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Question accordingly agreed to.


That this House notes with approval the progress which has been made towards returning to the private sector the shipbuilding yards and other facilities owned by British Shipbuilders ; notes also that, despite every effort, it has not proved possible to establish a viable basis for continued shipbuilding at North East Shipbuilders Ltd. ; and warmly welcomes the measures proposed by Her Majesty's Government to encourage new enterprise and employment opportunities on Wearside.

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Orders of the Day

Transport (Scotland) Bill

Order for Second Reading read.

7.26 pm

The Secretary of State for Scotland (Mr. Malcolm Rifkind) : I beg to move, That the Bill be now read a Second time.

The purpose of the Bill is to privatise the Scottish Bus Group, to make provision for the future of Caledonian MacBrayne and to dissolve the Scottish Transport Group. It will lead to a major change in the organisation of Scotland's public transport system and it marks an important further stage in the Government's policy of returning nationalised industries to the private sector.

The objectives of the Government's privatisation policy are, first, to increase real competition and as a result to increase efficiency and responsiveness to the consumer ; secondly, to widen share ownership ; thirdly, to release enterprise by removing Government controls from industry ; and fourthly, to create new locally based Scottish companies which will strengthen the private sector in Scotland.

The Scottish Transport Group is a significant employer in Scotland. It employs about 10,000 people, providing bus and ferry services. The main subsidiary of the group is the Scottish Bus Group, which employs about 9,000 people. With its 3,000 buses, it is a dominant force in the Scottish bus market. Through its various geographical subsidiaries, it provides over half the local bus services in Scotland. Some of these companies had their origins in the great period of bus expansion. The bus industry was then responding to a growing demand for popular travel. Although it is still a lively and innovative industry, bus operators now face a different situation. The growth of car ownership is mirrored by a long-term decline in the number of people travelling on buses.

However, it is far from being a dying industry. When an economy is growing, the demand for travel grows as well. Public transport has to respond to this and also to new types of transport demand. For instance, increased car ownership can lead to congestion in cities and to the need for public transport to provide a better way of moving large numbers of people on limited road space. New types of vehicle, such as minibuses, can offer cheaper and more flexible ways of meeting demand which cannot be met by larger buses on major routes.

In order to let the bus market respond to the changing demands of the public transport market, it was necessary, first, to free it of the restrictions of regulation which had governed its operations for 50 years. We did that in 1986, when bus services throughout Scotland were deregulated on 26 October of that year. From that date, subject to safety requirements and avoidance of congestion, a bus operator was free to run a service wherever he saw a commercial opportunity. The system was designed to encourage the bus operator to find out what the public wanted and provide it.

There were many prophets of doom who said that deregulation would not work and that rural bus services would disappear. That has not happened. Local authorities have used their subsidy powers wisely. The

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network of rural services remains intact. What is more, local authorities have been able to get their subsidised bus services at significantly less cost. Far from leading to a decline in bus services generally, deregulation actually led to an increase in the number of vehicle miles operated. Critics have said that these extra miles are on existing routes. Some of them are, and the result is that the busy routes, which were once the preserve of a single operator, now have competition. This means more buses and downward pressure on fares. In some cases there have been significant fare reductions.

Deregulation has also allowed new operators to emerge. In Scotland, 40 new firms have, since deregulation, provided local services. The number of vehicle miles provided by independent operators has increased by a third. Deregulation has encouraged innovation. There are more minibuses providing new services in housing estates. There are hail-and-ride services.

Having deregulated bus services in Scotland, the next step in making the industry more responsive to its customers is privatisation. The privatisation of the Scottish Bus Group will create 11 new locally based companies where previously there was only a single, dominant, nationalised industry.

Mr. James Wallace (Orkney and Shetland) : I hear what the Secretary of State says, but would he be concerned if the result of privatisation were that the 11 separate companies were all bought up by a single company? Does he believe that that would promote competition, and will he seek powers to try to prevent that from happening?

