House of Commons Hansard Debates for 2 Jul 1990

Column 795

Ways and Means

LEVY ON PORT PRIVATISATIONS

Motion made, and Question proposed,

That provision may be made for a levy on disposals of securities of companies to which the undertaking of a harbour authority is transferred and companies which control such companies and for the payment into the Consolidated Fund of payments of levy, interest on unpaid levy and penalties in respect of levy.-- [Mr. Lilley.] 11.18 pm

Mr. Bob Cryer (Bradford, South) : On a point of order, Mr. Deputy Speaker. Notices of amendments were given to Standing Committee E on the Finance Bill and they relate to the two resolutions, the first of which has just been disposed of. Will it be in order to discuss any of the new clauses, which are clearly relevant to the debate? Are the new clauses the property of the Committee until it makes a decision and reports to the House? I think that I know the answer to my questions, but, naturally, I seek your confirmation and guidance. If we are excluded from debating these matters, the House is being outrageously dealt with by the Government.

Mr. Deputy Speaker (Mr. Harold Walker) : The hon. Gentleman is interpreting the advice that has been given to me, which is that it would be in order to discuss the matters to which the motion applies.

11.20 pm

The Financial Secretary to the Treasury (Mr. Peter Lilley) : I shall endeavour to respond to some of the points raised but not answered on the previous motion. I shall be as brief as possible because I know that the House does not want to keep itself from its bed.

The Government have tabled six new clauses to the Finance Bill to provide for a 50 per cent. levy on the proceeds of the privatisation of trust ports. The House will be aware that two trust ports--the Tees and Hartlepool port authority and the Clyde port authority--are seeking to turn themselves into companies by means of private Acts of Parliament. The Government welcome that initiative because we see considerable benefits from early privatisation which will remove unnecessary restrictions on the way in which the port businesses can be developed, allow ports to develop their assets and give them a more flexible capital base while exposing them more fully to the disciplines of the market. The Government believe that privatisation will increase the efficiency of the trust ports and lead to a better service to port users.

The trust ports are owned not by the Government but by the state. It must be for Parliament to decide who should benefit from the proceeds of sale. In the Government's view, a proportion of the proceeds should go to the Exchequer. The clause provides that this proportion should be 50 per cent. It is a matter of judgment what the right proportion should be. In making their decision, the Government have tried to be fair to all the parties involved, including the ports and the Exchequer.

Mr. Tim Devlin (Stockton, South) : Will the only deductions from the capital raised by the flotation be the 50 per cent. taken by the Government, or will tax be levied on top of that?

Column 796

Mr. Lilley : Tax will apply to the proceeds in the normal way, but the levy will be a cost to be deducted in calculating any capital gain, which will be liable to capital gains tax. Therefore, the capital gain left after the levy will bear the burden of capital gains tax.

Mr. Devlin : What proportion of the total proceeds will be left with the successor companies?

Mr. Lilley : Clearly the proportion will be somewhat less than 50 per cent. How much capital gains tax is required will depend on the capital gain and the companies' ingenuity in reducing the capital gains tax that they pay.

Mr. A. J. Beith (Berwick-upon-Tweed) : A moment ago the Minister said that the ports were owned by the state. What is the state in this context? If it is not the Crown, can he explain any basis of English law in which there is something called the state which can own ports?

Mr. Lilley : It was the courts which used the term "owned by the state". It is not a term that we have added to their vocabulary. It comes from the vocabulary of the courts.

It is a matter of judgment to decide what is the right proportion that should be taken in the form of a levy. In making their decision, the Government have tried to be fair to all parties, including both the ports and the Exchequer. We had to take into account several factors. Factors which suggested a higher Exchequer share included the need to safeguard the interests of the taxpayer, who has contributed to the development of the trust ports, albeit on a relatively modest scale ; and the need to ensure a level playing field between the newly privatised trust ports and ports already in the private sector. Allowing the trust ports to keep the majority of the proceeds would give them an unfair commercial advantage over ports already operating privately.

There were several arguments in favour of a lower Exchequer share. They included the desirability of rewarding the initiative shown by authorities such as the Tees and Hartlepool and the Clyde port authorities of introducing private Bills ; the benefits of early privatisation ; the need to retain an incentive for other trust ports to seek privatisation ; and, of course, the ports' intention to use some of the funds to invest in new developments and develop their existing assets.

