§ Motion made, and Question proposed, That the Clause stand part of the Bill.
§ 4.17 p.m.
§ Mr. J. Grimond (Orkney and Shetland)
I understand that it will not be in order to go into detail about how the money which is required by the railways is to be raised, but the Clause re-enacts the provision of the 1947 Act about the Treasury guarantee. That implies that the money will be raised by redeemable loans at a fixed interest rate which will be a prior charge. It is my contention that it is wrong. It seems to me quite contrary to the view which has been put forward so often from the benches opposite that the railways are a commercial enterprise. If that view is accepted, this additional money for which the railways are asking should either be raised in the market without a Treasury guarantee, though that may well be difficult, or else the Chancellor should subscribe to what would in fact be an equity issue by the railways.
If the railways have to borrow all the new capital envisaged by this scheme at 3½ per cent. interest or thereabouts as a prior charge, they will have to find, with 1298 interest and sinking fund, about £40 million a year, profit or no profit. It would be quite wrong, I believe, from the point of view of the railways and of control by the House of public finance, to arrange for money to be raised in that way. The argument of the Treasury will be that unless it insists upon the interest on the loan being paid as a prior charge it will never get anything out of the railways, because, however well they do, they will not declare a dividend.
That is a grave reflection on the views of both the other parties. It is a reflection on the Socialist Party view that there should be public control of nationalised industries, because this is an admission that there cannot be public control. It is a reflection upon the Conservative point of view that the railways can be run as a business enterprise. I ask the Committee to consider whether part of the trouble into which we are running on the railways is not caused by the fact that the railways have been saddled with a very large prior charge which they have to meet, profit or loss.
The Chancellor has been playing the part of the wicked money lender to the optimistic heir, telling the railways to get all the diesels they want, to do up the stations, and to order immense quantities of rolling stock and he will guarantee that they will get the money. But there is this little matter of 3½ per cent. to be met year in, year out, profit or not. Are we not now running into the trouble with which the railways have had so much difficulty in the past and from another bout of which they are just emerging?
There will be a very small margin even on the figures put forward by the Commission. The railways put forward a figure of £85 million as the profit from new schemes, and against that there are additional charges for sinking fund, and so on, of about £80 million. It is a very small margin and the scheme is full of unknowns. All that the Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation could give the House on Second Reading was a pious hope that if we passed the Bill the Commission would succeed. The House of Commons has not been given figures which would give it great faith in the scheme. I am not arguing against the scheme, but I am saying that, whatever one's views on the railways, it is wrong 1299 to finance such nebulous proposals by a fixed prior charge.
We have to give much more consideration to the means by which Parliament can exercise control over nationalised industries. The question of how a nationalised industry should raise capital is something to which we have not given much attention. It is a matter of considerable importance in connection with ultimate control and the right use of resources. The Committee should urge upon the Government that they do not saddle the railways with this charge, but that they behave according to the normal tenets of ownership, that if the nation wants to take over the railways it should take over the risk, and that there should be an equity issue which, if it is not taken up by the normal market, should be taken up by the Chancellor of the Exchequer.
§ Mr. Geoffrey de Freitas (Lincoln)
I want to ask some questions which, obviously, cannot be answered now because I have not given the Minister notice. They are localised and concerned only with Lincoln. The inland waterways leading to Lincoln are not being used at present as efficiently and as often as they should be. I have said before in this Chamber that the electric power plant is on the edge of a navigable river and is well connected with the coal fields by inland waterways and yet nearly all the coal is carried by rail. That fact is relevant not only to the whole question of the use of inland waterways but to a particular Lincoln problem, because all the coal which goes into the power station is carried across the two principal streets of the city.
The railways for a long time viewed with suspicion any interest that a Member of Parliament took in the problem of Lincoln's level crossings. Only a few years ago when I asked if I might go one morning and look over these railway installations, I was given a very curt answer from the top of the headquarters of British Railways, saying that those concerned doubted the purpose of my visit and would not give me any facilities. That was a completely different attitude from that of the managements of other industries and undertakings—public and private—in my constituency which welcomed me whenever I went to look at their plants.
1300 Recently, however, the railways have been most helpful, not only to me personally. They have re-routed their iron ore trains so that they do not cross Lincoln's two main streets. That is a great achievement, but if they made more use of inland waterways, they would lessen the burden on the railways which cross the main streets.
There is a further point about which I should like some information. How much of the money provided under the Bill will be used on schemes such as that for the improvement of the level crossings in the High Street?
§ Mr. David Renton (Huntingdon)
On a point of order. I am very reluctant to interrupt the hon. Member, because he is making a very interesting speech, but it seems to me that the Clause deals with only two points. The first is the maximum limit of the Commission's borrowing powers and the second whether there should be a Treasury guarantee. If we are able to discuss matters as widely as has the hon. Member, it might be of great benefit to many of us. Could we have your guidance, Sir Charles?
§ Mr. Ernest Davies (Enfield, East)
Further to that point of order. Is it not a fact that if we are discussing increasing the borrowing powers of the Commission, we want to know how the money will be spent? I suggest that my hon. Friend the Member for Lincoln (Mr. de Freitas) is suggesting how the money could be invested in remunerative ways.
§ Mr. de Freitas
Would you bear in mind, Sir Charles, that I was expressly saying that the Bill provides this money and I was asking whether it was to be used for projects such as level crossings in the City of Lincoln? I was not referring to any road schemes but only to level crossings, one of which was blocked up last Tuesday and caused chaos.
§ The Chairman
I think that what the hon. Member said was all right and that at seven o'clock he will have another opportunity of saying it. Has the hon. Member finished?
§ Mr. de Freitas
No, Sir Charles, but I will not be long. The points which I want to make are short, but this is an important problem. It does not involve ranging over a wide field and is entirely concentrated in Lincoln.
1301 The problem of the High Street is that the level crossing is not only antiquated in design but antiquated in that it ceases to function, as it did last Tuesday so that there was chaos. Throughout the whole of the principal street in Lincoln there was a traffic block for the best part of half an hour. I hope to have an assurance later that some of this money will be used for a really sensible scheme of improvement, such as redesigning all these antiquated railway crossings. In Lincoln, they are so designed as to cause the maximum inconvenience to the ordinary road-using public, in spite of the fact that those responsible for the railway avoid having rail traffic crossing and recrossing unnecessarily.
I understand that if diesel trains are used in the local run from Grantham to Lincoln and elsewhere, it will mean that engines by themselves will not have to cross the High Street again to return to the engine sheds. [Interruption.] The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) should realise that I am asking how the money which is provided by the Bill will be spent, and I am suggesting that it should be spent in these directions.
Diesel engines are coming, but how soon?
I make no apology for returning to this matter from time to time. In the past, the Minister of Transport has not shown any considerable interest in it and I have had to adopt a policy of goading and harrying. I make no apology for that at all.
§ Mr. James Harrison (Nottingham, East)
Would my hon. Friend make clear his reference to light engines crossing the level crossing? I could not quite understand what he meant.
§ Mr. de Freitas
My hon. Friend has an advantage over me, in that he has had a wide experience of engines and of driving them. What happens is that a train comes into the platform but the engine sheds are separated from the platform by the High Street and it is necessary for the engine to re-cross the High Street to get to the engine shed. I understand that with a diesel train that problem would not arise, because then engine sheds will not be separated from the station by the High Street.
1302 I hope that the Minister, apart from anything he may do about the Pelham Bridge, will do all he can to ensure that the Transport Commission uses some of this money to improve the level crossings in the centre of Lincoln.
§ 4.30 p.m.
§ Mr. Renton
The main justification put before the House of Commons—I am not now speaking of this Committee—for this Bill was that a modernisation plan was being launched. It seemed to many of us that we were told only part of the story and that another and a necessary part was to know what would be contained in the charges scheme. It would assist the Committee to know when we may expect the charges scheme.
I wish to refer to the most interesting speech of the hon. Member for Orkney and Shetland (Mr. Grimond) on the subject of a Treasury guarantee. I consider that his speech would have been better directed to the Socialist Government of some years ago when they introduced the Treasury guarantee in the first place.
§ Mr. Grimond
Owing to a lamentable error on the part of the electorate I was not in the House at that time.
§ Mr. Ernest Davies
May I also remind the hon. and learned Member that precisely what he has suggested was done by the London Passenger Transport Board when other stock was introduced which had a variable rate of dividend? I do not say that I approve of it, but that was what was done.
§ Mr. Renton
I can see that there are reputable precedents for Treasury guarantees, but so far as this guarantee is concerned I think the argument could more appropriately have been addressed to the then Minister of Transport and Chancellor of the Exchequer.
Let us come to the position as it is today. The nationalised railways have not yet had the opportunity of finding their true economic level in the matter of charges. They are obliged to carry an enormous number of uneconomic traffics such as no other business coming to the capital market would reasonably be asked to undertake. We hope that as a result of the combined effect of the modernisation plan and the charges scheme the railways may discover which 1303 services they can operate economically and which they are unable to, and, therefore, willingly surrender to the roads. Pending the completion of this process they clearly cannot go to the capital market, as free business people would, and ask for an ordinary commercial loan without a Treasury guarantee, because they are in that handicapped state, and will be for a very long time. If they are to raise capital at all on the money market there must be a Treasury guarantee. I trust that the hon. Member for Orkney and Shetland will accept that.
