HC Deb 27 July 1972 vol 841 cc2068-79
The Minister for Transport Industries (Mr. John Peyton):

I will, with permission, make a statement about British Railways' finances. Despite the board's efforts to cut costs, its financial position has deteriorated over the past year. Price restraint reduced its income: the coal strike caused a loss of traffic and reduced income by £18 million: £10 million of business was lost through the subsequent rail pay dispute: the high level of the settlement has added to the board's costs.

As was always clear, the board will, therefore, need to make fare increases in September to help meet the cost of the settlement.

Even so, the board now expects a deficit of £40 million in 1972—over and above the amount of £27 million which we provided in the Transport (Grants) Act—and a comparable sum in 1973. The board, at my request, has since the autumn been reviewing its long-term prospects. It is clear that some new financial support will be needed and that new legislation will be required. There is an immediate need to meet the board's cash flow shortfall, which amounts to some £50–£60 million over the rest of 1972. A Supplementary Estimate will be presented to the House in due course in respect of this requirement. Any sums needed meanwhile will be issued from the Contingencies Fund.

I have also today given my consent to proposals from the Railways Board for restructuring its field organisation. These proposals and the reasons for them were described in the board's Second Report on organisation which I laid before Parliament in 21st April. They involve the creation of eight territories to replace the present structure based on regions and divisions, which no longer meets today's requirements. The changes are expected to result in further staff reductions of between 4,500 and 6,500 but this should largely be accounted for by normal staff turnover. The board estimates that the changes will save at least £10 million a year in administrative costs after full implementation. The board has assured me that it will do its utmost to minimise the adverse effects and inevitable inconvenience to its staff.

Mr. Bradley

The House will want to study the full implications of the right hon. Gentleman's statement. Will he consider issuing a White Paper setting out in greater detail what is involved in the Railways Board's calculations of its long-term prospects? Can he say by what amount fares will be increased in September, and will the legislation which he has foreshadowed provide for permanent powers to authorise grants to the British Ralways Board on a long-term basis, as the Opposition suggested earlier this Session?

Is the right hon. Gentleman aware that his consent to the proposed field organisation will cause dismay to British railways staff, who have endured countless organisational changes during the past quarter of a century, none of which has yielded the promised results and most of which have proved counter-productive?

Did the right hon. Gentleman take into account that management at all levels of British Railways will now be diverted from its prime objective of obtaining more traffic while it is implementing this massive and suspect scheme? What period of time does the board estimate it will take to introduce the new organisation to which the right hon. Gentleman has consented? What capital costs will be incurred by the board in providing new and additional office accommodation in places like Birmingham, Cardiff, Manchester and Newcastle?

Finally, does the Minister accept the need to maintain the viability of British Railways without imposing undue hardship on the travelling public on the one hand and its employees on the other?

Mr. Peyton

If the hon. Gentleman will be good enough to tell me a simple way of maintaining the viability of British Railways, I shall be delighted to give him a ready hearing. I will certainly consider issuing a White Paper on the long-term proposals as soon as I have received them from British Railways. I do not expect this to be until the autumn.

On the question of the fares increase, the proposals of British Railways are for an overall increase of 5 per cent., averaging about 7½ per cent. for passengers and 2½per cent. for freight. I recognise that no field reorganisation of this kind is palatable to those principally concerned and those who will be adversely affected, but the board must be allowed reasonable freedom to restructure its management, and that is what I have given it.

Mr. Edward Taylor

Will my right hon. Friend say what will be the implications of the reorganisation on employment in the Scottish railways system? Secondly, as increased business in the future will depend on capital investment at present, is the Minister aware of the concern amongst railway people at the successive cuts in the total amount of capital expenditure over the last few years, and will he assure us that an adequate investment programme will be provided for the railways?

Mr. Peyton

On the question of an adequate investment programme, the Government have always been ready to respond to reasonable requests from the railways in this respect. I do not think that my hon. Friend need have great apprehension about the effect of the reorganisation on employment in Scotland. I will look into it and write to him.

Mr. David Steel

Will the Minister say whether the semi-autonomous position of the Scottish Railways Board will be affected by the reorganisation? Can he give us, out of the 4,500 to 6,500, a figure for the reduction in staff north of the border?

Mr. Peyton

No, Sir. It would be very difficult to break down that figure at the present stage. The railways are able to give only a fairly rough estimate over the country as a whole.

Sir Gilbert Longden

Why is the only method that seems to be known to our nationalised industries for solving their problems to increase the price for a reduced service? Would it not help to attract custom if for a change British Railways were to reduce fares and freight rates?

