HC Deb 18 November 1977 vol 939 cc1019-54

12.47 p.m.

The Under-Secretary of State for Transport (Mr. John Horam)

I beg to move, That this House takes note of EEC Documents R/1568/77, on uniform costing principles for railway undertakings, and R/669/77, on the necessary measures to achieve comparability between the accounting systems and annual accounts of railway undertakings, and of the Department of Transport's Explanatory Memoranda dated 18th July 1977 and 9th May 1977, and Supplementary Memorandum dated 11th November 1977. The House will be aware from the statement of my right hon. Friend the Secretary of State for Transport on 4th November that an amended version of the accounting proposals on the lines described in the supplementary memorandum was adopted by the EEC Council of Ministers on 27th October. I shall be explaining in a few moments why it was that my right hon. Friend agreed to the adoption of the regulation before it had been considered by the House as your Committee recommended, Mr. Speaker—a most important point.

I think that it might be helpful, first, to put the matter into perspective. Community policy towards the railways has three basic objectives: First, the removal of disparities arising from the imposition of burdens or the granting of benefits by the State which could distort fair competition: secondly, the removal of direct control of railways from the State, giving railway management greater responsibilty and independence; thirdly, assisting the railways to achieve a balanced financial position, by encouraging the development of their commercial role, and by requiring the State to compensate for all social burdens imposed, including the continuation of certain defined public service obligations.

If disparities arising from financial burdens imposed or assistance given by Governments are to be removed, it is essential that they first be identified. Railway undertakings are already required, under EEC legislation, to publish in their annual accounts the sums granted to them by way of financial assistance or compensation under various EEC regulations. The new regulation agreed last month is designed to make the accounting systems and annual accounts of the EEC railways more comparable than they are today so that a clearer view of the assistance given by each Government to the railways is available to member States and the Commission, which can then report to the EEC Council of Ministers on the progress achieved in removing disparities.

It is the case that in some countries certain personnel are employed by the Department of Transport, while in others they are employed by railway companies. In our case it is British Rail, and therefore the personnel are included in the BR account in this country, and in another they are included in the Department of Transport account. It is that disparity that one wants to iron out.

As my right hon. Friend explained in his two memoranda of 9th May 1977 and 11th November 1977, the Commission's original proposals for an accounting regulation, published as R/669/77, raised difficulties for the British Railways Board and for the Northern Ireland Railways because they required the railways to draw up their accounts according to a prescribed Community format set out in the annexes to the draft regulation. The proposed regulations envisage that the railway undertakings will continue to publish annual accounts in their present format, but additionally they will transpose their annual results as far as possible into a common Community format to facilitate comparisons between undertakings. There will be separate documents, which they will complete. This requirement is broadly similar to the first stage of the Commission's original two-part proposals.

The requirement recognises that information is not necessarily recorded by each railway under the same headings. The railways will however have to explain any divergencies from the Community format and the reasons for them. The earlier proposal for a binding Community accounting system, as a second stage, has been dropped. The working of the system of transposed accounts will be evaluated with a view to the Commission submitting, before 1983, proposals for any changes needed to improve comparability.

Having heard the views of my Department and of the railways themselves, the Scrutiny Committee recommended on 21st June that the proposals be further considered by the House. For a number of reasons, however, it was decided that a debate would not be held during the remainder of the parliamentary Session. First, it appeared to the Government that the proposals were likely to be subjected to considerable criticism by the group of experts and following informal talks with the Commission, there seemed little sense in taking up the valuable time of the House to discuss a draft regulation that was about to be almost completely redrafted.

A further consideration was that the draft regulation on common costing principles had been circulated by the Commission and was sent to the Scrutiny Committee on 18th July with an explanatory memorandum. The Committee recommended on 20th July that it should also be debated in view of its connection with the accounting proposals. By that time it was too late to arrange for the House to discuss the proposals before the recess.

As we had anticipated, the accounting proposals were significantly amended in working group discussions during August and September along lines proposed by the United Kingdom. The effects of these changes were outlined in a letter sent to the Chairman of the Scrutiny Committee on 25th October and are amplified in our supplementary memorandum of 11th November 1977. Briefly, by requiring the railways simply to transpose into a common format the accounts already prepared under current accounting practice and by allowing deviations from the Community format, provided these were explained, the new proposals make it possible for the railways to comply with Community requirements without any significant changes in their existing procedures.

Mr. Norman Fowler (Sutton Cold-field)

The first request for a debate upon the issues came on 21st June 1977. Will the Minister explain why a debate could not have been arranged between that time and the recess?

Mr. Horam

We realised that there were such objections to this draft regulation that we felt that it was neither right nor sensible for the House to discuss it in its original form. We thought that it was worth while waiting until we had something more concrete. In the event, that came quickly in September.

Mr. Fowler

Does the Minister agree that the total effect was that we had no debate at all?

Mr. Horam

Exactly.

Mr. John Roper (Farnworth)

The Scrutiny Committee has considered the letter which my right hon. Friend sent to the right hon. Member for Bournemouth, West (Sir J. Eden) on 25th October. The Committee was given only two days' notice of the Council meeting on 27th October at which the decision was to be made. It is important that the Minister explains to the House why the Government said of the decision on 27th October Our national interests would be best served if the United Kingdom agreed to its adoption without further delay".

Mr. Horam

I am grateful to my hon. Friend. I shall explain the situation in further detail. The House is entitled to know why the events occurred as they did after the recess. The actual resolution of the problems did not take place in the working group until the end of September.

I agree that to allow nearly four weeks to elapse between that resolution and writing to the Scrutiny Committee indicating that we were going to accept the changed proposals was too long. I hope that in the future we shall cut down that time by half and give the Scrutiny Committee much more than two days in which to consider what is happening. I accept that the time should have been longer.

There are three reasons why we felt that it would be in the United Kingdom's interests to accept the proposals. First, the draft regulations had been revised in line with our proposals in toto. Secondly, our revised proposals ensured that there were no changes in existing procedures. British Rail is being asked to do nothing about its accounting methods other than to provide another set of forms to the Community. It seemed rather churlish, when all the other countries were willing to accept the proposals at that meeting, to hold back when we had achieved what we wanted.

Thirdly—and the House may not be aware of this—the next item on the agenda dealt with drivers' hours regulations. We were so anxious to get this agreed, in the way that we did, that we thought that it would be wrong to put a reservation on the previous item, although I accept that in deference to the House that might have been the wiser course.

Mr. Roper

I am grateful for that explanation. It appears that this item forms part of a package deal. The House met on 26th October. It appears to us that it would have been possible for the Minister to arrange a debate on the subject on that day.

Mr. Horam

I am sorry that that opportunity was missed. Since that day was the day between the note to the Scrutiny Committee and the Council meeting a debate would have caused some practical difficulties. I recognise that my hon. Friend the Member for Farnworth (Mr. Roper) has a valid point. I shall try to ensure that this situation is handled more sensitively and appropriately in the future.