Mr. Rifkind : I would be intensely disappointed if that were to happen, but I do not believe that it will. I shall deal later with the Government's approach to the flotation of the individual companies, which will be relevant to the hon. Gentleman's point. We have three important aims in our privatisation of the Scottish Bus Group. I want to explain in greater detail how each will be achieved.

The first aim is viaible and sustained competition. As I announced to the House on 30 November, the Scottish Bus Group, with its 3,000 buses, will be split into 11 units. These will vary in size, depending on local competition. Seven of the units will be existing subsidiaries of the Scottish Bus Group. The number of buses will range from 122 buses to 340 buses. All broadly correspond to the boundaries of a regional council, although since deregulation there are no longer exclusive territories. Two further companies will be created by combining Western and Clydeside and by combining Central and Kelvin. That will create two companies of around 700 buses and provide balanced competition with Strathclyde Buses, which is of similar size. In addition, Scottish CityLink, the coach firm, and SGB Engineering will be separately privatised to make the total of 11 units.

We believe that the Scottish travelling public will benefit from the creation of a number of new independent companies that can sustain vigorous competition.

Mr. David Marshall (Glasgow, Shettleston) : The Transport Act 1985 led to the privatisation of the National Bus Company in England and Wales. The Government saw fit not to privatise the Scottish Bus Group at that time.

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What has happened since then to bring about that change of policy? What is the benefit of privatising the Scottish Bus Group now when there was apparently no benefit from doing so three years ago?

Mr. Rifkind : The hon. Gentleman will recall that we did not then rule out the privatisation of the Scottish Bus Group. Two aspects led to no measure being introduced at that time. First, we wished to give priority to deregulation. We believed that it was such an important change that it had to be allowed usefully and comprehensively to come into effect. Secondly, we thought that it would be viable to look at what happened after the National Bus Company was privatised. The privatisation has been successful and it has led us to conclude that the time is ripe to introduce these proposals.

We considered whether we should divide the Scottish Bus Group into an even larger number of units in order to create more widespread competition. We were much impressed by the enthusiasm of the work force of the Bannockburn depot to set up their own company. We took their proposals very seriously. However, we decided that a smaller number of larger companies would also ensure vigorous competition and would at the same time provide greater stability of services.

Mr. Harry Ewing (Falkirk, East) : I notice that in the Secretary of State's recent statement and in his speech this evening he has deliberately referred to the workers at the Bannockburn depot. Is he aware that they wrote to me personally and, I suspect, to a number of my hon. Friends and complained about the fact that their Member of Parliament had refused to provide them with the information that they needed on which to base their inquiries about buying the depot?

Mr. Rifkind : That is untrue.

Mr. Jimmy Hood (Clydesdale) : Not at all.

Mr. Rifkind : I am sorry ; I repeat that that is quite untrue. I do not know what they have said to the hon. Member for Falkirk, East (Mr. Ewing), but the allegation that he has reported to the House is untrue. After the meeting between my hon. Friend the Member for Stirling (Mr. Forsyth) and his constituents from the Bannockburn depot, he discussed their request with me and we took measures to ensure that the information that they had requested was made available to them. I personally ensured that the Scottish Bus Group would ensure, for its part, that the information would be made available to the people concerned.

If the hon. Gentleman has received such a letter, I should be grateful if he will pass it to me so that we may consider what points have been made. I am entirely confident that, quite apart from his enthusiasm for the proposals, my hon. Friend has complied 100 per cent. with the responsibilities that he would properly have undertaken as a local Member of Parliament.

Obviously the pattern of sales depends on the bids that are made, but it is clear that bus competition will be maximised if the new companies that we are to create form a net addition to the number of bus companies that are already operating.

Our second aim is local control and responsiveness to local needs. The existing organisation of the Scottish Bus Group obviously makes provision for decisions to be devolved to local management. However, we want to

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increase this local responsiveness by setting up independent companies that are locally based and that are in close touch with the communities they serve.

The new companies will be free both from the central control of being part of a large group and free from Government controls over their investment. We took that into account in our decisions on the pattern of privatisation. I know, for instance, that the Borders was keen to retain its own locally based bus company, Lowland Scottish, which it has had since 1986. This local company was able to be more responsive to local needs. I was glad to be able to announce that Lowland Scottish would be privatised as an individual company. Elsewhere, the scale of the companies should allow them to be in close touch with their communities.

