§ 11.32 a.m.
§ The Minister of State, Scottish Office (Lord Sanderson of Bowden)
My Lords, I beg to move that the Bill be now read a second time. It has been the subject of much debate and scrutiny in another place and I am sure that it will be the subject of useful debate here. The purpose of the Bill is to make provision for the privatisation of the Scottish Bus Group, to transfer the ownership of Caledonian MacBrayne to the Secretary of State and to provide for the Scottish Transport Group to be dissolved. The three parts of the Bill deal with those three aspects.
In privatising the Scottish Bus Group the Government have a number of important objectives. First, we wish to promote sustained and fair competition in the bus industry. Competition will encourage efficiency and responsiveness to the 830 consumer. Secondly, we are seeking to widen share ownership, and in particular we shall be encouraging management and employees to acquire a controlling interest in the firms for which they work. Thirdly, we wish to establish independent, locally based companies which will be responsive to the interests of bus users and in touch with their local markets.
The privatisation will complete the process, begun with deregulation, of freeing the bus market of the restrictions of regulation and public ownership under which it has operated for many years. Deregulation has been a success. Far from leading to a decline in bus services generally, which some predicted, deregulation has led to an increase in the number of vehicle miles operated. New operators have emerged and there has been innovation in the types of bus service provided. Local authorities have not been slow to use their subsidy powers to ensure the provision of socially necessary services—often at lower subsidy cost than before—and the network of rural services remains largely intact. Now that deregulation is complete, and in particular that fears over rural bus service provision in Scotland have proved groundless, there is no reason for the Scottish Bus Group not to take the next step of privatisation. The decision to privatise it in 11 units—that is, nine bus operating subsidiaries, together with the coaching firm Scottish Citylink and SBG Engineering—will create 11 independent companies in place of a single large, dominant nationalised concern. That will be to the advantage of the bus user who can expect the new companies to play a more vigorous role in stimulating competition and improving bus services along with the many private sector operators already established.
I have mentioned that we wish to encourage management employee buy-outs, and my right honourable friend the Secretary of State for Scotland has made clear the basis on whch that will be done. First of all, we shall be giving financial assistance to one management employee team per company to help with the cost of the professional advice necessary to mount a bid. Secondly, the Scottish Transport Group has already held a series of seminars with management and a video is in preparation which will be shown at all depots so that all employees are aware of the issues involved. Thirdly, we have made it clear that in assessing bids for companies we shall give a preference to bids where there is a high level of employee participation. The share-owning structure of a bid is of course a matter for those responsible for developing the bid.
There are various ways of achieving significant employee participation. Employees might have an opportunity to subscribe for shares for cash. There might be an employee share ownership plan under which a proportion of shares is set aside for employees under a profit-sharing trust arrangement. Such plans, known as ESOPs, have become increasingly popular recently. The Chancellor of the Exchequer announced in his Budget speech a number of measures designed to encourage employee share ownership, including new reliefs for ESOP trusts. There are two changes of particular importance in the context of this privatisation. First, the annual limits on the value of shares which can be given tax 831 free to employees under all-employee share schemes have been increased. Secondly, the Finance Bill will make it clear that companies' contributions to ESOP trusts to acquire shares on behalf of employees will qualify for corporation tax relief provided that they meet certain conditions designed to ensure that the employees acquire direct ownership of the shares within seven years of their acquisition by the trust.
We hope that bids will emerge which will give employees a substantial share in their company. While preference will be given to bids by incorporating significant employee participation, that preference cannot be overriding and if a bid is to have a good chance of success the price offered will need to be realistic and relevant to the value of the assets of the company being sold. No company will be put up for sale until the management and employees have had reasonable time in which to mount a bid. The basis on which the sales will take place will be set out in the statutory disposal programme which the Secretary of State will draw up in consultation with the Scottish Transport Group.
The other part of the Scottish Transport Group is Caledonian MacBrayne. It provides essential ferry services on the west coast of Scotland. It has a long history going back to the firm of David MacBrayne which introduced steam ships to the west coast and the Caledonian Steam Packet Company which ran services in the Clyde.
