Railways (Electrification)

HC Deb 22 June 1981 vol 7 cc21-7

The Secretary of State for Transport (Mr. Norman Fowler)

The Government have completed their examination of the report on main line electrification. For this, we have reviewed the prospects for the freight and inter-city businesses of the railway which could benefit from electrification in order to judge the strength of their case for further major investment. I had earlier met rail management and unions in the Rail Council, to hear their arguments for further investment in the railway and particularly in electrification, and to discuss the pressing need for increases in efficiency and productivity in railway operations, and I am seeing them again later today.

This examination has had to take place at a time when the current financial position of the British Railways Board gives serious cause for concern. The trading position of the board has worsened during the year, and immediate substantial economy measures are now required. The Government for their part will continue to support the efforts of the board to meet the difficulties it has to face. But the Government will expect the industry's management and unions to play a full part in bringing about the necessary improvements.

As far as the businesses are concerned, our aim is that as much freight as can economically do so should go by rail. But the future of the rail freight business depends crucially on reduction in its costs. If the efforts of the board to eliminate uneconomic capacity, and to secure new agreements on working practices, do not produce their results quickly, and costs are in consequence not substantially reduced, the rail freight business will continue to shrink. Only if these cost reductions are achieved will there be enough freight traffic on the railway to contribute significantly to the case for electrification. These are matters entirely in the hands of the industry, but the Government are bound to take account of progress on them in their further decisions on future investment.

The Government's policy is that subsidy should go only to socially necessary passenger services such as rural and commuter services. The inter-city rail business, which could benefit from electrification, should be fully commercial. So far, in spite of large investment, the inter-city business has not made progress towards earning an adequate return on the assets employed. Immediate steps must therefore be taken to match the capacity offered closer to profitable demand. Given the necessary measures, services comprising the majority of inter-city business should be able to support new investment and win traffic on a commercial basis. I am accordingly asking the British Railways Board to bring forward plans for an inter-city business that will achieve a fully commercial performance by 1985, and to start on the necessary changes immediately.

Given the necessary will in all parts of the industry, these measures can succeed. There is no alternative if there is to be a healthy future for the large commercial railway businesses, which will benefit their customers and those who work in them, and will justify a selective programme of main line electrification. The Government are not prepared to give an unconditional commitment to the electrification of an extensive network, and progress on electrification will depend on the achievement of the changes necessary to secure manpower reductions and improvements in productivity.

I am therefore inviting British Rail to prepare and submit a 10-year programme of schemes for electrification only of those potentially profitable main line routes where it is clear that the benefits could justify the investment. These should be presented together with the new commercial plans that are now required for the businesses The approval of each successive electrification project will be conditional on the profitability of the investment in question and on the achievement of necessary improvements in productivity.

Mr. Albert Booth (Barrow-in-Furness)

Will the Secretary of State tell the House why he has ignored the three-year joint study by his Department and by British Rail of this major issue of rail electrification? Does he not accept that that report has identified a whole series of important issues which require Government decision. before electrification can take place and that, therefore, a. further report and study of the issue by British Rail cannot advance without a Government decision on those issues? Has he totally rejected the view in the report that the programme of electrification, in order to be efficient, requires a commitment from the work force, the management and the electricity supply industry which can be achieved only if there is a commitment to a specific electrification programme? It cannot possibly be brought about by a series of ad hoc decisions on individual lines.

The Secretary of State, in referring to productivity, made no reference to the 8 per cent. reduction which has been achieved by British Rail in its development over the 1971–79 period. Does he recognise that there has been a rise in train miles per staff member on British Rail, which betokens a considerable improvement in productivity? Does he accept that British Rail has reduced its labour force faster than the railway systems of West Germany, Italy, Holland and France? Does he accept that from now on productivity must largely be a consequence of investment and not a condition precedent to starting investment in important areas of British Rail?

Cannot a statement be made now about investment in track and signalling requirements in the South-East commuter services, which are also crying out for Government decisions? Is the prospect before us one of a few lines of excellence, while the rest of the British Rail network deteriorates to the point of collapse?

The Secretary of State's statement this afternoon will be regarded by the majority of people who are concerned with the issue as a blow to British Rail, a blow to the supply industry which was looking forward to some work arising from an electrification programme, and a blow to the regions which would have benefited had we had a decision to go ahead with an electrification programme.

