Financial Assistance for Employee Share Ownership Schemes

Orders of the Day — Ports Bill – in the House of Commons at 6:10 pm on 23 April 1991.

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'(1) Before inviting bids for their holding any relevant port authority under Part I or Part I of this Act shall give employees (including management) of the successor company the opportunity to put together a bid to purchase the holding, and the authority shall accept such a bid without inviting competing bids providing the following conditions are met:—

  1. (a) the amount of the bid represents at least the market value of the authority's holding in the successor company, such market value to be certified by independent professional advisers acceptable to the appropriate Minister; and
  2. (b) the structure of the bid must incorporate a substantial element of employee shareholding, ("substantial" in this context meaning that at least 25 per cent of the ordinary voting capital of the acquiring company should be held by, or on behalf of, employees, in addition to those held by directors and senior managers of the acquiring company).

(2) Financial assistance shall be available in respect of bids put together substantially by management and employees of the successor company and incorporating a substantial element of employee shareholding in order that those involved in preparing such bids are able to obtain the appropriate level of professional advice. Subject to the overriding discretion of the appropriate Minister, 75 per cent of fees and costs (including value-added tax) incurred for this purpose may be reimbursed out of moneys voted by Parliament up to a maximum amount (on which the 75 per cent reimbursement will be based) of £80,000.'.

Government amendments Nos. 5 to 7.

Amendment No. 53, in clause 8, page 6, line 12, at end insert— '(6A) Without prejudice to the generality of subsection (6) above, in deciding whether or not to confirm the scheme, the Minister shall have regard to the implications of the scheme for those currently employed by the relevant port authority and for their pension and employment rights, and to any proposals in the scheme designed to promote employee participation in the company.'.

Amendment No. 57, in clause 12, page 9, line 36, after '(2)', insert 'Except as provided for in subsection (2A) below,'.

Amendment No. 50, in page 9, line 37, at end insert— '(2A) Levy shall be charged at one half of the rate stipulated in subsection (2) above, in circumstances where at least fifty per cent. or more of all the securities disposed of are transferred to employees of the relevant port authority or to a trust fund created or operating for the benefit of the said employees, except that where, within five years of the original disposal of securities, as a result of subsequent transfers inter vivos of the securities, more than fifty per cent. of the securities are held by persons other than the said employees, or trust fund, the company shall be charged a further levy of one half of the rate stipulated in subsection (2) above.'.

Amendment No. 61, in page 9, line 37, at end insert— '(2A) In the case where the successful bidder for the authority's holding in the successor company incorporates a substantial shareholding by, or on behalf of, employees or former employees or their dependants of the successor company and its subsidiaries ("substantial" in this context meaning that at least 25 per cent. of the ordinary voting capital of the acquiring company should be held by such employees, in addition to those shares held by directors and senior managers of the acquiring company) the levy shall be charged at the rate of 50 per cent. on the consideration given for the securities disposed of.(2B) In the event that the percentage of the ordinary voting capital of the acquiring company held by or on behalf of suchemployees falls below 25 per cent. within five years of the date of the initial transfer of securities in the successor company, the Secretary of State may require the payment by the chargeable company of an additional levy, which levy may be an amount up to 20 per cent. of the consideration given for the securities at the time of their initial transfer (or, if lower, up to 20 per cent. of the market value of the securities at the time the employee holding falls below 25 per cent.).'.

Government amendments Nos. 9 and 10, 15 to 17 and 22 and 23.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

First, may I draw the attention of the House to new clause 2, tabled in the name of my right hon. and learned Friend the Secretary of State. These amendments fulfil a commitment that I made to my hon. Friend the Member for Ipswich (Mr. Irvine) when I accepted in principle an amendment that he proposed in Committee to enable port authorities to repay the costs incurred by their management and employees in buying or attempting to buy the authority's successor company. The main amendment is new clause 2, which substantively gives effect to my hon. Friend's proposal. Perhaps inevitably, there are a number of changes in the drafting, but I hope that my hon. Friend will accept that the Government's amendment goes at least as far as—and in some respects possibly further than—his proposal did in providing practical assistance for management-employee buy-outs when ports come to privatise themselves under the new legislation.

I will mention briefly the other amendments grouped with new clause 2.

New clause 3 makes equivalent provision to new clause 2 for the Port of London Authority and the new Tilbury company. Amendments Nos. 5 and 6 are consequential to new clause 2. If a port authority has incurred liabilities by giving financial assistance to a management-employee buy-out team before transferring its undertaking to its successor company, those liabilities of course need to be excluded from the transfer, and remain with the former port authority. Amendments Nos. 10, 16 and 17 are drafting amendments consequential to new clause 3, in particular of the need to relate the definition of "the port of Tilbury" to that clause.