§ Mr. Grimond
All I am putting forward is that the Chancellor should take up an equity issue by the railways to help the railways in their present unhappy state. I suggest that it is not fair to put a heavy burden of loan charges on the railways, and that the Chancellor should take up the issue if the capital market will not.
§ Mr. Renton
The hon. Gentleman is now putting forward a proposal which the Socialist Party would not accept—
§ Mr. Renton
—and which has not been accepted on this side of the Committee, namely, that the railways should obtain public capital but should be excused the obligation of paying a reasonable and limited interest on it, especially when that capital carries a Treasury guarantee.
§ Mr. Ernest Popplewell (Newcastle-upon-Tyne, West)
In one part of his speech the hon. and learned Member for Huntingdon (Mr. Renton) indicated that the railways are in the difficult position of having to carry uneconomic traffic, and he expressed the hope that in future the railways will be able to select their traffic. That is most interesting. Is the Hon. and learned Gentleman suggesting that the common carrier obligation of the railways should be abandoned; that they be allowed to select their traffic and not be obliged to carry all the traffic offered to them?
§ Mr. Renton
There is no question of the railways selecting their traffic. But we hope that it will be clear from the charges scheme that the railways will carry that traffic which they can carry at competitive economic charges, and that their charges for other traffic which 1304 they cannot carry now except at a loss will be such as to bring that traffic to an end. I think it is common knowledge among those who discuss transport matters that when the charges scheme is produced the railways will be pricing themselves out of certain sections of the traffic market, and that is why it is important for us to know what is contained in the charges scheme.
§ Mr. Popplewell
That carries the argument a step further. At first, I was under the impression that the hon. and learned Member thought that the railways should not be common carriers.
I wish to ask the Minister to be more precise about the reason for the increase in the borrowing powers of the railways from £275 million to £600 million. On Second Reading, he did not give any explanation beyond saying that it related mainly to capital expenditure which it was not expected would be undertaken during the years 1955 to 1959. The Committee is entitled to a further explanation.
Later during that debate the question of these borrowing powers became intermingled with the much wider question of modernisation and the £12 million plan which is envisaged. Is it proposed to use any of the money to assist the Transport Commission to meet the contemplated deficit which will be accentuated during the current financial year? We tried to get an account from the Minister of the undertaking he had given to the Commission respecting the additional charges being put upon it, but the right hon. Gentleman gave no answer. May I ask him again, therefore, if he had these in mind when he gave the all-clear to the Commission to go ahead?
Is this increase in the borrowing powers part of the price to be paid for the expenses and salaries of the area authorities? So far, we have had no definite statement from the Minister but only vague generalisations as to the powers of the area authorities. Will the right hon. Gentleman tell us what are the salaries, and what kind of expenses allowances will be made, and whether these form part of the necessity for the B.T.C. to ask for an increae in its borrowing powers? Undoubtedly, the Commission is in great difficulty. At present, it has to meet £52 million or £53 million a year in interest and central charges, and the 1305 increase of £325 million in the borrowing powers will put a further burden upon the Commission by way of the interest payable on any money borrowed.
I am aware that the Government have given a guarantee to the Commission. Here, in reply to the hon. and learned Member for Huntingdon, may I say that a guarantee to the railways was not something new which came about with nationalisation. In pre-war days, when the railway companies could not raise the £25 million which they wanted for the London region, the Government had to give a guarantee. So, if the hon. and learned Gentleman wants to make a comparison, he must go much farther back than the administration in the years between 1945 and 1950.
How does the Minister expect that the Commission will be able to meet its future obligations? With the denationalisation of road transport we enter into another era. The Commission has been following a policy of closing branch lines and trying to get an integrated transport system. The further development of this policy will throw away more traffic.
It is argued by the B.T.C. in justification of the closing of branch lines that, as this traffic does not pay, it does not matter if it goes to the roads. Yet a further development of this policy will cause the Commission to lose more revenue which it is no longer able to recoup from the road services. Furthermore, last year the Commission made a profit on road haulage of £9 million and so, with the hiving off of road haulage, it will be faced with another big deficit. Will the new borrowing powers assist the Commission to meet that deficit or for what will the money be used? The Committee is entitled to know.
Will the Minister tell us, also, whether the additional money will be used to provide amenities for the railway staffs? The railways are not covered by the Factories Acts and the conditions of shunters' bothies or guards' lobbies and other staff accommodation, even washing arrangements, are deplorable. Some of these places have been there from time immemorial, and although representations have been made in the past to the railway companies and latterly to the Commission for reasonable conditions, not luxurious premises, neither has had the 1306 money to spend on these things. Since a reasonable standard in these matters is important to the railway staff, this should have priority if additional borrowing powers are given to the Commission.
The money will have to be borrowed on the open market at current interest rates. Who can tell what fluctuations are likely to take place, especially after the recent rise in the Bank Rate? And there is every possibility of a further increase taking place in the inflationary period into which the Tories are driving us. This will have still another effect upon the Commission when it borrows money on the open market.
All these additional financial obligations will fall upon the Commission at a time when the Government are doing their utmost to prevent it from operating as a paying proposition. I share the view of the hon. Member for Orkney and Shetland (Mr. Grimond) that the Committee should not be entirely satisfied with a Government guarantee to underwrite this loan. If all these charges are to be borne entirely by the Commission, the Government are asking the impossible. I am not one of those who agree with subsidising the railways—
§ Mr. Grimond
The hon. Gentleman looked at me, but I do not want that either. Yet we are entitled to ask the Chancellor of the Exchequer what he is doing. The right hon. Gentleman is subsidising the railways though he says he is not.
§ Mr. Popplewell
We are entitled to ask the Government to do something more for the Commission than to make vague statements.
Even at this late stage additional expenditure is being foisted on the Commission by way of the appointment of the area authorities. Surely the transport users' consultative committees which have already been established can give the Commission far better advice about the nature of traffic in the areas than can the one or two individuals who are being brought in to act as an additional link in the chain between the Commission and the divisional general managers. The Minister should give careful thought to that because it is a serious matter to ask the House to approve additional borrowing powers of this magnitude, placing an additional burden upon the Commission, when 1307 so many actions have been taken to prevent the Commission from being efficient.
I hope the Minister will treat very seriously the suggestions which I have put to him and the questions that I have asked him about expenditure. I hope he will treat particularly seriously my questions about providing additional amenities for the staff. Booking offices and many of the other offices on the old railways are a disgrace. In the marshalling yards and at other centres, in view of the dirty nature of the work which the men are called upon to perform, there ought to be reasonable welfare arrangements. These places have been so grossly neglected that they are back to the standard of the Dark Ages. It is right that in giving the Commission these powers the House of Commons should insist that some of the additional cash should be spent upon the provision of amenities.
§ Squadron Leader A. E. Cooper (Ilford, South)
Perhaps the few remarks which I wish to address to the Committee on this matter will be considered somewhat original. Although I am very mindful of the need for amenities for the staff of the railways, I am also very conscious of the great need for amenities for the passengers. I am sure that hon. Gentlemen opposite will accept that the railways are operated for the people who ride upon them and for the goods which they seek to carry.
§ Mr. Popplewell
Surely, consideration should be given to the staff who are actually operating the railways.
§ Squadron Leader Cooper
If the hon. Gentleman will be good enough to read in the Official Report tomorrow morning what I have just said, he will find that I am very mindful of the need for amenities for the staff, but I repeat that we operate the transport system of this country for the benefit of the passengers and for industry and we do not operate it for the benefit of the staff. If we can get first things first clearly in our minds we may have more constructive debates in this House.
First, I want to make some observations about the very heavy standing charge to which the hon. Member for Newcastle-upon-Tyne, West (Mr. Popplewell) has just referred. It is common form for the Labour Party to create the impression in the country that an enor- 1308 mous sum of money is being paid out annually and which is a crushing burden on the finances of the Commission. Surely hon. Gentlemen opposite will recognise that if the nationalisers had built our transport system from scratch they would have had to provide the money and probably at a considerably greater cost than the present cost to the Commission. The charge can be regarded simply as an interest payment on the capital assets which the Commission took over. It is the kind of burden which every industry in the country has to carry. It is a burden which other nationalised industries have to carry, and they recognise it as part of the financial make-up of industry. One cannot get away from that sort of thing.
I was interested to hear the concern expressed by the hon. Member about the possible increase in charges which may result from the increase in the Bank Rate. We did not hear the same concern expressed by hon. Members opposite when the Labour Government nationalised the gas industry and there was the famous issue of Daltons which was made at about 100 and ended up at about 72, resulting in the loss of hundreds of thousands of pounds to small investors.
For several years now, when Bills of this sort have come forward, hon. Members on both sides have spoken about the amenities on our trains and at our stations. Year has succeeded year, but nothing has been done. The hon. Member for Newcastle-upon-Tyne, West described the amenities for the staff as disgraceful. I agree with him that they are disgraceful and that we should be ashamed that this sort of thing should continue in our railway service. However, the amenities for the ordinary passengers are more than disgraceful. As one who has travelled almost all over the world, I say without hesitation that our railway dining car service is the worst that I have met in any civilised country.