In the context of privatising the Scottish Bus Group and dissolving the Scottish Transport Group, we looked carefully at a range of options for the future of Caledonian MacBrayne. Taking account of the many views expressed to us we decided that the best arrangement for Caledonian MacBrayne was that it should become a company owned in the first instance by the Secretary of State. That decision recognises that for the most part the services provided by Caledonian MacBrayne are not profitable and a subsidy of about £6 million a year is required to provide those socially essential services. The Bill therefore provides for the transfer of Caledonian MacBrayne to the ownership of the Secretary of State.
However, we also want to look to see whether the present structure and methods of operation of Caledonian MacBrayne can be improved in order to get better value for money. Once the company is transferred to the Secretary of State he will be appointing a new board for the company. A clear undertaking has been given that although we want a wide spread of experience of commercial and shipping matters on the board, we would look for such persons among those who are resident in the islands. We are anxious to ensure that Caledonian MacBrayne is responsive to its customers. As part of that process the Secretary of State has said that he would like the new board to look at the possibility of moving its headquarters nearer to the centre of the area which it serves. He has suggested that Oban would prove a suitable place for this purpose. I am aware that this suggestion is strongly opposed in certain quarters. However, I am sure that when considering the best arrangements for its headquarters, the new board will take careful 832 account of the views of both management and employees and consult them fully before reaching a decision.
The new board will also be asked to look at the possibility of transferring to the private sector two routes at present run by Caledonian MacBrayne: the Gourock-Dunoon and the Wemyss Bay-Rothesay routes. The private sector already runs an unsubsidised crossing between Gourock and Dunoon and that appears an anomalous situation. No options for the longer term will be excluded from consideration by the new board subject to the overriding proviso that it must ensure that at least the present quality of service to the islands is maintained. I consider that with its own board and independance, Cal-Mac will be well placed to continue to provide an improving and cost-effective service to the islands.
The Bill provides for important changes in the organisation of a major part of Scotland's public transport system. It offers the prospect of more competition in the bus industry with a number of companies replacing a single nationalised operator. It offers the prospect of Caledonian MacBrayne with its own board taking a fresh look at how it can continue to serve the islands and improve its services.
I commend the Bill to your Lordships.
§ Moved, That the Bill be now read a second time—( Lord Sanderson of Bowden.)
§ 11.40 a. m.
§ Lord Carmichael of Kelvingrove
My Lords, first perhaps I may thank the Minister for his explanation of the Bill and his commendable brevity. He went through the Bill explaining the purpose of the Government. Since he has been through the proceedings in another place and knows the bare bones of the Bill, he will no doubt be aware that the provisions have been thoroughly raked over there.
I do not propose to speak for long today but I wish to raise a number of important points. As the Minister said, there will be the opportunity at Committee stage to go into them more fully. The noble Lord will realise that competition was a matter which worried Members who examined the Bill in another place—and not just immediate competition. The assumption that privatisation immediately leads to competition of a healthy nature is not borne out by some of the results arising from the deregulation Bill. In this case my colleagues in another place tried very hard to find out what defence there would be against a privatiser coming along after the ultimate creation of 11 new companies and combining them into one conglomerate. There seemed to be no way of preventing this.
Although I accept that it may be necessary to look again at the Scottish Bus Group, I am not sure that big is beautiful, certainly not where there is no way in which the consumer can have an effective voice. It is all very well saying that competition gives that effective voice, but we could reach the point where the consortium of 11 different companies, particularly after 1992, could be controlled from somewhere far removed from Scotland. It could be decided in a boardroom in Dusseldorf or Dublin that a bus 833 service was no longer needed in a particular place. Very little could be done; that service could be withdrawn. So often in Scotland we have seen companies from abroad suddenly making a decision to close down even a profitable or relatively profitable operation, for instance in engineering, wood pulp or aluminium.
I wish to know whether there will be a mechanism to prevent the amalgamation of the 11 proposed companies, or a significant number of them, so that we do not reach the quasi-monopoly stage. I imagine that whoever owned or took over the Scottish Bus Group engineering side could have a strong grip on the future of buses in Scotland. Through the control of good workshops and the spare parts vital to the bus industry, the owner could have a very strong grip on the industry.