I turn to the proposals for uniform costing contained in the Community Document R1568/77. The Council is required by its decision of 20th May 1975 to lay down uniform costing principles for the railways. That is the reason for the document that we are considering today.

The railways of the Nine have been concerned for some time about the difficulty of ensuring that rates charged for international rail freight transport are sufficient to cover the costs of all railway undertakings involved, that traffic is accepted or refused according to comparable criteria in all member countries, and that the revenue received for the carriage of international rail freight is distributed among the railways in a fair and equitable manner. Having failed to find a solution amongst themselves the railway administrations made strong representations that the Council decision should contain relevant provisions to help to improve co-operation by laying down costing principles that all the railways could use to solve the problems that they had had for a long time relating to international traffic.

Mr. Nigel Spearing (Newham, South)

I am grateful for what the Minister has said. Can he confirm that there have been no further supplementary changes to Document R1568/77 as there have been on the document on accounts? Does he agree that although this comparable method of costing applies only to international traffic, the whole purport of the regulation is that as soon as it is practicable it should also apply to internal traffic?

Mr. Horam

I confirm that. The first meeting of the working group will be on 7th December. We are having a debate today so that we can hear the opinion of hon. Members. There have been no changes. The draft regulation and explanatory memorandum remain on the table unchanged.

Secondly, it is a matter for negotiation whether the regulations then go on to deal with national as opposed to international traffic. The regulation deals with international traffic, and that is the point to which we are objecting. As I have indicated, the rules of the Nine provided for some costing principles to be worked out by the EEC to deal with the problem of allocating revenues from international traffic, but the Commission went further in its remit and put forward a set of proposals which would apply to national as well as international traffic.

The problem is that the costing principles in the different countries are so variable and different one from another that to do this now is a case of the Commission trying to run before it has started to walk. The difficulty that we foresee is the simple practical difficulty that we think that in this regulation the EEC is trying to bite off more than it can chew. My hon. Friend was entirely right in making his point.

Therefore, we seek the agreement of the House to our basic view that we should try to limit the regulation simply to international freight traffic for the immediate purposes I have described and not to allow it to go wider. Ultimately, we may have to deal with the question whether we should allow it to go wider, but at present we are trying to get the draft regulation limited to the issue of international traffic, and I seek the agreement of the House to proceed in this manner. The next meeting to discuss the draft regulation will be on 7th December. I shall be interested to know the views of hon. Members on the subject.

Mr. Spearing

On a point of order, Mr. Deputy Speaker. I apologise to the House for raising this matter now. I should have raised it before my hon. Friend the Under-Secretary of State began his speech, but his alacrity was too great for me.

The point of order concerns the form of motion and the question whether it is in order. The motion asks us to take note of EEC documents and the contents of the explanatory memoranda to which my hon. Friend the Under-Secretary has referred. The motion could ask us to approve or disapprove of the documents. The regulations of the EEC are public documents and notionally are available to the public, whatever the practical difficulties, but I believe I am right in saying that the explanatory memoranda are issued for the convenience of hon. Members and are not public documents, nor necessarily should they be so.

Therefore, if the House on this occasion takes note or on a future occasion approves or disapproves of the contents of explanatory memoranda, the citizens of this country will have no immediate access to the views of hon. Members. Therefore, I ask, Mr. Deputy Speaker, whether it is in order for the House to discuss a motion of this sort, whether there are precedents for it, and whether, even if the debate should continue, it will be in order to have further debates using this form of motion.

Mr. Deputy Speaker (Sir Myer Galpern)

The motion undoubtedly is in order. It is for the House to approve or disapprove it. The hon. Gentleman has raised the question of the non-availability to the public of the explanatory memoranda of the Department of Transport. They are available in the Vote Office to hon. Members. There are many precedents for such memoranda not being made available to the public.

The matter which the hon. Gentleman has raised is not one for the Chair. If he has any criticism, it must be a criticism of the Department for not providing what the hon. Gentleman thinks should have been provided.

1.4 p.m.

Mr. Norman Fowler (Sutton Cold-field)

The Department of Transport has a habit of getting slightly lost when it is dealing with EEC regulations, as we have had cause to point out before.

Let me go back to the original form of the draft regulation which the Under-Secretary of State has put before the House. It laid down that the EEC railway undertakings should, from the accounting year 1978, draw up annual accounts on the lines which were prescribed. They were to be forwarded to the Commission within 10 months of the end of the accounting year and the Commission would send a summary of its observations to members of the EEC within eight months of receipt. For a transitional period until 1984, undertakings' published accounts could continue to be presented in their existing form and an advisory committee would be set up to assist in the examination of the annual accounts and to keep under review the problems associated with the standardisation of accounting systems.

In its 26th report of 21st June 1977, the Committee on European Legislation reported this Instrument as raising questions of legal and political importance and recommended that the House should give further consideration to it. The Committee drew attention to the evidence which it had received from the British Railways Board. It indicated a number of the areas which British Rail said would cause difficulty—for example, changes in the accounting systems at present in use would be required, and there could be conflicts with the requirements of the Companies Acts and standard United Kingdom accounting practice; the comparability of accounts could be secured only if accounting practises were standardised; the information required for operating accounts for the diverse activities of the British Railways Board could not be obtained from accounts as they were at the moment.

Therefore, the first point that I raise—and it has been touched on before—is why there was no debate before the adoption of the 26th report. We were not exactly overworked last Session and yet no debate was accorded to the regulation before its acceptance. I gather from what the Under-Secretary has said that the Government's view is that if they had delayed, it would not have been in the interests of the United Kingdom. But how are we to define the interests of the United Kingdom unless these matters are debated in the House before decisions of this kind are taken?

It is clear from the memoranda of July of the Department of Transport that the Department and the British Railways Board envisage a number of practical difficulties in applying the requirements of the draft regulation as the Board's costing methods differ from those used by Continental railways. As the Under-Secretary said in July, it is difficult to assess the financial implications for British Rail. The use of either of the principles of costing in Article 8 would conflict with the present support system for the British Railways Board. The two principles which were laid down were the utilisation principle—allocation of cost—in proportion to the use of resources made by each category of operation—and the casualty principle—allocation of cost between categories of operations in proportions showing that certain costs could be avoided in the absence of certain categories.

Clearly the British Railways Board found that that presented it with certain difficulties. But I am not sure that the House should accept, and certainly not without question and debate, that the view of the British Railways Board is necessarily the view which the Government should put forward. The British Railways Board has an interest which it has every right to put, but it is only one of a number of interests which the House should consider. There are the interests of passengers, and the customers with freight to carry to consider.

Surely that is the whole purpose of having debates in the House. While we may disagree on the answers to those questions—I think that there would be disagreement between myself and the Under-Secretary and his hon. Friend the Member for Newham, South (Mr. Spearing)—there would be agreement between us that these are important issues which merit discussion and debate before decisions are taken.

