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7.30 p.m.

Earl Attlee: My Lords, I thank the noble Baroness for posing this Question. When I saw that she had tabled this Question I thought that my views would be somewhat at variance with hers. However, after listening to her excellent speech I realise that I am close to her. I should perhaps declare an interest as president of the Heavy Transport Association. I also have other connections with transport.

I, too, acknowledge the good work of the Transport Research Laboratory. It is a respected organisation which has done much work on crash tests, traffic management, the quiet heavy vehicle project that has made our commercial fleet a lot quieter, accident analysis and design of road layout. The role of the laboratory is clearly to carry out research mainly concerning road transport matters as required by the Department of Transport. However, its function can be similar to that of any other consultancy research establishment in the country except that the TRL only has one main customer, Her Majesty's Government, and also HMG are largely tied to the TRL. I assume that is the problem that the Minister seeks to address by looking for a privatisation solution.

The Minister also needs to place the research that he requires with those organisations which are best placed to do it. Recently the department had to consider the design and construction of recovery vehicles. The Minister commissioned a report from the Defence Research Agency. Initially that sounds rather a surprising choice but on closer inspection one finds that the DRA is responsible for the engineering management of the army's fleet of recovery vehicles. That is a large fleet. The DRA has carried out that investigation but the investigation into traffic management and congestion and strengths of roads was carried out by the TRL because that body is the expert in that area. I was impressed by the use of appropriate research facilities. As it happened, both bodies were agencies of the Government.

The difficulty of selecting a consultancy on a commercial basis is that one must select the right one and cost is not the most important factor. In fact, it is probably the least important factor. One cannot just consider the cheapest quote for doing the job. The main consideration is whether the consultancy understands

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the problems of HMG--TRL is in a good position to understand those problems--and whether the consultancy or the research establishment has the facilities and the experience to carry out the necessary research. The TRL clearly has the facilities and the experience which have been built up over a long period of time, as the noble Baroness said. Therefore I feel it would be in a good position to continue to obtain this work. My attitude is that in principle there is no problem with moving the TRL into the private sector because HMG will not be tied to the TRL and vice versa.

The worry that I have detected in industry concerns what HMG's commitment is to carrying out sufficient research. Will they just carry out the bare minimum and perhaps commission a report to give weight to a view that they have, or will they carry on with basic research to ascertain whether there is a problem, studying accident statistics and the sort of work that the TRL does now? The other worry I have is that some types of research clearly should be commissioned by the Highways Agency, for example that concerning the strengths of roads and bridges. I hope that the Minister will ensure that sufficient funding will continue to be available for that.

As regards the selection of bidders, I understand that the motoring organisations intend to bid, as the noble Baroness said. The role of the motoring organisations is to support the position of private car users. Their function is not to support pedestrians or cyclists. They probably do not do much to support motor cyclists, goods vehicle operators or any other users of the road. I do not think such a move would be good for the motoring organisations who I believe should stick to their core activity which is to look after private car users. The noble Baroness has mentioned the impartiality requirement. She was right to do so. Let us not see a motoring organisation becoming involved in running a laboratory.

As regards a dedicated consultancy business taking over the TRL as a profit making business, I have no problem with that at all. There are plenty of research consultancies which exist purely to make a profit. There is no reason why they should not continue to produce impartial research and reports. My favoured option is the management buy-out. Obviously the Minister will have to check the stability, the funding and the business plan of a management buy-out as well as of anyone else who wishes to take over the organisation, but I support the management buy-out route. Clearly the problem that the Minister has is to select a suitable, unbiased buyer for the operation. If he finds that the MBO cannot be accepted for practical reasons, he may have a big problem in finding someone who is suitable and unbiased. My question to the Minister is the following: what are the criteria for selection and how will the Minister ensure the independence of the laboratory in the future? I would say in summary that I do not think the Minister's policy is flawed, but I would be interested to hear his comments as regards the selection of a buyer.

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7.37 p.m.

Baroness Thomas of Walliswood: My Lords, the noble Baroness, Lady Castle of Blackburn, has done us all a service in keeping this issue alive even if the TRL is destined for inevitable privatisation at the hands of this increasingly dogma driven Government. One remembers with admiration--even nostalgia--some of the other mighty battles in which she has been so often engaged, sometimes triumphantly.