I must raise a couple of other points on the buses and I give the Minister notice that they will be raised very strongly in Committee. In another place, the Minister responsible refused to go very far in giving an assurance that the cost of the purchase of the companies would be made clear. He said that commercial confidentiality made it wrong for him to say how much a company was being bought for. I find it quite incredible that a public asset should be sold and that we, the public who have built up the company over the years, should not know the price. According to Lord James Douglas-Hamilton, the Under-Secretary in another place, he would not be able to state the price. I hope this House would take a rather different view.
I was pleased how far the Minister went in discussing the employee-management takeover. However, it will need careful examination. He has gone a great deal further than we expected. Although no concessions were made to my colleagues in Committee in another place, some of their warnings, pleadings and cajolings have obviously struck a chord in the Scottish Office. We have gained a great deal more than was given in another place, according to my reading of the Committee stage of the Bill.
I think that it is not enough merely to give management assistance in the buyout. We want more for people who have given the whole of their lives to an industry than technical and financial assistance. I hope that when we have examined closely what the Minister says today we shall be slightly more reassured. I do not believe that financial advice is enough. Videos and seminars with management were also raised in another place. We feel that if employees are to be part of the set up in a management-employee takeover, perhaps at least their representatives should be involved in the early discussions.
The Minister will no doubt be aware of another great cause for disquiet which came out in Committee and in the Scottish press over a number of months. It was the matter of asset stripping, particularly the example given of a Scottish company which has done extremely well. It has a mixed reputation, to put it no stronger. Some people think that Stage Coach is wonderful, some people do not put its standing quite so high. Undoubtedly the South Hampshire buses were bought by Stage Coach for £2 million. One of the points I wish to make, referring back to the Minister not divulging the cost 834 of the sale, is that the price always comes out. We shall find out at some point—the press in Scotland are very good at finding these things out. It was discovered that the South Hampshire buses were bought by Stage Coach for £2 million. Within a fortnight, two of the bus stations were sold for £4.1 million. That is rather good business, if you manage to get hold of it.
In Scotland it is estimated that the Glasgow bus station is worth about £4 million. But the Edinburgh bus station is right in the heart of St. Andrew's Square, where all the banks and insurance companies are hungry for land. An estimate of about £15 million is put on that St. Andrew's Square bus station. I wonder whether the Minister care give us any reassurance on that point.
I am speaking for longer than I had intended. The other main part of the Bill concerns MacBrayne's. All of us in the West of Scotland know MacBrayne's: they get blamed for everything. The firm is a great Aunt Sally, it is part of the culture of the west coast of Scotland. The Secretary of State announced that there would be a new board for MacBrayne's, and we are very anxious to find out who is likely to be on that board. A tally was made and all the Tory MPs who lost their seat at the last election have been fixed up with something. Perhaps some of those MPs should be offered a little more, if we are to get new blood on the board.
As regards the removal of the headquarters to Oban, I think Oban is a lovely town and it is one of my favourite places, but I do not see why there should be the expense and upheaval of moving the headquarters there, or to any other place away from Gourock, unless the Government are ready for a very quick sell-off of Clyde Western Ferries. If Clyde Western Ferries is sold off and taken away from MacBrayne's altogether, it could lead to some difficulties in terms of the flexibility of ships. In a number of cases in the past ships have had minor accidents and have had to be repaired. When that occurred, the larger fleet could be mobilised and the problems that could have arisen were avoided.
It will be interesting to see how the Scottish public reacts to the privatisation of Clyde Western Ferries. The last time the Government thought of nationalising Clyde Western Ferries in the early 1970s, public opinion was so strongly against it that they had to abandon the idea.
The Government have learnt a fair amount from the Committee stage of this Bill in another place, although they did not admit that at the time. I think the only amendment that was accepted was one moved by my honourable friend the Member for Aberdeen, North, when he succeeded in getting "may" turned into "shall". But, having said that, I believe we will have the benefit of what happened in another place. The Government have had a chance to think over some of the very important points that were made in another place. Some or those points were made by members of the Minister's own party. I hope that in Committee we can go even further towards making this Bill more relevant to the needs of Scotland than appears to be the case at present.
