide further funds for undertakings such as this. It is our clients' view that the market's confidence has been completely lost and that undertakings such as statutory boards and even local authorities will, unless confidence can be restored, soon find it virtually impossible to raise money from many of the most important sources upon which they have hitherto been accustomed to rely.
What consideration have the Government given to this point?
I am glad to see two Treasury Ministers present and that they are listening to what I say, even though I understand that neither is to reply to the debate. I gave notice that I would be asking this question, and I hope that the Under-Secretary of State for the Environment will be able to deal with it.
What estimate, if any, have the Government made of the effect of downgrading the security offered by the Mersey Docks and Harbour Board on the future cost of borrowing by local authorities and public boards? Let me take the Port of London Authority as an example. What will it add to the cost of funding its debt? Will it add anything? What estimate has been made on this point?
What effect will there be on the cost of borrowing by local authorities? What effect will this decision have on the cost of borrowing by the Government? I have heard indirectly of one stockbroker who has been advising his clients to move their fixed interest holdings out of public boards and local authorities into Government stock. That may help the Government, but is that the Government's intention? What estimate have the Government made on this point?
On the first point, about the effect of this on public boards, do the Government agree with what the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), with his great authority as a former Chancellor of the Exchequer, said in this House on the 1st December:
It is also a pity that the nature of the Government's plan should affect the credit worthiness of port authorities generally. If matters remains as they are, I doubt whether port authorities will be able to raise money in the future without some kind of Government guarantee. That ties round the necks of future Governments the responsibility for raising capital for port developments, and perhaps that was not the intention of this exercise."—[OFFICIAL REPORT, 1st December, 1970; Vol. 807; c. 1107.]
What view do the Government take of what the right hon. and learned Gentleman said on that occasion?
I have one final question. During the proceedings in the court preceding the appointment of the receiver of rates, it appears from reports that assurances were given by the Government to those who initially were opposed to the appointment of the receiver of rates and led to those bodies withdrawing their opposition. What assurances were they? What did the Government do which led to the withdrawal of that opposition? I hope that the hon. Gentleman can tell us that. Certainly it has not been made clear heretofore.
I have tried to make my point as moderately as possible so as not to make it more difficult either for the Government to change their mind or for hon. Gentlemen opposite who are inclined to support my plea. The Government must think again.
Naturally, my personal concern is mainly with small investors who sought security and who cannot afford the loss that this will cause them. I never thought it possible that a Government of this country other than, perhaps, in a period of great national crisis, would do anything like this. I beg the Government to think again.
Mr. John Taney:
The House is grateful to the right hon. Member for Birkenhead (Mr. Dell) for raising this matter.
I should perhaps declare that I am a partner with many others in a firm of stockbrokers which, ever since the inception of the Mersey Docks and Harbour Board, has in the ordinary course of business dealt in its bonds, though I personally have never been much enamoured of their so-called securities.
My right hon. Friend the Minister for Transport Industries referred to the writing down of the nominal value of the capital by 30 per cent. That will happen on 1st January. It will therefore be a partial default when that happens. Is not this the first time that a public board has ever defaulted in this country? Even though it would still be a technical default, would not it be very much better for there to be a delay in the repayment, as long as the full interest can be met?
My right hon. Friend went on to say:
I believe that the future of this immensely important port depends upon the contribution which can be made, and should be made, by a lot of people of differing backgrounds, differing functions and certainly differing political beliefs."—[OFFICIAL REPORT. 1st December, 1970; Vol. 807, c. 1098.]
I agree. However, those people will be found only in the various local authorities, and there are eight with which the Harbour Board deals.
I understand that there has been a meeting already between the Board and some
of the local authorities. Perhaps my hon. Friend the Under-Secretary of State for the Environment can give some information about that meeting, because I believe that, sooner or later, those local authorities have to back our regional port in the same way as the Port of Bristol Is backed by Bristol and the Port of Manchester has been backed in the past by Manchester. I remind my hon. Friend that almost every day the Lord Mayor of Liverpool replies to the toast,
The City and the Port of Liverpool.