Amendments Nos. 22 and 23 define what is meant by the terms "equity share capital" and "maximising participation by employees of the company in ownership of its equity share capital", which are used in new clauses 2 and 3.

Amendment No. 9 enables an authority to offest against the proceeds of disposal on which levy is payable any costs that it may incur as a result of meeting the expenses of a bid mounted by its management and employees, whether or not that bid is ultimately successful.

An amendment along those lines was proposed in Committee by my hon. Friend the Member for Ipswich when he made his important proposal, now reflected in the new clause 2. that the authority should be able to reimburse the expenses of a management and employee buy-out team.

The point that my hon. Friend the Member for Ipswich made in tabling his amendment in Committee was valid. Obviously, if an authority is to pay these expenses, they must be clear at the outset how the cost is ultimately to be met, given that their own assets and liabilities will in due course be transferred to the successor company after disposal. One possibility would be to let the new owner of the successor company eventually pick up the liability. But that approach would mean that, if an outside bidder purchased the company, he would then be saddled with meeting the expenses of a rival bid that had failed, a result which could hardly be justified.

Accordingly the Government accept that these expenses, like those that the authority incurs directly in organising the disposal, should be allowable as a deduction against the amount liable to levy.

Amendments Nos. 7 and 15 further underline the Government's commitment to the encouragement of management-employee buy-outs. Amendment No. 7 fulfils a commitment that I made in Committee to my hon. Friend the Member for Faversham (Mr. Moate), when I accepted in principle an amendment that he had tabled. I undertook to table an amendment which would reflect my hon. Friend's views, as expressed in his own amendment, and he will see that the amendment now before the House is very close to what he proposed.

I hope that my hon. Friend will agree that this embodiment in the legislation of the Government's wish to encourage management-employee buy-outs is a useful addition to the Bill.

Amendment No. 15 makes similar provision to amendment No. 7 about the exercise of my right hon. and learned Friend the Secretary of State's powers concerning the disposal of the port of Tilbury by the Port of London Authority.

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

I am sorry that we are so late in commencing our discussion of the Bill. I have a feeling that if the Bill is passed without our amendments it will be as expensive a mistake as the poll tax, which was the cause of the delay that kept us from further consideration of this Bill.

The Minister says that the new clause is all about money. The amendments in this group deal with employee share ownership bids, to some extent with the port of Tilbury and with various aspects of pensions. The point is that they are all concerned with money. The question is whether the commitment given by the Minister in Committee allows him to give an assurance to the House that proposals on employee share ownership plans and other forms of management and employee share ownership will be able to go ahead, or whether trust ports forced into privatisation and seeing ESOP schemes as perhaps the best way out will be so unfairly disadvantaged that they will not be able to achieve the ESOP scheme that they want.

6.15 pm

We remain fundamentally opposed to the privatisation of trust ports and to the sale of the municipal ports. We had hoped that a general election might intervene early enough to prevent this measure from going through—it still could. If the legislation goes ahead, an employee-management buy-out could give the local work force some hope of being able to continue to play a vital part in the local economy.

The amendments that we have tabled provide for a series of changes in the legislation that will promote share ownership schemes in the event that this unwelcome legislation is passed.

New clause 12 allows the authority to accept a bid from employees and managers "without inviting competing bids" provided that certain safeguards are met. Therefore, we are not saying that the ports should be given away per se, but that there could be safeguards and we have given an illustration of what they could be. The safeguards relate to the market value being independently certified and to the bid incorporating a substantial element of employee shareholding—at least 25 per cent. I cannot over-emphasise the importance of the fact that those making such bids should have access to financial assistance. For that reason our new clause provides for the reimbursement of £80,000.

Amendment No. 61 states: the levy shall be charged at the rate of 50 per cent. on the consideration given for the securities disposed of. We have to consider the Government's proposals in detail as well as the other amendments that have been tabled in this group, because we want the best possible scheme to be written into the Bill.

I am not sure what the Government proposals mean. I am not clear how much further they take us down the route to employee and management share ownership. Amendment No. 7 states: The appropriate Minister shall have particular regard to the desirability of encouraging the disposal to managers or other persons employed by the successor company of the whole or a substantial part of its equity share capital. Unlike the Minister's proposals, ours show in detail how that could be done. For those reasons, we press the House to accept the direct and detailed proposals that we have made. We feel that the Government have not included the detail that we would like.

In Committee, the Minister said that too much preferential treatment would destroy competition and that there was a danger that, if there were no competition, no other bids would be put alongside the ESOPS. He said that share ownership schemes might result in delays in the trust ports paying off their debts to the Government. The Government must address the whole issue of competition. They must tell us where they stand with regard to the question of employee and management share ownership. Does the concept have their support in principle only? Will the Minister say whether the terms of the amendments could be made more detailed, perhaps in another place?