§ 11.52 a.m.
§ Lord Tordoff
My Lords, I have the temerity to join in a Scottish debate. I apologise that my Scottish colleagues have already left for their Easter break. Having listened to the weather forecast and seen the scenes of snow and devastation in Scotland, I think that perhaps they are wiser than noble Lords who have stayed here for the debate. I shall be as brief as I can, because obviously noble Lords on all sides of the House who are going to Scotland will wish to get there as quickly as they can.
This Bill is curious in that on the one hand it is a privatising Bill, but on the other hand it is a nationalising Bill. The buses are being privatised, but the shipping is being nationalised. That must put the Government Front Bench in rather a theological whirl about.
I hardly wish to welcome the Bill. It seems to me to be a little doctrinaire in relation to the privatisation of the buses. However, once one accepts that privatisation will take place, one has to commend the Government on the way they have handled many parts of the Bill. I refer particularly to the management employee buy-out and the concept of management-employee ownership. That concept is obviously strongly supported by the Government in this case, even perhaps at the expense of obtaining a little more money for the taxpayer. I believe that concept is absolutely right, and that out of it will come perhaps the most efficient form of organisation that one could hope for. There is no doubt that National Freight has been a very good example of what can happen in that direction.
I was very glad to see that the Secretary of State made the distinction between management-employee buy-outs and management buy-outs. There is an important distinction there which has not always been made in the past by the Government Front Bench. We are glad that for the time being a monopoly is being avoided. I know that my honourable friends who represent Border constituencies in another place are particularly glad that the lowland Scottish company is being maintained as an integral unit.
Nevertheless, there is a natural tendency towards an eventual monopoly in these situations. We are not satisfied that there are sufficient safeguards to stop predatory purchases further in the future. One would like to see some safeguards built into the Bill. The English experience so far is of larger operating companies buying up smaller operating companies. That trend will, in the end, lead to a monopoly if one is not careful. So one must ask the Minister what safeguards the Government envisage at the moment. One must further ask the Minister to consider at a later stage amendments to the Bill which might build in safeguards.
The noble Lord, Lord Carmichael, referred to asset stripping. That is obviously a serious matter. The idea that parts of the company can be bought out and then stripped of their assets of bus stations is not merely sharp practice but also does not help to run a good bus service. If all the bus stations are sold off, a good bus service cannot be provided.
836 There are still fears for rural services, in spite of what the Government say. It is true that so far rural services have been maintained by means of subsidies from local authorities, but the pressure is on local authority finance all the time to reduce that subsidy. In the English counties, and indeed in my own county of Somerset, there are considerable question marks over whether some of the rural services can be subsidised to the level necessary in the future. As the Government are prepared to recognise the social need in relation to the shipping part of this Bill, I hope they will continue to recognise that there is a social need in rural areas and that taxpayers' money up front may be needed to maintain those services.
The other area which I think we shall probably get into in Committee is the question of staff pensions. We may have a re-run of some of the debates we had when the buses Bill was going through this House a few years ago. I still maintain as a matter of principle that if the Government are going to force a change in these matters, the employees who have been looking forward to certain pension rights should certainly not find themselves in a worse position than they otherwise would have been. Some progress was made on that issue in the buses Bill, but the situation was far from satisfactory in the end. I hope that we can make some more progress this time.
As regards Caledonian MacBrayne, I am glad that the Government recognise the social need there and are prepared to subsidise it. The Secretary of State is proud of the fact that the subsidy has been reduced over the past three years. However, he should not be complacent about that because reduced oil prices have been a factor and there are signs that oil prices may increase. Therefore, it may not be possible to continue the reduction in subsidy. I hope that the reduction will not continue if there is a need for further subsidy.
What can I say as regards the move to Oban, other than state that my honourable friend in another place, the Member for Argyll and Bute, is very pleased at the thought of the headquarters moving to Oban? As she is a true daughter of the late lamented Lord Bannerman who sat on these Benches several years ago, and therefore a figure not to be argued with, all I can say is that I support her in that view.