How are investors in this country and, above all, investors overseas, who have produced £150 million for local authorities on short term, to differentiate between the city and the port of Liverpool? Equally, local authorities on Merseyside will suffer a decline in their credit worthiness entirely because of the difficulties of the Mersey Docks and Harbour Board.
I want to refer to what my right hon. Friend the Secretary of State for the Environment said when he replied to the debate on 1st December. He implied that equity would be provided in lieu of the 30 per cent. But what is the value of that equity? If it is not to pay a dividend, it will be at a very substantial discount. We have had no figures. No budget has been produced.
Some people think that for a long time the Board has been too institutional and not enough commercial and that, when the fat has been cut off, the Board may be in the black within 12 months or so. No one knows. Other people say that the position is very much grimmer. We would like to know so that at least we can judge what the value of that equity may be.
I ask my hon. Friend to think of the reaction, not only among those who are possible investors in other public boards. but those overseas. What a wonderful example for people in Africa or Asia to deal with British securities in this unilateral way. If a contract can be torn up unilaterally, how easy it will be for certain leaders overseas to do the same.
Past Governments have in large measure been responsible for the advice tendered to the Harbour Board. In view of that, I hope that this Government will take more than their share of the equity. That will allow some of the 36,000 bond holders, from whom, like the right hon. Gentleman, I have received many letters, at least to have the option either to have the equity or have the full capital repaid as soon as possible.
The Secretary of State said:
My argument is that the Port of Liverpool does not need a subsidy"—
I agree that it should not need a subsidy once it is in the black—
it needs good management and good relations between men and management.
There will then be no need for a subsidy to be paid by those who have invested in the port, or by local authorities or Government."—[OFFICIAL REPORT, 1st December, 1970; Vol. 807. c. 1146.]
I agree, but at the moment, and for years to come, if nothing is done there will be no credit attached to the Mersey Docks and Harbour Board and it will be unable to raise any money to produce the working capital which it must have. The only way that I see of getting it is for the local authorities to give a guarantee. Then it can go to the market, and there will be no need for a call on the rates or on the taxpayer, provided that it can show it can be operative and in the black.
Let us have the power which Bristol and Manchester have. Do not let us call on the national taxpayer or even the ratepayer. Give us the power to underwrite our own regional port. Until that is done I cannot see that what we are debating today will ever pass this House.
I am sure that the House is grateful to the right hon. Member for Birkenhead (Mr. Dell) for raising this subject, and for the moderate terms in which he introduced the debate.
I agree with much of what was said by the right hon. Gentleman. We are looking at a very sad story in quasi-governmental stocks. The last published figures show the capital of this organisation at £84 million. Having written off £35 million in depreciation over the past few years, at the end of 1969 it had reserves of £15 million and made a loss of £1·7 million. It is not a very good financial story. Unless the position has deteriorated substantially since, I do not think that it really calls for the action which the Board has taken.
I agree with the philosophy of the Government that undertakings, no matter what they be, should eventually be economically viable. Presumably it was because of this underlying philosophy that the Board was persuaded to undertake this capital reorganisation. I say that reservedly, because I do not think that it is a true capital reorganisation.
The Government must be very careful not to upset the money market from which the Board gets most of its capital, whether through local authorities, water boards, and all the rest. Take, for example, the institutional buyers in the City of London with money which is put aside for the future pensions of hundreds of thousands of people. If this kind of market is upset, the Government will be in grave danger. I am not sure that this point has really been thought through.
I think that everybody accepts that technically this is not Government stock. Presumably the investors did not read the small print. A case can be made that the investors should read the small print. Even so, they might still think that it was quasi-Government stock, and the British Government have never in the past defaulted on a stock. The only default in recent times, which is not connected with this matter, was non-payment of interest on the Rhodesian stock, in relation to which £100 is now worth about £30. We do not want that happening in this country.
If the Government say, "You must be commercially viable and do what private enterprise does", I think that the organisation should conform to the rules of private enterprise and not introduce a Bill to try, by Act of Parliament, to have a capital reorganisation.
I remind the House that under normal company reorganisations concerning any reduction in capital, there is, first, a general meeting of the company at which every class of share and bond holder is present. The Board has to get a 75 per cent. majority, and that is obtainable only if the whole of the facts and figures of the company are placed before the share and bond holders. This has not happened in this instance.