In Committee, I said that should privatisation go ahead there would be some support among the Tilbury work force for such schemes. I expressed serious concern about the possibility of the Tilbury management's taking a naive view. The position might not be as easy as the management thought. I said that it was more likely that a large predator company would come along and would then want to sell everything off.

I should like to draw to the attention of the House press reports suggesting that Hong Kong International Terminals has expressed great interest in buying out the port of Tilbury. Given all the Minister's assurances with regard to management and employee share ownership—and to Opposition Members, employee share ownership is important—I hope that the Minister will be able to tell the House how the arrangements will fit in with his amendments. How are they affected by the information that there will almost certainly be bids such as the one from Hong Kong International Terminals?

The Minister may say that if there were no competition, the Tilbury employees would be worried about the danger of buying something that might not be a going concern in the future. If privatisation is to go ahead, this kind of share ownership could be the best of a bad job. These amendments do not provide employees or management with the assurances that they sought.

The issue of pensions is included in this group of amendments. The Minister looks puzzled. Does he intend to refer to this matter at a later stage? The amendments on employee share ownership plans are related to those that concern the pensions of the Tilbury work force. I reiterate the Opposition's view. Given all the problems that have arisen from previous privatisations, and all the real fears of employees, when public utilities have been sold off, about their pensions being kept on the same basis, will the Minister avoid simply repeating the assurance that he gave earlier? Can he tell us that he has found a way round the problem whereby about 400 employees of the Port of London Authority will be worse off as a result of these proposals?

It is important, in this context, to emphasise that the pension fund of Port of London Authority employees is so healthy that those people could have index-linked pensions in the not too distant future. Clearly, that is a benefit that employees transferred to the port of Tilbury would not enjoy. I hope that the Minister will be able to reassure the House on this point.

Finally, there is the issue of the Port of London Act 1968. Members of the Standing Committee had difficulty determining exactly what constitutes the port of London, and what constitutes the port of Tilbury, for the purposes of deciding which port owns what. The 1968 Act is now out of print, and we still do not have a clear definition. Is the perimeter fence at Tilbury the determining factor? Can the Minister assure us that what belongs to Tilbury will stay with Tilbury and that large tracts of land will not be transferred?

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

I did not wish to interrupt the hon. Lady just after she started her speech, but I am grateful to her for giving way now. She referred to the future. Can she tell the House whether the Labour party is committed to renationalising trust ports?

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

I repeat my party's assurance that it intends to implement an integrated transport policy, in which ports will play a most important role. We shall set up the advisory bodies that are necessary to secure investment in a national infrastructure. Our policies are laid out clearly in the party's documents. The hon. Gentleman seems to be uncertain as to the status of trust ports. I do not know whether I should be in order if I were to give him a history lesson. These ports have been held in trust by authorities. I think that I have dealt more than adequately with the hon. Gentleman's question.

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

I shall not give way again. I want to get on with this important group of amendments relating to management and employee share ownership schemes.

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

Yes, it is a debate.

We should seek ways of making sure that the Bill will result in the introduction of the best possible share ownership schemes. The amendments that we have tabled give more than a general commitment to such schemes. We spell out how they could be introduced and implemented. To that end, we have consulted those who are in the best position to give advice.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I shall leave aside the future, as we are debating this Bill. The query of the hon. Member for Langbaurgh (Mr. Holt) was inappropriate. My hon. Friend referred to the fact that the definition of the port of Tilbury was debated in Committee. She may have noted that amendment No. 65, which is in my name and has been selected for debate, refers to the cartilage of the port of Tilbury. Is it not a fact that certain installations at Tilbury have an accepted geographical boundary? Is not the boundary indicated in some map, or set out in the Bill?

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

I am grateful to my hon. Friend for bringing that matter to the attention of the House. He has echoed a discussion that we had in Committee, when it seemed that we should be referring the matter to the Monopolies and Mergers Commission. It seems impossible to determine which part of the port of London belongs to the Port of London Authority, and which part belongs to Tilbury. We pressed the Minister about the issue. Members of the Committee had a copy of the very glossy brochure issued by the port of Tilbury, in which red and green squares indicate the various operational parts of the port. I hope that the Minister will be able to give the House a full audit of the land available at the port of Tilbury, and will make absolutely clear, before any sale, what exactly is being sold.

In Committee, it was said that discussion of this matter was premature, and that we should wait until the whole mechanism was set in motion. What we need is a full audit of the land. I hope that the Minister will be able to give us more detail about which land belongs to whom. As I said, the 1968 Act is out of print. I found it almost impossible to get a copy. It would help if the Minister defined the land that belongs to each port and say why there cannot be a full audit of that land.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Bills usually contain definition clauses. At the end of this Bill I see that there is a clause with the rubric "Interpretation". Is my hon. Friend telling the House that in Committee the Government were unable to present either a map or a draft deed defining the boundaries of this possible future port—I say "possible", as the Bill has not yet been passed. If one purchases a house there is, at the very least, a boundary map. How on earth can the House of Commons consider the future sale of a port whose boundaries have not been defined? If my hon. Friend does not know the answer to that question, will she invite the Minister to intervene and tell us?