One fact that is not always taken on board in this county is that railway costing is one of the most crucial areas in the railway debate. It is also one of the most contentious. I do not claim that there is agreement on the way forward here, but in many ways everything depends on railway costing. If it is wrong, or the costings are inadequately presented, the public accountability of the railway undertaking, whether in Britain, France or any other EEC country, is substantially reduced. The public are left in the dark about the railway system which they themselves finance as passengers and taxpayers.

I suggest that this is very much the point that we have reached in this country today. New fares have just been announced equivalent to an overall national increase of 14½ per cent. We have been told in a Press release from British Rail that they will be on a selective basis. Increases generally are in line with the rate of inflation but there will be higher increases for inter-city and for commuter services.

At no point does British Rail provide information on the costs of these services and the justification for increasing fares on the commuter services as opposed to the rest of the railway system. That is the kind of principle which is at the heart of what we are debating. Unless we have that kind of financial information, the public will always be left in the dark and will always be given the impression that they are regarded by the railway undertakings—in this case British Rail—as a captive market and that they are simply being charged on the basis of what the market will bear.

Mr. Spearing

That is good Tory policy.

Mr. Roger Moate (Faversham)

We are anti-monopoly.

Mr. Fowler

Therefore, although we may not agree on the solutions to this problem, I hope that the Under-Secretary will accept that this is a crucial area of railway policy which deserves to be debated in the House, and I regret very much that no debate on it was arranged earlier.

I understand the case that the Under-Secretary is putting, and the case that the British Railways Board is putting. Many of us would find ourselves in sympathy with parts of the draft regulation and the Explanatory Memorandum. For example, the Explanatory Memorandum says that the aim of this harmonisation is to promote adequate autonomy for railway undertakings and the running of railway undertakings on economic principles, and ensure transparency of financial intervention by the State". It is this transparency of financial information, making the financial information clear to the public, which is crucial. This is also something that we should have considered in the House before the Under-Secretary and his colleague went to the Council of Ministers. This is an important area.

Any decision to support specific rail services brings us up against a major difficulty, the necessary information about the costs of the different services. The concept of the Government's entering into a contract with a railway undertaking—this is the term now used by the current Chairman of British Rail, Mr. Parker—to provide services which cannot be totally financed by fares, is acceptable only provided that that contract is as specific as possible. It is also important that British Rail should be made publicly accountable.

It seems to me that the rail passenger and the taxpayer have an interest in seeing that the maximum amount of information is published. No one would pretend for a moment that that is the case now with British Rail's accounts. The accounts conceal as much as they reveal. One could claim that they conceal rather more than they reveal. Separate information is not published on the cost of the main passenger business, let alone on the major services. There is no breakdown in the freight business between general freight and the cost of the parcels business. This is a basic defect. My criticism is that some of these points could have been aired in a debate on the regulations that the House is now belatedly considering.

There are sensible ways of dividing the costs in the activities of railway companies. For example, it is possible to divide British Rail's services into different components: inter-city, commuter, country passenger, passenger transport executive, freight and parcels. In my view there is no overwhelming difficulty in reaching a fair and reasonably accurate apportionment and attribution of costs in the railway system. It is possible to achieve this. One point made in the Explanatory Memorandum and the documents before us is that it is possible to do what British Rail says is not possible—to attribute and apportion cost fairly.

In a way this debate comes after the event. In a way it is academic now. I only regret that we did not have the opportunity to debate these questions earlier, because I sincerely believe that railway costing could not be more important to British Rail and to the way in which this House decides exactly what we want to see in the accounts of British Rail, because we are the representatives of the public.

I do not believe that it is enough for British Rail simply to say that this is its view. We shall take account of Britsh Rail's view, but that view is not paramount. The paramount interest is that of the passenger and the customer with goods to move.

1.18 p.m.

Mr. Nigel Spearing (Newham, South)

To the last sentence of the hon. Member for Sutton Coldfield (Mr. Fowler) I would add "the good of the nation as a whole" as a paramount factor. I agree very much that the controversy about costing is central to the whole debate on railways and on an integrated national policy for transport. But I cannot agree with many other points raised by the hon. Gentleman which arise from that.

It is on the basis of costing that one accepts new traffic, either for commercial reasons or for reasons of policy, or rejects it. It is the results of the costing which set railway strategy for the future. The approach of the hon. Gentleman and the Conservative Party would not make the best use of our railway system in the whole transport network, as an integrated approach would. Some of us have criticised British Rail for doing arbitrary costing exercises and saying that certain traffic would not be profitable or pay its way. Whatever the arguments to the contrary the suggestion is not then taken up.

If by chance one uses the wrong costing criteria, the effect on the railway network is felt over a period of years. The marginal or optional traffic goes down, putting a much greater cost on those essential travellers, the commuters, letting them bear a higher and higher proportion of the costs of the network. The opposite view, held by me and my hon. Friends, is that the more marginal traffic one can obtain and the more the costs are shared, the lower will be the costs to everybody. The economic costs to the nation will be less, and probably with an integrated transport scene, better use will be made of the railways.

Indeed, we know that the railways are already not pursuing this method in respect of the transport of bicycles. That has been shown. It is a very good example of the negative attitude to the costing of British Railways traffic. I have a letter telling me that it would not pay British Railways to transport bicycles. Yet now the scheme is a great success. This is the danger of doing the wrong costing, and in the approach that we see in the EEC documents there may be the seeds of a similar mistake. That is the great danger.

I am very glad to see the hon. Member for Sutton Coldfield nodding agreement. That is why this debate is of such great importance. I am glad that he agrees with that, too.

People outside the House are getting very hot under the collar about railway costs. Yet apparently Parliament does not have that attraction for some of our colleagues today to discuss the question, perhaps because the form in which the issues are put before us is obscure.

I wish now to refer to my point of order. Earlier, Mr. Speaker, your deputy ruled that we were in order in dealing with this because the documents which indeed contain the nub of our discussion—the Explanatory Memoranda—are available to Members although they are not available to the general public. I want to make it quite clear that I am not necessarily advocating that these Explanatory Memoranda should be available to the general public, and I am not in any way blaming my hon. Friend or the Department for not making them so available. I am not sure that it would be right to do so. But I am saying that it is wrong for Parliament to be discussing an approach, a policy or a reaction to the policy of the Commission when nobody other than those who have access to these documents knows what we have taken note of or what we have approved.

Again I am glad to see that the hon. Member for Sutton Coldfield is in agreement.

I do not think that this is necessarily the Government's fault, any more than the timetable of which the hon. Gentleman has made complaint is their fault. This has been forced on us by the operations of the Commission and by the nature of the EEC. These doubtful procedures of lack of immediate information to the public arise in part from the lack of notice, for the motion was made available only yesterday. Again, I make no complaint about that to my hon. Friend, because he had to wait for the Scrutiny Committee on Wednesday, but the very way in which the Scrutiny Committee is set up and operates means that it begins to inhibit the operation of democracy. Indeed, it begins to creep in and force us into parliamentary procedures and methods which in other ways we would discount as being undemocratic.