Mr. Fowler

I must ask the right hon. Gentleman to think again about his reaction to what I have just said. I do not believe that that would be the reaction of the railway industry or of the Chairman of British Rail. It is incumbent upon the right hon. Gentleman to understand a little more of what is being proposed before he produces sweeping and inaccurate generalisations of that kind.

Let me explain what is happening. I am asking BR to submit a list of schemes which can be started within a 10-year timetable. They will be ranked in order of return, and the cost will be taken into account when settling the external financing and investment limits for a particular year. There is commitment. The potential economic merits of electrification have been accepted, but it is a good idea only if the business performance of BR is also good. The benefits do not accrue automatically.

Therefore, we are saying not just that there is a commitment from the Government, but that there must be one from the industry. It seems to me perfectly fair for the Government to do that. Frankly, I should have thought that if the right hon. Gentleman were the Secretary of State for Transport he would be doing the same in similar circumstances.

We are seeking to ensure that British Rail meets the productivity target contained in its corporate review—that is that between 1980 and 1985 there should be a reduction of 38,000 posts. I am glad to confirm what the right hon. Gentleman said about the progress that has been made, but it must be common ground among all those who know anything about the railways that greater progress still must be achieved.

Mr. Robert Adley (Christchurch and Lymington)

Is my right hon. Friend aware that I was disappointed by his statement? I imagine that Sir Peter Parker must feel a little like Ian Botham. Does my right hon. Friend accept that there has been a massive reduction in the staff of BR and that BR covers by fares a higher proportion of its operating costs than does any other railway in Europe? Surely that is a factor that he is entitled to take into account in assessing BR's investment requirements.

Will my right hon. Friend assure the House that when he is discussing this issue with his Cabinet colleagues he does not compare British Railways with BL or the British Steel Corporation but recognises that the railways are a vital part of the nation's infrastructure and invests accordingly? He should not feel that if he does not do it someone else will. If the Government do not assist BR with its investment, no one else will do it for them.

Mr. Fowler

We are giving the promise of a running programme provided that sensible conditions are met. That seems to me to be a sensible step for the Government to take. Of course, I accept that there have been productivity improvements within BR. However, my hon. Friend, whose knowledge of the railways I respect, will know that there are areas within BR where further urgent improvements must be made, in particular on the freight side. Those improvements should be made, and there should be a matching commitment from the industry to that being made by the Government.

Mr. Stephen Ross (Isle of Wight)

I share the view that this is a desperately disappointing statement. It can lead only to further unnecessary unemployment in firms that are waiting for work from BR and to the break-up of the expert teams who are currently electrifying the line to Bedford. It will also lead ultimately to higher costs if electrification is not to be undertaken on a large scale, as BR has pointed out to us in the papers it has submitted. And all that says nothing about the saving of energy. The East Coast main line is well patronised and proposals are fully advanced for its electrification. It is possible to give the go-ahead there without further prevarication. Why has it not been given today?

Mr. Fowler

When the hon. Gentleman has had time to consider the statement—I realise that he has only just seen it—and has had time to discuss it with the railway industry, I believe that he will not adhere to the conclusion he has just expressed. We are committing ourselves to a 10-year running programme, but we require the industry to take sensible measures to make itself more efficient and more effective. That would be for the benefit of the long-term future of the railway industry, which is something in which I passionately believe.

Mr. Peter Emery (Honiton)

I congratulate my right hon. Friend because he has made a businesslike and sensible statement about the way in which taxpayers' money should be spent. He is looking carefully at the amount of investment that should be made in the railways and is setting it against performance. That is something that every Minister should undertake, and my hon. Friend should be congratulated on so doing.

Mr. Fowler

I am grateful to my hon. Friend. It is worth reminding the House that BR's current external finance limit is £920 million. That shows the Government's commitment to the railway industry. It seems fair that the Government should tell the industry: "There are improvements that we all know can be made; let us make them together."

Mr. Peter Snape (West Bromwich, East)

Is the right hon. Gentleman aware that the difference between himself and Dr. Beeching is that at least the good doctor was honest about his intentions for the railways? Is he aware that his statement will be demoralising and disruptive to the railway system and will lead to its further decay? Does he not feel that the much-heralded upturn in the economy might have a good effect on railway productivity? Will he consider the effect of his statement on the chairman and staff of BR in terms of a collapse of morale?