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport) 6:30, 23 April 1991

I share my hon. Friend's concern. He has expressed it much better than I could have. In Committee, the Minister for Shipping was unable to say what land belonged to the port of London, what land belonged to the port of Tilbury and which part of it would be sold off. We pressed the Minister for the details, but he did not provide us with a significant answer. We have had to wait until now, presumably because of the pressure that we have exerted, for the Minister to define the port of Tilbury as that which is defined in the references to be found in the Port of London Act 1968. The Minister does not appear to be willing to deal with that question now. Perhaps he intends to deal with it later.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

I should point out to the hon. Lady that, as the hon. Member for Newham, South (Mr. Spearing) has tabled amendment No. 65, that would be the most appropriate place to deal with the matter.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

On a point of order, Mr. Deputy Speaker. My intervention, in the form of a question to my hon. Friend the Member for Stoke-on-Trent, North (Ms. Walley), related specifically to my amendment, which Mr. Speaker has kindly selected. However, in the debate on this clause, we have discussed the port of Tilbury. It runs as a theme throughout the Bill. Is it in order for the House to consider a Bill that would permit the Secretary of State to sell part of a publicly owned property—the port of London—without the part that is proposed to be sold having been defined? I know that you cannot answer that question immediately, but there are some hours yet before Third Reading. Therefore, I draw it to your attention.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

I understand the hon. Gentleman's point. I am sure that he will take into account the fact that the Minister said that he believed that it would be more convenient to deal with the matter when we reach amendment No. 65, which has been selected for debate.

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

The Government are attempting to sell off something that they do not own; furthermore, they do not even know who owns it. That is extraordinary. It emphasises the terrible way in which this privatisation is taking place—presumably because the Treasury want to get their hands on the money. When the amendment tabled by my hon. Friend the Member for Newham, South (Mr. Spearing) is debated, I shall seek guidance from you, Mr. Deputy Speaker, on whether it would be in order for the sale of this part of the land to proceed without that information having been provided.

Ports that are against privatisation have expressed great interest in employee-management share ownership schemes. I cannot express too strongly the keen disappointment that is felt within the ports following the Government's insistence on going ahead with auctioning off the trust ports, by means of sale by tender. Many ports would have preferred an unlisted quotation and the opportunity to explore with the managers of local authority pension funds and their customers ways in which to make a bid. It was agreed to go forward on that basis in the case of Tees and Hartlepool Port Authority Bill, which was so severely damaged in the other place that its future is being considered in this Bill.

Whatever the Government say, the simple fact remains that the sky is the limit. They will not tell the House what positive action they intend to take so that these schemes can go ahead. Unless our amendments attract support and unless we can persuade the Government to go down this road, it will be impossible, whatever they may say, to establish employee-management share ownership schemes.

Photo of Mr Michael Irvine Mr Michael Irvine , Ipswich

On Second Reading, my right hon. and learned Friend the Secretary of State for Transport said that he was considering how best to encourage management-employee buy-outs. New clauses 2 and 3 and the related amendments make it clear that his considerations have been fruitful. Management-employee buy-outs faced a major difficulty arising from the provision for competitive bidding. It was quite clear that to set up a competitive management-employee buy-out would be complicated, requiring specialist legal and financial advice and a range of valuations of property and equipment.

It was suggested that, in the case of an average port, the cost could amount to about £250,000 and that, in the case of larger ports it could amount to considerably more. That would have been a very real deterrent to a management-employee buy-out bid. As the Bill was drafted, in the event of the bid failing, managers and employers would have been at risk of having to find the money to meet those costs themselves.

The problem does not apply just to this privatisation or to privatisations generally; it applies also in commerce when companies wish to sell off part of their operations by means of a management-employee buy-out. In the commercial world the problem is usually overcome by the vendor agreeing to underwrite the cost of legal and financial advice and the necessary valuations.

Specific statutory authority is needed to permit such underwriting in this case. It is interesting to note that there are precedents for such assistance to other management-employee buy-outs of state industries, or parts of them. In Committee, I made the point that such assistance was afforded when the National Bus Company was privatised. My hon. Friend the Member for Gosport (Mr. Viggers) gave a better example—the important privatisation of Harland and Wolff. A clause similar to new clause 2 was introduced to facilitate that management-employee buy-out, with very good results.

In Committee, I sought to move an amendment to deal with the difficulty. I acknowledged that my amendment was imperfect and I withdrew it when the Minister accepted that its provisions contained force. I am glad to see the new clauses and amendments, which put the matter far better and far more effectively than my amendment did.