Mr. Peyton

I am sure that if British Railways were persuaded that that was the way to raise revenue they would readily resort to it, but over the years the management of the railways has not proved to be all that optimistic.

Mr. Harold Walker

Is the right hon. Gentleman aware that his announcement will be a shock in my constituency of Doncaster, an area of high unemployment, which will lose another 450 jobs? Will he tell us the time scale of the rundown of manpower? The righthon. Gentleman said that natural wastage would account for it, but, according to the original proposals published by his Department, once approved the changeover will start immediately. Will he say what this involves?

Mr. Peyton

The fact that the changeover will start immediately does not mean that it will be finished immediately. My advice from the railways is that redundancies will largely be looked after by natural wastage. I realise, of course, that to Doncaster and other cities which are possible headquarters this decision must be a disappointment. The Railways Board has seen fit to make its choice for its territory headquarters, and it is not right for Ministers to seek to intervene in what are basically management decisions.

Mr. J. H. Osborn

Will my right hon. Friend say to what extent this blow has been caused by the railwaymen's wages increase reducing job security? To what extent will the reduction in employment in the move from Sheffield to York be met by natural wastage? Apart from the cost to the railwaymen and their families, to what extent will the reorganisation be paid for by the travelling public and to what extent by the taxpayer?

Mr. Peyton

It is a little early to say. The judgment of British Railways is that the proper fares increase at the moment, in an attempt to make a contribution to remedying their difficult financial position is the figure that I have just quoted. I do not think that I can comment further.

Mr. David Stoddart

Is the right hon. Gentleman aware that his announcement will merely compound the despair felt in my constituency over railway policy generally? Is he undertaking studies within his Department on an overall transportation policy in which the financial and social aspects of the railways will be considered? On the railway field organisation, is the Minister satisfied that the railways have carried out their duty under Section 45(2) of the 1968 Act to consult properly and in full the people employed in the industry?

Mr. Peyton

Yes, Sir. I believe that the railways have carried out the duty laid on them by the Act to consult. I say again that I realise that these changes are not acceptable to those who are adversely affected by them, but it is of little use asking for an efficient railway industry if the board is not free to make what it considers proper changes in its management structure.

Mr. Stoddart

Will the Minister answer my first question? What studies are his Department making on an overall transportation policy, taking into account the financial and social aspects?

Mr. Peyton

Very considerable studies are being made, but I cannot answer in detail now. I remind the hon. Gentleman of what I said in my statement—that ever since the autumn the board has been making a very considerable study of its long-term problems. I hope to have a report from the board by the end of October, and thereafter as soon as possible to report my conclusions to Parliament.

Mr. McLaren

Is my right hon. Friend aware that his statement on reorganisation will be received with disappointment in the West of England and that on merits the proper place for the Western regional headquarters is Bristol and not Wales?

Mr. Peyton

I understand the disappointment of those who represent Bristol consituencies. My own position in the West Country leads me perhaps to have additional sympathy with their arguments. But I would not like my hon. Friend to have the impression that Bristol and other cities concerned here will be totally bereft of railway employment and job opportunities. For instance, the area manager responsible for all operations will continue to be in Bristol, as will the area civil engineer, the area signals and telecommunications engineer, the area mechanical and electrical engineer, and the area passenger sales manager. In other words, a substantial railway operation will be based at Bristol.

Mr. Ron Lewis

To what extent were the trade unions consulted before the right hon. Gentleman drew up his statement? Can he give a greater breakdown of the number of redundancies grade by grade? Can he give an assurance that grant-aided lines will not be touched in any way, shape or form?

Mr. Peyton

I could not give a blanket undertaking of the kind requested by the hon. Gentleman in relation to grant-aided lines. Secondly, it is not possible for me at this stage to break down the estimated reduction in staff. It would only be misleading if I were to try. Thirdly, the trade unions concerned have been fully consulted by the board, by my Department and by me.

Mr. Ian Lloyd

I think that many hon. Members will sympathise with my right hon. Friend in this dilemma, which in political terms could perhaps be described as almost hereditary as well as inherited, and some of us are particularly dismayed at the prospect of what seems to be an unlimited commitment by the Exchequer, which may be regarded as a cornucopia from which the consequences of wage-cost inflation through the country are being met. Is there any foreseeable end to the process?

Mr. Peyton

My hon. Friend has asked me a question which I should love to be able to answer. He referred to heredity. Whatever I may have inherited, I would claim to be exempt from any accusations as far as heredity is concerned.