Our third aim is to widen share ownership and increase employee involvement in the firms in which they work. I was delighted to see the widespread interest shown by management and employees in buying their own companies which followed on my statement on 30 November. For instance, a substantial number of the work force at Strathtay Buses are already contributing to a savings scheme to buy shares in their own company. In Northern Scottish, which serves Grampian, staff have also started a savings scheme and are keen to take part in a buy-out. Highland Scottish staff have started a savings scheme. In Midland and Fife the management are keen to mount bids involving the staff. In fact, I would expect that in every bus company a management-employee buy-out proposal will be developed.

Mr. Alistair Darling (Edinburgh, Central) : May I ask the Secretary of State a question that I asked him yesterday on electricity privatisation but which he failed to answer? Even if there is a management buy-out, what will he do if the shareholders in the new company sell to a third party? That happened in England. There were management buy-outs, after which there were sales to Gibraltar and other places. How will the Secretary of State ensure that control over the Scottish bus industry remains in Scotland ; or is he concerned only about the location of its head office--never mind who owns and controls the undertaking?

Mr. Rifkind : We are seeking to encourage bids not just from management but from management and employees, combined. There is a crucial difference between the two. Apart from the obvious difference, there is also the factor that if management and employees combine in a successful bid to acquire a company, the proportion of the shares that are acquired to control the company could not lead to a change of control unless the staff as well as the management wished such a change to take place. The hon. Gentleman has referred to management alone being involved in a buy-out. That is one of the reasons why, if one had to choose between the two options, I should prefer a management-employee buy-out to succeed rather than one that involved the management alone.

Mr. Robert Hughes (Aberdeen, North) : The Secretary of State says that he is keen on employees becoming involved in the ownership of companies. Will he arrange for the Bill to provide for a minimum number of employee shareholders, and will he also provide for the right of veto by employees to prevent sale to a third party?

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Mr. Rifkind : If the hon. Gentleman waits for a moment, he will find that I am about to refer to the provisions in the Bill that represent Government policy on that matter. It will answer at least part of the question that he has put to me. Staff and management in virtually all the companies in Scotland have expressed their support for the possibility of a buy-out, and I am delighted to read of the support for buy-outs which is forthcoming from the trade unions. It was reported in the press that the Transport and General Workers Union will encourage its members to participate in buy-out schemes. The Unity Trust, which is financed by the trade union movement, has already helped to provide the funds for a buy-out in England. I understand from the press that there are to be discussions about its involvement in the Scottish Bus Group privatisation.

We in the Government will play our part. In my recent statement to the House, I said that I was keen that this privatisation should increase employee participation and that financial assistance would be provided to management-employee teams who are considering making a bid. Hon. Members on both sides of the House welcomed this undertaking. The financial assistance will be designed to enable management-employee teams to obtain the professional, financial and other advice necessary to enable them to put forward credible proposals for purchasing their companies. It will be available to one management-employee team per company.

The aim is to ensure that, when developing proposals, management-employee teams are not disadvantaged as compared with existing companies in the private sector who already have their own sources of professional advice and may be contemplating making bids. The assistance will be available in the form of an underwriting, by the Scottish Transport Group, of a proportion of the fees which teams will incur. In the event of a bid being successful, the assistance will require to be repaid. If, however, the bid fails, the greater part of the fees will be met.

I am pleased to announce that the level of assistance in such cases will be 75 per cent. of the costs of approved fees for the preparation of a detailed bid, in each case not exceeding £65, 000--that is, maximum assistance of £48,750. In addition, the Scottish Transport Group will run seminars for managers and make a video on buy-outs which will be shown at depots. [Hon. Members :-- "Hear, hear".] I am delighted at this enthusiastic welcome for initiatives which the Government have in mind. We have not yet decided who will feature in the videos, but I am open to constructive suggestions from Opposition Members.