I know that there is a great deal of interest in a management-employee buy-out in my constituency port of Ipswich, not only among the managers, but among all who work in the dock. I suspect that that is the experience of many of my hon. Friends and Opposition Members. It is significant that the hon. Member for Stoke-on-Trent, North (Ms. Walley) got herself into a contortion when she explained how she was basically opposed to this privatisation yet she was in favour of management-employee buy-outs. I am grateful to my hon. Friend the Minister for the new clauses and amendments.

Photo of John Prescott John Prescott Shadow Secretary of State, Member, Labour Party National Executive Committee, Shadow Secretary of State for Transport

The hon. Gentleman did not quite understand the intent of what my comrade the Member for Stoke-on-Trent (Ms. Walley) said. [HON. MEMBERS: "Comrade?"] It is a good and useful description. The Tory twits come out with silly nonsense.

When debating the Bill, we have to deal with matters in the order in which they appear in the Bill. The Bill is basically intended as a privatisation measure and we are against the privatisation of the trust ports. The difficulty associated with the trust ports—that of getting access to develop their assets—can be dealt with by a harbour revision order. We explained that on Second Reading and in Committee. We should prefer such an order. In the course of this debate, we must keep within the context of the Bill.

The Government have claimed that they want an ESOP arrangement. Given that, we have tried to make the point that if they wish to do that, heavy costs are involved. In that sense, we have an agreement. We may not have an agreement on what we do with the trust funds and on how we might deal with the ports. In the context of the Bill, it is right for my hon. Friend the Member for Stoke-on-Trent, North to make her point.

Photo of Mr Michael Irvine Mr Michael Irvine , Ipswich

The problem facing the hon. Member for Kingston upon Hull, East (Mr. Prescott) and his hon. Friend the Member for Stoke-on-Trent, North is that, from an ideological viewpoint, they do not like privatisation, but they know very well that, among the dockers, the idea of a management-employee buy-out has a lot of support. It has a lot of support in Ipswich, and I believe that it has a lot of support in other ports. I welcome the new clauses and the related amendments, which clear the way for such management-employee buy-outs.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

The fact that the Government have tabled amendments to promote employee participation in management-employee buyouts, that the Labour party has tabled similar amendments and that I have tabled amendments towards that end shows a remarkable consensus that management-employee buy-outs tend to be a good thing. We should therefore examine in some detail, if not at great length, the extent to which the new clause tries to promote an objective that is shared by hon. Members of all parties.

It is fair to say that there will be some cases in which the number of employees is not sufficient for such a buy-out. However, one would have hoped to find other provisions in the Bill which would seek to promote some employee participation, even if it does not amount to a buy-out.

The hon. Member for Ipswich (Mr. Irvine) was perfectly right to point out the number of additional expenses, especially the expensive buying in of professional expertise, which will be necessary to allow management and employees to put together a package. Undoubtedly, the new clauses and supporting amendments go a considerable way towards helping to promote management-employee buy-outs by taking that cost off the shoulders of those seeking to put together a package, if the trust port or company wishes such a package to go ahead. I note that the new clause says that the trust port may on such terms as it thinks fit agree with the bodies concerned. It is a permissive provision rather than one that would require the trust ports to agree.

I also note that the provision will come into play only if there is an association of employees and management. They will have to have formulated a proposal to maximise employee participation. The third condition, which is contained in new clause 2(3)(c), is that the employee-management team must appear to the body concerned to be best placed to secure the implementation of such a proposal. Will the Minister tell me what he understands by that? Does it mean the best proposal of a series of potential management-employee buy-outs, or does it mean that the management-employee buy-out seems to be the best of numerous proposals, including non-management-employee buy-outs? If the latter interpretation is intended, it begs a further question about whether there are other provisions in the Bill—or more likely, not in the Bill—which would try to give some encouragement to management-employee buy-outs.

Amendment No. 58 was a stab at answering that question. Given the resources available to us, I do not pretend that it is the best means of trying to promote an employee buy-out, but it would at least allow for the levy to be at one half of whatever is stipulated in cases in which there is a management buy-out. That would give management and employees a certain edge in putting together a package.

6.45 pm

Amendment No. 53 not only relates to encouraging proposals to promote employee participation in the company, but suggests that, when considering schemes, the Minister should have regard to the pension and employment rights of those employed, irrespective of whether it is a management-employee buy-out.

That point was made to me last week by employees when I visited the port of Poole. They want some assurance about the transfer of pension rights and about the theoretical possibility—which may be more than theoretical—that the business might not continue as a port as we know it with stevedoring and cargo handling, and that the person purchasing the port might carry out an activity entirely different from the main port activity, which could put many people's jobs in jeopardy. I suspect that there are similar concerns at other ports. People want some assurance that the rights of employees would at least be taken into account when the Government consider various schemes. Such an assurance would be welcome, and I look forward to hearing what the Minister says.