Mr. Devlin : I apologise for interrupting my hon. Friend again. If the proposals are accepted--this is of fundamental importance to the privatisation of the two ports--there will be no incentive for any other port to follow in their footsteps. Secondly, there will be no proper reward for the two companies that so bravely went forward where others feared to tread. Thirdly, benefit will be lost to the peoples of the Clyde and Teesside, who would otherwise have benefited, because in both instances the ports will have to go to the markets in London for their flotations if they are to make a real profit. That will be a disaster for my constituents and for the constituents of Clydeside Members.

Mr. Lilley : My hon. Friend is unduly pessimistic. I am surprised to find that he has an ally in the hon. Member for Bradford, South (Mr. Cryer). I do not accept my hon. Friend's suggestion that the ports will have no incentive to privatise. They will retain 50 per cent. of the funds.

Column 797

Mr. Devlin : My hon. Friend said that that would be taxed.

Mr. Lilley : Of course. The receipts will be subject to capital gains tax. That has always been the position and it is not being altered. We are merely reducing the net assets that will be liable to taxation.

The incentive to privatise is not only to retain funds from the issue. The ports have made a strong case--I consider it to be a convincing one--that they are hampered by the present deeds and structure of their make-up. They wish to have a private company structure and to be freed from the limitations that are now imposed on the activities in which they can engage. They would not desist because the money that they obtain will be somewhat less than previously was estimated. It seems not unreasonable that we would take 50 per cent. of the proceeds. I recall that we took 100 per cent. in the case of Associated British Ports. I do not take the pessimistic view of my hon. Friend the Member for Stockton, South (Mr. Devlin).

Mr. Stuart Bell (Middlesbrough) : If 50 per cent. of the assets are to be taken by the Government, that leaves 50 per cent. of the proceeds. If 40 per cent. is the higher rate of capital gains tax, is it not right that 40 per cent. of the 50 per cent. will further be taken by the Government?

Mr. Lilley : I imagine that in this instance capital gains tax will be paid at the corporation tax rate rather than at the higher rate of CGT, and that is 35 per cent.

Mr. Dennis Skinner (Bolsover) : Is the Minister sure about that?

Mr. Lilley : I am never sure of anything.

Mr. Skinner : I hope that that will be written down.

Mr. Lilley : Bearing in mind all the considerations which I have outlined, the Government believe that, on balance, 50 per cent. is right. As the new clause imposes a charge, we need a Ways and Means motion such as the one which is before the House.

The hon. Member for Berwick-upon-Tweed (Mr. Beith) was critical of the Government for imposing a tax and suggested that money should be diverted to employees, local authorities and others. Without a levy, it would be impossible to divert money to any specified beneficiaries, unless the hon. Gentleman proposes to do so by a thoroughly unparliamentary means such as extra-parliamentary plunder. I shall be grateful if he enlightens the House on that score.

The hon. Gentleman asked why we withdrew the ways Ways and Means motion earlier and suggested that the Government were having second thoughts and wished to alter it. We withdrew it because we wished hon. Members to be able to go home to bed after they had been debating other matters at great length. It seemed sensible to withdraw it and then to reintroduce it. The motion was tabled on Friday and copies of it were available in the Vote Office that morning. It was published on Saturday and it could have been taken home by hon. Members over the weekend.

Mr. Beith : If the House is to be asked to pass the motion, surely it must be on the basis that the Government have specific plans to channel the revenue to the good of the employees and communities concerned. On that basis, it might be worth inviting the House to approve it. It is

Column 798

apparent, however, that the Government have no plans to do that. It is on that basis that I argue that it is wrong for the money to go to the central Exchequer.

Mr. Lilley : If the hon. Gentleman believes that the central Exchequer should never receive any money from taxation or levies, he will be hard pressed to finance the public expenditure plans he supports.

In the clauses we have spelt out that up to 3 per cent. of the shares can go to employees, that 50 per cent. will be retained, before being subject to capital gains tax, by the trust ports. That money will be reinvested in the ports and in assets that have lain idle and undeveloped because of the restrictions imposed on the operations by the trustee status of the ports. The money will therefore be channelled automatically into the local authority areas. The other 50 per cent. will be available to the Exchequer to put to the excellent use to which the Government put public expenditure. 11.30 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East) : The Financial Secretary said that he is never sure about anything and, having followed him through most of the Committee on the Finance Bill, I cannot contradict him.