Mr. Fowler

I do not accept the hon. Gentleman's statement. I know of his connection with the railway industry. I do not believe, for example, that the chairman of BR shares the view advanced by the hon. Gentleman. We are attempting only to achieve within BR productivity improvements that he and I know are possible. Provided that that is done, this imaginative plan can go ahead.

Several Hon. Members

rose—

Mr. Speaker

Order. I propose to allow questions to run until 4 o'clock. I hope that they will be brief because then we shall have far more questions asked.

Mr. Roger Moate (Faversham)

Is my right hon. Friend aware that many of us accept his description that this is an imaginative plan, particularly since it links investment with much-needed higher productivity? Will my right hon. Friend, however, dispel the notion that seems to have gained ground that electrification of the railways is some sort of job creation scheme? How many jobs would be generated even if the most expensive option were to be adopted?

Mr. Fowler

In net terms, about 2,000 jobs would be available, but over the 10-year period 80 per cent. of the work will be done by the private sector. Not all the improvements in productivity require extra investment. We all know that in the freight business changes in working practices can and should be achieved now and would be a substantial step forward.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

Is the Secretary of State aware that his statement, although it has been the subject of congratulation, will be viewed with complete dismay not only in the railway industry but in those sectors that were looking to the electrification programme to provide help for its industries, too? He said that more freight should go on the railways. He is asking the railway people for a commitment, but he is neglecting to give a commitment himself. Is he aware that investment begets productivity? It is not the other way round. Has he read the conclusion contained in the report? It might be as well if he were to read it again—

Mr. Speaker

Order. The hon. Gentleman will remember that his hon. Friends also want to catch my eye. We are moving on to the next business at 4 o'clock.

Mr. Cowans

May I direct the Minister's attention to the call for a rolling programme instead of using the delaying tactic of asking for a subsequent report, when he already has a full report in front of him?

Mr. Fowler

No one is asking for a subsequent report. We are asking British Rail to submit a list of schemes that can be started within 10 years. We are asking for a programme of action, not a report. I can only conclude that the hon. Gentleman has not understood what is being set out. I also tell him that, although he has the right to speak for himself, he does not have the right to speak for the whole railway industry. I expect the chairman of British Rail to welcome the proposal, as it gives the railways a good and fighting chance. The chairman recognises, as I hope the House recognises, that we need the working changes in British Rail to get the necessary investment.

Mr. Michael McNair-Wilson (Newbury)

May I welcome the breath of realism that my right hon. Friend has brought to British Rail's problems? Is it not clear from what he has said that financial restructuring of British Rail may have to take place in the near future? Is it not also clear, as British Rail knows only too well, that it is still grossly overmanned? As a result of my right hon. Friend's decision, how soon will he ask British Rail to come forward with the schemes? As British Rail may soon have to consider re-equipping would it not be a tragedy if it spent money on diesel locomotives when it might be turning towards electrification?

Mr. Fowler

The speed of the scheme and the next step depend essentially on the speed with which British Rail produces its plans and achieves the changes that we have set out. The ball is very much in British Rail's court, as has been explained to the chairman. Clearly we expect the schemes to be produced and the work on them to be done very quickly.

Mr. Alexander W. Lyon (York)

Although no doubt Sir Peter Parker will be relieved that he has some funds for electrification, is not the announcement an abuse of the work done on the railways over the past few years, particularly under his chairmanship, which has produced marked improvement in productivity, and which showed that, had there not been a recession in the past two years, British Rail would have made a considerable profit in the current year? What has caused the fall-back is the ineffectiveness not of Sir Peter Parker's regime but of the Government.

Mr. Fowler

I remind the hon. Gentleman that the goal that we are setting British Rail is the one already set by the chairman in his corporate plan—that 38,000 posts should go between 1980 and 1985. A few days ago the chairman said that over the next two years he expects a further 14,000 posts to go. I pay tribute to past efforts to improve productivity, but they have not negated the need for further improvements. The chairman shares that view.

Mr. Raymond Whitney (Wycombe)

I also congratulate my right hon. Friend on the entirely justified caution with which he has approached the problem. As he continues to tackle the difficult task and make further investment decisions, will he remember that over the past decade £5,000 million of taxpayers' money at today's prices has been given to British Rail in grants, quite apart from other funds which have been written off?

