HC Deb 11 May 1971 vol 817 cc337-48

Motion made and Question proposed, That this House do now adjourn.—[Mr. Speed,]

10.7 p.m.

Mr. Julian Ridsdale (Harwich)

I welcome this opportunity to discuss transport services in London and the South-East region, in view especially of the severe increases in fares which so many people have had to face recently on both buses and the railways. I am only sorry that we cannot have a longer debate, because I know that a great number of my colleagues, like my hon. Friend the Member for Essex, South-East (Mr. Braine), my hon. Friend the Member for Gillingham (Mr. Burden), my right hon. Friend the Member for Ashford (Mr. Deedes), my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden), and my hon. Friend the Member for Derbyshire, South-East (Mr. Rost), feel very strongly about the burden that the commuter has to bear in increased fares.

The most recent rail fare increases of up to 25 per cent. came into force in London and the South-East on 25th March. We have been told that the increases were necessary to offset the Government's partial withdrawal of grant aid to rail services in London and the South-East Region.

The increases were foreshadowed in a statement in the House by my right hon. Friend the Chancellor of the Exchequer on 27th October, 1970, when he reiterated the intention of the Labour Government's 1968 Transport Act that rail services in London and the South-East area should be made progressively less dependent on grant aid and that, by 1973, these services must be made to stand on their own feet and pay their way. Thus, as a first-stage reduction of the grant for 1971, fares have been increased substantially in London and the South-East Region.

I cannot understand why the Government have a different policy for the withdrawal of subsidies in the London area compared with the rest of the country. I was disappointed, when my right hon. Friend withdrew the partial subsidy from London and the South-East Region, that he did not have a consistent policy and see fit to withdraw the subsidy from the rest of the country. I asked that this should be done in November, at least partly to prevent the heavy burden that commuters in the London area had to face, only to be told that the Government were considering the matter.

I hope that we shall get a clear statement today of the reasons why this withdrawal of subsidy applies only to the London and the South-East Region. The latest figures that I have show that the running costs of grant-aided passenger services in 1969 amounted to£163 million, of which£60 million consisted of Exchequer grants, made up of£15 million from the London commuter area.

So far a total of only£10 million of grant aid has been withdrawn for 1971–72, yet we have been told that, because of this withdrawal, fares have been increased by 25 per cent. Can the Minister give us some later figures for grant aid, because, due to the inflation which has occurred since 1969, surely grant aid is running at a higher figure than£60 million for the country as a whole and higher than£15 million for the London area commuter network?

What concerns me, though, is the burden commuters are having to face. If the withdrawal of£10 million of grant aid has led to a 25 per cent. increase in fares, will the Minister give his estimate of the amount by which fares will have increased by 1973 as a result of the total withdrawal of grant aid for London and the South-East Region; and will this estimate allow for the present unparalleled inflation which is facing the country? Further, how much are fares likely to increase as a result of the recent 9½ per cent. wage increase on the railways, which equals a 20 per cent. wage increase since May of last year?

In addition to these increased wage costs, railway costs have risen due to the general unprecedented rise in prices that we have all had to face over the last few years. Therefore, unless productivity on the railways can be considerably increased, which seems most unlikely, especially if they are starved of capital, over the next three years commuters are likely to face fare increases which since 1969–70 will be almost equal to a doubling of fares. For commuters in North-East Essex this would mean an almost £200 increase net, which is an even greater burden when we consider how much must be earned to make this net figure from gross income.

Is it any wonder that I have had to send to the Minister a petition from 1,865 commuters protesting about what is happening? Of course they are in despair. If increases of this nature are to be made, it will mean that many will have to leave the North-East Essex coast and move nearer to London.

Therefore, I ask the Government to make a comprehensive statement as soon as possible about future transport policy. I do not want a policy of subsidy, which disguises costs. In a recent debate on commuter services my hon. Friend the Under-Secretary of State for the Environment said this: …we are taking a wide look at the whole problem of how to match investment in various forms of transport in the cities with one demand competing against another. It is a highly complicated situation…we are interested in seeing what can be done in the totality of the problem, and studies and consultations are going on to see whether any adjustment may be made in national policies."—[OFFICIAL REPORT, 10th March, 1971; Vol. 813, C. 553–4.] I hope that these studies are now complete and that we shall hear from my hon. Friend tonight that there have been some adjustments in national policies. I assure the Government that many people are in despair about the continuing rise, not only in rail fares but also in bus fares. I hope that an early indication will be given of policy changes to meet the situation so that many people who are being hit so hard can plan for the future which at present holds so many uncertainties for them.