It may be that in future years historians will look at this debate and the exchanges that took place between my hon. Friend the Under-Secretary and my hon. Friend the Member for Farnworth (Mr. Roper) as a textbook example of the way in which it is virtually impossible for the House to grapple with these matters. The paperwork alone is extraordinary. We have two regulations, three Explanatory Memoranda, three reports of the Select Committee, one debate in the European Consultative Assembly, and two memoranda from British Railways. Those are the documents which one must read if one is to participate in the debate in a meaningful way. That is another example of the intangibility of the issues which confront us.

Now to the documents themselves. I accept what my hon. Friend said about Document R/669/77. This is at present satisfactory whereby British Railways carry on their existing practice, irrespective of its merits, which I will not debate now, and, as it were, have a translation in EEC terms into another set of accounts which are available to the EEC. So far, so good. But any future requirement of the Commission or any suggestion by the Commission that would make EEC demands, requirements or suggestions alter the way in which British Railways at present issue their accounts or the way in which any British Government or British Parliament require them to set out their accounts would, I think, be resisted—certainly by this side of the House and I sincerely hope by the other side also.

It would be intolerable if an organisation such as British Railways, which is responsible to this House and to this House alone ultimately, should be forced by an overseas commitment to produce their accounts in any other way than that authorised and required by this House to which they are accountable.

I therefore hope that my hon. Friend the Under-Secretary will assure us that any future moves by the Commission or the EEC in that direction will be wholeheartedly opposed.

I turn for most of what I have to say—fortunately there is not a great pressure on time in this debate—to the second document, R/1568/77, which I believe is the much more important document in this debate and which relates to costing. I refer first to what my hon. Friend the Under-Secretary said in reply to my intervention. It appears that the Commission has gone well beyond the initial request. As I understand it from what my hon. Friend said, there was a request—not an unreasonable one—from the railway undertakings in the Community for some means whereby they could come to a common agreement in relation to international traffic. That is reasonable. I suppose that if it was not done by the Commission it might be done by the UIC or some other handy railway organisation. However, the Commission was handy, the matter comes within its competence, and so the matter was done.

The Commission produced the proposals—that was fair enough—but then went on to make them applicable to the internal traffic of each member State. In other words, the Commission is doing something for which it was not asked, though I have no doubt that we shall be told—perhaps my hon. Friend will, tell us in winding up the debate—whether it is within the Commission's competence under the Treaty to go on to that second stage.

My hon. Friend said that the Commission is to be resisted, that he at least will say—"International traffic, yes. Internal traffic, no." That, I take it, is the Government's attitude. I do not know whether my hon. Friend will be able to say what the position of the Governments of other member States is, because if we find ourselves in a minority, perhaps a minority of one, my hon. Friend might be placed in a dilemma, particularly if the next agenda concerns tachographs. The package-dealing aspect then would loom large and the much-vaunted veto of which we heard so much some years ago would then be there in theory only—but in practice we would have to say that it would be very difficult.

So the scheme might conceivably be extended. Indeed, I think that my hon. Friend did not close the door to some long-term extension, anyway. I am sorry that he was not as firm as I should have liked. I hope that in winding up the debate he will confirm that the Government are against any move at any time in the future towards the extension of this costing principle to internal traffic if only because the Labour Party and the Labour Government have said that this country must have powers over our own economic future, particularly in relation to economic and regional policy. Indeed, even my indefatigible hon. Friend the Member for West Lothian (Mr. Dalyell), in defending Livingston New Town and its development, in the European Assembly, quoted the need for railway access to developing areas. I see that he is rapidly becoming converted to another point of view. This is vital for our own regional policy in this country, of which rail access certainly plays a part.

As the hon. Member for Sutton Cold-field said, costing has been at the heart of railway controversies for the past 10 or 15 years. That was what Beeching was about. That was what the various formulae that we have had about railway costing in the past have been about. That is what the balance of road and rail traffic is about. That is why the hon. Member for Sutton Coldfield is particularly interested in this matter.

Paragraph 4 of the Government's Explanatory Memorandum states: Section II of the Regulation would apply the 'particular costing' principle to specific goods traffic in full train loads. The aim would be to provide data to assist the railways in deciding whether to accept new traffic and in costing existing traffic which they were considering terminating. In the case of international traffic the data is intended to assist in apportioning revenue between the railways involved. Therefore, as we see, it is not merely a matter of commercial co-operation. Although my hon. Friend the Minister has reservations, the proposal would go much further than that. If it did, as I have said, it could have considerable impact on the use of our own railways.

Already there is controversy, as the hon. Member for Sutton Coldfield said, about freight and passenger goods—which carries the cost? That is an internal controversy in this country. If we had that controversy settled by an edict of the EEC, that would have enormous consequences not only for freight but for passenger traffic, particularly in the rural areas where we are always having complaints about lack of transport facilities and arguments about the closure of branch lines. Therefore, any move further than international traffic could be of considerable significance.

That is borne out by paragraph 14 of the Government's memorandum, which says, It is difficult to assess the financial implications for British Rail". If that is so, that is a very considerable warning and backs up the Government's doubts about this matter.

I turn, almost in conclusion, to the regulation itself. EEC regulations are not always quoted in these debates. Perhaps it is desirable that they should be quoted so that those interested in these matters who do not find it easy to get hold of EEC documents can hear some of the things that they say.

Document R/1568 /77, after outlining the objective, says, in paragraph 6, To meet these objectives, it is proposed that, from 1st January 1979, the railway undertakings should use the principle of particular costing for two purposes, i.e. the determination of the costs of a specific goods traffic and the allocation of costs to categories of operations. It then goes on in great detail to say what they should be. In Annex 2 there are no fewer than 23 standard factors to be taken into consideration in calculating particular costs for goods traffic.

I think that we can say, in summing up, "so far, so good" on the question of accounting. On the matter of costing, the Commission has already gone too far, and what we read is not good. We hope— many of my hon. Friends agree with me—that the view which is taken by Her Majesty's Government, welcome though it is, is also shared by many others. Unless it is, we may be up against the package factor and may find that our internal accounting and costing of our own railways, carrying our own people with our own traffic, like many other things in this country, is increasingly dictated from Brussels.

1.34 p.m.

Mr. Roger Moate (Faversham)

I regret that I missed the opening exchanges in this debate, which I understand were largely concerned with a procedural matter. I wish to add one further procedural point.

I believe that this debate, in theory, is exempted business that could be taken after 4 o'clock for an hour and a half. It so happens that matters have worked out presumably as the usual channels expected, and it has been taken at a very civilised hour. But I think that it is worth giving the warning to the House that it is a very dubious practice to put on exempted business after 4 o'clock on EEC regulations.

It is just conceivable that the earlier debate, the Second Reading of a Bill, could have gone on all day. These things happen unexpectedly in the House. To take EEC regulations at 4 o'clock on a Friday night, particularly at this point in the Session, would be quite absurd. I hope that it will not be taken as a precedent by the usual channels.