The reasons for the sell-off were given in a Written Answer to the noble Lord, Lord Gainford, on 14th March 1995. In summarising the reasons I use my words and not the Minister's. The reasons were to get independent advice at good value for money; to transfer the TRL to the private sector as soon as possible and to realise as much cash as possible. Those were the reasons for selling off the TRL. In the same reply the Minister added that the purchaser would have to be of sufficient substance; that there was interest on the part of the private sector in acquiring the business with a lease or freehold interest in the property and buildings required for the operation of that business--the property and buildings are substantial--that the Government would provide guarantees of further work for a privatised TRL; that bidders would have to demonstrate that the supply of advice and research to the Government would not cause a conflict of interest with their other operations, and that a management buy-out would be considered.

Subsequently, answering a Question in this House that was stimulated by the noble Baroness, the Minister said in effect that offering a guarantee of future business to a private purchaser was not inconsistent with not giving such a guarantee to the TRL itself. That reply seemed to be greeted with a certain amount of disbelief at that time. The Minister further said that the TRL had faced a loss of business and needed to seek business elsewhere which could not be satisfactorily achieved whilst the TRL was in the public sector. At that point a noble Lord intervened to ask why not. He did not get a clear answer. However, we know that the Government continue to be, as other governments have been in the past, extremely reluctant to allow organisations which operate at arm's length to function in any way in the private market as private suppliers to private businesses. I understand that that is a problem, but it seems to me that it would be much more sensible to retain TRL in its present circumstances and enable it to function more effectively outside the constraints of being able only in effect to supply the Government.

At present TRL is a very successful and expanding business notwithstanding the remarks made on 19th April. Its turnover has increased and is now well over £31 million a year. As the noble Baroness said, its profits were in the region of £2.5 million. In 1994-95, the last year for which we have a report, £1 million was invested in expanding the assets of the company. Therefore, it is not a company which is dying on its feet and cannot survive. Quite the contrary.

It is also noticeable from the report that a good deal more business is being conducted abroad. If, in the current climate, the Government, because of the decline

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in their road-building programme and for other reasons, are not able to sustain the TRL, it seems to me that it is in those countries which do not have such constraints that TRL might well find a satisfactory market for its undoubtedly excellent products.

The interesting question is why it has taken nine or 10 months for anything else to happen. Like the noble Baroness, I saw the titbits in the Daily Telegraph and Independent on 18th December which informed us that the Minister was in difficulty over the decision and that as well as the management buy-out, which it was fairly certain would be forthcoming as that was the obvious thing for the management to do, one other consortium was bidding. As already stated, that consortium includes an engineering consultancy company and two organisations dedicated to the wellbeing of the private motorist.

Why has the decision been held up? It has taken nine months to sell a desirable piece of property. In local government we are obliged to move a good deal faster than that, and the Government were very keen to raise large sums of money from this particular sell-off. Have there been problems in relation to TUPE considerations? Are there difficulties in finding a purchaser for TRL who can guarantee that there will be no conflict of interest between its existing business and the business of the road laboratory? Is that the problem? Or are people not interested in guaranteeing the continuing development of all aspects of the laboratory's work? These range from pedestrian safety and child restraints to the safety of vehicles, the design of roads, the surfacing materials which go on those roads, how pavements are maintained in a good state of repair and the movement of transport through urban areas efficiently and effectively. SCOOT is one example of the programmes which the laboratory has developed. They do not necessarily all hang together with the interests of any individual private company or group of private companies. They are a disparate collection of activities. They include an interest in pollution control, which is not necessarily something an engineering company wants to take on. Therefore, that might be the problem.

It is my strong feeling that if this excellent and well-regarded institution is to be sold then by far the best way of doing that, and achieving what the Government themselves want to achieve in terms of independence of advice, would be to allow the management buy-out to take place. That seems to me by far the best solution. Like the noble Baroness, I hope that we may be informed even tonight that that will happen, in which case we are all wasting our breath. Perhaps I should sit down with that plea.

7.45 p.m.

Lord Carmichael of Kelvingrove: My Lords, as previous speakers have said, thanks are due to my noble friend Lady Castle for raising this matter once again. Tracing through the records I find that she has asked at least seven Questions on the subject in the past year. Her speech today indicates that she still requires a lot of answers.

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In various ministerial answers over the past 12 months there has been the suggestion or implication that somehow my noble friend's only reasons for objecting to the sell-off of TRL are the desire to maintain the status quo and an ideological resistance to privatisation. I served as a junior transport Minister under the noble Baroness, and I can assure the House that my noble friend was never one blindly to defend the status quo. Her record at the Ministry of Transport was one of change, innovation and boldness. She mentioned that she introduced seat-belts. I believe that her greatest fight with the status quo was the introduction of Blennerhassett--the drink-driving laws--which we all now accept as being one of the great innovations in transport. Her speech tonight was certainly not doctrinaire. I hope that the Minister will accept that we do not approach this subject in that way either.