For the avoidance of doubt, it would be helpful to the House if I said that the Ways and Means resolution that we are discussing will enable the Government to introduce clauses into the Finance Bill tomorrow to bring in a new tax. You will know, Mr. Deputy Speaker, perhaps better than anyone in the House, that, in the normal way of things, the Finance Bill Committee is not allowed to put up taxes or introduce new ones. Our affairs are circumscribed by the resolutions passed in the House at the end of the debate on the Budget. To facilitate such an unusual course of events, the Government have come to the House, correctly in their terms, to get the money resolution and the Ways and Means resolution through.

The resolution does not serve any announced taxation policy--there was no word about it in the Budget speech or on Second Reading of the Finance Bill. It does not concern a new tax nor does it raise VAT or adjust the rates of income tax to secure better the revenues of the state. The resolution has been tagged on to the end of the Finance Bill to facilitate private legislation. The Labour party regards that as an abuse of the Finance Bill procedures. It is wrong that privatisation measures introduced through the private Bill procedure--technically they are not backed or opposed by the Government or the Opposition, but are subject to a free vote --should be facilitated by the Finance Bill.

The Labour party is opposed to privatisation measures, but that is not the matter under discussion tonight. We are discussing the share-out--the division of the money. The Government have argued that the trust ports belong not to the Government, but to the state. If that is so, surely it behoves the House to consider the mechanism by which the state offers those trust ports for sale. We are well aware that that mechanism is a private Bill passed through the House and the other place. The sale is governed by the decision of Parliament. Who is in charge of the administration of the state? It is ludicrous for the Government to try to pretend that that is not a matter for them. For whom is it a matter if not for the Government? The Government must make the decision. If the state is offering the trust ports for sale and

Column 799

the Government are in charge of the state, surely the Government keep the money realised from the sale. That, surely, is the logical position, although it is not the one that the Government are adopting.

The Government could adopt an alternative position. They could say that these institutions are somehow in limbo--not actually owned by the state and controlled by the Government but more distant. The analogy might be with a family company that is floating on the stock exchange and raising money in the same way as would any other private company that is going public. But surely, in these circumstances, the analogy should be with a company raising extra money that would accrue to the company--and to no one else, certainly not to the Government. Those seem to be alternatives : the Government cannot say that both are true, since they are mutually contradictory. So the Government will take half the money and the other half will remain with the port companies and be subject to taxation in the usual way. If the proposals are passed tomorrow, the tax obligation placed on the new limited companies will be the minimum 50 per cent., instead of the maximum.

Mr. Cryer : My hon. Friend will bear it in mind that, in the new clauses tabled for debate by the Finance Bill Committee, the Government will take powers, subject to resolution of the House, to alter that percentage to any that they deem suitable. Fifty per cent. is only an assumption, subject to alteration at the whim of the Government.

Mr. Brown : We can go on only what the Government have told us of their intentions so far, but my hon. Friend is quite right. The hon. Member for Berwick-upon-Tweed (Mr. Beith) made a similar point, and he could have gone on to say that the tax treatment of the proceeds involved in this operation is bound to affect the share price. As people consider what they will pay for the Clyde or Tees and Hartlepool port authorities--we have not even agreed to pass the privatisation legislation in respect of the latter- -they will inquire about the tax treatment of the institutions that they are buying. If a large amount of the proceeds revert to the Government, the value of the shares will fall ; and if the whole proceeds stay with the company as if it were a private company going public, presumably the value of the shares will rise.

The privatisation process is highly unlikely to help Clyde, Tees and Hartlepool or any of the other 50 small trust ports that may end up in the hands of private capital. The private investment will come from all over the country. If there are profits--especially short-term profits--to be made from the privatisation, those profits will be dispersed all over the country, not retained as they should be, in the region in which they originated. Were successor public authorities to be created, we could ensure that the profits were retained locally.

My hon. Friend the Member for Cunninghame, North (Mr. Wilson), in the debate on the Clyde port authority, mentioned the public duties placed on the port authorities--to dredge rivers for river users, to maintain lighthouses--which thereby incur expenditure that does not necessarily generate a return. How will such duties sit alongside private sector ownership? Unhappily, I suggest. In the previous debate the Government did not say what

Column 800

provision they intended to cover these matters. I suspect that the Financial Secretary will say nothing on the subject tonight, but we shall press him on it tomorrow.