§ Lord Carmichael of Kelvingrove
My Lords, just to show that there can be different points of view in Scotland, I should say that my honourable friend in another place who represents the Western Isles thinks, strangely enough, that things would be better left as they are.
§ Lord Tordoff
My Lords, as I read the proceedings in another place, the honourable Member was not there at the time of the Third Reading. But I may be doing him an injustice. I am glad to have that information, but as I say I do not want to get into these theological disputes north of the Border.
Membership of the board was also raised by my honourable friend in another place with particular reference to the appointment of local people. I agree with the noble Lord, Lord Carmichael, that it is very important that members of the board should not be 837 only government appointees. The debate that we had yesterday raised grave doubts about the way in which some appointments have been made by the Government. I hope that in this case the local interest will be seen as paramount and the members of the board will not be solely party appointees.
With that, and in the hope that simultaneous translation has not been necessary for what I have said, I look forward to the Committee stage of this Bill with interest.
§ 12.1 p.m.
§ Lord Teviot
My Lords, in broad measure I support what the Government are doing in this Bill. I believe that returning the companies to the private sector, where they were born and grew up, is a logical step given that deregulation has already taken place in Scotland. There is little case for bus operations in Scotland remaining nationalised industries. However, as with all legislation, we have a duty to ensure that the Bill contains all that is necessary to ensure that it meets its objectives. In that respect I have some concerns.
First, I believe that the Bill should contain safeguards to prevent large groupings of former SBG companies establishing monopolies over large areas. We noted the care with which the Government split up the National Bus Company when it was privatised during 1986 and 1987. Despite that care, however, several large groups of former National Bus Company companies have been established and are undoing some of the Government's good work which was intended to further competition.
For example, on Merseyside it has come to my attention that Crosville and North Western are owned by the same company, Drawlane. We have recently seen the report of the Monopolies and Mergers Commission which found that the merger between Badgerline and Cityline in Bristol was against the public interest. I hope that the Government will introduce measures into the Bill to ensure that the companies being privatised cannot re-combine or seek to take over other independent companies to establish territorial monopolies as happened in England. That could be achieved by several means, including providing in the Bill for automatic referral to the MMC of any bid by or for such a company and retaining a golden share to control mergers.
Secondly, I make no apology for raising the issue of service performance. We must not forget the performance of several of the companies affected by the Bill on D-day. It was not a creditable performance. The streets of Glasgow were literally swamped with buses out of all proportion to demand. It was a bus war, for want of a better term. During the next year or so the companies will go through a difficult period as they prepare for privatisation. We must ensure that the standard of service does not deteriorate and affect the passenger. The resources of the traffic commissioners need to be adequate for that task.
Thirdly, like other noble Lords, I hope that the Bill will ensure that any bus stations now owned by the Scottish Bus Group will be retained for that use. 838 They serve a valuable purpose for the travelling public and help to reduce congestion on the streets. We do not want to see them turned to other uses by companies whose interests are primarily in property development with bus operation a poor second.
Finally, like other noble Lords who have already spoken, I am glad that my noble friend has said that the Government will be able to give bids from management—which I hope will be supported by employee share ownership plans—a discount, as they did with the National Bus Company. That will ensure that privatisation takes its most acceptable form and will help guard against the dangers of monopoly to which I have already referred.
I shall follow the progress of this legislation with great interest. I already feel encouraged by my noble friend's introduction this morning, but there may be one or two matters which I shall wish to raise in Committee.
§ 12.5 p.m.
§ Lord Sanderson of Bowden
My Lords, I thank all noble Lords who have taken part in this short but very important Second Reading debate. I should like to come straightaway to some of the points which have been raised.
Perhaps I can start with the noble Lord, Lord Carmichael, and the difficult point of the publication of sales proceeds. The noble Lord referred to proceedings in another place. It is perfectly true that the suggestion that the amount paid for each company should be published raises difficult problems of commercial confidentiality. I am sure that we shall come back to that point when we debate the Bill in Committee. During the process of privatisation it would clearly not be a good idea to publish what has been received for each company because that could well affect prices of subsequent sales. It might lead to less satisfactory prices as the process of privatisation proceeded.