I cannot see the logic of saying, "Yes, you must do what private enterprise does, but you need not conform to the rules of private enterprise." If private enterprise wanted to give the facts and figures and to write down its capital, it could, or it could wind up. Everybody appreciates that a public undertaking cannot be wound up like that. However, I suggest that the rules of private enterprise should have applied here.
I deplore that a Bill has been introduced. I cannot see how it can become effective on 1st January, because it will not have been passed by 1st January.
My right hon. Friend has raised a good point. Although the Bill will say that it will be written off on 1st January, the Bill cannot be passed by 1st January.
My real point is that in arbitrarily writing off 30 per cent. of the capital, whom did the Board consult? I presume that it consulted the Government. The Government are in no different position from any other bond holder in this organisation. My hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney) and my hon. and learned Friend the Member for Southport (Mr. Percival) have many constituents who I understand invested in this undertaking. They have not been consulted, but presumably the Government have.
Next, I refer to the deferring of redemption for two years. This may be all right. It is not as serious as an arbitrary writing off. But what is serious is that any new borrowing after 27th November this year should rank in priority to the existing loans and debt of the undertaking.
If it is right—we must be logical—that we must write down the capital and only 70 per cent. of the loans remain they should rank pari passu with any new money, if there is something wrong with the 70 per cent., then the Board has made a mistake; it should have written it down to 50 or 60 per cent. But under no circumstances should it be able to write down 70 per cent, and not let it rank pari passu.
I warn the Government about the loss of confidence that this kind of action brings about. No one will believe that the Board is acting without guidance from the Government. There will be a great loss of confidence. Mention has been made of the loss of confidence in the Port of London Authority. Anybody who knows the City knows that there is resistance to local authority, water board, or any governmental or quasi-governmental borrowing. This is important for the taxpayer. If this kind of lack of confidence goes through and hits local authority loans, local authorities will need to have recourse to the Public Works Loan Board, and this means the taxpayer. Has this really been thought out? If we are going to kill this confidence, I beg the Government, as others have, to think again.
We must keep faith with these investors. I know that the organisation, for various reasons, has made a loss and that it has probably been increased because the revenue which was projected did not materialise. It had labour troubles and all the rest. I think that the Board, in conjunction with the Government, should reach some other solution. The deferring of redemption is not too hard a burden to bear, provided that the interest is being paid—a moratorium on, say, 30 per cent. of the interest—but with the right for the bond holders in perhaps two years to demand a meeting to find out what has happened to the undertaking and to see, as soon as possible, when it can fund that interest. I think that the point I made about letting new money rank pari passu with the 70 per cent. left is obviously financially logical.
I am delighted that the Treasury Minister is here. I am sure that if he were to speak in the debate he would agree with me. We find ourselves in an unhappy situation. There is no quoted price for the stock, but the price is about £30 for the lower interest rates and about £45 for the higher rates. The loss of confidence is extraordinary. The yield on the stocks goes up to 21 per cent., which is nonsensical, and shows what the investor thinks. I accept that the small investor with just £1,000 is hurt far more than the institutions, but when I talk about these yields the important point is not just the small investor but the loss of confidence that the City generally and particularly the institutions have in this stock.
In 1960 we had a Private Bill with some similarity to the present Bill. That was the Oldham Corporation Bill. Many investors up and down the country must be grateful to my hon. and learned Friend the Member for Southport who led an excellent campaign against that Bill, which was eventually amended.
The Mersey Docks and Harbour Board must think again. It must retain the confidence of the investor. We do not know where we shall end on this slippery slope if we lose the confidence of the institutional investor and the small investor, and if the Government's credibility is lost. I ask my right hon. and hon. Friends to think again.
I had not meant to intervene, but I want to press the Government on the very important issue of public confidence. Already it appears that the question we are debating has had an effect on public confidence. I understand that two recent local authority loans had to be offered at a higher rate of interest than would have been the case but for the history of this matter. Had the Government foreseen this? Had they taken it into account? If not, will they please respond to the very strong pressure, not only from my right hon. Friend the Member for Birkenhead (Mr. Dell) but from hon. Members opposite, and think again?
