HC Deb 19 March 1956 vol 550 cc827-32
The Minister of Transport and Civil Aviation (Mr. Harold Watkinson)

With your permission, Mr. Speaker, and that of the House, I would like to make a statement about British Transport Commission charges.

Last year the railway strike and increased costs and wages added some £30 million to the British Transport Commission's deficit. As a result of increases in wages and costs the deficit for the current year might be as much as £55 million. This would bring the total deficit up to over £100 million.

Faced with this position, and having regard to its statutory duty to pay its way, taking one year with another, the Commission felt bound to come forward with proposals for a substantial increase in charges. These include general increases in freight rates and passenger fares and are designed to bring in a total of some £37 million in a full year.

The Government realised that the Commission, in view of its statutory obligations and financial position, was fully justified in taking this action. Moreover, the strict application of the Government's present economic policies requires that, in fixing their charges, all the nationalised industries should seek fully to reflect their costs.

At the same time, there are now signs that renewed and strenuous efforts will improve the financial outlook on the railways through more efficient working arising from better relations in the industry. The Government have been encouraged by recent statements of the British Railways Productivity Council and the British Transport Joint Consultative Council, which indicate that there is a new readiness on the part of all concerned in this great industry to work together to these ends.

In these circumstances, the Government came to the conclusion that they would be justified, in the national interest, in asking the Commission to take a course which would involve an exception to the general policy in regard to the nationalised industries' charges which I have already mentioned.

The Chairman of the Commission, after full consultation with me, has said that it is the desire of the Commission to co-operate fully in this policy. To this end the Commission has informed me that it will defer those increases in certain fares on London Transport services and British Railways for which it has made application to the Transport Tribunal under Section 23 of the Transport Act, 1953.

With regard to railway freight, dock and canal charges in respect of which the Commission has made an application to me under Section 82 of the Transport Act, 1947, I consider that it is expedient that regulations should be made to make increases in general not exceeding 5 per cent. and I am accordingly consulting the Transport Tribunal.

As regards those increases in passenger fares for which the Commission bas an existing authority from the Tribunal, the Commission will be making its own announcement. These changes will increase the Commission's revenue by some £20 million in a full year.

In view of its statutory obligations, the position must be re-assessed by the Commission in six months' time. It is on this clear understanding, that the Chairman of the Commission has agreed to the course of action proposed.

During the next six months it is hoped that this new initiative will enable the British Transport Commission to put in train measures leading to improved efficiency and to getting its operations on a more economic basis so that a more favourable view can be taken of its financial prospects over the next few years. I hope that all ranks in the industry will make full use of this opportunity.

Mr. G. R. Strauss

The Minister's announcement is a very important one, from many angles. He has told us that the deficit this year is likely to be £55 million. The Commission wanted to increase freights and charges to bring in an extra £37 million, but as a result of Ministerial interference those increases are to be limited to £20 million. The first question I should like to ask is this. The right hon. Gentleman says that he does this in the hope that there will be some change in six months, but does he seriously believe that, whatever improvements can take place in that period. there could be such a dramatic, spectacular change as to alter the whole of this position and is it not completely wishful thinking to suggest that that could happen?

The second point is this. This interference could surely be used as a precedent in regard to all the nationalised industries. The Government could say that they desired that a nationalised industry should not increase its charges. Does not that, in fact, imply that the Government are prepared to give a subsidy where necessary when they interfere in that way?

Mr. Watkinson

indicated dissent.

Mr. Strauss

Surely that must be so, and whatever the merits of the Minister's interference in this matter may be, surely he realises that this is an entirely new departure in policy with very considerable implications and, moreover, it interferes with the statutory obligations resting on a nationalised industry.

Mr. Watkinson

I agree with the right hon. Gentleman that this is a very important step, and it was not taken without careful thought. I find that I cannot agree with anything else he said—for these reasons. The first point he made was whether it is possible for any substantial contribution to be made in the next six months. I agree with him entirely that it is not possible for some vast sum of money, in terms of millions, to be saved in the next six months, but I take great account that, for the first time, I see in this nationalised industry some of the spirit that makes private enterprise profitable—a spirit that seems to show that those concerned are now willing to work together to get on with the job. Therefore, this six months' period is a period in which I trust that the Commission, working in close collaboration with the unions concerned, will come forward with the necessary proposals. For example, I should inform the House that this may well include much more drastic closure of branch lines, and many more drastic economies that will be necessary, and this is the Commission's opportunity to do it.

The right hon. Member for Vauxhall (Mr. G. R. Strauss) said that this was some new interference. It is not an interference, but done with the willing cooperation of the British Transport Commission.

As to the question of subsidy, there is no question of subsidy in this at all, and that is why this particular operation is strictly limited to six months, at the end of which period the position must and will be re-examined.