I hope that these studies and consultations will underline the necessity for more investment in rail as an effective and economical means of transport. Certainly more investment is needed in the railways, as travellers know only too well, because of overcrowded trains and deteriorating service due to lack of investment and cutting back of staff.

Undoubtedly the railways still have an important part to play in transporting commuters daily. The railways make the least demand of any form of transport on the environment, avoiding air pollution and the increasing land use associated with road transport. If commuters are to be forced on to the roads because of fares which they cannot afford, the road system will quickly become congested and we shall be faced with increasing financial problems against which the present railway request for more investment will seem most economical.

I estimate that, over the next 10 years, the railways as a whole will need about£300 million capital, of which£220 million will be needed in London and the South-East Region. I do not believe that it is realistic to keep on fanning the flames of inflation by trying to get this capital by always increasing fares or prices in nationalised industries. Of course passengers and consumers must pay realistic fares and prices, but is it realistic to take away£60 million of grant aid, push up fares and fan the flames of inflation when we know that, in London and the South-East Region, the railways need that£220 million of capital over the next 10 years?

If we are to be realistic in transport policy, why do not we make a charge on motorways, as the French and Italians do? Should we not do more to encourage traffic and passengers on to our railways? I know that the railways are big users of capital but surely at this time we cannot starve them of capital, despite what has happened in the past. If we are to prevent congestion from so many cars coming into city centres, we must encourage more use of the railways.

All this, I know, is set against the background of wage demands which the railways will find it difficult to contain by increased productivity. There has been a 20 per cent. increase in wages since last year, but I hope that those negotiating for further increases will realise the vital need for further investment and that the Government will come forward with a plan. I hope that the trade union leaders will be able to moderate future demands knowing how vital investment over the next 10 years is for the railways.

Not only rail fares but bus fares are causing concern to transport users. Cannot the Government do something to break the bus monopoly which is working so badly, especially in rural areas? Why cannot licences be given to mini-bus operators, who, I am sure, could fill in a lot of the services which the railways are finding it more and more difficult to run economically and which the big bus companies are also finding it difficult to fulfil?

I assure the Government that the travelling public are in despair at the ever-increasing demands they are having to face. I hope that the Government will very soon find a solution to these difficult problems.

10.19 p.m.

Mr. Andrew Bowden (Brighton, Kemptown)

There is a sense of grievance among commuters in the South-East because the system is clearly unfair. My hon. Friend the Member for Harwich (Mr. Ridsdale) has mentioned that, in some parts of the country, the system is not operated in the same way as it is to operate in the South-East. I want to take the point a stage further.

Some lines in the South-East are obviously wholly economic and it is unreasonable that commuters living at the end of those lines—my constituency is an example—should be forced to subsidise other travellers in the region. This gives rise to one of the senses of grievance, judging from my post bag. I hope that the Government will think seriously about this problem.

10.20 p.m.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths)

My hon. Friend the Member for Harwich (Mr. Ridsdale) who opened the debate has, as always, touched on a wide range of important matters to his constituents and indeed to the House and the country as a whole. He spoke of what he described, possibly somewhat extravagantly, as the despair of his constituents. He touched on the wide-ranging questions of pay policy. He dealt with rural buses. He spoke eloquently about the environmental advantages of the railways, and he carried me with him a great deal of the way in that respect.

However, I am sure he will appreciate that in a short Adjournment debate of this kind it is not possible for me to touch on all the matters which he raised. He made a number of interesting points, and I assure him that I will be glad to follow up all that he has mentioned and to discuss them with him at some future time.