To avoid repetition I shall confine myself to points other than those which have been made this morning, but I should not like it to be thought that I am not just as concerned about each of those points as are those who have put them forward.
I hope that I shall not be thought to be an old-fashioned lawyer if I stress the one point which has not been stressed sufficiently today. We are talking about people's contractual rights. We are talking about quite a lot of small people who have relied upon the fact that they had a contract with the Board, and have made detailed arrangements. I shall not give details of all the letters that I have had from constituents, but I recall that one constituent has bonds totalling £1,200, some maturing on 1st January and some later. He is approaching retiring age, and his plans for retirement are substantially based on the receipt of the moneys which his contract guarantees him.
The House should be reminded of the view which it expressed when the Oldham Corporation Bill was before it. My hon. Friend the Member for Surrey, East (Mr. William Clark) was kind enough to refer to my part then. Practically every speaker then stressed that we all recognise that the House must be very slow to interfere with people's contractual rights. There may on occasions be cases where the argument is so strong that some intereference must be suffered. Interference may be justified because it is in the long-term interests of the persons whose contracts are concerned. But at present I, for one, am entirely at a loss to understand how we can at one and the same time have the Government taking over the entire responsibility for the management of the concern and permitting that concern to write off 30 per cent. of the rights of those who have invested—and write them off for all time. I might be persuaded that a moratorium was justified. I find it difficult to see how I could possibly be satisfied that this substantial writing-off could be justified.
So as to allow the maximum time for my hon. Friend the Under-Secretary of State to advise the House and the country about the matter, I say no more. But I hope that I have said enough to indicate that I and many right hon. and hon. Members who cannot be here today are very concerned about what appears to be proposed.
This debate has turned on three principal issues. The first is the suggestion by the right hon. Member for Birkenhead (Mr. Dell) that there has been injustice to bond holders and other security holders by reason of the moratorium on repayment and the capital reconstruction proposed in the Board's Private Bill. The second issue has been the action taken by the Government to have a receiver of the rates appointed by the court. Third, hon. Members have been concerned about the potential effect of these actions on other similar borrowings.
The debate is somewhat inhibited by the fact that it is not appropriate for us to anticipate discussion of the Board's Private Bill, and many of the matters raised by my hon. Friends can and will be put when it is debated. Moreover, I must emphasise that the Government are not responsible for the proposals in the Bill, and certainly not for the circumstances which have led to the Board deciding to take this action.
It is very difficult in a limited Adjournment debate of this kind to deal with all these complex matters. However, there have been a very full statement by my right hon. Friend the Minister for Transport Industries and an emergency debate.
The Government's position is quite clear. The Board came to see my right hon. Friend the Minister for Transport Industries at the end of July, when he suggested that it appoint consultants to examine its serious financial position. Early in November the Board informed the Government that it was faced with cash deficiencies totalling some £20 million over the next three years, mainly to meet bond redemptions falling due in that period. In the absence of Government bridging loans or guarantees to cover these expected deficiencies, some form of moratorium on the repayment of bonds and a revision of the Board's capital structure were inevitable. That is the background to the Bill.
I said that in the absence of Government bridging loans or guarantees it would be inevitable.
The Government are in no way responsible for the circumstances that have led to this situation. We are sorry that a great deal of distress has been caused by it, and particularly is this so in the case of the small investors.
On the understanding that the Board would take steps to assure the immediate viability of the port and to take the necessary remedial measures, the Government are prepared to continue to provide loans for the Seaforth scheme as it was planned and for other approved capital works. We are making these fresh loans on the clear understanding, and only on the understanding, that the Board itself is taking, and will continue to take, all the necessary steps to put its finances on a sound basis.
Seaforth is vital to the future of the port, so in supporting Seaforth—to the tune of £40 million—my right hon. Friend is making a substantial effort to help the port and to ensure its future. Incidentally, the Government have today made another loan advance of over £½ million and a further payment of some £300,000 will be made next week.
The Government have also agreed that their loans, made before the deposit of the Bill, should be treated in exactly the same way as the money put in by private investors. The reason is that all these past loans are on an equal footing and we recognised that the Board's proposals, which represented its view of the essential capital reconstruction needed to preserve solvency, ought to be accepted by everyone who has any interest in the continued operation of the port, including those with money invested in it.