The hon. Member for Newham, South (Mr. Spearing) made a number of points to some of which I shall refer later. I noted one of his phrases. He said that outside this place people were getting very hot under the collar about railway fares. Indeed they are. I believe that they would be even hotter under the collar if they could hear the nature of the debate that we are having today. I believe that these documents and this discussion on railway costings and railway accounting systems are totally irrelevant to the real crisis that is facing hundreds of thousands of people who are facing massive fare increases a few weeks from now.

Indeed, those hundreds of thousands of people are very much concerned with railway accounting. They would dearly love to have more facts and figures from British Rail so that they can assess whether the fares that they are being charged are right or wrong. Frankly, the documents that we are talking about today will not help them in the slightest. Indeed, these documents are totally irrelevant to the problems facing British Rail. I suspect that the Minister would not dissent much from that suggestion. They are totally irrelevant to the needs of the freight users of this country and the rail passengers.

Had these documents never seen the light of day, all that would have happened is that we should have been spared a great deal of the sort of bureaucratic work to which the hon. Member for Newham, South referred. All the papers that have been touched upon would have been consigned to the wastepaper basket, and we should have been none the worse for it. This is an indication of the time-wasting exercises that occur as a result of some of the decisions taken in Brussels. That is not a remark to be interpreted as making me against the Common Market. Indeed, I suggest that the Common Market would be stronger if it did not indulge in some of these activities.

As I was leaving home in Westminster this morning someone said "Do not forget to put out the dustbin. Today is dustbin day." I think that very often in the House of Commons Friday is dustbin day, and I think that these documents quite literally should be consigned to the dustbin. None of us would be the worse for it.

I turn to the question of the public need for better accounting principles, but I emphasise again that these particular documents do not help in any way, shape, or form. Certainly we want to see British Rail accounts presented in a different form. We want more information. I am sure that there would be greater acceptance by the public of the facts of life, of the need for fare increases, if they were given the chance to share in the problems of British Rail, if they were given the facts and figures and were presented with the problems facing British Rail account- ing. But those matters are disguised from them. I think that this is most unfortunate.

If the Common Market were saying that it wanted to see British Rail accounts opened up to the public, perhaps our arguments today would be rather different, But it is certainly not saying that. Looking at this regulation on the accounting systems, I find the solution that has been adopted very odd, because it is stated now—one welcomes this—that there will no longer be any move towards a binding Community railway accounting system. That is good. But the supplementary explanatory memorandum goes on to say that additionally British Rail will have to transpose its annual results into a common Community format to facilitate comparisons between the two undertakings.

Therefore, we are now to have two sets of books, one for the Common Market and one for British Railways. Most of us have understood for a long time that in certain Community countries the maintenance of several sets of books was fairly common practice. In Italy, I understand, two sets of books are fairly standard, sometimes even three sets. I did not understand that we were to be harmonised in that particular matter, but I wonder whether we should not now have three sets of books, one for the Community, one for British Rail—and how about being really revolutionary and having one for the British public? That would really be helpful. But I am afraid that nothing like that is suggested in these documents.

I emphasise again the importance of this matter to the public. On 1st January British Rail passengers, certainly in the South-East, will be paying up to 16 per cent. more in rail fares. I say 16 per cent. because that was the way in which the increase was presented in the Press. No doubt the Under-Secretary had some hand in that. But fares will be going up by about 20 per cent., and many people see this as a crisis in their personal budget.

Those people are entitled to know the costings factors which have gone into that fare increase, why they are paying very much more than other rail travellers in other parts of the country, and why they are paying so much more than the freight users. But those facts and figures are concealed from them.

Mr. Douglas Jay (Battersea, North)

Will not one extra cost falling on the railways now be the cost of producing this extra series of accounts, which will be useless except for showing to someone unknown in the Brussels machine?

Mr. Moate

I am sure that must be right. There must be some additional cost here, and these accounts can be of no conceivable benefit to the rail passenger.

We now know that the Price Commission is to be privy to rather more information than is available to the public, and that it will be examining the efficiency of British Rail's passenger services and trying to discover why these increases are weighted against the commuter. It is a bit late, because the process has been going on for some years. It would be more helpful if the Price Commission took action in relation to the new fare increase, but that is not happening and we are denied this information.

There is nothing whatsoever in the regulation dealing with accounting principles that will help the commuter, the railway passenger, or the rail user in any shape or form. It is utterly irrelevant and we would be better off without it.

Mr. Spearing

Will the hon. Gentleman not agree that if this goes to a second stage of costings, which may be forced on this country, it could well be against the interest of the commuter, because it could conceivably reduce the total traffic carried by rail, and therefore put even greater burdens on the commuter who is using essential routes in order to get to work in centres such as London?

Mr. Moate

It could lead to that, but I only hope that the Under-Secretary will be able to carry out his general intent to keep these things within commonsense limits in the future and that all Ministers will adopt the same commonsense approach. My point is that we would be better off without it.

I feel that there should be more criticism of our acceptance of the decision, presumably, in the Council of Ministers' meeting of 20th May 1975. Why on earth did we accept it? We accepted the decision that we should adopt the necessary measures to achieve comparability between accounting systems and annual accounts of all railway undertakings. We did not then say that it should be limited to international traffic only, because the decision referred to in the Minister's own memorandum clearly applies to all traffic, international and national. Why did we accept that decision in May 1975? The Minister ought to be criticised for that.

Again on this issue, we ought to have the courage to say that it is nonsense and will not benefit anyone. All this could have been stopped had we used our power to say "No", and we have that power.

As to the other regulation, which concerns uniform costing principles, it has already been emphasised that how we apply our costing is of crucial importance to the commuter. The argument is essentially about who bears the cost of track and signalling. Should it be borne by the freight user or by the passenger? I think that most of us would apply the commonsense principle and say that each section should bear its fair share of the cost.

The hon. Member for Newham, South denied that, but let us look at this in relation to the revenue accounts of British Rail for 1975. In that year freight and parcels earned a total of £405 million of revenue. The total earnings from passenger fares, leaving aside subsidies, was £505 million. In revenue terms, therefore, about 45 per cent. of the earned revenue came from the freight and parcels side.

When we look at the track and signalling costs and at the administrative costs which are specified as being relevant to track and signalling, we find that the total costs came to £329 million, but only £64 million of that £329 million was apportioned to freight. We have, therefore, about 45 per cent. of earned revenue coming from freight, but freight is only bearing some 20 per cent. of the track costs.

I am sure that freight requires much less sophisticated track and signalling than is required for passenger traffic, but certainly that is not reflected in the proportions to which I have referred. It is probable that the passenger side of the business is carrying anything between £50 million and £100 million of costs which, under a different accounting system, could properly be apportioned to freight.

In their consultation document the Government referred to this as a favourable accounting system in relation to the freight business. There is no dispute about that, but I think that the passenger is entitled to know that he is paying now to support the freight business of the railways.