§ Mr. J. Harrison
Will the hon. and gallant Gentleman tell us some of the places with which he is comparing the British Railways' restaurant car service?
§ Squadron Leader Cooper
Let the hon. Gentleman simply get out a map and take all the countries in Europe, starting at Finland and going down through the Scandinavian countries, Western Europe and Western Germany, even to Spain and 1309 to Italy, and even along the Northern Coast of Africa, where the labour is poor. We all know that our trains just do not compare with anything in Canada and America. In any of the countries which I have just mentioned, and even in India and Burma, the facilities provided for passengers far exceed anything that we have in this country.
§ Mr. Ernest Davies
When the hon. Gentleman talks about better conditions in dining cars, is he comparing price with price and like with like? It is a well-known fact that on the French railways the prices are very much higher than they are in England; the food may be a little better than here, but the prices are far higher than in this country. One must compare like with like.
§ Squadron Leader Cooper
The hon. Gentleman, who almost always leads for the Opposition in these debates, seems to be satisfied with standards of mediocrity which my hon. Friends and I are not prepared to accept. One can go to any of the countries which I have mentioned and can have two or three different types of meals on the railways. One can have a cheap meal if one so desires or one can have an expensive meal.
Hon. Members know what sort of a meal one can get and what sort of service is provided if one travels on British Railways. If one travels on the morning train to Manchester or Liverpool at breakfast time, what does one find? One is not provided with a menu to look at to make one's choice. No, what happens is that somebody comes along with one of those notorious coffee pots, which, I am convinced, have two spouts, one which puts the tea or coffee in the cup and one which puts it in the saucer. Then a waiter comes along with two or three dishes along his arm, perhaps with two sorts of semi-warm fish, a miserable looking sausage or some kind of mixed grill. Then these things are put down in front of one—
§ The Chairman
I would point out to the hon. and gallant Gentleman that we are dealing with borrowing and capital, but not with revenue and expenditure.
§ Squadron Leader Cooper
I am trying to put forward the argument that a lot of money needs to be spent upon these services at the present time. If this money is not in the "kitty" at the moment, then 1310 the borrowing powers of the Commission should be used to divert some of it for these services. That is all I am seeking to show in my argument and I submit that it is germane to the discussion.
So much, then, for our dining cars on trains; a similar state of affairs exists in restaurants on our stations. Surely nobody would deny that. Not only are conditions in these restaurants bad, but the facilities are not normally provided for seven days a week. If one has the misfortune to travel on a Sunday, one will probably find that one cannot get anything at all and other facilities also are not open to one. A great deal of money should be spent on the hotel services run by the Transport Commission and I should say that the hotels which they run are probably the worst that there are. [HON. MEMBERS: "Rubbish."] Why should hon. Members be afraid of criticism which everybody knows to be true?
§ Mr. Ernest Davies
The hon. Member is making statements and allegations which he is not at all attempting to substantiate. He is simply making statements of fact without proving them. Some of the British Railways hotels, such as Glen-eagles and the Royal Station, at York and others, are extremely well-known hotels and extremely well run. They have received considerable praise from tourists.
§ Squadron Leader Cooper
The hon. Member seeks to sustain his argument by mentioning two, or three hotels out of a large number. One need only go to the big cities. Let us not refer to holiday places where special catering facilities are provided, but to those places where the ordinary traveller has to go, like Manchester. If any of the names which have been thrown at me from the other side of the Committee are indicative of the standards hon. Members seem to want of a hotel, then I am very sorry for them. I repeat my argument which I obviously cannot prove by bringing a hotel to the Floor of the House and asking hon. Members to look at it. I can argue only on the basis of public opinion and what we know to be established facts.
My final point is one which I have raised on several occasions in the past. The chairman of the Transport Commission has written me several letters about 1311 it, but still nothing is done. The toilets on our trains and in our stations are appalling. The hon. Member for Nottingham, East (Mr. J. Harrison) nods in agreement. Much money needs to be spent in that direction.
§ The Deputy-Chairman (Sir Rhys Hopkin Morris)
It does not seem to me that this matter arises on the Clause at all.
§ Squadron Leader Cooper
I was under the impression that this was a Bill to provide the Transport Commission with extra moneys to improve its facilities. I have mentioned ways in which those facilities could be improved and twice I have been called out of order. I submit that to improve the things I have mentioned it is necessary to spend money and that falls within the matter which we are discussing.
The general public is far too complacent and apathetic about the state of affairs which we find on our railways today. If the general public were to criticise the Transport Commission more often to improve facilities, such as I have suggested, I am sure it could be done.
§ Mr. J. Harrison
I should have fully agreed with the hon. and gallant Member for Ilford, South (Squadron Leader Cooper) if the purpose of his contribution had been to see that the money to be expended under this Bill would be used to improve these very essential ancillary services, such as restaurants and hotels. I do not want to be cynical or too critical about the matter, but it would have helped his case had he mentioned some particular hotel.
If he had mentioned some hotel, or hotels, we could have joined with him in looking at the case, because some of us are familiar with some of the hotels run by the British Transport Commission.
§ Mr. Harrison
Such a contribution as that would give more weight to any criticism he made.
In the transport world we are suffering from a tendency towards carping criticism, which is not helpful and very often unsubstantiated, of the operations of the Commission's different services. I also regret 1312 the comparison which the hop. Member made between the British Railways' services and those in Spain, Burma, and. many other countries.
I suggest that our services compare very favourably, not only with the Spanish, or French, but even with the American and Canadian services. In fact, our services are a little better than the French services. That has been my experience. It is not so many years ago that we sent men to Canada to assist in the reorganising of what were then bad services there. Those men shared the considerable fund of experience and knowledge of reorganisation which we possessed in this country, and it is regrettable that such a damning indictment of British Railways should have been made by the hon. and gallant Member.
His first point was a more reasonable line to take. He suggested that had the British Transport Commission to purchase its present assets anew, putting down the actual cash in modern terms of purchasing power, it would have cost the Commission considerably more than was paid at the take-over. I agree with him on that, and it brings us to a point of substance in the organisation of the Commission's concerns.
There is another factor that enters into such a picture. Suppose we expended all that extra money for the purchase of those assets at current prices. In an ordinary business that purchase would immediately be reflected in the charges for the commodities we were to sell, and therefore transport charges would be very substantially affected by any such expenditure. One can imagine the height that transport charges would reach to meet such expenditure.
Therefore, the general public and industry are much better off by being able to accept the position that we do not have to pay for the main assets of the Commission anew. The Commission is not charging—compared with other prices and charges—as much as industry generally is charging for its commodities. Transport and freight charges have not gone up to the extent that commodity prices have increased. To that extent we can see an element of subsidy from the Commission to industry and the country generally. I feel that is something which we ought to appreciate in our assessment of the general position.
1313 On the matter of the borrowing of this vast sum of money, I should like to return to the theme of the hon. Member for Orkney and Shetland (Mr. Grimond). He said we were embarking on an endeavour that was to cost the British Transport Commission considerable sums of money in interest each year. I recognise that in the venture envisaged in the Bill we are running some risks about the repayment every year of the heavy interest charges.
I do not think there was any substantial contradiction between the theme of the hon. Member for Orkney and Shetland and that of the hon. and learned Member for Huntingdon (Mr. Renton). The point made was that the substantially heavy burden was a risk, and that the Commission would have to work very hard every year in order to find the money. It was pointed out by the hon. and learned Member for Huntingdon that the present position of the British Transport Commission is that it is a. completely uneconomic organisation, and that if we tried through ordinary channels to secure the necessary money we should have to wait a long time.
Indeed, it might be that the money would not be forthcoming because it would involve a measure of risk, and the general public would not be willing to take that risk which they would be taking if they subscribed these vast sums. The state of the present assets of the Transport Commission, is something which must be seriously faced. This Bill will contribute to the removal of the uneconomic position regarding the assets and the organisation, and at the same time the other aspects of the risk will give the Commission an opportunity of putting the business on a broader commercial basis. To argue from a commercial basis at this juncture is to assume that there is something from which to argue, but I am suggesting that the present position is not sufficiently commercially sound to accept it as such a basis from which to argue.
§ Mr. Arthur Holt (Bolton, West)
Does the hon. Member not agree that when an ordinary commercial enterprise gets into difficulty it reorganises its capital on the basis of present profitability no matter what the replacement costs are? Does he not think that that would be a good idea for the railways to adopt?
§ Mr. Harrison
If the railways were something less vital, if they were just an ordinary industry or an ordinary commercial institution, I should agree with the hon. Member.
Unfortunately there is another element in this matter, and that is that we could not afford to reorganise our railways in the way suggested by the hon. Member, because if an ordinary business ceases to make a profit to the extent which the railway organisation has done it closes its doors. We cannot visualise a position in which the railways would close down or even restrict their enterprise, because they might have to do that to such an extent that it would be a killing blow to all sections of industry. Therefore, we are not in a position to choose that particular method of reorganisation.