I was also asked what other form of preference would be given to management -employee teams--in particular whether they would be given financial assistance towards the bid itself. I am bound to say that it would be somewhat circular for the Government to give money to a potential purchaser to buy an asset from the Government. An element of financial preference was given to management buy-outs in the National Bus Company privatisation.

I have already said that we want a rather different pattern of bids in Scotland, with much greater involvement by employees. This is already evident with the widespread reports of management-employee interest. We would clearly wish to give some preference to management-employee proposals, but I have already made it clear that

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we cannot give a guarantee that any one type of potential purchaser will always succeed, irrespective of the price offered.

As hon. Members will see from clause 2, price is not the only consideration which I shall take into account when deciding on which bids to accept. The main test will always be the promotion of sustained and fair competition. Subject to that, the other considerations I will have to take into account are employee participation and price. New Scottish-based companies with significant employee participation will clearly satisfy some of the competition and participation objectives, but it is essential that the price is also relevant to the value of the assets.

Hon. Members will wish to note that we have given greater emphasis to employee participation in the Bill than was the case with the National Bus Company disposals in the Transport Act 1985. In particular, clause 2 provides that emloyee participation should be taken into account--with the question of sale proceeds, and subject to the main objective of promoting competition--in framing the disposal programme. In the 1985 Act, employee participation was not taken into account when the programme was being prepared and it was taken into account only so far as practicable when it was carried out. This difference in emphasis reflects our keenness to have

management-employee buy-outs, provided, of course, that a proper price is paid for public assets.

I welcome the proposal put forward by the management and employees of Grampian Regional Transport to buy their company from its owners, Grampian regional council. I particularly welcome the fact that the buy-out has the support of all policital parties on Grampian regional council. The proposal provides for substantial employee participation in the company through an employee share ownership plan. Discussions between the regional council and the Scottish Development Department are now at a very advanced stage and I expect, subject to studying information sent to me yesterday by the council, to be able to give formal approval to the proposal soon.

I very much hope that the three other public transport companies--in Edinburgh, Glasgow and Dundee--will follow the same course as Grampian and provide their employees with the same opportunity to participate in the ownership of their companies.

Mr. John McAllion (Dundee, East) : When the Secretary of State last made a statement on this matter, he said that there was evidence of support among employees of the Tayside public transport company for privatisation. I asked him to give us the evidence, but he did not provide any. Will he take this opportunity to give us the evidence which led him to claim that there is support among employees of the Tayside public transport company for privatisation and a buy-out?

Mr. Rifkind : I notice that the hon. Gentleman mentions employees and does not dispute the claim about management. It appears that there is common ground between us that the management in Dundee are keen on a buy- out.

Mr. McAllion indicated dissent.

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Mr. Rifkind : The hon. Gentleman shakes his head at that, too. All I can say is that that is the information that I was given. If the management and the employees show that they are uninterested in having the same opportunities as the management and employees in Grampian, that will be interesting. In Strathtay, which operates in a comparable part of Scotland, we have found that that is not the view of employees.

The other component of the Scottish Transport Group is Caledonian MacBrayne. It provides essential ferry services on the west coast of Scotland. It has 28 vessels of varying types and sizes, depending on the different requirements of its 26 routes and employs about 800 people. When we came to office we increased the support for Caledonian MacBrayne significantly in real terms. During the past three years, we have been able to reduce subsidy while keeping the general level of fare increases in line with inflation. The reduced subsidy reflects a reduced need for subsidy to provide the same level of service--it is not a reduction in our commitment to ferry services. It is the result of reduced oil prices, increased carryings and increased efficiency. We are anxious that this trend should continue, and that the company should further reduce subsidy while maintaining the standard of service.

Since 1979, there has been substantial investment in CalMac. We have approved £22 million in new vessels and £6 million on new piers. In 1984 the new Isle of Arran came into service, and in 1985 the new Hebridean Isles came into service. In 1987, the new Isle of Mull was launched at Port Glasgow and early next year a new vessel to serve Barra and Lochboisdale will be launched, also at Port Glasgow. Linkspans have been added to the piers at Uig, Tarbert, Lochmaddy and Colonsay. A linkspan is at present being built at Barra. These are greatly improving the time for unloading and the quality of the service.