Mr. Fowler

British Rail is being offered a fair deal. Its trading position has worsened considerably this year.

Mr. Cowans

Through lack of investment.

Mr. Fowler

It has nothing to do with investment. Passenger revenue is £52 million down on the forecast and freight revenue £27 million down. An overshoot of the external finance limit is likely unless action is taken. However, against that background, and in spite of that, the Government are going ahead with the commitment. Opposition Members should understand the position.

Mr. Leslie Spriggs (St. Helens)

Is the right hon. Gentleman aware that the two most important considerations should be a really efficient railway system and jobs in the peripheral industries that are waiting for work from British Rail? Will he take those two important factors into account and get on with the job of investing in a first-class transport system?

Mr. Fowler

That is entirely what the plan is concerned with. It is concerned to make fully commercial businesses out of the freight and inter-city businesses. Let us consider the working practices in freight. Freight drivers average about 30 miles a day, and we do not need investment to change it.

Mr. Nigel Forman (Carshalton)

Although I welcome the productivity pre-condition in the announcement, how many miles of track will be electrified if the 10-year programme goes ahead and at what extra cost to public funds?

Mr. Fowler

That will depend on the scheme. The cost will be taken into account when setting the external finance and investment limits each year.

Mr. Les Huckfield (Nuneaton)

Is the Secretary of State aware that he has said nothing specific or positive to encourage railway workers or users? Does he intend to make the electrification schemes entirely self-financing? What effect will they have on external finance limits? What is his estimate of how much electrification it will mean in practice?

Mr. Fowler

The estimates of the extent of the electrification must wait until British Rail has submitted the list of schemes. We are asking British Rail to submit a list of schemes that can be started within 10 years. That is the sort of commitment that we are talking about. The cost will be taken into account when setting the external finance and investment limits for the year. Obviously it depends on the success of British Rail's commercial businesses, but the commitment is there and it is an important step forward for the commercial businesses of British Rail.

Mr. John Bruce-Gardyne (Knutsford)

May I join in the congratulations given to my right hon. Friend on insisting that evidence of achievement and productivity must precede investment? Has not British Rail given 11 miles a day as being the average performance of the average freight train crew? Against that background, how on earth are we to obtain a commercial return from electrification?

Mr. Fowler

I believe that the correct figure is the one that I gave—30 miles a day for the average freight train driver. However, one does not need to know a great deal about railways or performance in other countries to realise that that is not satisfactory. Not only the Government want to see such matters improve; the chairman and the board of British Rail do, too. We want a commitment from the industry to match the commitment that we are giving over the 10 years for electrification.

Mr. Michael English (Nottingham, West)

Why should the inter-city services subsidise the commuter services? Why should Nottingham and other cities pay for services in areas in the relatively prosperous South-East such as London?

Mr. Fowler

That is a good question, but it does not remotely apply. At present the inter-city and freight services are not meeting their full financial costs.

Mr. R. A. McCrindle (Brentwood and Ongar)

Why does all the money required for an electrification programme have to come from the Government? Just as British Rail has joined with commercial property interests to develop its valuable station sites, has any consideration been given to the possibility, especially in view of the spin-off into private enterprise, of some kind of association between British Rail and private industry to push the programme along?

Mr. Fowler

Some work has been done by merchant bankers advising British Rail, but no proposals have been put to me. The rail network naturally presents difficulties, but clearly I should be prepared to consider genuine schemes of private investment.

Mr. Allen McKay (Penistone)

Does the Minister realise that the report, however he excuses it from the Dispatch Box, lacks imagination? Does he realise that people outside the House and many within the House regard electrification of the railways as the biggest single factor in pulling the economy round in relation to coal and steel as well as to the railways themselves? Does he realise that his statement today will be viewed in the light of his attitude towards the closure of the Woodhead line and British Rail's report on that? In view of his 10-year commitment and of that report, will he now abandon plans for that closure for the next 10 years until the electrification plan is completed?

Mr. Fowler

The hon. Gentleman has succeeded, with ingenuity, in getting into questions on this scheme a reference to the Woodhead line. I shall not do as he suggests, because the Woodhead line highlights the difficulties faced by the railways. In that instance, British Rail is trying to make changes in the business which make good financial sense from the business's point of view. Only if the board is allowed and able to do that can the industry look forward to the kind of future that we want for it.