Mr. Martin Redmond (Don Valley) : My hon. Friend makes an interesting point. Why have not the Government written that into the Bill? Obviously, they do not want liability to fall upon the new privatised ports and harbours--or whatever the Financial Secretary wants to call them. If liability does not fall on the privatised companies, where does it fall, if not upon the public purse? The poor old taxpayer may have to continue to pick up the bill for performing a duty that should rightly belong to the new privatised industry.

Mr. Brown : I share my hon. Friend's fears. Probably it would work like this : the newly privatised port authorities, which will command a monopoly when running the facilities of the port or harbour of which they are in charge, will say to the users, "The cost of dredging is this. If you want it done to a certain depth, you will each pay your share, and if you object to that, we won't do it." The days when the river was dredged for them, as a subsidy to industry along the river, will be over. The same may even be true of the maintenance of lighthouses, which people's lives depend on. The privatised port authority will say to users who require the lighthouse to be there, "You will pay the economic cost or it will not be maintained."

I remind the House that we are talking not merely about assets that pertain to the operation of a port authority--there is much more to it. The port authorities own assets that far outstrip the narrow function of running a port. Indeed, one of the arguments for privatisation is that full and proper economic use of those assets cannot be made under the current trust status, which relates solely to port operation. A limited company, a series of limited companies, or an owning company and another company that will run the port separately--allowing the owning company to get on with other economic activities--are required. In other words, they will get on with the exploitation of surplus land, because there certainly is surplus land in many port authorities.

Tees and Hartlepool port authority, as my hon. Friend the Member for Middlesbrough (Mr. Bell) knows, said in its notes of evidence that it is aware that

"The current members of the Port Authority at the time when the Act is implemented, will be responsible for setting up the companies and will of course constitute the Trust, which will be responsible for the sale.

The current members have said that the Bill will enable the business to have scope to develop outside the estuary, both elsewhere in the UK and in Europe, and both in the provision of port facilities and in other distribution activities.'

The current members also said again in a press statement, issued when the Bill was announced :-- The authority is determined that broadening its business scope will take place without diminishing its commitment to maintain, develop and expand the ports of Tees and Hartlepool and that direction of its activities will remain on Teesside so as to ensure that the area shares to the maximum in the benefit that willaccrue'"--

I emphasise this--

" from the development of its business on a broader scale.'" In other words, private status and expansion are intended, which, as my hon. Friends the Members for Jarrow (Mr. Dixon) and for Middlesbrough would be quick to point out, is bound to be facilitated by the existence of urban development corporations in the areas that many of the port trusts under consideration occupy. State money for economic development sits alongside new limited

Column 801

companies that have trading in spheres other than narrow port operations as a stated objective. The opportunity to make substantial profits on real estate speculation is considerable.

Mr. Cryer : I draw my hon. Friend's attention to the Exmouth Docks Bill. Exmouth is a relatively small port, and it has been closed illegally. The authority applied to the House for permission to close it, but has done so without waiting for that. Exmouth's function as a harbour has been neglected, to the detriment of the immediate hinterland, because the directors want to develop surplus land for a marina and associated housing. That area has lost a valuable transport facility.

Mr. Brown : As a Member of Parliament for the city of Newcastle upon Tyne, I am not unfamiliar with such scams. I am grateful to my hon. Friend for drawing my attention to one in another part of the country. The opportunities--and my hon. Friend gives a stark example--are considerable. I and other hon. Members must challenge the wisdom and the equity of what the Government are doing. If there is a need for a change in status for the port authorities that provide important public services, surely we should look for successor institutions in the public sector. Such institutions are quite capable of taking care of economic development functions, and of doing so in such a way that they are accountable to the local community. The social desirability and the profits of such activities are matters for the local community and not for people who happen to end up as owners of the new private sector institutions, perhaps because of their position prior to privatisation. Many people have been put in influential positions prior to privatisation by no other person than the Secretary of State for Transport, who has charge of such appointments.

The Government did not announce the new tax in the Budget. They did not announce it on Second Reading of the Finance Bill. Indeed, their first reference to the fact that they might take a share in the proceeds of the sale, other than through normal taxation--to which my hon. Friend the Member for Middlesbrough referred--was in a ministerial response on Second Reading of the Clyde Port Authority Bill. That was when they announced the proposed 50 per cent. take. It was on the evening prior to the Committee stage of the Tees and Hartlepool Port Authority Bill.

