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Sale of Government Assets

Volume 497: debated on Monday 12 October 2009

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the proposed sale of Government assets announced today.

Thank you, Mr. Speaker, for the opportunity to come here this afternoon and answer questions about the sale of Government assets.

Our overriding ambition is to lock in the recovery and then to lay the foundations for growth in the years to come. Because of the action that we have taken this year, we are confident that growth will return to our economy towards the end of this year and into 2010. Over the months to come, therefore, the Chancellor will set out more detail around our plan to halve the public sector deficit over four years once recovery is secured. This entails a return to growth with support for firms and families; fair tax rises for those most able to bear the burden; and slowing the growth of public spending. As the Chancellor set out in April, an ambitious programme of asset sales is part of our plan—a plan that sets out up to £16 billion of property and other asset sales, with proceeds raised being used to support our priorities, including new capital investment and paying down debt.

Today the Prime Minister set out a few details of that programme, and in the months to come we will publish a portfolio of assets to be sold. It will cover assets for sales, and assets where we wish to explore different ways of managing things in the future. The portfolio will include the Tote, the Dartford crossing, the student loan book and the channel tunnel rail link. We know that councils will make a major contribution to the overall level of asset disposals through sales of housing and other assets, as will central Government property. As I said, these three elements are expected to deliver £16 billion in receipts over the period 2011 to 2014. However, we aim to secure receipts from central Government sales within the next two financial years where and when market conditions are right.

We have already sold £30 billion of public assets since 2004. This success, building on the £22 billion sale of 3G licences in 2000, played a major role in the reduction of debt over the past decade. We have made tough choices to cut debt in the past; those decisions allowed us to support the economy now. We will not flinch now from tough choices to allow us to live within our means in the years to come.

Thank you, Mr. Speaker, for calling this urgent question. It is Parliament’s first day back, and we have seen old habits—this national car boot sale was announced in the media yesterday evening, with a major speech by the Prime Minister and no statement to Parliament.

I have no objection to the principle of asset sales, which are an important part of managing the public finances. However, there are big questions about timing and content. Can the Chief Secretary first confirm the Treasury’s own figures that the net worth of Government has declined from 70 per cent. of GDP in the late 1980s, before the big privatisation, to nil today and will decline to a minus figure in 2013? That means that if the Government were to sell off the whole of what remains of the public sector, they would have to pay somebody to carry it away.

On the substance of the Chief Secretary’s answer, he said that there would be £16 billion of sales. Is it not true that £13 billion of that will be from local authorities and that, as he confirmed to me in a discussion on the radio at lunch time, there is no pressure on local authorities to make those disposals and they will be free to invest the money raised? In that case, how will the sales narrow the Government budget deficit, if at all?

Can the Chief Secretary explain why the Government were in favour of privatising the Tote in 2008, then announced in the Budget this year that it would be kept in the public sector in the medium term, but now say again that it is to be privatised? The Tote has had more false starts than any race in history.

On the timing of this announcement, the Government have a terrible record in selling public assets, with the history of gold sales and the sale of QinetiQ, which was condemned by the National Audit Office. There is now a proposal to sell land, in a market in which development land is at about 15 to 20 per cent. of its peak value. Is that not an absolute guarantee that the Government will not get value for money, and that this announcement has been driven entirely by political concerns?

I am grateful to the hon. Gentleman for the question and for his renewed interest. I know that that is completely unrelated to his own difficulties to do with tuition fees and mansion taxes at his party conference recently.

Let me be absolutely clear about the substantive question that the hon. Gentleman poses, because it is important and there will be wide interest in all parts of the House about our strategy. As I said in my statement, in the Budget, the Chancellor set out the ambition to sell about £16 billion of assets over the period 2011 to 2014. About £11 billion of those assets will, of course, be local authority assets. That is based on a long-term picture of what local government tends to sell each year. Over the past 20 years, local authorities have raised something like £3.7 billion a year, and of course they are free to keep those receipts and reinvest them in priorities such as affordable housing and schools.

In addition, we anticipate that something like £2 billion of central Government property can be sold and reinvested by Departments. We believe that additional business and financial assets can also be sold, such as those that the Prime Minister listed, and that something like £3 billion can be raised from them over the next couple of years. Of course, that money will be available to pay down debt.