For the most part, however, these services do not make a profit, and a subsidy of about £6 million a year is required. I have always been clear that Caledonian MacBrayne is not a straightforward case for privatisation. The first priority in any arrangements is to guarantee the lifeline services which they provide. It is for this reason that, having studied the issues carefully, I have decided that, on the dissolution of the Scottish Transport Group, the ownership of Caledonian MacBrayne should be transferred to the Secretary of State. The Bill makes provision for this.

I intend to appoint a new board for the company, which will contain persons with commercial expertise, including some with first-hand knowledge of the islands served and their needs. That is vital to ensure the responsiveness of the company to its customers. As a matter of priority, I would look to the new board to examine the possibilities of relocating the headquarters nearer the centre of the area which it serves. Oban seems likely to prove a suitable place for this purpose. I shall also ask the new board to explore the possibility of transferring to the private sector the Gourock-Dunoon and Wemyss bay-Rothesay routes. It is anomalous that Caledonian MacBrayne operates a substantial service on a route similar to one operated by an unsubsidised private operation. In the longer term, I will expect the board to examine carefully all existing practices in the company's operation with a view to providing more efficient and cost-effective ways of providing at least the present standard of service.

No options for the longer term will be excluded, subject to the overriding proviso that they must ensure at least the

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present quality of service to the islands. I consider that, with its own board and independence, CalMac will be well placed to continue to provide an improving and cost-effective service to the islands.

The Government attach great importance to improved communications for the remoter parts of Scotland and, in particular, for the islands. As I have mentioned we have provided substantial resources for Caledonian MacBrayne. We also believe that the smaller islands should not be neglected. In Orkney, a substantial improvement is being carried out in the internal ferry services supported by Government grant. Last week we announced that we would be paying grant on two new roll-on/roll-off vessels for the outer North Isles of Orkney. We accept that, in per head terms, the cost of providing adequate communications for small remote islands may appear large. However, we believe that, within limits, everyone should enjoy benefits of improved communications.

A good example of the problems of improving communications in remote areas is Vatersay in the Outer Hebrides. In 1985 my predecessor announced that he was prepared to pay grant on a causeway linking Vatersay with Barra. Since then, the islands council has taken forward the necessary preparatory work promoting a parliamentary order and carrying out a hydrographic survey. The main obstacle to further progress was accommodating such a project within its normal capital allocation. I am happy to announce today that I shall be making a special addition to the islands council's capital allocation for 1989-90 and for the following year to accommodate the building of the Vatersay causeway.

I understand that Vatersay has seen an alarming drop in population in recent years and also that it is the firm view of the islands council that this trend can be reversed with improved communications. I therefore look to see a return of population to Vatersay with the improved communications which this causeway will bring.

In addition to the bus group and CalMac there are also a number of minor interests of the Scottish Transport Group to be disposed of, including the SMT Insurance Company and Sanderson Travel, before the Scottish Transport Group can be dissolved. The future of those subsidiaries is being considered at present, with the help of my financial advisers, Quayle Munro. I may decide that some such disposals should take place prior to the passage of the Bill under the Scottish Transport Group's existing powers to dispose of activities not required for the on-going purposes of their business. Any disposals made in advance of legislation will, however, be limited to these minor interests and will not include any of the operating subsidiaries of the Scottish Bus Group.

I should like to turn briefly to the detailed provisions of the Bill. The first part deals with the bus group. It gives me the power to draw up, after consultation with the Scottish Transport Group, a programme for the disposal to the private sector of the Scottish Bus Group's subsidiaries and the minor subsidiaries of the Scottish Transport Group. It provides that, in preparing that programme, my main objective will be to promote sustained and fair competition. I am further required to have regard to the desirability of encouraging employee participation, a matter to which I have already referred, and to the effect of implementing the disposal programme on the net proceeds to be expected from all disposals.