It was clear from the answers given by the chief executive of the port authority at the Committee hearing that the level of take and its mechanism had been something of a shock. That view is underscored by the fact that the hon. Member for Isle of Wight (Mr. Field), who chaired the proceedings, tabled an amendment to the Finance Bill to reduce the percentage of the Government's take. That amendment has disappeared-- [Interruption.] It has disappeared. I do not know what magic has brought that about.

Mr. Beith : The answer is simple--the Government withdrew their clause, thereby sweeping away amendments that had been tabled to it. They then retabled the clause a couple of days later.

Mr. Brown : In those circumstances, surely it would be possible also to retable the amendment--but it has not reappeared. It is probably too late as the matter is to be discussed tomorrow.

Column 802

It is important that the House realises that we are considering a Ways and Means motion that will facilitate a new levy. It is not connected with corporation tax or capital gains tax. Technically, it is difficult to understand, although the objectives are clear. The levy is payable only on a disposal of securities to what is referred to as a successor company from what is referred to as a relevant port authority. In other words, the latter can be only a harbour authority that is not already a company and is not a local authority. I am assuming that if it is a company owned by the Government or local authorities, all the proceeds of privatisation flow into the right pockets anyway, and if it is a privately owned company, it could not be privatised again.

The levy is designed to apply where a non-company harbour authority transfers its trade, an undertaking by Act of Parliament, to a subsidiary in exchange for shares. In other words, the circumstances that we are expecting to pertain following the passage of the private Bill on the Clyde port trust, and that on the Tees and Hartlepool port trust, if those Bills are passed, will apply if the companies then sell the shares. The Government may say that the levy applies only where the shares are sold by the relevant port authority or its creature. The taxation of such schemes is, by necessity, complex. It will depend on the corporation tax statutes, the harbour authority, the terms of the private Act, and the scheme for transferring the trade. However, at first sight, the levy is a second non- offsetable charge to tax. Although that may not be what the Government intend, what has been published shows that that is how the scheme will operate in practice.

Mr. Roger Moate (Faversham) : I trust that the hon. Gentleman will tell us what his proposals are. Assuming that privatisation goes ahead, what does he think should happen to the proceeds? Is he saying that 100 per cent. should remain with the new owners, or that 100 per cent. should revert to the taxpayer, or what?

Mr. Brown : I thought that I had dealt with that point. The Labour party's view is that if there is a need to restructure the Clyde or the Tees and Hartlepool trust port, there should be a successor--more modern, and perhaps more versatile, but a public authority in the public domain, representing the interests in the local community, and carrying on what are essentially public functions. The Labour party is voting against the private Bills--a fact that the hon. Gentleman has probably noticed. For the hon. Gentleman to say that, while we disagree with it, it has now been done and we should say what the tax treatment should be, is disingenuous. We do not think that it should have been done in the first place. Therefore, I see no point in answering the hon. Gentleman's question. I have made it clear that we believe that it should not have been done in the first place. It is like saying to somebody, "You don't believe in capital punishment, but if people have to be put to death, should they be hung or gassed?" It should not be done at all.

Mr. Deputy Speaker : Order. We are getting away from the resolution before the House. I hope that we shall get back to it.

Mr. Brown : I have done my best to answer the question in my terms. I am sorry that I will not come on to the hon. Gentleman's ground, and debate the details of a matter that is wholly for the Government, not the Opposition. We

Column 803

do not agree with it, so we shall not join the argument about how the spoils should be shared out. There should not be any spoils. The money should remain with the local community, in a successor public authority.

Mr. Moate : This is an important matter, not just for the ports that we are discussing at the moment but for many other trust ports. Assuming that privatisation takes place--and the hon. Gentleman volunteered that that is not what we are debating--does not it behove the hon. Gentleman to make serious proposals about what should happen to the proceeds? Have not the Government come forward with an acceptable--

Mr. Deputy Speaker : Order. I hope that we shall not pursue that line of debate, because I should have to rule it out of order. I hope that the House will confine itself to the motion.

Mr. Brown : I have done my best with the question. If it would help the hon. Gentleman, I can tell him that we shall be voting against the Government's proposals tomorrow, and if Tory Members on the Committee considering the Finance Bill wish to oppose them as well, perhaps because they think that the proposed tax is too high or too low--both lines are open to them--all that they have to do is to shout no when we do. I wonder how many Tory Members will do that. The hon. Gentleman does not have to persuade me to vote against the Government ; he has to convince his hon. Friends and I suspect that that is a different matter.