How telling that at the end of the Prime Minister’s summer of denial, instead of following the Conservative lead and taking the tough decisions required to get the deficit under control, this morning he has ducked the issue and chosen to peddle the illusion that asset sales can somehow avoid the pain of fiscal adjustment—taking people for fools again. Can the Chief Secretary confirm that he, at least, understands that asset sales, however necessary they may be to reduce debt, do not reduce the deficit, and that they can only ever be a supplement to, not a substitute for, proper fiscal discipline?

Can the Chief Secretary confirm also that the package of central Government assets mentioned this morning amounts in value to little less than a week’s worth of borrowing at the current levels, and that it is not the Government’s intention to seize the proceeds of sales of local authority assets? Can he tell the House why anyone should believe a word the Government say on asset sales when they have announced every single one before? The Tate in 1999—[Interruption.] No doubt it is coming. The Tote announcement was made in 1999 and was in the Labour party’s 2001 election manifesto. The announcement on the student loan book was made in 1997 and again in 2007, on URENCO in 2005 and on the channel tunnel rail link in 2007. Not a penny piece has been achieved from any of them. Will the Chief Secretary confirm that the value of all those assets is now significantly lower than when their sale was first announced? Indeed, did not the comprehensive spending review 2007 pencil in a £6 billion receipt for the student loan book alone—twice what the Government now expect to get from flogging off the entire package?

Selling the family silver will not solve the crisis in the public finances. The country has had enough of denial, dither and delusion. The Government need to start taking the tough decisions, not ducking them, or call an election and let someone else get on with the job.

I enjoyed the remark about tough decisions. I have made a mental note of the Tate. The hon. Gentleman presumably refers to tough decisions such as proposals on state pension plans—I understand that the National Institute of Economic and Social Research, having looked at his plans, has discovered that he is £3 billion short and five years out in his sums. So I will not take lessons in tough decisions from him.

The hon. Gentleman knows that bringing public spending within the bounds of what is possible in the years to come will take a mixture of things: growth coming back, investing in new industries and jobs, the right decisions on tax—decisions that he has opposed consistently; I think that the Conservative party has voted against something like £20 billion of necessary tax increases for the years to come. It requires tougher decisions on spending in the years to come, but where there are things that the Government should not hold on to, we should sell them off. Yes, we should allow local authorities to keep receipts to invest in local priorities, but business or financial assets, such as those that the Prime Minister talked about today, can be sold off and the proceeds used to pay debt.

In 2008, I spoke in the House about defending the jobs in the Tote in Wigan, in my constituency and that of my hon. Friend the Member for Wigan (Mr. Turner). After meetings with Downing street and the Minister at the time, a commitment was given that, in any future sale, the jobs and the investment in north-west Wigan would be protected. Will my right hon. Friend give a commitment that that is exactly what will happen? The first I heard as a local Member of Parliament about the 600 jobs and the sale was over my porridge at six o’clock this morning.

I do not think that the Government’s position on the sale of the Tote has changed in essence. The medium-term decision was to keep it in the public sector, but now is the right time to look at the possibility of its sale. The dimensions and constraints around the sale of the Tote that my right hon. Friend outlined have not been disturbed.

Columns 586 to 588 in Hansard on 9 July 1987 contain the acceptance by the Labour spokesman that the Dartford bridge—effectively the first privately funded, operated, designed and built public works—would, as I said as Minister in the previous column, have tolls for 15 to 20 years. How can we have trust in Parliament if both sides accept something and then one side says, “We’ll keep the tolls going so we can sell it off”?

Again, the precise way in which the different assets are sold will have to be the subject of further debate and conversation, not least in the House. That is why it is the Chancellor’s ambition to bring before the House a portfolio of assets, which we believe could be sold. There will be several different questions that relate to different assets, but once the portfolio is published, we might be able to have a bit more of a debate about the precise detail of each one.

What does the brief say about the Thurrock-Dartford toll in relation to the fact that it is lawful to toll a riparian crossing only to control and manage congestion? How does a sold bridge and tunnel allow either the operators to get a return, or the Government to continue to pay, if they are constrained by the European Union directive?

There will be many different questions on each of the assets. In some cases, the sale of the assets will require us to return to the House to change legislation but, as I said, once the portfolio of assets is published, we can have a proper debate about the whys and wherefores of each one.