Photo of Stuart Bell Stuart Bell , Middlesbrough

I am grateful to you, Mr. Deputy Speaker, for calling me early in this debate. The hon. Member for Ipswich (Mr. Irvine) raised an important point on Second Reading, which was taken up in Committee. We have congratulated the Minister on the draftsmanship and workmanship of the new clauses. From what the hon. Member for Ipswich has said, it seems that the new clauses are a straight lift from the Bill that privatised Harland and Wolff. That privatisation has been a great success in terms of productivity, management and competition. I visited Harland and Wolff not long ago, and I saw how well it is doing after privatisation. If the wording of the new clauses has the same impact, we should welcome it.

My worry on behalf of those who have invested their lives in the docks is that the wording of the new clauses is not strong enough to ensure that there is worker participation that includes employees rather than simply the management. I am somewhat reassured by amendment No. 7, which says: In exercising his powers under sub-section (2) above the appropriate Minister shall have particular regard to the desirability of encouraging the disposal to managers or other persons employed by the successor company". That may cover my concern. The only way in which the Government could entirely cover my concern would be for them to accept new clause 12, which was tabled by the Opposition.

The point that there would be massive expenditure by any management-employee team who wished to compete with the godfathers of the shipping trade was well taken in Committee. Such godfathers might want to come into the port as it came up for privatisation, and it would be difficult for employee-management buy-out teams to compete. We know that the Tees and Hartlepool port went to celebrated merchant bankers in the City of London, who came up with a scheme that was so disastrous that it was kicked out. in the other place.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

Can the hon. Gentleman tell the House how many of those godfather shipping companies have acquired the companies in the ports industry that are already in the private sector? Is that not an unnecessary scare?

Photo of Stuart Bell Stuart Bell , Middlesbrough

I do not think that it is a scare, because my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) has mentioned one already. When I was in Northern Ireland, I talked to the people at Warren Point; they are in the same situation as Felixstowe. [Interruption.] My hon. Friend, from a sedentary position, mentions Sealink, and there are quite a number of others that I could mention, such as Hanson Trust. I could mention quite a number of companies which may not have thought of the great assets that are linked to our ports and are there for the taking under the Government scheme. We are debating a way of preventing these predators from moving in, of giving the management and the employees, who are the ones who have invested their lives in the business, a chance to maintain that investment and—to get back to our central point—of seeing that there is a benefit for the local community.

I think that we are all aware of what is out there in the wide world waiting to try to take over our ports. Therefore, anything that strengthens the concept of the management buy-out, which is a buy-out with a strong employee interest—we are not interested in a straightforward management buy-out that leaves the employees out in the cold—must have the support of the House.

My feeling is that, to overcome the essential difference between us—the emphasis in the Government wording is on management while the emphasis in ours is on employees—the House would be better served if the Government accepted new clause 12 at this stage.

I am grateful that I am following the hon. Member for Orkney and Shetland (Mr. Wallace) and I sympathise with his other problems. It is good to see that, despite the difficulties he has had in his constituency in Orkney, he has nevertheless maintained a strong interest in this Bill, both in Committee and on the Floor of the House.

I therefore hope that I can persuade the Minister, in my usual seductive fashion, to look again at new clause 12, which is our new clause, to pit that against new clauses 2 and 3 and to give us credit on this occasion for getting the balance right in the interests of the employees and of the local community.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

I think that this has been a useful start to the debate. I tried to explain in opening and putting forward the Government amendments that the Government are committed to seeing management and employees given every incentive and certainly put at no disadvantage. I can say, with regard to a point made by the hon. Member for Orkney and Shetland (Mr. Wallace), that the new clause is designed to enable the authority to work out which are the best placed of the management-employee buy-outs to sponsor. He may remember that that was a question on which I was asked for clarification by the hon. Member for Aberdeen, North (Mr. Hughes). That is certainly the Government's intention.

New clause 12, which the hon. Member for Stoke-on-Trent, North (Ms. Walley) tabled, is basically a well-balanced combination of the unacceptable and the unnecessary. Taking the latter first, subsection (2) of the proposed new clause has been anticipated in the Government's amendments on financial assistance in new clause 2 and, in the case of the PLA, new clause 3. As far as the unacceptable part is concerned, subsection (1) would completely undermine the Government's policy of inviting competitive bidding for the ports by giving a MEBO team first refusal in every case. That goes far beyond the intention of providing a level playing field for all possible potential bidders. We believe that it is right to establish the market price of a port by competitive bids rather than by a theoretical valuation. If there were to be a theoretical valuation and that proved to be wrong, who would be the people shouting the loudest about the Government's selling off at a lower price than could be expected? We all know who would be shouting the loudest and most vociferously. It would obviously be the Opposition.