The hon. Member for Newham, South said that it is quite right that these costs should be borne by the passenger, because by that means the freight charges to the freight user can be reduced. That means that British Rail can take on more marginal business and that the revenues of the railways can be expanded. I find it strange and a little unconvincing that we should tell the passenger that he must pay higher fares so that we can have lower freight rates, so that we can encourage the railways to take on more uneconomic freight business, so that the railways can lose more money.

Mr. Spearing

I shall read my speech with great care on Monday. But does not the hon. Gentleman agree that where, for the good of the community, the Government agree that it is right and proper for railway passenger services to be provided—and there is a good deal of revenue support to those services from the Government—it would be quite stupid to say that freight should not also he carried, if the line is there and is already maintained for passenger services?

Will the hon. Gentleman agree that when we attempt to allocate costs on lines which carry both freight and passengers, it becomes an almost impossible task? It is a very arbitrary exercise.

Mr. Moate

I do not think that I agree with the hon. Gentleman's second point, because all businesses manage to apportion their shared costs with considerable accuracy. It is only British Rail which seems to find it difficult to do—at least, so it says. It could do it if it wished.

If British Rail finds the avoidable costs concept a sensible and useful management tool, that is fine. Let it use it as an internal matter. If it wishes to make commercial judgments about taking on marginal freight traffic, that is a matter for it and it will be reflected in its results at the end of the year.

But let us not confuse that with what we charge the taxpayer, the fare payer or the rail user in terms of calling it "passenger operation". What is happening at the moment is that the accounts are being fudged. The passenger is shown in the accounts through the fares he pays, but he is bearing costs which should properly be borne by freight. That is the argument about the avoidable costs concept, and it is desirable to clarify the position in that respect.

The Minister, in the explanatory memorandum of 18th July 1977, suggests that the avoidable costs concept might not be permissible if these regulations were carried out with regard to internal traffic. He says that, but paragraph 3 says: Article 3 of the draft regulation proposes the adoption of the principle of 'particular costing'. This is a novel expression capable of varied interpretation by the railways, and so may overcome the difficulties in reconciling the use of terms such as 'direct', 'marginal' or 'avoidable' costing, which have accepted meanings. I rather get the impression that if it were adopted we should still carry on with our present costing simply on the basis that the document is capable of various meanings. If that is the case, it emphasises the point I made about its total irrelevance.

Paragraph 10 of the explanatory memorandum of 18th July says: The first need is to establish some mutually acceptable criteria for such traffic which would assist the railways—

  1. (a) in deciding whether to accept or reject new traffic, and to cost existing traffic…".
Are we really telling British Rail that it needs to have new criteria recommended by Brussels before it can decide whether to accept or reject commercial traffic? That would be a most patronising and extraordinary thing to do. It again emphasises that it has very little to do with the success or failure of our own railway system.

This is a critical time for railway operations. No one underestimates the difficulties, either at home or throughout the world, of managing railways. It is a major problem. Whoever runs British Rail, or whichever party is in power, the problem is not easy of solution, but this sort of approach imposes burdens on the House and on the taxpayer to a certain extent, and it does no good to British Rail and the British people. I do not think that it will do any good to the Community, either, and we are better without it.

1.52 p.m.

Mr. Tony Durant (Reading, North)

I support my hon. Friend the Member for Faversham (Mr. Moate) on the question of commuter fares and costing. It is time British Rail allowed much more scrutiny of its costing so that the ordinary travellers, commuters in particular, could see whether these prices were justified.

Reading has a fair number of commuters to London, and the latest increase will mean on average £100 extra on an annual season ticket—a lot of money by anyone's standards. It is not just directors who travel to London from Reading, but a lot of ordinary citizens, trainees, apprentices, and others doing special work that can only be found in London. The rail fare is an enormous burden. It is a serious situation.

The last time the fares rose I met many constituents who were considering whether to move to London or look for work locally. That is not a good situation for a place like Reading. If they remain, there is not enough work for them all, and if they move out we lose population that we do not want to lose. It is a serious trend.

The Minister said that there was some argument about compatibility regarding freight, and he felt that this was perhaps as far as we should go in this matter. I ask him also to consider the question of passenger traffic. I had the idea of taking my family on the Rome Express. We thought that it would be exciting, because children nowadays like going on trains, because they spend so much time in cars. But when I went into the cost of going from London to Rome by rail, I found that it was nearly double the air travel cost for the family.

British Rail told me that it had no control over costs beyond Dover because there was no compatibility with the other countries in the Community, that there were no cheap fares across the board. If we are part of the Community, surely this is an aspect which might help all the railways of the EEC. There is some argument for getting a cheap fare arrangement among the member States.

Mr. Spearing

I follow the hon. Gentleman's argument, but supposing there were to be harmonisation, is it not equally likely that we would have to increase our fares even more? Surely the risks of harmonisation are much too great in that respect.

Mr. Durant

I do not agree. On that argument, air fares would never have got on their present basis. There are agreements on air fares among the countries. There is nothing wrong with getting a European basis for rail fares. I can see no argument for not doing so. It would increase passenger travel. But at this time the only thing to do is to go by air, because rail travel is too expensive.

Mr. Moate

I agree with my hon. Friend about the costs of European travel. Is not what we want a Freddie Laker to do to European travel what he has done to transatlantic travel?

Mr. Durant

It would be rather difficult. I see the point, but, unfortunately, Mr. Laker could not set up a completely new railway system; one can buy an aircraft. Nevertheless, let us have a Freddie Laker in British Rail to push this aspect, but I do not think that he could set out separately on his own.

There is an element of compatibility which could be introduced and which would help passenger traffic as well as freight, but in the way this document is presented we have virtually a fait accompli. There are many more arguments which could have come out if we had had fuller debate. This is not the way to treat the House in a matter affecting so many of our citizens. I support the criticisms by my hon. Friends of the way it has been done.

I repeat that the latest fare increase to commuters in the Berkshire area is a very serious matter and therefore we should have more information upon which we can judge whether such increases are worth while or even profitable. People are now resisting travel. The latest idea is to go by car at 100 miles per hour to Slough, park in the streets there—to the annoyance of local residents—and rush to the railway to London. That is not a good thing in general for society, and it is certainly not profitable for British Rail.

1.57 p.m.

Mr. Horam

My hon. Friend the Member for Newham, South (Mr. Spearing) raised a point about the memorandum being available to the public. I take the point, but perhaps, as it is not my responsibility, it should be pursued with my right hon. Friend the Leader of the House. It related not to the memoranda in this case but to discussion of Community documents in general. It is the responsibility of my right hon. Friend the Leader of the House to decide what to do about that.

Mr. hon. Friend asked whether the Commission had a locus to deal with national as well as international traffic. In this respect, we are bound by the terms of the 1975 decision on railways, to which the hon. Member for Faversham (Mr. Moate) referred. This said that uniform costing principles should be laid down. Therefore, the Commisison can go into the area of national traffic. We could at some future date draw up regulations, if we were so minded, to deal with national as well as international traffic. We have disputed whether that is the right thing to do. As far as I am concerned, while I remain in my present post I shall continue to dispute it in the circumstances that we have, but I cannot bind any future Government, so my hon. Friend's concern must remain undiminished.

