§ Mr. Colin Shepherd
asked the Minister of Transport what steps are being taken to prepare for the sale of the National Freight Corporation; and if he will make a statement.
§ Mr. Fowler
I intend to transfer the National Freight Corporation to the private sector at the earliest practicable date. For a number of reasons, and in particular the need to complete a full actuarial assessment of the corporation's pension funds, I am advised that the earliest a flotation would be practicable is in the early part of 1981.
To this end I intend, with the agreement of my right hon. and learned Friend the Chancellor of the Exchequer, to make an order under section 45 of the Transport Act 1980 appointing a day at the beginning of October for the transfer of the undertaking of the corporation to the National Freight Company Limited, which was formed and registered for this purpose on 30 June 1980, and also for the simultaneous dissolution of the National Freight Corporation.
By removing the constraints of nationalised status under the Transport Act 1968, this step will enable the NFC to make the most of the wider commercial opportunities that will be available to it as a company with widely drawn memorandum and articles of association. While the company remains in the public sector I shall of course continue to exercise financial controls over investment and borrowings similar to those which now apply to the corporation. I shall be considering 328W how this might best be done. During the period of 100 per cent. Government ownership the company will continue to have a published external financing limit within which it must operate. I have no doubt that this change to the company status is the surest way to safeguard the future prosperity of the undertaking as a whole, and of its employees.
The precise timing of the sale must of course depend on market conditions. An interim period of operation as a limited company before flotation will enable the new board, its managers and work force to adjust to the new conditions, and will also assist potential investors to assess their performance.
I have also concluded that it would be wrong to burden the new company with fixed debt to the Government. The outstanding commencing capital debt of the corporation amounts to £42.1 million and subsequent borrowing from the national loans funds to £57.9 million—details are shown in the annexed schedule. These debts will, under the provisions of section 45(4) of the Act be extinguished immediately before the appointed day. I do not propose to require the company to assume any corresponding amount of debt.
Under section 46 of the Transport Act 1980 I shall require the National Freight Company Limited, as successor to the corporation, to issue to me an appropriate number of ordinary shares, credited as fully paid up. The immediate effect will be to relieve the board from the need to meet fixed interest payments of approximately £9 million per annum. Instead the company will have to consider and settle with the Government an appropriate level of dividend to be paid on its shares. I will expect the board, while the company remains wholly-owned by the Government, to use any improvement in the financial position as a result of this arrangement to reduce its bank and other borrowings from the private sector.
This loss of interest to the Exchequer should in part be reflected by an enhanced price for the shares when these come to be sold. I am satisfied that any eventual net loss of funds to the Exchequer is justified by the need to provide a firm basis for a successful issue of shares to the public.329W
I will be announcing further details of the arrangements for these changes in due course.
CAPITAL LIABILITIES TO THE MINISTER OF TRANSPORT AS AT 7 AUGUST 1980
Commencing capital debt
The principal outstanding is £42,143,726 and falls to be repaid as follows:
Repayment date Amount of principal £ 2nd January 1981 8,264,329 2nd January 1982 8,264,329 2nd January 1983 8,264,329 2nd January 1984 8,264,329 2nd January 1985 9,086,410 42,143,726
Loans have been made by the Minister of Transport under section 20(1) of the Transport Act 1962. On 4 August 1978 the Minister of Transport, in accordance with section 17(1) of the Transport Act 1978 (Commencement No. 1) Order 1978, and with the approval of the Treasury, reduced the loans in aggregate to £41,327,616. Since then the Minister of Transport has made further loans to finance repayments of the commencing capital debt. The total of all loans is now £57,856,274.
The Minister of Transport has directed that interest on the loans stated below shall be at the respective rates of interest stated and that the loans shall be repaid on the dates stated:
Repayment date Amount of Principal of loan Rate of interest Per cent. £ per annum 2nd October 1980 1,720,876 9.000 2nd October 1980 1,720,876 8.500 2nd October 1980 1,720,876 8.750 2nd October 1980 1,720,876 9.000 2nd October 1980 1,720,876 13.375 2nd October 1980 5,162,625 10.625 2nd October 1981 1,720,876 8.875 2nd October 1981 5,869,327 10.875 2nd October 1982 8,264,328 14.500 2nd October 1983 8,264,328 9.875 2nd October 1984 4,264,329 12.875 2nd October 1984 4,000,000 13.375 2nd October 1985 4,264,320 16.250 2nd October 1985 4,000,000 15.500 2nd October 1985 3,441,752 14.750 57,856,274