The railways must continue in almost the way they are doing today, and their economic position makes it inevitable for us to find the money for reorganisation so that they can be turned into a successful commercial proposition. But it is always well to remember that in the reorganisation of the railways we are more or less tied by the nature of the undertaking.
When we considered the question of finance in our recent debate the hon. Member for Wolverhampton, South-West (Mr. Powell) sent me a copy of a pamphlet entitled "Change—our ally," and he called attention to a recommendation about the canals. It might be to the advantage of the Committee generally to examine the view here expressed. This is what is said about the problem of the canals and the finances of the Transport Commission:Probably a part of the canal system, given real freedom in charges and a chance to obtain new capital, would prove its superiority for suitable traffic to other forms of transport.That seems to me to be an ironic comment on the plight of the canals and of the Transport Commission.
We seem to be in the position that through normal channels we cannot attract new capital for reorganisation. That is one of the major difficulties, and this Bill, irrespective of the risks involved—and there are some—is the only means to meet the position which we find today in the British Transport Commission's undertakings.
§ Mr. David Jones (The Hartlepools)
Before we conclude the Committee stage of this Bill, we should like to get some more information from the right hon. Gentleman on some of the questions which were directed to him and to the Joint Parliamentary Secretary during the Second Reading debate on the Bill. I am sorry that the hon. and gallant Gentleman the Member for Ilford, South (Squadron Leader Cooper) has left the Chamber, for I always think that to exaggerate criticism is to destroy one's case completely.
Of course there is room for improvement in the British Transport Commission's dining-car service. It may very well be that some of the hotels run by the Commission could be improved. But some of us know hotels in some parts of the country which are very well run. I have one in my own constituency, and I invite any hon. Member in this Committee to come along to it. He will there experience first-class service at reasonable prices. I am not advertising the Grand Hotel at Hartlepool at all.
§ The Deputy-Chairman
I would call the hon. Member's attention to the fact that this has nothing to do with the capital charges mentioned in this Clause.
§ Mr. Jones
With all due respect, we are debating a Bill to give the British Transport Commission increased borrowing powers, and if the Minister were foolish enough to listen to his hon. and gallant Friend the Member for Ilford, South, who recommended that the Commission should spend a large part of its money on improving its hotel service, then obviously there would not be sufficient capital left to develop the essential services. How the British Transport Commission spends this money when it is sanctioned by Parliament seems to me to be relevant. But I bow to your Ruling, Sir Rhys, and leave the matter there.
§ Mr. Ellis Smith (Stoke-on-Trent, South)
On a point of order. This raises a very important matter of interpretation of the Standing Orders. Your predecessor in the Chair today, Sir Rhys, ruled that my hon. Friend the Member for Lincoln (Mr. de Freitas) was in order when dealing with a number of local problems arising out of railway administration in Lincoln, and other hon. Members have followed a similar course. I want to put 1316 the point to you that before the Committee votes the necessary finances increasing the borrowing powers from £275 million to £600 million we have a right to ask how the money is to be spent, and, particularly, how much is to be spent on modernisation.
§ The Deputy-Chairman
The hon. and gallant Member for Ilford, South (Squadron Leader Cooper) was discussing the administration of hotels, which seemed to me to concern the day-to-day working of the Transport Commission. The purpose of the Bill is to increase the borrowing powers of the Transport Commission and it sets out certain ways in which that can be done. That is what the Bill seems to me to deal with.
§ The Minister of Transport and Civil Aviation (Mr. John Boyd-Carpenter)
I hope that nothing you have said, Sir Rhys, indicates that you will not feel it possible, when the time comes, to permit me to make certain observations in reply to the charges made by my hon. and gallant Friend the Member for Ilford, South against the hotel and catering administration of the Commission. He was allowed to make certain allegations about that, and I should like to say something in reply.
§ The Deputy-Chairman
I did not hear the whole of the hon. and gallant Member's speech, but if he was not ruled out of order the right hon. Gentleman must be allowed to reply. The part of his speech which I did hear seemed not to be in order, but if a previous Ruling was given I must abide by it.
§ Mr. Jones
As I understand it, Sir Rhys, your illustrious predecessors in the Chair, in the days when the late railway companies were seeking additional borrowing powers, ruled that it was competent to discuss fairly fully how they were exercising their powers and spending the money which they already had. At the time of the first British Transport Commission Bill I remember that the right hon. Gentleman who is now the Minister had some very caustic things to say about railway administration. I assume that my hon. Friends and I are now entitled to discuss how the Commission is exercising the powers and using the money that Parliament has already permitted it to use. That is all that I was trying to do.
1317 I disagree with the argument of the hon. and gallant Member for Ilford, South that no effort should be made to improve the amenities which are available to the staff of British Railways. I agree that the primary purpose of the railways is to provide for travelling passengers and to convey freight from one place to another, but unless an employer with modern ideas seeks to treat his employees in a reasonable fashion he is not likely to get that efficiency which the Court of Inquiry some weeks ago thought possible in British Railways.
During the Second Reading debate, the Minister of Transport pointed out that some part of the £600 million which the Bill grants to the Commission would be employed in putting into operation some parts of the modernisation plan. He said:The expenditure during this forward period, what I may call the normal capital development of the Commission, is expected to be about £450 million, of which about £200 million will be found from the Commission's own resources. I used the expression 'normal capital development' to refer to development which is mainly apart from that contemplated in the modernisation and re-equipment plan which has recently been published."—[OFFICIAL REPORT, 8th February, 1955; Vol. 536, c. 1747.]He also said that there was a sum of about £75 million which could be devoted to the modernisation plan in general.
Later, his hon. Friend the Joint Parliamentary Secretary, replying to the debate, enumerated a number of schemes which, he said, had already been started and which, he inferred, were part of the modernisation plan. I attempted to intervene to point out that most of the schemes which had already been started were not part of the modernisation plan but part of the ordinary development of the Commission from year to year.
The point upon which I was seeking some information then is one which I want to put to the Minister again, because in neither of the debates has it been answered to my satisfaction. It has been said by the Court of Inquiry and in the Report of the Commission for 1953 that at the end of 1953 there was a deficit of £273 million; that the deficit in 1954 would be a further £15 million and—in evidence given before the Court of Inquiry—that the deficit in 1955 would be £25 million. That did not take into account the additional cost of the wage concessions in December of last year and January of this, which amount to a further 1318 £10 million. According to those figures, the Commission is likely to be £77 million "in the red" by the end of 1955.
So far as one can see, it is likely that the Commission's figures upon the expenditure side will exceed, by some £35 million, its receipts for the years from 1st January, 1956 onwards, unless there are improvements. I have reason to believe that it may be possible to save about £5 million by reorganisation and the elimination of redundancy as a result of the joint consultative machinery coming into operation during succeeding years. It has also been estimated by those who know that if the Commission increases its freight charges by 10 per cent. it will receive an extra £15 million a year, taking into account traffic for which the Commission has to compete with other forms of transport.
Ten million pounds of the £15 million will arise from traffic which is more or less monopoly traffic, but the balance will arise from traffics in relation to which the Commission has to compete with other forms of transport. If both those factors are realised—that is, the saving on administration and the extra revenue coming in from increased freight charges—the Commission can expect to be £20 million better off in 1955.
As against that there is likely to be a deficit of £35 million. We have, therefore, to add at least £15 million to the £77 million which, in any case will be the deficit at the end of 1955. I sought to put that point, and the Parliamentary Secretary indicated in his reply that the half-dozen improvement schemes which he mentioned had already been set afoot would yield such an advantage to the Commission that it would balance the deficit. He said:We expect to begin to obtain increased returns almost as soon as the expenditure is incurred."—[OFFICIAL REPORT, 8th February, 1955; Vol. 536, c. 1853.]The Commission is not nearly so optimistic. Paragraph 136 of "Modernisation and Re-Equipment of British Railways" says:It is not possible to say how quickly the expenditures made under the Plan will fructify, but since they are all interdependent the full benefit will not be reaped for many years ahead. A question arises as to what the policy is to be meanwhile. Experience shows that once traffic had been lost to a particular form 1319 of transport it is very difficult to attract it back again. The position must be faced that certain traffics may have to be carried for some years to come although they are considered to be unremunerative, because ultimately under the Plan the new operating methods to be introduced will make them remunerative and it would be unwise, to say the least, to discard them in the meantime.The Commission there suggests that any advantages arising from the reorganisation plan will not be reaped for some years, but most of the schemes which the Parliamentary Secretary listed during his speech on 8th February have nothing to do with the modernisation plan at all. They are improvements which were projected before the modernisation plan was conceived.
I therefore put it to the Minister of Transport the point that it will be completely unfair to the staff employed on the railways, to the Commission, and to the public for us now to be talking about increasing the Commission's borrowing powers to £600 million. If the right hon. Gentleman is still in office—and I shall do my best to see that he is not—I have no doubt that some time, either later this year or during next year, he will be seeking, in this House, further borrowing powers so that the British Transport Commission can embark upon this scheme.