In 2001 and 2005, the Government made a manifesto pledge that they would nationalise the Tote in order to gift it to racing. Will the Minister tell us what proportion of the proceeds from the sale will be given to racing and what steps he will take to safeguard the jobs in Wigan, because he studiously avoided the question on that from the right hon. Member for Makerfield (Mr. McCartney)?

The announcement today has done nothing to disturb the policy commitments that have already been made about the different sales of assets. However, the Government must balance the need to get best value for the taxpayer in the years to come with the constraints and policies regarding each of the different businesses and assets. That is quite properly a subject for further discussion in the House.

May I just clarify things? We have consistently made a commitment to the racing industry that if we sell the Tote, we will contribute half the receipts back to the racing industry. Is that still our position?

How much have the Government pencilled in from sales of leisure centres owned by local authorities, and how many of those leisure centres are currently facing financial ruin because of Her Majesty’s Revenue and Customs’s claims to recover retrospective VAT?

The figures on local authority asset sales that have been put before the House this afternoon are projections based on the pattern of local authority asset sales for the past 20 years. Over the last 20 years, local authorities have sold something like £3.7 billion of assets a year. As the recovery sets in and as market values return, we have no reason to think that those values will be any different in future.

Does my right hon. Friend agree that a lot of people listening to this debate will think that it is a bit rich that the market got us into this situation, but the market will now be able to buy our assets on the cheap?

As I said in my statement, the Government must not only lock in the recovery, but lay the foundations for growth in the years to come. As growth sets in, our ambition is to halve the deficit over four years. That is going to require a number of difficult decisions. If we want to invest in creating new industries and new jobs in the years to come, as well as to put public finance on a sustainable footing for the medium term, there will be difficult decisions on tax and difficult decisions on spending. However, if we can create new investment in the infrastructure that we need in the years to come and if that can be financed through selling off assets that we no longer need, it is the right decision to take.

Will the Minister confirm that his brief fails to alert him to the common sense of hon. Members on both sides of the Chamber relating to the funding and history of the building of the two tunnels under the Thames and the Thames bridge? It was intended that they would be paid for and then made free. In a spirit of joined-up government, will he confirm that the Department for Transport is at this very moment looking at proposals that could lead to the removal of the tolls altogether?

The Department for Transport has to look at a whole range of scenarios for the years to come, not least whether another crossing is put over the Thames. That is why I said that the ambition over the next couple of years—the next two financial years—is to raise something of the order of £3 billion from the disposal of central Government businesses. We think that the assets listed could make a big contribution, but there will not be a fire sale. We will seek to extract the most value for taxpayers from the sale of the assets. That is why the Chancellor will return to the House with a portfolio of assets that we think it is right to sell over the next couple of years—the assets to which the hon. Gentleman referred will, I think, be among them.

The programme that we are putting before the House now, and which we will put before the House in more detail in the months to come, does not include disposal of the Government’s interests in financial institutions.

I would define a fire sale as selling things for substantially less than we think we could secure for taxpayers. However, this Government have a good record of selling assets in order to pay down debt, not least regarding the money that was raised from 3G licences in years gone by. Those decisions allowed us to go into this recession with debt at something like 36 per cent. of gross domestic product, which is much lower than other countries in the G7. Those decisions have helped us to ensure that help is available for businesses and families to get through this recession—help that the Conservatives opposed.

With all these public assets due to be sold off, may we be reasonably satisfied that at least the Palace of Westminster will not be flogged off to some land speculator or property company in the near future?

On 29 June, the Prime Minister said that the £16 billion would be redirected to public investment. Will the money go to investment or to pay off debts? Even the Prime Minister cannot spend the same money twice.

As I tried to say in my reply to the hon. Member for Twickenham (Dr. Cable), we think that local authorities will be able to secure some £11 billion of asset sales and central Government will achieve some £2 billion of asset sales. That money will be available for re-investment in infrastructure and other capital investment priorities. There are some businesses that can raise some £3 billion over the next two financial years, and those proceeds can be used to pay down debt.

Can the Minister confirm that the onward sale of the Tote will be on the basis of the seven-year exclusive licence that was in the original sale? Will the Treasury be willing to consider a revised bid put forward by a racing consortium?

The answer to the second question is yes. The answer to the first question is, as I said to my right hon. Friend the Member for Makerfield (Mr. McCartney), that the current policy position on the sale of the Tote is undisturbed by the announcements made today.