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The Scottish Transport Group will be required to implement the disposal programme within a time scale which will be specified in the programme and will be given the necessary power to make any necessary preparations-- for example, by forming subsidiaries or transferring property rights or liabilities between them. In implementing the programme, the group will be required to have regard to my main objective of promoting sustained and fair competition, and to the other considerations relating to employee participation and disposal proceeds relevant to the drawing up of the programme. Each disposal will require my consent. The group is furthermore required, in conducting its business in the period before privatisation, to have regard to the estimated effect of its activities on the likely net proceeds of sale.

Part II of the Bill relates to the group's shipping operations and simply provides for the transfer of ownership of Caledonian MacBrayne to me on a date to be appointed, after suitable preparations have been made. It also provides that the annual accounts of CalMac should be laid before Parliament while the company is in my ownership. There is also provision for the Secretary of State to give any necessary directions and to guarantee borrowing by the company. Part III of the Bill contains a number of general provisions including powers to enable transitional arrangements to be made, should they be needed, with regard to group services and pensions, financial provisions and powers to dissolve the Scottish Transport Group once the disposal programme has been completed and the ownership of Caledonian MacBrayne transferred to the Secretary of State.

The Bill has important implications for the future of Scottish public transport. It will create new locally based Scottish bus companies designed to provide competitive bus services. That will benefit the traveller who stands to gain from the competition among a number of companies. It will give a boost to Scottish enterprise. It will provide Caledonian MacBrayne with its own independent board and the stimulus to increased cost- effectiveness and responsive to its island communities.

The reaction of the employees and management of the various companies that make up the Scottish Bus Group demonstrates that they are enthusiastic about the opportunities that are now available to them. In Grampian there is all-party support for similar proposals for the passenger transport company in that area. If the Labour party, the Democrats, the Nationalists and the Conservatives in Grampian believe it is right to give employees and management an opportunity to own the bus company in which they work, I hope, although I cannot anticipate, that the same parties in the House will not wish to deny management and employees elsewhere in Scotland similar opportunities. If they wish to deny them, it will certainly be appropriate and opportune for an explanation to be given as to the differences between their approach to Grampian and to the rest of Scotland. The Bill offers exciting opportunities in the bus industry which will benefit the consumer as well as the employees and management. Accordingly, I commend the Bill to the House.

7.55 pm

Mr. Brian Wilson (Cunninghame, North) : I begin on a note of total harmony, by welcoming very warmly the Secretary of State's announcement about the causeway to

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Vatersay. That is a matter close to my heart and the heart of my hon. Friend the Member for Western Isles (Mr. Macdonald). I have not the slightest doubt that, without that announcement, the island of Vatersay would have gone the way of other Hebridean islands and within a relatively short time would have been left devoid of population. That would be particularly inappropriate as Vatersay is populated largely by people whose forebears came from the island of Mingulay, when it became depopulated due to the lack of a reasonable harbour. I welcome the announcement very warmly and advise my hon. Friends that, if they want £3 million on Wednesday, they should get an Adjournment debate on Thursday.

At that point, the harmony ends. We have heard from the Secretary of State the familiar fable about thrusting competition, undisturbed rural services, eager shareholders, and delighted consumers--a veritable Brigadoon. It is all the more remarkable that the party that the right hon. and learned Gentleman stands for measures its support at 19 per cent., even in Brigadoon. He spoke of real competition and new locally based Scottish companies, but all those delights are speculation. None of it is in the legislation. Furthermore, there is absolutely nothing in the English experience that leads us to believe that the picture that the Secretary of State has painted is likely to become reality.

We are against the privatisation of the Scottish Transport Group and of the Scottish Bus Group in particular. We consider it an unnecessary measure, and we believe that we should leave well alone. We believe that there is no demand from consumers or employees of the Scottish Bus Group for its privatisation. Now, through yet another unwelcome piece of Conservative legislation for which no mandate exists in Scotland, we are engaged in a damage limitation exercise.

Mr. Rifkind : So that we can be clear about the hon. Gentleman's position and that of his party, is he saying explicitly that, even if he could be satisfied that every company that is to be privatised would be sold to a management-employee buy-out, nevertheless he would advise his hon. Friends to vote against the Bill because of his opposition to privatisation?