Photo of Joan Walley Joan Walley Shadow Spokesperson (Transport)

In view of what the Minister has just said, will he tell the House why it was possible to do that in the case of Tees and Hartlepool, and to come to an agreement on £62 million—my hon. Friends will correct me if I am wrong—and comment on the fact that there should be tax amounts based on £31 million, that is 50 per cent? Why was it possible to do that in the case of Tees and Hartlepool but not possible in the case of the other trust ports? Will the Minister tell the House that?

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

The House is dealing with a Government Bill; it is not dealing with the private Bill that passed through the House and has not made all the progress which its promoters would have liked.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

The Minister, of course, is seeking an explanation for the point which my hon. Friend put, but the essence of the matter is this. The Government supported the Tees and Hartlepool Port Authority Bill; they supported the principles and the financial measures in that Bill. Therefore, my hon. Friend's question is pertinent. Why is it not now a possibility even under this Bill?

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

The Government made their position quite clear at the time of the starting of the Tees and Hartlepool Port Authority Bill; we said that we would bring forward our own legislation which would enable all trust ports to follow the system of privatisation. That was not the case at the time when Tees and Hartlepool first promoted their private Bill. The House is not now dealing with a history lesson on the earlier private Bill; it is dealing with the Bill that is before it.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

The Minister says that that was not the case when we were dealing with the private Bill, but he must recognise—I am sure that he will not deny it—that the Bill before us was going through the House a few weeks behind the Tees and Hartlepool Port Authority Bill, which had been through the House and was in the Lords. Therefore, his explanation is not adequate.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

I do not have the precise dates before me, but I think that the hon. Gentleman will find that the Tees and Hartlepool Port Authority Bill began its stages in the House in March 1989 and the Government's Bill was announced in November in the Gracious Speech.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

The hon. Gentleman's dates are wrong. The Bill did not come to the House until 27 November 1989, and it was kept in the House for many months after that in Committee, and some weeks after that before hon. Members could examine the Tees and Hartlepool Port Authority proposals on site. Therefore, I am suggesting to the Minister—and I am sure that he will react honourably to this—that the point he is making to my hon. Friend is invalidated because the private Bill was running only a few weeks ahead of the Bill to which he is now addressing himself.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

I should like to correct myself and apologise, in part, to the hon. Gentleman. He is right that it was in November 1989. And of course the Gracious Speech in which the Government's intention to bring forward a ports Bill was announced was in November 1990. So I was perfectly right in saying that the Tees and Hartlepool Port Authority Bill started a long time before the Government secured the position in the legislative programme to bring forward the Bill that is before the House tonight.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

It may assist my hon. Friend and all Opposition Members who are floundering to know that I moved the Second Reading of the Tees and Hartlepool Port Authority Bill on 15 March 1990, when 29 Opposition Members voted against it

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

I am grateful to my hon. Friend. Perhaps, Mr. Deputy Speaker, we can make some progress instead of going through a history lesson. I want to deal with various amendments put forward by the hon. Member for Orkney and Shetland.

First, I believe that his amendment No. 53 is unnecessary, because the Bill already takes care of some of the hon. Member's concerns and a tabled Government amendment would take care of the remainder. The transfer of undertakings regulations apply to the employment rights of those affected by transfers under the Bill. Although the regulations do not apply to occupational pension schemes, the general transfer clause 2(2) —this is the important point—ensures that the rights and liabilities of a port authority would be transferred to its successor company and the rights and liabilities of the employees in relation to such a scheme would continue. It is later on, when we come to deal with Tilbury, for special reasons that were discussed in Committee, that the position is different. I therefore hope that it will be seen that there is no need to pursue amendment No. 53.

The amendment would also require the Minister to have regard to the promotion of employee participation. Provision for this is already made in Government amendment No. 7, which is cast in similar terms and would have substantially the effect desired by hon. Members. I could offer the hon. Member for Orkney and Shetland a long explanation in respect of amendments Nos. 57 and 58, although I do not know whether I need to do so. I realise that the amendments are well intentioned, but they would give too much of an advantage, and it would not help management-employee buy-outs to reduce the levy to 25 per cent. in such cases. The hon. Gentleman should think through what effect that might have on the base price and on price pegging. We will deal with the matter in greater detail when we discuss the proposed levy.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

The Minister said that the amendments would give too much of an advantage. Then he said that they would not help. Which of those statements is right?

7 pm

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

The amendments would not help in respect of the amount that would have to be paid, but they would not provide the level playing field that the Government want, either. Although my two statements may appear contradictory, I believe that they can both be defended.