My hon. Friend keeps saying that it is inevitable that we should have a capital reconstruction, and inevitable that there should be this and that, but who else has seen the figures? Have the bondholders seen the figures?
The Board makes its judgment of its own circumstances. The new Chairman, Mr. Cuckney, has said that it is only through the united efforts of the staff and the workers in the port, and of the users and investors as well, that a base for a thriving port in the end can be secured. I am sure that this is right; and that my hon. Friends will recognise that an effort is required on the part of investors as well as the rest. It is important to remember that the Board's statement of 27th November, issued at the same time as the Bill was deposited, made it clear that the Board proposed further legislation to create a statutory company with equity capital to replace part of the existing debt.
It has been suggested in the debate that some of the Board's security holders have not been adequately consulted about the Board's proposals for capital reconstruction. The facts are as follows. The Board sent copies of its statements of 24th September and 27th November to all known investors—about 30,000 people. The statement of 27th November not only explained in detail the current financial position and the management steps taken to deal with it—that is to say, the higher charges, the cost savings, the land sales, and so on—but dealt very fully with the Board's proposals for capital reconstruction and its reconstitution plans.
The same statement went on to explain the purposes of the Board's Private Bill. It indicated that further legislation would probably be necessary, and it gave an undertaking that all holders of the Board's capital debt would be given further details when these had been worked out. I understand that Mr. Cuckney is concerned to ensure that those further details should be provided as quickly as possible.
I understand, too, that the Board has welcomed—indeed, encouraged—the initiative of the Investment Protection Committees of the British Insurance Association and the National Association of Pensions Funds to set up a consultative and advisory body which can act, as it were, as a focal point for representing the interests of security holders. This is very much welcomed by the Government as well as by the Board, and it will provide a continuing forum for consultation. I would also remind the House that the Board's Private Bill will be subject to all the safeguards of parliamentary procedure, including the right to lodge petitions, and these matters can be and will be debated and discussed at that time.
The Minister says that an effort is required of the investors. As I understand the word "effort", it is something voluntarily given by those involved. Surely what is happening here is that the investors have been told, or it has been proposed that the House should tell them, what they should do. Although they may have facilities for approaching the House during the passage of the Bill, this is not an effort that is required of them but a sacrifice.
If the hon. Member is able to anticipate the House's decision in this matter he is able to foresee the future better than I am. There will be opportunity during the discussions on the Private Bill for all concerned to make their points.
The Government's decision to apply for the appointment of a receiver of the rates, in respect of which the necessary order has now been made by the High Court, was intended to achieve two objectives. The first was to protect the financial interest of the Government and the other secured creditors. The second was to achieve the payment of all expenses properly chargeable to revenue and necessary for the maintenance management and working of the port; in other words, to keep the Port of Liverpool in operation. The Government consider that this action is in the best interests of all the secured creditors whose loans rank pari passu with the Government's past loans, and we took it having regard to the fact that the Board was faced with substantial cash deficiencies over the months ahead until its Bill to construct its capital could become law.
The point I make is this. In spite of some unfounded rumours in the Press, it would be wholly wrong to run away with the idea that because the Mersey Board is in acute financial difficulties every other port is in the same plight. This simply is not true. Some ports, indeed, having already benefited from successful modernisation schemes, are on a fully profitable basis.
More than one of my hon. Friends were concerned about possible guarantees by local authorities. My hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney) virtually suggested that the Government should, as it were, bring in legislation to enable the local authorities to guarantee renewal of the bonds falling due. I had thought about this a good deal, but I am not sure that it would be right for the Government to promote a Bill giving general power for this purpose, for the one very simple reason that only a minority of local authorities have ports in their locality. In any event every local authority which has a neighbourhood harbour is free to take Local Act powers to guarantee that harbour if it wishes. Some have already done this—for example, Manchester and Ipswich—and the means to take such powers are available and always have been available to those who wish it.
Essentially, this is a matter of individual choice for local authorities themselves, and I do not think that central Government should appear to be stimulating local authorities generally to accept such new liabilities.