Publishing the prices once the sales were completed also raises problems of commercial confidentiality, as was mentioned in another place. I shall be interested to debate the matter at a later stage. In terms of the public interest, however, I believe that the important figure is the sum which is realised for the Scottish Bus Group as a whole. If individual purchasers wish to reveal what they paid for a company I believe that that is a matter for them.
I wish to deal at greater length than I did earlier with the very important matter of property disposal raised by the noble Lord, Lord Carmichael. It is essential that property assets are properly valued and that measures are taken to prevent their being sold on after privatisation at a very large profit. Specialist property advisers have been appointed by the Scottish Transport Group to value all the properties of the bus group and to advise on the best treatment of those properties in the course of sale.
There are a number of options for dealing with the properties. The first is to strip the property from the company and sell it separately. That might apply to property which is not essential to the running of the bus undertaking. A second option is to sell the 839 property with the company but to ensure that the price received fully reflects the range of values of the assets. A third option is to sell the property with the company but with a legal charge on the property which ensures that if subsequently sold within a specified period for development purposes the Government will receive a specified share of the development proceeds. A fourth option would be to dispose of an operational property separately from a company but with a long lease arrangement to allow the company to use it and to prevent early disposal for development. We shall be considering all those options very carefully in the light of advice that the group will be getting, we hope very shortly, from the property advisers.
I turn now to the restrictions on purchase. The prime aim of the Government's privatisation policy is to increase competition and hence efficiency and service to the customer. The Secretary of State has therefore decided against privatisation as a single unit. The choice of nine operating bus companies was made in order to strike a balance between strong, viable bus companies and lively competition. If the Secretary of State had wanted a smaller number of competitive units he would have divided the bus group into a smaller number of units for sale. It is therefore clear that we do not want a single buyer to buy up several SBG subsidiaries.
No limitation on the number of companies which one buyer could acquire was written into the English and Welsh legislation and we have not specified one in this Bill. However, we accept entirely the need to avoid a single buyer acquiring too many bus companies. In part the situation depends on where those companies are. Given the nature of Scotland with its concentration of bus travel in the central belt we accept the need to limit the number of companies bought by one purchaser.
In the NBC disposal, as my noble friend Lord Teviot said, the maximum number of operating companies allowed to be bought by one company was four. In Scotland, in proportionate terms, that would mean one, but we have not yet taken a final decision on such a limit. Nor would we want to approve the sale of two adjacent companies to the same buyer. Those limitations will be set out in the disposal programme which will be published.
Perhaps I may deal with a couple of other points that have been raised before I come to the issue of competition safeguards which all noble Lords who have spoken in the debate thought was very important. Let me deal first with the question of the resourcing of the traffic commissioners which my noble friend raised. The responsibility for the traffic commissioners throughout Great Britain rests with the Secretary of State for Transport. The commissioners and their staff are funded from within the Department of Transport Vote. The arrangements seek to ensure that, as far as possible, they have sufficient resources to meet the demands placed upon them. I am well aware of the demands that were placed upon them in relation to Glasgow at the time of deregulation. They include any work that may arise directly or indirectly as a result of privatisation. Those costs are recovered from fees levied for the services provided.
840 I listened with interest to what my noble friend said about Crosville and North-West. As I have already said, a limit will be placed on the number of companies that can be bought by a single purchaser. We have not yet decided on the details, but once in the private sector—this is the important point—companies will be subject to the monopolies and mergers provisions of competition legislation. Under those provisions, cases may be considered by the Office of Fair Trading, which in turn may refer them, where appropriate, to the Monopolies and Mergers Commission. I am sure that my noble friend will be aware of the situation regarding the city of Bristol to which reference has recently been made.
On the question of pensions raised by the noble Lord, Lord Tordoff, it will be for the privatised companies to establish new pension arrangements for their employees. When making bids, prospective purchasers will be asked to state their proposals with regard to pensions and that information will be taken into account in considering bids. I understand that the terms of new pension arrangements will be different from those of the STG schemes, but I should like to return to that matter when we debate the Bill at Committee and subsequent stages.