Mr. Benn

Is the right hon. Gentleman aware that the feeling in Bristol about the decision to move the territorial headquarters is not confined to that city alone but is shared by hon. Members representing many constituencies west of London and in the West Country, who feel, as many other nationalised industries firms have done, that Bristol is the natural centre? Is he further aware that the responsibility for this decision rests firmly on him, since he has a statutory obligation to examine the proposals made to him? The right hon. Gentleman said staff had been consulted. A large number of staff at Bristol feel that they were not given adequate information on which to argue their case. There is a very strong case for him to state publicly and clearly the reasons which led him to uphold the board's decision, because under the Statute it is his responsibility, and this should be clearly seen.

Mr. Peyton

The claim of Bristol as a natural centre was powerfully represented to me by many of my hon. Friends, as well as by the right hon. Gentleman, representing West Country constituencies. On the other hand, even though hon. Members representing that city have not been very vocal in their applause today, I have had some representations from Cardiff, where there is a good deal of originating freight traffic. I cannot deny that I am under a statutory obligation, but I hope that no one will accuse me of any disrespect to Parliament when I say that this particular obligation was conferred on a Minister in one of Parliament's very unusual lapses from high common sense and total wisdom.

Mr. Adley

My right hon. Friend let the cat out of the bag about originating freight traffic. It is not necessary to sit and watch trains go by in order to run a railway efficiently. There is great concern amongst trade unionists and others in Bristol and throughout the West Country about the way in which this matter has been handled. The phrase "natural wastage", if it refers to Bristol and Exeter people having staff jobs in Cardiff and being expected to travel two hours a day, is not going to satisfy them. Can my right hon. Friend, despite his assurance to my hon. Friend the Member for Bristol, North-West (Mr. McLaren), be more precise as to how many jobs are likely to be lost, either through natural wastage or through effective wastage through people being offered jobs which it is impossible for them to operate from their homes in the West Country?

Mr. Peyton

I have given all the information I can at present about jobs and job opportunities which will remain in Bristol. I know my hon. Friend's very strong views about this. I would only add that when I first had a look at this problem one thing which was clear to me was that of all the possible candidates three cities were going to be pleased and silent and the rest would be disappointed. I have seen no reason whatever to intervene in what I regard as a series of management decisions simply because they are announced together.

Mr. Adley

Political decisions.

Mr. Palmer

In addition to the other points made by other hon. Members representing Bristol, may I ask the right hon. Gentleman whether he is prepared to receive further representations, or is the whole issue now closed?

Mr. Peyton

I do not think that any Minister can ever say that he is not prepared to receive further representations, because he gets them whether he is prepared to receive them or not. I have given my approval to this reorganisation, and I hope that British Railways will now be free to get on with the task which has perhaps been too long postponed, with uncertainty protracted.

Mr. Ridsdale

How much of the fare increase of 7½per cent. is due to the inflationary rail and coal mining awards?

Mr. Peyton

I made the best effort I could to apportion the causes of the present situation. I do not think that I can go any further. Dividing up a bitter pill is not really a profitable occupation.

Mr. Urwin

In view of the deep concern quite properly and frequently expressed in the House about the intolerably high levels of unemployment in the development areas, and the fact that a number of people will now have to be decanted again from the industry, will the right hon. Gentleman indicate whether he has undertaken discussions with other members of the Government, especially the Secretary of State for Trade and Industry, about planning alternative job opportunities for those people who are now to be displaced? Will he further undertake, realising, as he will do, that the Northern Region particularly cannot afford to be denuded of any more jobs in administration, that the interests of the Northern Region will be fully safeguarded in the reorganisation?

Mr. Peyton

I very much hope so. I remind the hon. Gentleman that York is in the Northern Region—

Mr. Urwin


Mr. Peyton

It is in the north of the country. Rivalry for this headquarters was between York, Sheffield and Don-caster, Two of them were bound to be disappointed. The decision of the board was that York was the best place for the new territorial headquarters, and I see no reason to challenge that view. Of course these proposals have received the consent of my right hon. Friends. I will call the attention of my right hon. Friend the Secretary of State for Employment in particular to what the hon. Gentleman has said.

Mr. Bruce-Gardyne

Does the average of 5 per cent. in fares reflect the unfettered judgment of the Railways Board as to what the market will carry, or has it been affected, either voluntarily or involuntarily, by the CBI's restraint scheme, and, if it has, how much of the £40 million additional subsidy reflects that fact?

Mr. Peyton

The matter has been fully discussed with the CBI, but the proposals now put forward are those which emanate from the Railways Board as to what the traffic will bear.