Mr. Wilson : I shall come to that in good time. For the moment, it is important to note that that is not what is in the Bill. In spite of the Secretary of State's impressive sleight of hand in attempting to suggest otherwise, that is not what is on offer, so he asks me a hypothetical question.

Mr. Nicholas Bennett (Pembroke) : What is the hypothetical answer?

Mr. Wilson : The real answer will come in a short time, if the hon. Gentleman can contain his red-tied eagerness.

Scotland needs a comprehensive, integrated bus service. That service can be run only with due regard for the social interest. In this, as in so many other matters, that is the philosophy which the Government have deserted.

The Secretary of State spoke about the need to respond to changing times and the increase in private car ownership--all of it true--but the implication that, because more people own private cars, we need less social remit in the public transport service which remains, stands truth on its head. The fact that proportionately more

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economically disadvantaged people and people living in rural areas depend on public transport is the justification for leaving the service in public hands and having a social remit rather than a justification for the priority of private profit.

No transport debate can be complete without reference to safety considerations. There is much talk about bus competition. The Secretary of State referred repeatedly to "real competition", as though it were universally accepted that that was a condition to which to aspire. As we watch the deregulated competitive buses hurtling down the A9 or the unimproved A74 or the unextended M8, some of us question whether competition on the roads is such a wonderful idea. We sometimes have the uneasy feeling that here is yet another disaster waiting to happen.

We do not believe that the product of the exercise will be a series of worker and management-owned and controlled bus companies throughout Scotland. We would conditionally welcome that. We see the Bill as an opportunity on the cheap for the expansion of large and powerful operators whose loyalty is not to communities, levels of service or working conditions. The loyalty will be to profit. How that profit is gained will be a matter with which the Government will not concern themselves too much.

I want to take up the points that the Secretary of State made about Grampian. The right hon. and learned Gentelman trumpeted Grampian loudly, both when he announced the legislation and again tonight. We are told that Grampian is to be held up as the model of political unity on the joys of privatisation. That is rubbish and a travesty of the truth.

In June, when the Secretary of State initially intimated his intention to privatise the Scottish Bus Group, naturally the municipal bus authorities and those who run them listened to his words and started to draw some uncomfortable conclusions. Bus Business of 15 June 1988 stated :

"Scotland's four municipally-owned bus operators have been thrown into doubt about their future by the suggestion from Scottish Secretary Malcolm Rifkind that his announcement about the break up and privatisation of the Scottish Bus Group drew attention to their somewhat anomalous position' ".

The Secretary of State went on to say tactfully that the Scottish Bus Group decision must have "implications for them". The municipal bus authorities saw a thinly veiled threat that they were next to go down the road taken by the Scottish Bus Group. Not surprisingly, they looked again for ways to pre -empt, and engage in damage limitation. To say that the people who controlled and operated these municipal services in Grampian and elsewhere were advocates or supporters of privatisation is not true.

Mr. Rifkind : I have listened to the hon. Gentleman with considerable fascination. If he suggests that Grampian regional council has no choice and that the employees, management and the council are simply indulging in what he calls "damage limitation", can we hear whether he would advise Strathclyde, Lothian and Tayside to indulge in damage limitation and to privatise their companies for the same reason? Will the hon. Gentleman make that clear? If the hon. Gentleman would not so advise them, why are those councils somehow judged by different criteria to those applying to Grampian?

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Mr. Wilson : I am surprised that the right hon. and learned Gentleman's normal facility for words has deserted him. He seemed to be under the impression that my comment that Grampian made a pre-emptive strike was synonymous with what he suggested I said, which was that it had no choice. I should have thought that those were two different concepts. On a good night, the Secretary of State would have no difficulty in distinguishing between them.

What about Strathclyde? I am not here to advise local authorities on how to react. I have no doubt that, on exactly the same basis, they will have to make exactly the same calculations as Grampian has done. The emphasis is again on damage limitation and pre-emptive strike--not, as the Secretary of State suggests, on the wishes of employees local authorities, Opposition parties and, least of all, consumers. That is the distinction.