Mr. Martin Lindsay

Is it not a fact that if it is designed to stabilise the cost of living, the more Ministerial interference we have the better?

Mr. Watkinson

The whole point—and I must put this firmly to the House—is this. Is the House really satisfied that we can go on with this sterile business of putting up charges year after year and making no effort at all to absorb some of the increased costs?

Mr. D. Jones

The right hon. Gentleman will be aware that some part of this deficit arises because of previous interference by himself and his right hon. Friends. The Lord Privy Seal knows perfectly well that that is true. What firm proposals have the Government now got to overcome this £80 million deficit which will arise on the B.T.C. accounts at the end of this year?

Mr. Watkinson

From his long experience in the railway industry, the hon. Gentleman knows as well as I do that the industry will never overcome any deficit unless it works together in a new spirit. That is what I am putting to this industry—that having given it a fair deal I now expect it to give, and believe that it will give, a fair deal to the nation in return.

Mr. Partridge

May I ask my right hon. Friend what exactly he means by a re-assessment in six months? Are we to assume that at the end of that time we shall be faced with an increase in charges?

Mr. Watkinson

Yes, I quite agree—and I think that this answers the right hon. Gentleman's point about subsidy. This is a six-month period in which the Commission—and I firmly believe this—will be able, in the new spirit of the industry, to bring forward sweeping proposals to increase its efficiency. How much that will enable us to take a more favourable view of this deficit in six months' time neither I nor the Commission can say at the moment, but it would be quite wrong for me to lead the House to believe that one can escape further increases in six months. All that is in question is, therefore, the degree, and that depends on the degree to which we are able to improve efficiency.

Mr. Grimond

Is not the Minister's answer a little disingenuous in denying that this is a subsidy, because it simply means that certain forms of transport will be sold at far less than the economic cost, with effects on other forms of transport? Could I ask the Minister to look at the financial structure not only of this but of other nationalised industries to see if it would not be easier to reduce the prior charges which they have to bear?

Mr. G. Wilson

May I ask the Minister by how much the Commission hopes to reduce the deficit in the next six months?

Mr. Watkinson

That is the point, Mr. Speaker. [Interruption.] It is a very important point, and I want to be fair to the Commission. I think that right hon. and hon. Gentlemen opposite are taking a wrong view of this operation. This is a piece of willing co-operation between the Commission and myself, and we have gone into this together. Therefore, it would be quite unfair to the Commission for me to pin on it at the moment any particular sum—a target figure. All I am saying is that it will do its best, and in six months we shall be able to re-assess the position in the light of what the Commission has been able to do between now and that time.

Mr. Rankin

As railway transport in Scotland will shortly become the responsibility of the Secretary of State, and as the Minister's statement affects Scotland, might we not have expected to have had a Scottish Minister on the Front Bench today?

Mr. Watkinson

I am still responsible, as the hon. Gentleman knows.

Air Commodore Harvey

In vew of the desirability of increasing exports, will my right hon. Friend consider postponing the increased charges on freight and creating a standstill in the ever-increasing wages, and consider going very much further in this matter, at least for a limited period?

Mr. Watkinson

My hon. and gallant Friend has put a perfectly proper point, and that was taken into consideration, and was the reason why we felt it was not right to go beyond the 5 per cent.

Mr. Ernest Davies

Are not the Government being quite inconsistent in their policy? Does not the right hon. Gentleman recall that under the 1953 Act the Commission was given full authority to go ahead, and to act with flexibility on a commercial basis? Is not this policy a departure from that? Therefore, is not the Minister being quite unfair to the Commission in that he is preventing it from operating commercially and at the same time giving it no assistance? Does he not realise that he will be driven to give it a subsidy if he pursues this policy? How is this consistent with the Government's policy of dropping the subsidies on bread and milk?

Mr. Watkinson

The hon. Gentleman is not quite up to date, and yet I know that he knows about this. Until the Commission gets its new freight charges scheme it has not the flexibility about which he is talking.

Mr. Nabarro

In consideration of the fact that the deficit cannot in any way be affected by anything that occurs during the next six months, will my right hon. Friend say what are the Government's proposals for dealing with this enormous figure of £100 million? Is it to be written off? Is it to be funded? Is it to be replaced by new capital? How is it to be dealt with?

Mr. Watkinson

That is a quite proper question. [HON. MEMBERS: "Then let the right hon. Gentleman answer it."] I know the answer and it is quite clear. The first thing to remember is that the annual turnover on our railways is £700 million a year. One must see this deficit against that turnover of £700 million. It will be seen, I am sure, by my hon. Friends that even a relatively small percentage increase of efficiency on a turnover of that kind would have a very large effect on both the present and the prospective deficit. I say that this is a marginal thing which the railwaymen can overcome if they will work together, as, I believe, they are going to do.