To many of us TRL is a special case. Any body which has the task of guiding Ministers in the spending of the huge sums involved in road construction and transport infrastructure must be independent. It has an awesome task and responsibility in pursuing safety on our roads, which it fulfils with commendable efficiency.

I am particularly uneasy about the question of TRL's independence. That point has been voiced by many speakers in relation to the privatisation of TRL. On 19th April last year I asked the Minister whether he was aware of some of the work done for overseas countries on highly expensive contracts by the National Engineering Laboratory. I recall one particular case when one of the major countries of the world--America--had a huge engineering project and could not find a single organisation in that country, which did not have any connection with the industry itself, to undertake the necessary research. Every university engineering facility received subsidies from one or other of the big companies. So the work went to the National Engineering Laboratory at East Kilbride. It was a massive contract. The work was done behind safety screens so that no one would be able to interfere with it and the locks were sealed.

The National Engineering Laboratory had the same status as the TRL has now. I do not believe that we should let that go easily. As my noble friend Lady Castle said, TRL has a world-wide reputation. We do not have enough organisations left in this country with that kind of reputation; we should hold on to it. Under very strict security assessments, the job was undertaken in East Kilbride to the total satisfaction of the client.

At col. 486 of the Official Report of 19th April last, the Minister gave me two assurances. First, he said that no type of bid would be ruled out, including a management buy-out and running the laboratory on a non-profit making basis. Has he considered this bid, as he promised? Secondly, he said that the onus would be on the bidders to demonstrate that they would be able to maintain their independence. I cannot understand how one does such a thing when there is no public accountability, and where a private industry is primarily, and properly from its point of view, concerned with the bottom line on the balance sheet.

I am sure that the Minister is familiar with the House of Commons Cmnd Paper 647, published last July. According to the annual report of the TRL, the

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laboratory made a profit of almost £2.4 million on a turnover of £32 million. I should have thought that that was most satisfactory from a body whose first function should be the reduction of transport accidents, the saving of life and the general economy of the transport industry. I am sure that the Minister will have studied the TRL annual report. On page 16 of the annual report, the Minister will have noted the achievement targets set out by the Secretary of State. In 1994-95 five targets were set out. The targets, and the success with which they were met, are published. They are very satisfactory.

It is puzzling why the Government are so keen on the privatisation of this organisation. The Minister will be aware of the sheer professionalism of the organisation and the dedication and involvement of its staff. I visited it quite frequently and was fascinated by the work that it was doing and the general quality that was apparent in everything it did. It is an organisation with a reputation recognised world-wide which is a credit to the country.

Perhaps I may be a little doctrinaire for a moment. I remember listening to that brilliant speech of the late Lord Stockton. It was the famous speech about selling the family silver. In that wonderful way in which he was able to express matters, I thought the most telling part was when he said, "You sell the family silver, and this and that, and find that all you have left are the Canalettos". I believe that that is the point that the Government are reaching. In order to gain as much money as possible for an election treasure chest, they are willing to sell an asset built up by dedicated people over a long period of time. I hope that the Minister has had second thoughts and will give a serious opinion tonight that there will be an independent organisation. In other words, I support the idea of a management buy-out if that is the only way in which we can save this asset.

7.53 p.m.

The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, I am grateful to the noble Baroness, Lady Castle, for the opportunity to discuss the important issues concerning the future of the Transport Research Laboratory. As has been said in the debate today, it is the most recent in a long line of Questions which the noble Baroness has brought to your Lordships' attention. It demonstrates her commitment to examining the future of this organisation.

The debate is particularly timely, because, as your Lordships may be aware, we have recently received final offers from the two short-listed bidders in the sale of the laboratory. However, I can say to the noble Baroness, Lady Castle, that a decision has not been made; and that I am sure that my right honourable friend the Secretary of State for Transport will read carefully the transcript of today's debate and will have high regard for the views which your Lordships have expressed.