Let us not forget, however, that if we take the £1,200 million which is the cost, and the £450 million normal expenditure that was mentioned, we are not talking about an expenditure of £1,200 million but of £1,650 million on British Railways. In addition to that, the Commission will be "in the red" at the end of this year to the tune of some £77 million, with an anticipated loss of a further £15 million each year for five years at least.
The Chancellor of the Exchequer, either wittingly or unwittingly, did not give the House the full facts on 3rd Febbruary. He then said:So far as I can judge, and taking into account the figure of £25 million which has been given as the £15 million deficit plus the £10 million for the recent settlement, it is reasonable to say that there are good prospects of this plan paying its way. The Government therefore consider that funds for this plan must be found."—[OFFICIAL REPORT, 3rd February, 1955; Vol. 536, c. 1853.]The Chancellor did not say what the Commission had to do about the deficit already incurred for 1954—and I am 1320 speaking without the assistance of the 1954 Report of B.T.C.—and the projected deficit for 1955, which will be incurred even if the Commission's best estimate is realised of a £5 million saving on administration and additional revenue from the new charges scheme of £15 million. It is obvious, of course, that they will not realise £15 million in 1955. So far as I know, the scheme is not yet known and it cannot be operative for more than nine months in this year at the most.
I would, therefore, invite the right hon. Gentleman, when he winds up the debate, to tell us just a little more about how the Transport Commission is to handle that deficit which remains on its books and which, as far as I can see, is likely to increase year by year for the next five years. It is bound to be a source of worry to the people charged with the responsibility of running the Commission, and must be of concern to those employed by the Commission who, with this deficit hanging over their heads, may find themselves waking up any fine morning with a new scheme of retrenchment in the air because the difficulty caused by this deficit ought to be cleared up.
I think it was the hon. and gallant Member for Ilford, South who said that if the Transport Commission was starting from scratch it would have to borrow the money and would have to pay interest on the money needed for constructing the railway, but everyone appreciates that were we free tomorrow to construct a new railway system we should avoid a very great number of mistakes, and save a large sum of money which was needlessly wasted in competition in the earlier years. Therefore, we cannot examine this matter from the angle of making a fresh start. We have to accept the railway system as it is now.
We have to do something more. We have to recognise that rail transport has now become a public service to all sections of the community. There is not a single commercial enterprise, there is not a single industry—be it private or public enterprise—which could carry on if the railways were not there to carry the goods. It was, I think, an illustrious fellow-countryman of yours and mine, Sir Rhys, who once described our coal industry as the industry which gave lifeblood to this nation. If that be the case, then the railways are the arteries through which that 1321 lifeblood passes to every part of the economic body.
Therefore, we have, very largely, to treat this industry as a public service, and I hope, in the interests of the industry and of the 600,000 men employed in it, that we shall have some more information tonight on what is to happen about the deficit on the railways, in order that the men employed on the railways can at least be satisfied that in another 18 months or two years they are not likely to be faced with another period of retrenchment.
§ Mr. Holt
I am very pleased to follow the hon. Member for The Hartlepools (Mr. D. Jones), because it is most important that the Government should tell us more about what they intend to do about the deficit on the railways, which, as is recognised by everybody, is likely to be very much worse next year. As far as I am aware, we have heard of no comprehensive plan for getting rid of it, with the exception of some rather hopeful suggestions that the 15-year modernisation plan might, at the end of that time, have eliminated the deficit.
I do not agree with some of the closing remarks of the hon. Member for The Hartlepools. There are many methods of transport in this country, and I am desperately keen that the railways should pay their way in providing those services for which they are most fitted.
§ Mr. D. Jones
Can the hon. Gentleman imagine any form of transport, other than the railways, being capable of transporting coal, iron ore, sand, ballast, and that kind of traffic, from one part of the country to another?
§ Mr. Holt
Last week, I spent a couple of days visiting some atomic plants, and it may be that in the course of years—it may even be generations—commodities like coal will not be moved about the country in the way that they are now. There is nothing static about transport. There was a great revolution in the last generation, and there are now many things that are more appropriately carried on the roads than on the railways. However, I still agree that there is a large amount of freight and a large number of passengers which can still be carried most economically and comfortably by rail, and, where that can be done, I want to 1322 see the railways making a profit from doing it.
I wish to refer to the words printed in italics at the end of Clause 1, which authorisethe Treasury to give guarantees with respect to stock or loans and which provide for charging sums required for fulfilling any such guarantee on the Consolidated Fund and for paying into the Exchequer any sums received by way of repayment of sums so required or by way of interest thereon.I should like to hear quite frankly from the Minister whether the Government envisage that they may have to carry out the guarantees laid down in the 1947 Act; that is to say, whether, in fact, they envisage that this year, next year or in another year, the railways will not be able to make the contribution to the Transport Commission which they could make, and that the Treasury will have to pay the interest on the transport stock. The Act says that the Treasury can do this, and that might be a reasonable way out of the difficulty. I suggest that this deficit cannot be left in the air, as it is. It is a quite intolerable burden for the Commission to go on bearing.
It may be that if the railways were built today, they would cost far more, or, if they were laid out more efficiently, far less than the value at which they now stand in the books of the Transport Commission. But that seems to me to be quite irrelevant. If we have a lot of physical assets which cease to make a profit, and, instead, constantly make a loss year after year, they depreciate in value. In fact, they can cease to have a value at all. A commercial company which ceases to make a profit goes out of business, and all its assets, which may have cost £1 million may be sold for £1,000. Hon. Members who have any knowledge of conditions in Lancashire before the war know that many mills in the 1920s were worth £1 million, but were, nevertheless, sold for a few hundred pounds during the 1930s.
I suggest to the Government that they should look in more of a commercial manner upon the British Transport Commission in its present plight and that, since the Commission stated to the inquiry which took place before Christmas that it did not consider that any useful purpose could be served by increasing charges—irrespective of any alterations that might 1323 come in under the new charges scheme—and that by increasing charges they would lose traffic, the net result of which would be a loss. I do not know whether that is true or not, but it is their statement. If that is so, how is the deficit to be dealt with?
The hon. Member for The Hartlepools has pointed out that the deficit will still continue, no matter what savings are likely to be made in the immediate future. Therefore, I suggest that it is not unreasonable, no matter what was originally paid for these capital assets, to consider reorganising the capital structure of the Commission. I do not think that this would contain an element of subsidy, or that it would be closing our eyes to the real issue, but I do think that the introduction of an element of reality into the capital structure of this nationalised industry might well be an example to be followed in others.
We are faced with an industry which for many years has fallen on evil times, and we want to give it a fresh start. I suggest that there is a great deal to be said for the kind of capital reorganisation which would take place in an ordinary commercial enterprise, and I suggest that it would help if we did something like that. An ordinary commercial enterprise which embarked on such a reorganisation would say, "We can see that in the years ahead we might make real progress and become really profitable. We therefore suggest writing down our £1 stock to 5s."—as was done more than once before the war in the cotton trade, when shares were written down to Is.—"We are reorganising our stock, and, as a consequence, we shall not have to pay so much interest on stock in future years. Then, we will issue some more stock, and be quite realistic about it."
The Commission could say that it could not go on the market, but that the Treasury would back the stock, and, though it might not receive any interest for a few years, it would get more than 3½ per cent., and even 7, 8 or 9 per cent. in ten years' time. If the Treasury backs this railway plan, I think that that is the kind of view which they might realistically take.
I should like to hear from the Minister whether he considers this to be completely foolish and a scheme not worth consider- 1324 ing, and, if he does, what he proposes to do about this deficit, of which the hon. Member for The Hartlepools gave details. It seems to me that the Government have not faced up to the difficulties arising from the heavy deficit during this year and which are likely to arise in subsequent years, and which the Transport Commission will have to meet.
§ Mr. Ernest Davies
As the House resumes at 7 o'clock, and as I am sure the Committee would like the Minister to reply to the large number of points which have been put in debating this Clause, I should now like to put some further points to him.
He will have noticed that throughout the debate various hon. Members have asked the Government again and again what they intend to do about the financial position in which the Commission finds itself today. We are now debating the borrowing by the Commission of £325 million more, and, therefore, it is our responsibility to inquire whether, by borrowing this additional sum, the Commission is likely, in the years to come, to be in better financial shape, or whether, by so doing, its position will not be improved at all. In view of the fact that there is no prospect of the Commission's paying its way within the next decade—fifteen years was the period given by the Chancellor of the Exchequer—the outlook is not encouraging.
In 1954, the Commission already had an accumulated deficit of £27 million. It is now estimated that the deficit for that year will be £15 million which, with the increased wage award, will make the deficit in 1955 £35 million, not allowing for economies. In 1956, again allowing only £5 million for possible savings, there will still be a deficit in the nature of £30 million per annum. When these figures were given, the only answer of the Parliamentary Secretary was that we were on the pessimistic side and that he did not take such a gloomy view. Whether the deficit is £10 million, £20 million or £30 million, neither the Minister of Transport, the Chancellor of the Exchequer nor the Parliamentary Secretary, has held out any hope of the Commission's paying its way within the period which we are now discussing, the next five years.