Before I deal with some of the specific railway points which he made, perhaps I could make two general points and then spend a few minutes setting out the background to the problems of the London commuter area. My first general point is that the withdrawal of operating subsidies for the London commuter network must be seen against the background of the Government's overall economic strategy. Control over public expenditure—and railway grants are a part of public expenditure—is central to the strategy of my right hon. Friend the Chancellor. His recent Budget proposals, which I know my hon. Friend welcomed as much as I did, were made possible only because of the Government's willingness to tackle difficult problems of public expenditure such as the one which have been raised this evening.

My second general point concerns the onus of proof. This is not an esoteric point but a practical one. It is simply that the payment of subsidies, and not their withdraw, has to be justified. The general principle is that people normally should pay the cost of the services they use and there need to be compelling social reasons to depart from that principle. I can find no such compelling social reason that is peculiar to the London commuter. I have myself been a London commuter but, in the general context of the national economy, it is difficult to find a compelling social reason for the London commuter to be singled out to receive a measure of subsidy that is not available to many others.

As a group, the London commuters have no conspicuous claim on the taxpayers' money. Many people in much less prosperous areas meet the full cost of their journey to work. I can give one precise example in the area which my hon. Friend knows as well as I do, namely those London commuters north of the river who travel by London Transport. They pay the full economic cost.

Mr. Nigel Spearing (Acton)

Does the hon. Gentleman realise that the whole Government strategy for London Transport and the commuters is one of mystification, because they have not announced any support for the Fleet Line; they have not committed themselves to a 75 per cent. comparable capital contribution as they have done for roads; and the Minister is not prepared to issue a Green Paper, yet the Government have given a 75 per cent. grant to the Liverpool tube line.

Mr. Griffiths

The hon. Gentleman must raise that matter on another occasion. We are here dealing with a subject raised by my hon. Friend and I want to answer it. I stress that there is no change of policy in the matter of grant aid. Treating the British Railways London commuter network as a single entity and aiming to make it viable as soon as possible was just as much the policy of the previous Administration as it is of the present one. The previous Administration in their White Paper "Transport in London", published in July, 1968, says clearly The London commuter services will be treated as a network … the first overall objective will be to achieve viability for the network by the end of 1972. The previous Government went on to say: Subject to their financial objectives, British Rail will themselves determine fares on the network. That means that not only was viability the aim of the previous Government, but this was to be achieved by a marketing approach to fares policy. I do not generally agree with our predecessors in this matter, but since they for once decided on economic viability and then on a marketing approach to fares as their policy, I hope that my hon. Friend will not object to the present Government, who are committed to those very principles, also applying them in practice.

Mr. Ridsdale

Are we to apply them to the rest of the country, too?

Mr. Griffiths

I hope to come to that, but I must put this general point.

The logic of a marketing approach to fares is that the Board must base its charges not simply on the cost of providing an individual service but on what the market will bear. Suggestions that the Board has been unfair in increasing its charges on routes which pay, as well as on routes that do not, are misconceived. Services which fail even to cover their direct costs are prima facie candidates for examination by the statutory closure machinery. But, as with any large multi-product commercial organisation, provided loss-makers cover their direct costs and make some con- tribution to overheads—even though that contribution is less than their proper allocation of overhead costs—the organisation may well be better off with them than without.

The same applies to the individual traveller on the profitable service. If fares on loss-makers were increased beyond what the market will bear, then traffic and revenue would fall. But the costs of providing the service would not fall; and would therefore need to be recouped on the profitable services—which would mean even higher fares. So the idea that some passengers within the network are cross-subsidising others, or that some have been treated more harshly than others, is far too simple, and is broadly inaccurate.

Even if it were desirable to relate fares to the cost of providing an individual service, on much of the network —perhaps particularly on Southern Region—it is not possible to calculate it on that basis. Many different services run over the same tracks and use the same stations, depots, rolling stock, signalling equipment and so on. Allocation of these fixed costs between the different services is therefore complicated and ends up being fairly arbitrary. So there is no alternative but to treat the whole commuter network as a single entity.