Mr. Bagier

Does the Minister agree that the railways are fed up with being reorganised? He says that he has consulted the trade unions; but has he reached agreement with them? As to the financial balance of British Railways, is it not time that the Government appreciated that the railways are a public service and that if the whole of the public is to be provided with a public service as such it is only fair that the whole of the public should provide some money towards that undertaking?

Mr. Peyton

I do not quite know what the hon. Gentleman means when he says that "it is only fair that the whole of the public should provide some money". The public provide a great deal of money now.

Sir H. d'Avigdor-Goldsmid

My right hon. Friend said in reply to an earlier intervention that he wished that someone could give him a clue how to make the railways viable. Let me commend to him the idea that he should apply to the Treasury for a loan of public dividend capital to meet the new capital charges which are about to fall on the railways. The advantage of a public dividend capital advance is that no interest need be payable on it until such time as the railways are viable. Perhaps my hon. Friend will give that idea his consideration.

Mr. Peyton

I will certainly give any idea put forward by my hon. Friend my most careful consideration, though it would be wrong for me to conceal my own very considerable anxiety as to the capacity of the railways to earn a proper reward even in the long term.

Mr. Walter Johnson

Is the right hon. Gentleman aware that this new field organisation will cause real hardship and anxiety to many thousands of white-collared workers, not only those who are to be made redundant, but also those—probably about 1,000—who will have to move their homes for the third time in five years? Does not the right hon. Gentleman realise what hardship this entails in matters such as schooling and housing?

Mr. Peyton

Of course I do. I realise that it will be a source of hardship and inconvenience to individual members of the staff. The railways management has the responsibility for managing the railways. I do not. I add this counsel to the hon. Gentleman. If Ministers are to start taking on themselves the responsibility of fair detailed management decisions, the final plight of the railways will be far worse than it is now.

Mr. Ronald Bell

Did not the four private companies meet their operating costs from revenue in every year, including 1926, even if they did not always pay a dividend on their equity capital? Does not my right hon. Friend's statement show that the nationalisation of the railways was a ghastly mistake? Is there any hope of getting them back to private enterprise?

Mr. Peyton

If I were to disagree with my hon. and learned Friend, I am sure that he would be deeply surprised and very shocked. I certainly do not disagree with him. I have never made any bones of my belief that public ownership applied to great industries like the railways is a fiasco.

Hon. Members


Mr. Bidwell

Is the Minister aware that that last reply was completely idiotic? Having regard to the nationalisation of the railways at the beginning of the industrial period in Germany, for example, his remark flies in the face of history. By that reply he must be suspect as a transport Minister. I suggest that a transport Minister in this day and age will be judged by his ability to balance the proper usage of road and rail. It is no way to face the future of our transport problems to see the railways run down in any shape or form. To what extent does this statement mean that there will be less usage of railways both in regard to passengers and in regard to freight? Will it lead to an idiotic situation such as has already been developing on the Southern Region, where well-laden passenger trains are cut out?

Mr. Peyton

It does not lead to anything of the kind the hon. Gentleman suggested. All I am suggesting is that public ownership has not been proven to be a very great success. [Hon. Members: "That is different."] I am moderating my language to match the sensitivities of hon. Members opposite. Public ownership has not been a great success. I personally very greatly regret that hon. Members opposite, having watched the results of their own policies, still go on pursuing nationalisation as the golden solution to all our problems. I am certain that it makes for rigidity in industry and it exacerbates all the problems of management. I have done my best while I have been in my present office to support and sustain those who have the heavy responsibilities of running British Railways; and I shall continue to do so.

Mr. Mulley

I am sorry to press the Minister further on this, but will he not take an opportunity to withdraw his remark about "fiasco", because public confidence in a Minister responsible for not only one great nationalised industry—the railways—but many others is bound to be shaken by the thought that the Minister is perhaps deliberately trying to destroy the industries for which he is responsible. I know the right hon. Gentleman well enough to know that that is not so, but will he not give a clear undertaking that he will do his best both for the public and for the employees of these industries while he holds his present position?

Mr. Peyton

I do not think that the undertaking for which the right hon. Gentleman asks is necessary. Of course I can give it in any event. All I said just now was that, looking at it from a national point of view, I find the addiction of the Labour Party—[Hon. Members: "That is not what the Minister said before."] It is what I am saying now. [Interruption.] I retreat from nothing. I find the slavish addiction of the Labour Party to public ownership very difficult to comprehend. In its conseqeuences overall public ownership has been disastrous.

Several Hon. Members rose

Mr. Speaker

Order. This is an Opposition Supply Day. I must protect their Scottish business.