Photo of Mr Eddie Loyden Mr Eddie Loyden , Liverpool, Garston

If the Government are serious in claiming that they want to give port employees the opportunity to be involved in management-worker bids, why does the Bill not discriminate in favour of such people? The people most likely to ensure that a port continues to function as a port are those who have spent a lifetime working in it. Probably generations of their families have worked in the industry, too. The Government pay lip service to the idea, but they are not prepared to remove the disadvantages to such people, even if they recognise them.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

It is partly because of such considerations that the Government seek to give people who have worked in the ports all their lives and contributed a considerable amount a share in their companies, and to allow them to play a more positive role. They are likely to benefit the most if companies are successful, and that is precisely what privatisation will achieve.

I hope that the House will accept the Government amendments, and that the Opposition will feel able not to press their amendments.

Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool

I want to reason out my argument with the Minister, without challenging him, because that is the best way to elicit a response to the good sense in new clause 12.

I apologise for repeating myself, but the Tees and Hartlepool Port Authority Bill was brought to the House of Commons, without consultation with anybody, on 27 November 1989—the deadline for the submission of private Bills. During the following year, that Bill spent most of its lame in the House of Commons The proceedings of the Committee that dealt with it were protracted and its deliberations were held up, because its members insisted on seeing the Tees and Hartlepool port authority on site—much against the wishes of the Chairman of the Committee. The present Bill eventually came to the House in the latter part of 1990, following the Queen's Speech. A procedural motion was needed for the reference, following a message from the House of Lords, to take the Bill to the other place.

Perhaps the Minister will think again about new clause 12, which says: Financial assistance shall be available in respect of bids put together substantially by management and employees". Under the Tees and Hartlepool Port Authority Bill the management would have been permitted to seek financial resources to assist a management takeover. Such a takeover would have involved, first, the setting up of a holding company and, secondly the port authority's becoming a subsidiary company of the holding company. The Government supported that Bill then and agreed that the Tees and Hartlepool Port Authority Bill could raise its own finances. The Minister's approach to this Bill contradicts the Government's previous position.

Two or three months ago, the House of Lords turfed out the Tees and Hartlepool Port Authority Bill because it was said that the Government were introducing a Ports Bill. The Government must have been cognisant of the provisions of their own Bill, which rejects financial assistance for management takeovers, whereas the Tees and Hartlepool Port Authority Bill allowed for such assistance. That reveals a dichotomy in Government thinking. They supported the provisions of the private Bill on management takeovers, but the public Bill does not embody support for the same principle. The Minister is a reasonable man. He must respond to that argument. I do not think that his promotion prospects will be diminished if he responds in the proper manner.

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

I now have the timetable before me, and I hope that it will not stretch your patience too much, Madam Deputy Speaker, if I give some details. As the hon. Member for Hartlepool (Mr. Leadbitter) said, the Bill was laid on 27 November 1989 and Second Reading was on 15 March. I remember enjoying the hon. Gentleman's speech on that occasion, although I hope that his speeches tonight will be shorter. The Bill went into Committee on 15 May and came out on 25 July. Third Reading was on 22 October 1990. The Bill had therefore gone through all its stages in this House when the Government's intention to introduce a Ports Bill in their own time was announced in the Gracious Speech. A revival motion was debated after the Gracious Speech, on 4 December.

On Second Reading, in response to a question about the private Bill from the hon. Member for Greenock and Port Glasgow (Dr. Godman), my right hon. and learned Friend the Secretary of State said: No such advice will be given to the sponsors of that Bill or to the sponsors of the Tees and Hartlepool Port Authority Bill which is going through this House. Those private Bills were sponsored by the port authorities in question. It is entirely for them to decide whether they wish either to continue with their Bills or to wait and then use the provisions of this Bill." —[Official Report, 28 January 1991; Vol. 184, c. 670.] The Tees and Hartlepool Port Authority Bill did not go all the way through the House of Lords, although I understand—I am not 100 per cent. sure of the procedure in the other place—that an attempt could be made to overturn the Committee's decision. We have always made it perfectly clear, as the Secretary of State did on Second Reading, that the provisions of any of the private Bills before the House at that time might come within the scope of this Bill if they did not succeed. That is what the House is discussing now.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

Before he finishes speaking, will my hon. Friend reflect on what the hon. Member for Hartlepool (Mr. Leadbitter) said about the reasons why their Lordships threw out the private Bill of which I was a sponsor? The report said that it was not felt that the management would have the experience to move into new areas of activity. What has changed, now that we are dealing with a Government Bill? Why should managements now be deemed to have sufficient experience to overcome the objections voiced in the House of Lords?

Photo of Patrick McLoughlin Patrick McLoughlin The Parliamentary Under-Secretary of State for Transport

We have always made it plain that any trust port can come under the provisions of the Government's Bill. I cannot be responsible for the reasons on which the upper House decided, in its wisdom, to report. All that I can be responsible for is the Bill at present before the House of Commons. I commend the new clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.