Mr. Robert Hughes : Having had extensive discussions with employees in the Grampian bus companies, I assure my hon. Friend that he is right. The approach to privatisation is one not of enthusiasm but of resignation and desperation. The employees were terrified that their fate would lie in the hands of the Secretary of State.

Mr. Wilson : I am grateful to my hon. Friend. He is right and reinforces my point.

The next point of distinction involves the way that

"privatisation"--if the Secretary of State demands the use of that word-- was carried out. Bus Business of 28 September 1988 stated : "A council spokesman said that the company was not on the open market' and that the management and staff of the bus company were the only present bidders. But it was not clear this week if Rifkind would allow the deal to go through, or if he would rule that the company should be offered for sale to all- comers."

The Secretary of State seems anxious to draw parallels. He told us that tomorrow he will approve this great privatisation exercise. Is he drawing the same parallel with the Scottish Bus Group? If, on the same terms, those involved in the employee-management buy-out seek to take over without the companies going "on the open market" but they are offered directly to them as "the only present bidders", will the right hon. and learned Gentleman maintain the parallel that he has sought to draw and accede to those demands? Apparently, the right hon. and learned Gentleman does not wish to intervene at this time. That deals easily with the Grampian issue of which the Secretary of State made such a meal. The Grampian structure provides for two councillor directors and two worker directors. If that is the kind of arrangement that the Secretary of State wants, he should withdraw the legislation, go back to the drawing board and do exactly as Grampian has done, and we shall give close consideration to supporting that as a decent compromise in the public interest.

But that is not what the right hon. and learned Gentleman expects to see or has any interest in seeing. He does not want anything similar to what Grampian has done. In his heart, he knows that this is a cowboy's charter and an invitation to asset strippers. He knows that the majority of those who work in the Scottish bus industry will pay the price of this legislation in jobs and conditions rather than end up as proud co-owners of the industry in which they work. The folksy image of conductors controlling their destinies as well as their ticket machines

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is largely a myth. We need not look in a crystal ball, because we can read the book--the one that tells the story of what has happened in England.

We listened in vain to the Secretary of State, hoping for new information. He moved around the subject. He said that he was delighted to hear about widespread interest in management-employee buy-outs. He said that he was keen--the one thing that no one would accuse the right hon. and learned Gentleman of not being is keen--and enthusiastic about management-employee buy-outs. We listened in vain for new information about how these are to be encouraged, or, indeed, made possible. The Minister's fig leaf of enthusiasm for employee buy-outs has not expanded. Nothing turns that aspiration from pious hope even to a reasonable prospect of reality. Even if some management-employee buy-outs succeed, the Bill contains no safeguards against predatory takeover, probably within months, rather than years. We shall fight in Committee for those safeguards, and the Government's good will in the whole question of management-employee buy- outs will be judged by their responses.

Why have we heard so much in Scotland about these

management-employee buy-outs when we know that the legislation does nothing to promote them? It is lip service to the political climate in Scotland. The reasoning is that the Government might get away with it if they say often enough that they are trying to promote management-employee buy-outs. That might then have some credibility in Scottish public opinion and make the idea seem a little less naked and foolish than it would otherwise. As usual, the Conservative party in Scotland underestimates the intelligence of the people to whom they are appealing. People can easily see through the Government's plan. They will not listen to tonight's fine words, but will look at the legislation and the reality that eventually emerges.

Unless the means of promoting management-employee buy-outs are written into the Bill, the Minister's avowal of sympathy for them will be seen as hollow and hypocritical. No one can serve two masters. If the Government are legislating in the interests of Stagecoach and its ilk, no number of honeyed words will disguise that fact.

Clause 2(2) of the Bill states :

"The Secretary of State shall have regard to the desirability of promoting the acquisition by persons employed in any undertaking or part of an undertaking which is to be the subject of a disposal under the programme."

Those words are meaningless unless the Government choose to make them meaningful. There will be no shortage of support in Scotland for such a course.

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