Fares increases would have been needed even without the decision of my right hon. Friend the Chancellor to withdraw the operating subsidy. In 1970 the costs of the London commuter network were, in round figures,£100 million and receipts were£85 million. The unremunerative service grant, therefore, was£15 million. Costs are rising, particularly wage costs. Labour accounts for more than 60 per cent. of the Board's total costs on this network. On the railways, as anywhere else, if wages rise faster than productivity or cost savings, the inevitable result is higher charges. For every I per cent. that wage increases in the railways exceed increased productivity, the Board has to find£750,000 more revenue. The only alternative to higher fares to meet those higher costs is ever-increasing subsidies, which would in practice mean inflation financed by the Government. That is unacceptable to the present Administration.

I turn to the particular services in which my hon. Friend is interested. The Felixstow-Ipswich line is one of them. The costs of this line are£120,000 per year. Earnings are£16,000 per year and the grant, therefore, is£104,000 a year. It is very difficult, against a background of seeking to contain public expenditure, that that amount of money should be paid.

I come to the Manningtree-Harwich service. The costs are£102,000, the earnings£26,000 a year, and the necessary grant to make up the difference£76,000 a year. My hon. Friend will recognise, for he is a considerable economist, that those figures cannot be continued unless there is an increase in subsidy as costs increase or there is an increase in fares. That is the kind of harsh choice confronting the Government.

No doubt there are individual cases of hardship, particularly among those less-well-off inner London residents or those comparatively less-well-off families who have contracted out of the city to travel to places where there are comparatively fewer jobs. This is not the choice of the railways and it is certainly not the choice of the Government. It is the choice of the people themselves who, throughout the South-East, have elected to commute long distances to live in pleasant country or by the sea.

I cannot deny that there will be some effect on road congestion, but I am advised that it is likely to be relatively small and that significant switching to car commuting is unlikely if only because of the difficulties in parking and the existing congestion on the roads. I remind my hon. Friend that motoring is not cheap. Season ticket fares on the railways, in spite of the increases, are still generally less than the cost of the petrol alone.

On the more positive side, there can be little doubt that the end of the operating subsidy will have a beneficial effect on British Rail staff morale and management. The morale of the staff and management improves as they find that they are not the pensioners of the State.

The Government will continue to provide infrastructure grants for certain types of capital expenditure and improvements to the commuter system. The initiative for putting forward investment proposals lies with the Board, but I know that the Board is conscious, as are the Government, of the need to improve the quality of its London commuter services.

My hon. Friend raised a number of specific questions which I should like to answer. He asked me—will grants be abolished elsewhere? I cannot give him a complete and comprehensive answer. I would say that we have to examine the arrangements within the other conurbations, particularly in the passenger transport authorities in the four great conurbations in the North.

He asks by how much fares will be increased by 1973. I cannot answer that question. That must depend upon cost inflation, in particular on wage increases. It must depend, too, on the application of the Chancellor's policy of reductions of grants. He asks what will be the result of the latest 9 per cent. wage increase on the railways. I can only say that it will be substantial. I cannot, and will not, dissemble by suggesting to him that this rise in fares is the last. I wish that it were. It would be untrue for me to say that it is the last. He said that the railways are starved of capital and that more investment is justified, not only on transport grounds but on general planning, environmental and other grounds. I agree with that. He must however face the question: where is the investment to come from? The investment can either come directly from the taxpayer, which means increased Government expenditure, increased taxation, to provide it, or from higher revenues from the railways system; but the higher revenue can only be derived from those who use it, and the end of that line is higher fares.

Therefore, I fear that my hon. Friend and the country, including our constituents, must face the fact that the railways, except for Government grants, are by no means able to cover their costs from their incomes, and the grants made available by the Government are paid for by all of us as taxpayers.

Mr. Spearing

Like the roads.

Mr. Griffiths

The Government are anxious to reduce the burden of tax in accordance with their election manifesto. I am sure that my hon. Friend will agree that the Chancellor has made a useful start in his Budget by cutting taxation by close to£1,000 million a year. The Government intend to go on cutting taxes just as soon as the state of the economy will allow it, but this can only be done if the growth of public expenditure, including that in unremunerative railways grants, is contained. That means, as my hon. Friend knows perfectly well, that subsidies paid to a whole range of public activities, including the railways, have to be contained in order that our policy shall succeed. Unless the rise in public expenditure is halted or contained, taxes cannot be cut.

The Question having been proposed after Ten o'clock: and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order,

Adjourned at twenty-three minutes to Eleven o'clock,