Mr. Spearing

It is.

Mr. Horam

I can give my hon. Friend no comfort in this respect, other than to say that what we are doing today is to agree to "take note" of a regulation which we have amended in total to suit our own railway interests, and that we hope in the working group on 7th December similarly to limit a Commission proposal which goes, in our view as well as in my hon. Friend's, far beyond what is required.

Mr. Spearing

I am grateful to my hon. Friend for making it clear that the powers and locus of the Commission to deal with the costing of internal goods traffic are within its competence. Could it now go into the costing of internal passenger traffic? If that were the case, would it not be possible for the fare increases that we have heard so much about today to be dictated, like goods costs, from outside this country? Could not passenger fares also be decided, in effect, by the Common Market? Is that a possibility?

Mr. Horam

I do not think that we are talking about decisions on fares. We are discussing comparable principles for accounts or costing. That is a far cry from saying at what level fares should be set. Fares for national transport are matters for national Governments. I cannot envisage a situation in which any Government would give up the right to decide their fare levels. We are discussing here accounting costing principles upon which Governments will decide those levels, and that is a completely different thing. My hon. Friend, however, is right in suggesting that if comparable costing principles are devised it is within the remit of the Commission to devise them for both national traffic and internatinal traffic, and, within national traffic, for passengers as well as freight.

Mr. Julius Silverman (Birmingham, Erdington)

Is the position then that the Commission can put forward proposals to increase fares, although whether those proposals are accepted by the Council of Ministers is a different matter?

Mr. Horam

No, that is not so. The Commission cannot do that and I do not envisage any situation arising in which they could do it. We are talking about drawing up costing principles and accounts—

Mr. Spearing

We are halfway there.

Mr. Horam

That is a long way from talking about the methodology of individual decisions about fares and costs, and that is way into the future. That sort of thing may be within the remit of the 1975 decision, which talks simply about uniform costing principles being laid down and refers in no way to decisions about fares. If we are talking about future decisions, they are a long way into the future.

Other countries, too, were as opposed as we were to the common approach to accounting principles. So there was a general opposition, and if one looks at the realities of the situation it seems that the sort of approach adopted by the EEC is meeting with no support in any of the major countries. That factor should be borne in mind. Ultimately these matters will be decided by the politics of the matter, and the politics of the matter appear favourable to my hon. Friend the Member for Newham, South as things stand.

Mr. Durant

I am confused. If everyone was reluctant and unhappy and disagreed with the proposals, why are we here now?

Mr. Horam

A lot of people were unhappy with the original proposals, but we are here precisely because they have been changed to take account of that unhappiness. The actual cost of preparing these additional accounts to be shown to the EEC is the princely sum of £200. I think that the charges advanced by the hon. Member for Faversham have some degree of substance in that this is not exactly a leap forward for mankind in terms of comparable accounting systems. We have gone a very small way indeed because we were not satisfied that the EEC approach and method were right in this respect.

It was not only a matter of believing that the Commission was wrong in trying to bring forward proposals which would get comparable treatment between many diverse systems. We also took the view that the approach it adopted, and the system for accounting and costing which it was suggested were simply out of date. Its proposals were based on the UIC proposals of 1948. There have been considerable advances in accounting and costing methods since then, and we believe that the EEC, if it is to have a comparable approach, should use the most modern methods.

We also contend—though I accept that this is subject to legitimate differences of opinion—that British Railways have developed a system of accounting which is sensible as a management tool. We may differ about whether this is right for the purposes or whether it is the right method for the objective which has been set out. There can be no disagreement, however, with the fact that British Railways, by comparison with some of the Continental railways systems, have developed a fairly sophisticated system of accounting—that is, on an avoidable cost basis.

As the hon. Member for Faversham rightly said, that is a management tool, and in examining the principles of accounting or costing the objective should be considered. The objective in this case is certainly efficiency in British Railways' business. The question is, are we taking decisions on the right basis, and as such, an avoidable costing system, in the opinion of British Railways, is the right system for them and in many respects is in advance of what other railway systems are doing. If we had agreed to the original form of the regulation British Railways would have had to go over to this old-fashioned system of accounting and would not have been able to use any other system.

In that case the argument advanced by the hon. Member for Sutton Coldfield (Mr. Fowler), who was fairly saying that the interests not only of British Railways but of the House should be considered by obtaining as much accountability and openness as possible, would not have been served either. They would have been using a system of accounting which was a fundamental management tool but which was out of date.

Mr. Norman Fowler

The Minister is making potentially a most important statement. He seems to have suggested that the Government are now committed to the avoidable cost concept developed by British Railways and at present in use only on its freight operations. The Opposition have pressed the need for British Railways to be made more publicly accountable. We have also pressed that there must be some way in which, for example, we can find the costs of commuter services. With the avoidable cost concept this is simply not possible and it could not be after three, four or perhaps even five years. Will the hon. Gentleman therefore confirm that the Government are committed to the avoidable cost concept, and does he therefore accept that there is no prospect in the next few years of providing the kind of information to the public and the House that the Opposition have been seeking?

Mr. Horam

We have been into this subject at great length. We did so in Committee on the Transport (Financial Provisions) Bill. The hon. Member for Sutton Coldfield has failed to understand the whole nature of the argument. I am sorry that it is taking such a long time to educate the Opposition in the simplest approach to this matter. We are talking about two different factors. One is the system of accounts which shows what the public and this House have a right to know. There is no difference between us about that right to know.

We pointed out in the White Paper how we wished all nationalised industries to go further than they do in this matter. I should like to draw the attention of the House to the point that was made by the Select Committee on Nationalised Industries. I am sure that the Opposition spokesman knows exactly what I am talking about here. The Committee went, at considerable length, into the need for a more open approach by British Rail so that people could know exactly the breakdown of costs in different parts of the railway system. We support that and, although we have not yet given a reply to the report, we shall indicate that we have great sympathy with that approach. I have placed in the Library documents that have not been made available by any previous Government and they refer to the PSO grants system. The documents show exactly how all the money—the £300 million or so—that we give to the railways in the form of support for the passenger system is worked out and how the final figures are arrived at.

We are anxious to reveal as much as it is sensible for us to do, and to give the House and public the figures that they require. Let there be no doubt about that. Much can be revealed that is not revealed now, and we shall do that. It will not be impossible to reconcile that object with a different system—the avoidable costing system that British Rail is using as a management tool.

The object of the avoidable costing system is that the costs should be revealed in such a way that sensible management decisions are possible. That is quite separate from giving the public the breakdown on particular commuter services or a generalised indication of costs in London and the South-East services network. These are separate objectives that must be approached in different ways, but ways that are not incompatible.

I should like to point out to the hon. Member for Faversham that the EEC approach is intended to help us to reveal more in this general way—forgetting for the moment the use of accounts as a general tool. Indeed, that is virtually what was said by the Opposition spokesman in his opening remarks. If the EEC is saying that we should be more open, then I agree, but there are two different objectives and two different methods of accounting. That is what the Opposition have not grasped.