The main thrust of what was said by the noble Lords, Lord Carmichael, Lord Tordoff and Lord Teviot, refers to safeguards in competition legislation, which applies to the bus industry in the same way as it applies to other industries in Great Britain. The main areas covered are restrictive agreements, monopolies and anti-competitive practices. The Office of Fair Trading has the power to carry out investigations and, where appropriate, to refer cases to the Monopolies and Mergers Commission. I hope that the noble Lord, Lord Carmichael, will join me in saying how pleased we were to see the result of the recent Elders—Scottish and Newcastle referral to the Monopolies and Mergers Commission. The system can work.
The noble Lord, Lord Teviot, referred to the experience of former subsidiaries of the National Bus Company. It is true that since privatisation some subsequent inter-company sales have taken place and a number of substantial bus groupings have emerged. The name of Stage Coach has emerged in this debate. However, generally the ownership of former NBC subsidiaries remains fairly widely dispersed.
Taking the whole, there have been relatively few takeovers since privatisation, but I want to make this point: one way of making it more likely that companies will remain independent after privatisation is by encouraging management-employee buy-out bids. It will be open to prospective purchasers to establish shareholding arrangements which may reduce the likelihood of a company being sold on after privatisation. For example, it would be possible for the new company to make provision in its articles of association to limit the ability of shareholders to dispose of shares outside existing groupings of shareholders. Articles of association can be changed only if 75 per cent. of shareholders vote to do so. That is something to which we may return in our later deliberations on the Bill.
841 Perhaps I may now turn briefly to the question of the Caledonian MacBrayne arrangements and say to the noble Lord, Lord Tordoff, and other noble Lords who have welcomed the general thrust of our proposals that it is not so easy to privatise a company if it receives an annual £6 million government subsidy. I believe that that must be the answer to the charge that the Government are perhaps facing in two different directions in this Bill. But I should point out that since 1979 investment by the Government in Caledonian MacBrayne, which is the best way to improve the services for the people in the Islands, cost£22 million in vessels and £6 million on piers—not a small amount of money given the size of the company. The noble Lord is quite right to say that some of the benefits are due to the reduction of prices. However, I hope that he will understand that the arrangements that we make from now on will reflect the wishes of the islanders.
I note what noble Lords have said about membership of the board. Of course I cannot give them any indication at this stage. However, my right honourable friend the Secretary of State and I, with our responsibility for the Highlands and Islands, want to hear from the highlanders and islanders if representation from the Islands is not to the liking of the islanders when I go to see them.
On the question of the Gourock—Dunoon and Wemyss Bay—Rothesay services raised by the noble Lord, Lord Carmichael, there is no doubt that the present situation regarding the Gourock—Dunoon crossing is anomalous. An unsubsidised private sector crossing competes with a subsidised public sector crossing on similar routes. I remember only too well what the noble Lord said the last time that this matter was raised. The vessels operated on that crossing are shared with the Wemyss Bay—Rothesay crossing and are interchangeable. There therefore seems to be a good case for the private sector to take on those crossings. We shall ask the new board to look into the matter, investigate and report. The size of the remaining Cal-Mac fleet—some 25 vessels—will be such that it will still be able to substitute vessels in the event of breakdowns and refits. I hope that that reassures the noble Lord on that issue.
Finally, I should like briefly to remind noble Lords of our objectives. First, we wish to promote competition in the bus industry. I believe that I made that clear in my opening statement. Secondly, we want to encourage a wider pattern of share ownership. Thirdly, we hope that the pattern of privatisation that we have chosen will lead to the setting up of independent, locally based companies responsive to local needs. Coming from the board, I appreciate what the noble Lord, Lord Tordoff, has said. We have certainly worked with the grain in allowing Lowland Scottish to become a company on its own dealing with that particular part of the world.
We shall transfer the ownership of Cal-Mac to the Secretary of State and appoint a new board. We hope that that arrangement will ensure the continuation of at least the present quality of service to the Islands and the maintenance of essential transport links which are so important to them. I believe that this is an important measure which I hope noble Lords will support.
§ On Question, Bill read a second time and committed to a Committee of the Whole House.