Would my hon. Friend bear in mind that the Mersey Docks and Harbour Board deals with no fewer than eight different local authorities. This would therefore mean eight different Private Bills, and what we want is action quickly. Since we have no Merseyside County Council can the Government not give these eight authorities power, and do this in Government time?
Perhaps I should add that as far as I am aware none of the local authorities concerned has so far indicated any desire to guarantee borrowing by the Board. The local authorities have, however, been willing to assist the Board over its immediate cash problems; for example, by purchasing certain land and by deferring the collection of rates and other charges for a period. Eight Merseyside local authorities have also set up a working party to discuss ways in which they can help the Board out of its financial crisis.
I gladly pay tribute to this helpful attitude on the part of the local authorities, and I say to them that if local authorities generally wished to go further and wished to discuss with the Government the question whether general powers should be conferred, I am quite sure that my right hon. Friend would be only too pleased to listen to their views.
Throughout everything that the Government have done my right hon. Friend has had in the forefront of his mind the need to ensure the continued working of the port. The steps which we have had to take have been taken with great reluctance, and we regret very much that they have in some cases caused distress to bondholders and other holders of securities of the Mersey Docks and Harbour Board.
But the only way in which it would have been possible for these effects to have been avoided would have been for the taxpayer to foot the bill for the whole of the Board's cash deficiencies, which amount to £20 million or more, and even this might not have been enough to assure the port's future viability. Even if it had, it would still have been quite wrong, and certainly quite contrary to the Government's general policy, to take on full financial responsibility for a situation for which the present Government and the British taxpayer are in no way responsible.
The same objections to apply to the provision of bridging finance to meet the Board's immediate obligations until its Private Bill is passed. Moreover, such a provision of short-term bridging finance would have created manifest unfairness, as the purpose would have been to enable the Board to pay off the early bondholders in full while the later security holders, including the Government and the taxpayer, would have been subject to the proposed capital reconstruction.
The position was not at all clear at that time and certainly the present Government were not making the decisions.
I want to deal with the effect of this on the borrowing of other similar bodies, because a number of somewhat harsh remarks have been made this morning. There is no reason why the arrangements proposed by the Mersey Docks and Harbour Board should affect the borrowing of local authorities, or any other viable public boards, and I will try to explain why. The credit-worthiness of local authorities arises from their right to levy rates upon people in the area they serve, and the viability of public boards can be established from their balance sheets and their accounts, which are published annually. The arrangements proposed by the Mersey Docks and Harbour Board make it clear that bodies of this type borrow on their own credit. They do not rely upon a pool of unlimited Government credit available to all and sundry regardless of success or failure and regardless of efficiency or inefficiency. There is no such unlimited pool.
Nor can there be any doubt, while they are reminded of this, as they are, that investors and their financial advisers are perfectly well able to appreciate the difference between the Mersey Docks and Harbour Board and the local authorities and to pay due regard to the published results of other public boards. I must tell the House that, unlike my hon. Friend the Member for Surrey, East (Mr. William Clark), I am not aware of any local authority which has found it impossible to borrow since 27th November, that is to say, since the date of the Board's statement.
In the shorter-term money market, interest rates for local authorities have remained extremely steady. For two-day and seven-day loans the interest rates had by 14th December dropped by ⅛ per cent, since the November statement when they were standing at the same rate as at the time of the Board's original September statement. For three-month and one-year borrowings the rates were the same on 14th December as at the time of both the November and September statements by the Board. Some public boards which are not local authorities, I accept, have experienced rather more difficulty than usual, but the position has now settled down again and there is no reason why viable authorities should have any difficulty in borrowing from their usual sources.
I should like to have been able to deal more precisely with some of the questions put to me, but I am running out of time. However, I should like to reject here and now the suggestion by the right hon. Member for Birkenhead that there was any outrage in this matter. On the contrary, the Government have taken the right and courageous stand. My right hon. Friend has done what is best for Merseyside and for the British economy at large.
I do not believe that it does any good for the Mersey, the bondholders, the workers there, or the national economy for Labour Members continually to make these charges in public when the task before us, whether we sit on the Opposition or Government side of the House, is to make the Mersey Docks and Harbour Board work and to make it successful, and that is the Government policy which my right hon. Friend's decisions will bring about.