As I understand the proposals--I know that we shall be going into more detail tomorrow, so I shall not detain the House much longer--the levy can be deducted in calculating any gain made on the sale of the shares that attract the levy. That suggests that quite large gains on the sale of those shares are expected. That brings me back to what we consider to be at the heart of the debate. Quite substantial sums--£60 million in the Hartlepool and Tees port trust and a slightly smaller sum, in the mid- £50 million range, in the Clyde port trust--are at stake. The House should take seriously the treatment of that money. We consider that the Government should establish successor public authorities that will serve the public interest rather than bolt through the private Bill procedure and, through very tacky use of the Finance Bill, facilitate a measure that will be in the long-term disinterest of the citizens whom the port authorities serve and the people of our country.

11.56 pm

Mr. Tim Devlin (Stockton, South) : I shall not detain the House long as I know that my hon. Friends wish to get on with the debate as quickly as possible, but I wish to make one important point. The levy is a new tax on a completely new procedure for taking trust ports out of the public sector and putting them into the private sector. One could argue convincingly on both sides of the question as to whether such a levy should be made and whether it should be 100 per cent. or nil.

Two particular points concern me as a constituency Member of Parliament near one of the ports currently undergoing privatisation. First, as I understand it, the amendments to be introduced in the Finance Bill Committee tomorrow attach the levy not to the proceeds

Column 804

of sale but to the market value of shares. Therefore, if the ports go to the market and the market gives them a certain price which is taken to be the proceeds, they will face the levy not on the proceeds gained from the sale but on what the shares might have realised if they had been sold in the City of London.

The plan in regard to Teessideis that the port will sell its shares to local pension funds and other interested bodies so as to keep the equity and the interest in the local community.

Dr. Norman A. Godman (Greenock and Port Glasgow) : Will the hon. Gentleman give way?

Mr. Devlin : I will give way in a moment, but I wish to finish this important point.

If the proposal goes through as currently drafted, instead of the shares being offered to the people and the pension funds of Teesside, they will be offered to the City. That is why I reject all the assurances given by the promoters of the Bill when it came before the House some time ago.

Secondly, the levy is not the end of the taxing arrangements for privatisation. The 50 per cent. levy is a straight abstraction of funds from the privatisation process. In addition, there will be a further rate of corporation tax of the order of 30 per cent. That means that approximately 65 per cent. of the possible market value of the shares will be abstracted from the flotation. Indeed, it is possible that more than 100 per cent. of the proceeds of the sale will be abstracted. It will thus have failed completely and there will be no reward for the brave local authority proposing the plan and no incentive for any other public port to go through the same process. I am profoundly disturbed by that.

I understand that the Liberals tabled some amendments to the original proposals but dropped them when the draft clause was withdrawn. As the new clause has been introduced in a slightly different form, the amendments would not normally attach to it, but it has been confirmed that the Liberals' amendments will attach to it tomorrow. The amendments tabled by my hon. Friend the Member for Isle of Wight (Mr. Field) and further amendments being tabled by Conservative Members will attach to it when it is considered tomorrow.

I am happy to vote for the concept of a levy on disposals for the purposes of the motion, but I am not in favour of a levy on the market value of the shares rather than on the proceeds of the sale, thus making privatisation a meaningless process. I ask my hon. Friend the Minister to consider that closely because, unfortunately, I shall not have the pleasure of joining him in Committee tomorrow morning.

Dr. Godman : The concern that the hon. Gentleman expressed about the need to retain the ownership and management of a port authority in the locality is shared equally by Clydeside Members in relation to the privatisation of the Clyde port authority.

Mr. Devlin : I am grateful to the hon. Gentleman, because the hon. Member for Newcastle upon Tyne, East (Mr. Brown) did not satisfactorily answer the question about how much of the proceeds should be retained by the state. It is no answer for him to say that we should not undergo this process. He must face the question of the tax treatment. The only ideologically pure position for the

Column 805

Labour party is to abstract 100 per cent. of the proceeds of sale. That is what the hon. Member for Newcastle upon Tyne, East should have had the courage to say.

Mr. Nicholas Brown : Will the hon. Gentleman give way?

Mr. Devlin : I will just finish this point. The hon. Gentleman will not say that because he is a north-eastern Member of Parliament and does not want to upset the voting public around the ports on the Clyde and Teesside.