If this £325 million is borrowed—we consider it is necessary that it should be 1325 borrowed—there will be increased interest charges, and the expenditure of the capital will take time in bringing results. Its immediate expenditure will not bring additional revenue. Of the £325 million, as my hon. Friend the Member for The Hartlepools (Mr. D. Jones) has just pointed out, only £75 million is to be spent on the modernisation plan within the next five years, as the Minister and the Parliamentary Secretary both stressed.
The schemes under the plan are by no means immediately remunerative. In summarising them the Minister stated that there would bea great deal of the first work on extra bridge renewals and track strengthening in preparation both for higher train speeds and electrification. There will be preliminary expenditure on automatic train control… on signalling and the additional cost of new methods of propulsion—new types of locomotive."—[OFFICIAL REPORT, 8th February, 1955; `Vol. 536, c. 1748.]From none of those will there be additional revenue. There will be something from electrification from Chelmsford to Ipswich.
It is necessary for us to be realistic. The expenditure of this money will not immediately improve the position of the Transport Commission. It is essential that the money be borrowed, as that will save the Commission from being in worse plight now, but it will not help the Commission in the immediate future. One has to look at it from the long term, that of the modernisation plan over a period of fifteen years.
Even there, one cannot be sanguine about the long-term financial results. The most optimistic forecasts in the plan and in the House of Commons are that £30 million net additional revenue will accrue when the plan is fully operative. Not allowing for increased costs, which may be offset by economies or increased charges under the new charges scheme, the net revenue of £30 million will only meet the expected deficit of £30 million. So, even after fifteen years when the plan comes into operation, the additional earnings will only wipe out the deficits which are now being incurred.
The Chancellor and other Government spokemen took that point of view. They said there was a reasonable prospect of the Commission's paying its way in fifteen years' time. That is not very encouraging. In asking the Committee to pass the Clause for additional borrowing powers 1326 the Government ought to give more explanation than they were able to during the Second Reading. In the City, this proposition would appear very poor business. If investors were asked to loan £325 million, and all they could be told by those who were making the issue was, "In the next fifteen years we shall make losses but at the end of the fifteen years there is a reasonable prospect that we shall pay our way. We are going to let the losses and the deficits continue, and to be added to the other £27 million lost" it would be a pretty poor business outlook. This is supposed to be a Government of business men who believe in business ways.
We are, therefore, justified in asking the Government to be a little more explicit about what they intend to do about the solvency of the Transport Commission. In the debate on 3rd February, the Chancellor of the Exchequer said that he would direct himself as concisely as possible to the Government's attitude towards the future solvency of the railways, but we found no answer. He said that he looked upon the Transport Commission as responsible, and had every confidence in it to do everything it could to economise, increase efficiency and modernise, and so forth. Within the fifteen years it would be paying its way.
We have not yet been given a direct, definite and convincing answer what the Government think can be done to make the expenditure and revenue accounts of the Commission balance within a reasonable time, and to accumulate a surplus in order to wipe out the deficits which have already accumulated. We have been told that there would be a Treasury guarantee. That is the minimum which could be done. The plan points out that the capital cost will carry about £40 million in interest charges per annum. That appears to be rather high, working it out at 5 per cent. gross on the £800 million which it is proposed should be borrowed for the plan. I appreciate that it includes both interest charges and capital redemption charge, but it seems to make the cost of borrowing rather high.
I am wondering whether the Government, and particularly the Treasury, have thought of cheaper ways of borrowing. 1327 So far, borrowing for all the transport stock has been on a long-term basis, and it might be cheaper if a certain amount of this stock were borrowed on a short-term basis, in view of the fact that it is being invested to bring in remunerative capital within the comparatively short period of fifteen years.
I am certainly not attracted by the suggestion, which came from the Liberal benches this afternoon, that an element of equity stock should be introduced into the nationalised concerns. I do not want us to return, as it were, to the profit motive, even though the Government are the interested party in operating the industry.
The Government subsidised private enterprise before the war by giving a Treasury guarantee to the railways for special capital work so as to enable them to operate at a far cheaper rate than they would otherwise have been able to do, and I think that they should give serious consideration to making an interest-free loan to the Transport Commission in order to relieve it of additional interest during the transitional period from the present difficult position to the improved position which, we hope, will be brought about by the modernisation and re-equipment plan. That is the minimum which the Government should do at this stage. Not only is it right that the Commission's loan stock should be guaranteed by the Treasury, but, if the Commission is to be helped at all, an interest-free loan for the capital investment might be one way of doing it.
During our previous debates, we on this side asked what were the Commission's views on the financial position. We were not wholly satisfied with the answers which we received from the Treasury Bench. The Parliamentary Secretary stated categorically that the Commission had never asked for a subsidy. We, of course, accept that absolutely. The Chancellor of the Exchequer made it absolutely clear that he had no intention of giving a subsidy to the Commission. But it is one thing not to ask for a subsidy, and another to make one's financial position clear without saying specifically that one is asking for aid.
I should like to know whether the Commission has been consulted by the Minister or by the Treasury about its 1328 financial position. Have conversations taken place, and has any conclusion been reached as to how the present position is to be met? Or are the Government leaving it to slide, and the deficit to accumulate? Again, in this connection, no satisfactory answer has yet been given as to why the Chairman of the Commission, in particular, appeared to believe that financial aid was to be given to the Commission.
The Chairman has been frequently quoted as saying, when the wage award was made, and when he was asked where the money was to come from, that it was no concern of his. But we on this side cannot help thinking that no such statement would have been made by a gentleman in such a responsible position as the Chairman of the Commission unless he had been given an indication, however indirect, that he could expect some financial assistance to be given to the Commission. So far, here is no indication of such aid being given, and in our view the Commission is being treated a little shabbily at the present time.
The Commission is doing a fine job. We were glad to note that on the last occasion the Minister himself paid a great tribute to what had been done by the Commission in recent years. If the morale and confidence of those working inside the organisation are to be maintained, there must be some hope of bringing about a satisfactory solution to their present difficulties, and that, I suggest, would be stimulated and aided if they knew exactly where they stood from the financial point of view.
The more we discuss the plan itself, for which part of this money is being raised—although only £75 million—the more remote, in one way, it appears to become. We are still rather concerned about priorities, and the small scale on which the plan is to be embarked upon in the next five years. If the plan, as estimated, is to cost £1,200 million in fifteen years, and if in five years only £75 million is to be spent, then it seems that somebody is being very optimistic in thinking that it will be possible to spend the balance in the remaining ten years.
Altogether, £600 million is to be raised other than by borrowing. Perhaps the Minister can give us some information this afternoon about the sections of this plan which are to be financed out of the 1329 £75 million during the five-year period, in addition to those on the list which he gave us. I hope that I have made the point clear. He has indicated the schemes on which the £75 million which is being borrowed is to be spent. We should like to know whether, in addition, other works in connection with the plan are to be carried out during the five years and whether they will be financed from internal resources.
If there is an additional list, that would give a little encouragement regarding the speed with which the plan is being carried out. This is an imaginative scheme, and we want to see it carried out as soon as possible. We have been a little discouraged by previous remarks made by the Minister which indicated that it would be a very long time before we really began to see results.
There is a further question which I wish to put to the Minister. We have been discussing the modernisation and re-equipment plan, but this money is being borrowed by the Commission for all its purposes, that is to say, it is not confined to the railways alone. We have recently had the Commission's statement about Route C—the new tube route from Tottenham to Walthamstow. Full details of the plan were released by the Commission for completing this route.
I think it would be helpful to us if we could be told why at this stage, when details of Route C had been released—obviously indicating that there are plans for proceeding with this route—no mention was made during the debate of this new tube. So far as I recall, we have not been told whether some of this borrowing is intended for the purpose of starting preliminary work on that long-needed project. I hope that the Minister will be able to indicate that before very long work will start on this tube.
It would be helpful, if it were possible, for the Minister to give us some idea of the priorities. As I have stated before, from my constituents point of view I very much regret that the electrification of the north London suburban line was not mentioned in the immediate project. I hope that when the priorities are considered, and when it is possible to publish the order in which the work is to be done, it will be found that the Enfield lines are to rank among the highest priorities. Facilities for north London rank at the 1330 top in the Report on travel facilities in London. The urgency and the need have been stressed, and it is regrettable that certain other lines which have appeared at the head of the list, such as the Tilbury-Southend line, are to take priority. That is the indication and if the Minister can deny it, I hope he will.
§ Mr. Davies
If my hon. Friend does not know where Enfield is, I am sorry for him, because he does not know what is good.
In conclusion, we support the Clause, but we are anxious to have from the Minister a little more information. We hope that he will be a little more forthcoming than during the last debate, and will reassure us about the Government's attitude to the Commission's bad financial position.
§ Mr. Boyd-Carpenter
I will endeavour, if I may, to deal with the considerable number of points which have been raised in the debate on this Clause.
§ Mr. Boyd-Carpenter
The hon. Member has got me there I can deal only with those points which have been raised—and only with those if I am able to decipher my handwriting.