We fully recognise the value of the work which the TRL has contributed over the years, and indeed the high reputation in which the laboratory is held as a centre of excellence. However, we have to look to the future. We

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cannot ignore the fact that the TRL has lost business. As a public sector agency funded by taxpayers' money, the TRL is necessarily constrained in competing for work with the private sector. Although one is often asked regarding a wide range of organisations, "Why not just waive Treasury rules and pretend that they are competing on the same basis?", a government-backed organisation competing with private sector organisations is not competing on the same basis and must be constrained in the way that those organisations are. The prospect of business declining, with no means of arresting that decline, has led to our decision to move the laboratory into the private sector.

The competition to transfer TRL began last summer when prospective purchasers were invited to submit initial bids to Price Waterhouse, our financial advisers. The sale memorandum giving details about the TRL business attracted a great deal of interest and several substantial bids for the laboratory were received in August. A number of those bidders were then asked to submit confirmed or revised bids by October on the basis of additional information about the laboratory, its business and markets.

We announced in November the two short-listed bidders and those bidders have now submitted their best and final offers. The noble Lord, Lord Carmichael of Kelvingrove, asked me whether I would stand by my assertion that we would consider the management buy-out. Indeed, that is the case. I do not think that I have participated in a debate for a long while in which so many statements that I have previously made in your Lordships' House have been quoted back at me. It is my duty to make sure that I have been entirely consistent. I hope that by the conclusion of my brief remarks this evening that will be proven.

The bids constitute a consortium comprising Pell Frischmann Consulting Engineers Limited, Mouchel Associates Limited, the Automobile Association and the Royal Automobile Club, and, on the other hand, the Transport Research Foundation which includes members of TRL's existing management. The foundation is bidding to acquire TRL as a non-profit distributing company.

The noble Baroness, Lady Castle, referred--it has been done in the past--to the KPMG Peat Marwick report. It has been suggested by some that the Government should simply have turned the laboratory into a non-profit distributing company, without having gone through the competitive sale process. In fact the KPMG report in 1993 identified two preferred sale options: a consortium sale; and privatisation as a non-profit distributing company. That is the choice we face in deciding between the final bids that we received for the laboratory.

For reasons of confidentiality, and to protect the integrity of the sale process, I cannot reveal details of the offers made by the short-listed bidders. Neither, as your Lordships will appreciate, can I disclose details of the discussions which have been held with both bidders. However, what is abundantly clear is that we have two very strong bids for the laboratory. I contest what the noble Baroness, Lady Thomas, asserted. She felt that the

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time-scale was long--I would contest that--and that we were in difficulty with a lack of high quality bids. That has not been the case. On the question of time-scale, it is important that when considering such an important organisation we go through a proper competitive sale process and give all the bids the proper, careful and detailed attention that they deserve. I am delighted that the TRL has received the quality of bids that it has.

The noble Earl, Lord Attlee, asked about the evaluation of the bids and how we would take that process forward. There is no question of either bid being given preference in evaluation of final offers. The final offers will be assessed on an equal basis against the sale objectives announced by the then Secretary of State for Transport in March 1995. I think that that is the point to which the noble Baroness, Lady Thomas, referred rather than our reasons for selling the laboratory. Our aims are to secure the continued provision of high quality independent research and development at good value for money across the range of the department's inland surface transport needs; to transfer the laboratory to the private sector as soon as reasonably practicable; and to optimise the net proceeds to the taxpayer. We expect to make an announcement about the selected purchaser shortly. The sale should be completed as soon as possible thereafter. I regret that we are not yet in a position where I can inform your Lordships of the results of the sale process.

I believe that the noble Baroness, Lady Thomas, touched on the issue of real estate and the property which is concerned with the laboratory. We intend to grant a lease for those parts of the sites at Crowthorne and Livingston required by the purchaser of the laboratory. This will include the research test track at Crowthorne. We envisage a separate sale of the freehold of the sites as soon as possible after the transfer of TRL to the private sector. The key point is that the purchaser will be able to lease the parts of the property which it requires for producing its research.

One of the key issues which was discussed by all who have contributed to the debate this evening is independence and impartiality. We have made clear throughout the sale process the importance we attach to TRL remaining as a source of high quality, independent research for government and other customers. We have asked for assurances from bidders that TRL's reputation for independence and integrity will be safeguarded under their ownership. We will be considering all aspects of final bids in selecting the preferred purchaser, including the bidders' proposals for ensuring that no conflicts of interest arise which might affect TRL's ability to provide impartial research and advice to government.

I do not accept the argument that has been put forward on a number of occasions that impartial research cannot be provided by bodies in the private sector. Nor do I share the view that commerce and integrity are incompatible. A great deal of research is

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done for the Government by a wide range of organisations, some in the state sector and some in the private sector.

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