Mr. Norman Fowler

I do not want to be too aggressive, but the Minister has not understood the point at issue. He has generalised about accountability but I advise the Minister, before he makes any charges, to take account of what British Rail is doing. Perhaps he should even visit British Rail to find out. The British Railways Board now uses the avoidable cost concept for its freight operations. It is possible for the Board to develop that concept for all the other areas of its operations. We are asking whether it is possible to go along that road and so get a breakdown of accounts. I hope that the Minister will now give a frank answer and tell us whether that is what the Government are committed to. That is a fairly simple question. Perhaps we could now have an answer.

Mr. Horam

Of course the Government are committed to that. That is quite obvious and I am surprised at the hon. Gentleman for making such a fuss about it. For some years British Rail has been developing an approach to accounting for its own management purposes, and that is the avoidable costing system. That is the right approach for British Rail as a railway business. However, the Opposition have failed to understand that that is a quite separate point, if they are debating what the public or the House have a right to know about the basic British Railways accounts, costs and breakdowns of parts of its services. That is a separate question.

Mr. Moate

Perhaps that point can be pursued at another time. If the totals of the avoidable costs of all sections of the business do not add up to the total cost, who will pay the basic facility costs that are left?

Mr. Horam

One might say "the taxpayers"—in the sense that we are subsiding British Rail to the tune of £300 million a year. Indeed, the Opposition are putting themselves in a curious position. They are trying to alter that which British Railways has developed as a sensible management tool in order to find out more, quite legitimately, about the costs of particular passenger services, But the Opposition need not do that. The two objectives are quite different and we can and should approach them in different ways. It is absolutely foolish that the Opposition spokesman should suggest that British Railways should abandon the approach to costing and accounting that it has developed over the years, simply to reach the position referred to by the hon. Member for Faversham, where it would be allocating its costs in an extraordinary naive way according to the amount of revenue recived by each side.

I can give an example of the Opposition's nonsensical position. The hon. Member for Faversham said that British Rail should allocate costs according to revenue and indicated that revenue on the freight side was about 45 per cent. of the total. Yet there is a much higher weighting of the costs on the passenger side. However, as the hon. Member for Faversham has agreed, that is only one method of allocating the costs. It could be done, as I suggested during the Committee stage of the Transport (Financial Provision) Bill, according to miles and use of track, which would be a much more relevant criterion.

If one also takes into account the fact that the railways system is basically determined by the needs of the passenger system, one can see that the totally different figures showing a weighting for freight costs are quite fair in comparison with passenger costs. That shows that the Opposition simply have not understood the sophistication of the system that they are dealing with. They have found an objective as a way out of their problems on commuter fares and are pursuing it to the detriment of the efficiency of British Rail. In the end, it is all about efficiency. I am sure that we are all agreed that we are anxious to make the railway system as efficient as possible. If we achieve productivity and greater efficiency we shall be able to hold down fares—and commuter fares is a matter that was quite rightly raised by the hon. Member for Reading, North (Mr. Durrant).

British Rail has now developed a management tool in the shape of an accounting system which allows it to achieve its objectives, and which the Opposition now want to break up. That would mean losing years of progress, and I can assure the House that the fares increases that we are to have in January would be a bagatelle in comparison with what the increases would be if we abandoned the progress that British Rail has made over the years. The Opposition's naive and simplistic ideas about cost allocations are not in the interests of passengers. An efficient system is in the interests of passengers, and that is what British Rail is seeking through these accounting principles.

I agree with the Opposition that as much information as possible should be provided. We are committed to that in our White Paper, and we shall be saying more on that in response to the report of the Select Committee. We have given the basic principles behind the PSO grant to the House.

Mr. Norman Fowler

During the past year I have taken part in many debates with the Minister and this is by far the worst reply that even he has ever given. It is quite clear that he is merely flouncing around, desperately not understanding what he is saying and seeking to charge the Opposition with doing the same thing.

Mr. Speaker

Order. Is this an intervention?

Mr. Norman Fowler

It is an intervention.

Mr. Speaker

Order. I was still on my feet. The hon. Gentleman has addressed the House once already.

Mr. Norman Fowler

Perhaps I can put this point in an interrogative form. I am sure that the House would agree that the Minister has been seeking, however inadequately, to respond to the point I have made. My point was that he clearly does not understand the avoidable costing concept to which he has now irrevocably committed the Government. Neither did the Minister understand the point that was put by my hon. Friend the Member for Faversham (Mr. Moate) about the rump cost that would be left. The Minister blandly said that that would be given to the taxpayer to finance. It surely ill becomes a Minister, having made such an extraordinary comment, to accuse us of advocating a system that would push up fares. The approach that the hon. Gentleman is adopting will not only push up fares. It will also push up the cost to the taxpayer.

What I should like to ask the Minister—

Mr. Speaker

Order. I am breaking all the rules. I think that honour was satisfied about two minutes ago. But I shall allow the hon. Member for Sutton Coldfield (Mr. Fowler) another 30 seconds to finish making his point.

Mr. Fowler

Is the Minister now saying that there will be two systems—an avoidable costing system on one side, and an attribution cost system on the other which gives the public information which we seek?

I apologise, Mr. Speaker, for the length of my intervention. This is a most important point, and it is not one which the Government yet understand.

Mr. Horam

That is exactly the point. At long last, light is beginning to dawn on the hon. Member for Sutton Coldfield. That is precisely the point that I have been making all along. If we are looking at accounting systems, we have to look at the basic objectives. If we are trying to achieve more information for the public and the House, we shall try to do it one way, by a system of opportioning the accounts. If we are trying to run British Railways efficiently, we shall do it another way, and British Railways have chosen another way. We have finally got that understood by the Opposition. We are making progress.

Mr. Durant

May I make a short intervention? If the object is efficiency, which I do not belittle, and if it is to the exclusion of everything, the net result will be very efficient trains with no one in them.

Mr. Horam

I think that we are pursuing logic to an absurd length in this debate. The tendency with an efficiently run system is to increase the number of people who travel by it and to keep down costs.

The Opposition have raised this point about the differences in British Railways accounting and their desire to have a more open system of government in this respect. However, they have addled the egg, as a result of which there is more confusion than light. However, I think that I have established the basic point, which is that if the objectives are different, different methods will arise. The fact is that the British Railways' system of accounting is a sensible management tool which has already improved the efficiency of British Railways. We are anxious that they should develop that and not be sidetracked by what we regard as out-of-date EEC regulations.

If that is agreed, we can finally bring this debate to an end.

Question put and agreed to.

Resolved, That this House takes note of EEC Documents R/1568/77, on uniform costing principles for railway undertakings, and R/669/77, on the necessary measures to achieve comparability between the accounting systems and annual accounts of railway undertakings, and of the Department of Transport's Explanatory Memoranda dated 18th July 1977 and 9th May 1977, and Supplementary Memorandum dated 11th November 1977.