Mr. Brown : That is all very well, but Newcastle ceased to be a port some time ago. With a majority of 12,500--somewhat larger than the hon. Gentleman's--I do not have to kowtow to any interest group in my constituency, and I certainly would not do so. The point that the Labour party is making is that we do not have to say how we would deal with the proceeds of the sale of these institutions because we would not sell them at all--we would create successor authorities in the public sphere and in the public interest, something that the Conservative party seems willing to overlook.

Mr. Devlin : As the Labour party does not have a view on this matter, it will obviously sit mute in Committee tomorrow and not oppose the Government or say anything further, allowing hon. Members who do not have difficulties about dealing with the tax treatment of this problem to deal with it among themselves. No doubt the hon. Gentleman and his party will sit there and say nothing.

12.3 am

Mr. Ian McCartney (Makerfield) : I am a member of the Finance Bill Committee and chairperson of the Transport and General Workers Union parliamentary group. Under the private Bill procedure, our union submitted a great deal of evidence about the effects of the levy and proposals for the surplus income realised by the sale of the assets. The motion is a Government attempt to provide a back-up to the proposals in new clauses 67 to 72 of the Finance Bill, which will be considered tomorrow. The Government want to provide a new, confiscatory tax on the assets realised from the privatisation of the Clyde port authority, the Tees and Hartlepool port authority and other authorities to be privatised later. The new clauses will allow the Government to implement their announcement that they intend to take 50 per cent. of the proceeds of the privatisation of any trust port.

The British Ports Federation urged the Government to introduce general enabling legislation to allow trust ports to go down the privatisation road, if they so decide. Through lack of public parliamentary time, the Government have not been able to provide the necessary facilities to allow the companies to go down that route. They have offered the private Bill procedure, and the Clyde port authority and the Tees and Hartlepool port authority are following it.

The Government's actions in the motion and the new clauses are not a million miles away from the procedures applying to the disposal of assets by local authorities. New clause 67 states :

"--(1) A levy shall be chargeable on the disposal of securities of a company which is, or has control of, a successor company to a relevant port authority if the disposal is made by--

(a) the relevant port authority,

Column 806

(b) a company under the control of the relevant port authority, or (

Only 20 per cent. of the income derived from the capital receipts gained by a local authority in the disposal of its assets can remain with the authority for the use of the community, while the remainder goes to the Treasury. Under the motion, at least 50 per cent. of the capital receipts accrued from privatisation goes to the Treasury and will not be retained by the successor company for use in developing the port or in assisting the community through a development agency, the local authority or a similar body. The successor company will be prevented from using the money in the way that it would prefer. The Government's 50 per cent. proposal could have been influenced by arguments in opposition during the passage of the Clyde Port Authority Bill and the Tees and Hartlepool Port Authority Bill. Those who presented petitions and gave evidence to the Committees made it clear that, if privatisation went ahead, the capital receipts accruing from the sale should remain with the successor companies and within the local communities, for the development of port resources and facilities and to utilise joint projects within the ports and in the surrounding hinterland. The new clause would remove that opportunity.

Hon. Members on both sides of the House put aside their objections to the original privatisation proposals on the ground that, as the hon. Member for Stockton, South (Mr. Devlin) said, assurances had been given that resources accruing from the sales would be ploughed back into the development of the infrastructure in the local communities from which the assets had been realised. Most of the ports are located in areas where resources are required to develop alternative forms of employment and infrastructure, so one can understand the opposition to the Government's proposals. Under new clause 67, millions of pounds' worth of assets accruing from the sales may be siphoned off to the Exchequer rather than being used by the successor company or by that company in conjunction with the local community.

When the British Transport Docks Board was privatised and became Associated British Ports, the equity value of the company was way below what the Government had estimated before the flotation price was set. The assets were completely undervalued and initially the company did not realise its true value on the open market. Under the Ways and Means resolution and new clause 67, both the Clyde ports authority and the Tees and Hartlepool ports authority may be sold on the open market at considerably less than their true market value. If their assets are undervalued, the resources coming back into the successor companies will be less than one might have expected. At the same time, the authorities will have a minimum of 50 per cent. of their supposed assets taken by the Treasury. That will undermine the long-term viability of the company and its ability to raise capital to develop the port facilities which the Government so readily suggested needed to be privatised so as to raise the finance to develop future opportunities in the ports. Those resources will be withdrawn from the ports, first by undervaluation on flotation and, secondly, by the imposition of a confiscatory tax after the sale.

Next Section

Home Page