The hon. Member for Orkney and Shetland (Mr. Grimond) raised the question of the Treasury guarantee. I think he under-rated the value of that Treasury guarantee for the Commission's borrowing. Many private enterprise concerns which have not the advantage of that guarantee would, I think, be only too thankful to have it. It means that borrowing can be effected at broadly the same price as that at which Government credit stands, and it is, therefore, a considerable advantage to any concern to have the Treasury guarantee.
The hon. Member raised the interesting and rather wide question of whether a replacement of the Treasury guarantee, at any rate of part of this borrowing, should not be some kind of equity borrowing by the nationalised industries. One of my hon. Friends pointed out that the present principle was applied in all the nationalisation Acts, except, I think, the Coal Act, where, speaking off the cuff, I believe the borrowing was from the Consolidated Fund, although the effect was similar.
1331 There would be great difficulty in applying the principle of equity borrowing to nationalised industries. Apart from anything else, in the ordinary commercial way the holders of the majority of the equity shares of most concerns are entitled to control, and if these proposed equity shares in the B.T.C. were held publicly it would raise many difficult questions of control, whereas if they were held by the Government it might involve a greater degree of control over the business management of the B.T.C. than right hon. Gentlemen opposite, who set up the Commission, or my right hon. Friends and I would like to see.
I think there is a fairly large body of feeling in the country that the nationalised corporations should have a considerable degree of independence in running their own business affairs, and I think there would be some difficulty in reconciling that principle with the idea of equity shares, but it is a very interesting idea.
§ Mr. Grimond
It could be an important point. If a nationalised industry makes a large profit, does the Minister expect, in that event, that it should be entitled always to plough it back into the industry, except for 3½ per cent., which is interest payable on the loan?
§ Mr. Boyd-Carpenter
Without studying the Act, I should have thought that a large profit might well be used for amortisation of stock, which in many cases would be very satisfactory, but I do not think that aspect of the matter overcomes the difficulty which I put to the hon. Gentleman.
§ Mr. Henry Usborne (Birmingham, Yardley)
Does the right hon. Gentleman intend to speak for three-quarters of an hour? There are a number of points which hon. Members would like to make, and if he intends to speak for three-quarters of an hour perhaps we might interrupt him to make them briefly. If, on the other hand, he intends to speak for only part of the time, why did he not wait until the end of the debate?
§ 6.15 p.m.
§ Mr. Boyd-Carpenter
Speculation on the length of House of Commons speeches would, I think, be going into the equity 1332 business. I hope I shall not weary the Committee for the length of time the hon. Member suggests, although I can give no undertaking if points are put to me. I hope for my sake, as well as that of the Committee, that I am not guilty of such prolixity.
§ The Chairman
Even if the Minister goes on for such length of time, we are to have more or less the same subject again at seven o'clock, so that speeches not made on this Bill could be made then.
§ Mr. Boyd-Carpenter
The hon. Member for Lincoln (Mr. de Freitas), who was good enough to let me know that he would be unable to be present at this stage of the debate, said that the local points which he raised were points raised without notice and that he did not expect a firm and definite reply to them tonight. I am aware of the particular problems affecting the City of Lincoln, through the level crossing to which he referred, and I am anxious, both through my connection with the B.T.C. and in other Ministerial capacities, to do what I can to overcome the difficulty. Dealing with his question on inland waterways, I may say that the Transport Commission has recently had a board of survey under Lord Rusholme which has been looking into the question generally.
My hon. and learned Friend the Member for Huntingdon (Mr. Renton) referred to the modernisation plan as being the main justification for the Bill. Broadly, I will agree with him, but I think that in any event it would have been necessary to ask Parliament to increase the Commission's borrowing powers in view of the fact, which I disclosed on Second Reading, that it had reached within £22 million of the permitted maximum under the 1947 Act, as amended by the 1953 Act.
My hon. and learned Friend also asked about the charges scheme. The Commission is still discussing the proposed charges scheme with the various interests concerned and hopes to get it to the Tribunal before many weeks have passed. The discussions have taken longer than was originally hoped, but I think the Committee will agree that when proposals of this sort are being put forward it is sensible that the fullest possible explanation should be given to those who may be very seriously concerned. The Commission has been most painstaking in its 1333 discussions and explanations, which may ultimately help to secure that the charges scheme takes less time in the later stages.
The hon. Member for Newcastle-upon-Tyne, West (Mr. Popplewell) asked for the reasons for the increase in the proposed borrowing powers from £275 million under the present Statute to £600 million. I do not think I can add very much to what I said on Second Reading. As far as we can calculate, this increased borrowing should take the Commission over a period, perhaps, up to 1959.
As I then said, it is very much a matter of judgment how one fixes the figure in these borrowing powers Bills. One school of thought says we should make it a large figure so as not to cramp the industry concerned, but there is also the point of view of the rights of the House, and if we ask for a very large figure the House will be deprived for longer than is strictly necessary of its rights to investigate the affairs of the industry concerned in this way. Broadly, therefore, as the borrowing powers would run the Commission, we thought, until 1959, we thought that was about right and about in accordance with precedents for other increased borrowings which have been effected by Parliament under recent Acts.
The hon. Member asked whether this borrowing was for the contemplated deficit. It is only indirectly, in the sense that I have already tried to explain—that in our view and that of the Commission it will greatly improve the Commission's capacity to earn its living by obtaining up-to-date equipment. He also asked what the area authorities were doing, and I have obtained the latest information on the subject. They have taken over responsibility as from 1st February and are already at work on the examination of works and equipment projects, trend of traffic receipts, punctuality of trains—that may appeal to the Committee—availability of locomotives, staff appointments, productivity and budgets for 1955.
They are getting down to the job which, during the debates last autumn, I forecast they would undertake. Even at this stage they are entering into their duties with very great enthusiasm which, I hope, will be of great assistance to the administration.
§ Mr. Boyd-Carpenter
The hon. Member, or some other hon. Member, asked that question in the previous debate. These appointments are not made by me, but by the Commission. In those circumstances, it is not for the Minister to refer to salaries of appointments he has not made. Salaries for appointments he makes are stated annually. I do not deny any information I can give to the House. I hope the hon. Member will realise that if we go into the sphere of the Commission on appointments it makes, and start specifying salaries of a particular set of men, no doubt all the salaries would have to be given. I do not think that that would be satisfactory or reasonable.
§ Mr. Popplewell
The right hon. Gentleman will agree that this is a different type of appointment from those to the administrative or executive side of the Ministry's service. This is a body which was deliberately forced on the Commission, as it were. I know the Minister will say that it is the Commission's own scheme, but the Commission had to think it out in consequence of Government direction. I think that it is rather different from asking for the salaries, for instance, of those actually employed by the Commission in an administrative capacity. I know that the right hon. Gentleman is usually very frank with the House and I hope he will find some way of giving us this necessary information.
§ Mr. Boyd-Carpenter
I do not wish to conceal anything, but, as I said—after consideration—on the previous occasion, I thought it would be wrong and it would have far wider repercussions if we were to start retailing individual salaries in respect of appointments made by the Commission. Salaries in respect of appointments I make appear in the White Paper.
The hon. Member also asked whether some of this borrowing would be used to provide amenities for the staff. I need only refer him to paragraph 104 (d) of the Report on Modernisation and Re-equipment, which says:It will also be essential to incur expenditure upon staff welfare. The term welfare covers a wide variety of items, including such things as messrooms, canteens and hostels; 1335 lavatory and washing facilities; and social and recreational activities. The standard of accommodation and working amenities have a powerful influence on staff recruitment.I think the hon. Member will find that satisfactory.
The hon. Member also asked whether the work to be financed by this borrowing was expected to be remunerative. The answer is yes. I gave the House some figures on Second Reading. I would hesitate to inflict them on the Committee now as they are set out in the modernisation plan. Briefly, the answer is "Yes."
My hon. and gallant Friend the Member for Ilford, South (Squadron Leader Cooper) made some rather violent comments, if he will allow me to say so, on certain matters relating to catering on the railways. For once I found myself in some agreement with the hon. Member for The Hartlepools, when he said that exaggeration in criticism tended to devalue the effect of the criticism. I thought my hon. and gallant Friend was, in some respects, unfair to some of those concerned; that was surprising for him. I believe that the service in railway dining cars is excellent. I have a very high regard indeed for the cheerful and efficient willingness of dining car staffs to serve a large number of meals to a very large number of passengers in a short time, sometimes in a rapidly moving train in conditions for cooking which most hon. Members would not like to undertake. I have a very high regard for them and I am sure that my hon. and gallant Friend has, too.
The quality of the food which is supplied is a perennial subject of discussion. Hon. Members who have served in the Armed Forces of the Crown know that it is a persistent subject for conversation. Of course, I am not going to maintain that the standard of cuisine in every dining car or station restaurant is as high as the Commission is striving to make it, but the general charges are quite unfair. The standard is at least as good as that on Continental services when considerations of prices of food are taken into account. I say that with some confidence because it falls to me at present to travel a great deal; therefore, I can give firsthand evidence.
I am not for a moment indicating that anyone is complacent about this. There are people who take the view that the 1336 culinary arts are not arts in which this country excels, whereas others like the old-fashioned English cooking. I would not say there is not considerable room for improvement, but I ask the Committee to realise that they are taking a great deal of trouble to try to improve the standards of food. As pointed out in paragraph 71 of the Report on the Modernisation and Re-equipment they are experimenting with different types of catering vehicles to meet the very varied type of services which passengers on different lines require.
I did not follow my hon. and gallant Friend at all on the question of hotels. I know of some excellent British railway hotels. It would be a great pity, not least from the point of view of the British tourist industry, if persons who have not had the experience of staying in them were deterred from doing so. I do not want to read out the list, but there are some very fine hotels. I will not follow the hon. Member for The Hartlepools by mentioning a local one—
§ Mr. Boyd-Carpenter
We have some very good hotels in Kingston. We want to improve railways hotels. No one wishes to minimise the wartime difficulties through which we have been, but there are some very fine hotels.
The hon. Member for The Hartlepools referred again to the debate on Second Reading and, in particular, to the calculations he and other hon. Members had made of the size of the deficit in which the Transport Commission will be involved in future years. It is very difficult to give precise forecasts when there are factors, including favourable factors, which may well affect the figures as the year, and the years, pass. I do not think it is either wise or encouraging to underrate the factors which can operate to reduce the prospective deficit. As the Parliamentary Secretary pointed out during the Second Reading debate, one factor is the charges scheme. That certainly should help the Commission's revenues directly and indirectly.
The hon. Member also referred to the joint consultation work going on with a view to increasing the efficient working of the railways. That may well contribute a substantial saving. There are the first fruits of modernisation. From some 1337 points of view I think there is a little confusion about this. There are schemes which have been assimilated into the modernisation plan which were planned before and are very near to actual operation. There are some of what we might call modernisation schemes running at the moment, such as the diesel railcars in the West Riding of Yorkshire which, I am glad to say, are showing very satisfactory commercial results.
Results are coming in from electrification schemes north-east from London already undertaken. There is reason to hope that as some of the early schemes come into operation they may have some effect on the size of the deficit. While it is easy to make calculations, to take figures which were mentioned before the Court of Inquiry and to add figures to them, I find it difficult to accept figures of that order, because we must see how the favourable factors to which I have referred operate in reducing those figures.
To pass more generally to the issue, of course nobody likes to see a great undertaking facing deficits of this order. On the other hand, it has been the experience of many great undertakings to pass through periods when they have not been able to earn a profit and to come successfully through such periods. Therefore, one must put the matter to some extent in proportion.
Certainly, I see this matter very much from the point of view that there is, as the hon. Member for Enfield, East called it, a transitional period to be passed through; that we are now taking steps—I believe, effective steps—whose ultimate effect will be to restore the solvency of our railway system; and that it is necessary, in the interim, to face the fact that there will be substantial deficits for a time but that this should not be allowed to blur the picture of an enterprise whose future is on soundly based lines.
I do not want, therefore, to be led into speculations as to precise figures. Our object—and Sir Brian Robertson has made very clear that it is his object—is to get the deficit reduced by increased efficiency as quickly and effectively as possible, and I have the utmost confidence that he and his colleagues will do all that human skill can do to help to bring about that result.
1338 The hon. Member for Bolton, West (Mr. Holt), after observing, which gave me great pleasure, that there was nothing static about transport—I was grateful for that tribute—referred to the possibility of a reorganisation of the Commission's stock. I am not sure what he meant by that. The position is that liability for the service of that stock was placed under the 1947 Act on the Commission and guaranteed by the Treasury. Therefore, any reorganisation such as, I think, the hon. Member had in mind could only have the effect of putting the liability which would follow, not upon the Commission, but on to the taxpayer. That is an inevitable consequence of the solution arrived at in 1947.
The hon. Member for Enfield, East (Mr. Ernest Davies) asked some pertinent questions about the effect on the Commission's financial position of the borrowing proposed by the Bill and of the modernisation scheme. It is on the clear view that this scheme will help to improve the solvency of the Commission and will help it to be in a position in which it can earn a reasonable modicum of profit, that these proposals are put forward. The whole intention is that they should operate in this way, and they have been most carefully considered by the Commission with that objective in view. That is so clearly set out in the modernisation plan that the Committee would probably resent it if I went into great detail. It is clearly set out in the Commission's own words.
The hon. Member referred, naturally and properly, to the question of timing. I have to some extent dealt with that in reply to his hon. Friend the Member for The Hartlepools. It is clear that there are items in the modernisation proposals which can be expected to help the finances of the Commission in the not very distant future. There are other items—some of the major electrifications, for instance—which will be some years before they are able to help in that way, but we can look forward as electrification and the use of diesels on certain individual lines go forward, to some improvement in net earnings on those lines and, therefore, to a favourable tendency. That deals with the point, to which the hon. Member himself very properly referred, of the desirability of maintaining the solvency of the Commission.
1339 The hon. Member for Enfield, East also suggested the use of shorter-term borrowing. I am not sure that when one is borrowing for capital purposes of this order, it is sound finance to borrow short. This money is required for long-term projects which, we hope, will provide a railway system which will be useful for a good many years. I am inclined to think that the line we have followed on the date of the stock has been about right, but I will certainly bring forward the hon. Member's suggestion to my right hon. Friend the Chancellor of the Exchequer to see whether we could usefully take up that idea. But soundness of finance calls for fairly long-term borrowing.
§ Mr. Holt
I agree on the last point, that it does not seem advisable to borrow the money on short-term, but as the right hon. Gentleman said earlier, other businesses go through this stage when they have a bad time. They, of course, can pay no dividend. They do not pay even their preference service. Has the Minister nothing to offer the Transport Commission on this line? If he will not accept any of the suggestions that have been made, is the Treasury prepared for a period of three, four or five years to implement the guarantee, because the Commission simply cannot pay this money?
§ Mr. Boyd-Carpenter
On the contrary, the hon. Member is quite wrong. The Commission can, and is, maintaining the service of its stock, and it would be unfair to suggest the contrary. The hon. Member is up against the difficulty of the totally different financial structure of a nationalised industry to a private business. He must face the fact that a nationalised industry obtains the advantage of a Treasury guarantee, to which I have referred, but which also has certain disadvantages. The contrast, however, is not quite as vivid as that, because a private industry that is unable to pay the service on its debentures finds itself in difficulties even though it may be possible not to pay dividend on the ordinary stock. The hon. Member is putting too sharp a contrast between the two, but there is, of course, an element of that.
§ Mr. Douglas Jay (Battersea, North)
As we are dealing with such large amounts, and, presumably, we want to 1340 keep down the interest rate if we can, will the Minister look seriously at the suggestion that there might be a sound financial case for borrowing fairly short? After all, we anticipate that in fifteen to twenty years' time the revenues of the Commission should be much more favourable than they are now.
§ Mr. Boyd-Carpenter
As I have said, I have taken note of the point and will see that it is considered by my right hon. Friend the Chancellor of the Exchequer. The Treasury is well equipped to advise on matters of this sort and is very helpful in connection with issues of this kind. The Treasury's advice, as the right hon. Member knows, because at one time he contributed to it, is generally very useful.
The hon. Member for Enfield, East asked whether we had been in contact with the Commission in connection with its financial position. I am in the closest contact with the Commission on this and all issues, and we know each other's minds very well. The hon. Member also asked for further information on the timing of certain works and referred particularly to Route C. I hope the hon. Member will not think it discourteous if I "pass the buck" on Route C to my hon. Friend the Parliamentary Secretary, who will be speaking during the debate on the British Transport Commission Private Bill, which begins at 7 o'clock. Powers in respect of Route C are sought in that Bill. Probably I should be guilty of anticipation if I were to talk about it now, but, in any event, the issue is likely to arise; and I have spoken to my hon. Friend the Parliamentary Secretary. It will probably save the time of the Committee if I leave it to my hon. Friend to deal with the matter on the Private Bill.
The hon. Member asked one or two questions about other earlier works. As he pointed out, I mentioned in the earlier debate some of the works on which the £75 million involved in the Bill would be spent in the earlier years, and, therefore, I shall not go over them again now. The hon. Member is quite right in assuming that the Commission intends to use some of its own resources, in addition to the money that it borrows under this Bill, to enable it to make progress, I hope, with other works during the same period.
The hon. Member for Enfield, East may recall that on Second Reading I said that the Commission had indicated 1341 that it would publish yearly forecasts of work, with a less firm but helpful forecast for the second year ahead, and that as those forecasts are submitted, it will become apparent how the work is done. I cannot now add further details of the work, but I am sure that the hon. Gentleman himself would not want the Commission to be tied in too rigid a framework of a time table. It will keep the public informed by way of those annual forecasts to which I referred.
I am very glad that the Committee, as I understand, takes the view that it is right to allow this extension of borrowing powers. We are at a significant and important moment in the history of the Transport Commission in general and of the railways in particular, and I know that the Committee will wish Sir Brian Robertson and all the members of the Commission well in the skilled and difficult job of seeing that this money is spent in the way most conducive to an efficient and up to date railway system.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.
§ Clause 2 ordered to stand part of the Bill.
§ Bill reported, without Amendment; read the Third time and passed.