Transport (Finance) Bill

HC Deb 24 November 1981 vol 13 cc763-839

Order for Second Reading read

4.8 pm

The Secretary of State for Transport (Mr. David Howell)

I beg to move, That the Bill be now read a Second time.

The Bill deals with borrowing limits and other financial provisions for some of the transport industries. It is a short Bill, but it is none the less important, because it gives Parliament an opportunity to consider the finances of these industries, which play a major part in serving the needs of industry and the community.

Its provisions are in large part technical in nature. Clause 1 increases the British Railways Board's borrowing limit. The present limits which the clause will amend were set in 1974. The figure then was £600 million, and that was increased by order in 1979 to £900 million. The Bill increases the limit by £200 million to £1,100 million and provides for a further extension of £200 million by order.

Clause 2 is designed to enable the Government to continue to compensate the British Railways Board for the costs that it incurs in fulfilling the public service obligation imposed upon it by a direction under powers in the Railways Act 1974. Parliament set a limit on the exercise of those power; by placing a ceiling on the amount of compensation that could be paid. This limit was subsequently increased to £3,000 million in the Transport Act 1978. It applies to the cumulative level of grant paid from 1 January 1979. The Bill increases the limit to £6,000 million and provides for a further increase to £10,000 million by order. I shall say a little more about finance for the railways and other aspects in a moment.

Clause 3 gives the Treasury powers to guarantee the British Railways Board's liabilities if it becomes a member of EUROFIMA—the European Company for the Financing of Railroad Rolling Stock. EUROFIMA is a consortium of railway companies formed to finance the purchase of rolling stock. It also promotes collaboration on design, development and standards of stock. It is owned by 16 European railway administrations. British Railways are the only major company which is not a member.

A treasury guarantee of BR's liabilities would be a condition of membership. Because of these guarantees EUROFIMA is able to borrow on international money markets at keen rates of interest. I should emphasise however, that the Bill only provides an enabling power. Government approval would be required for the board to join and we would want to be assured that there was sufficient national advantage to make it worth while.

Clause 4 increases the National Bus Company's borrowing limit. This was fixed at £130 million in 1968 and subsequently raised to £200 million in 1975. The proposed increase to £250 million does not, of course, in any way keep pace with the rate of inflation since 1975 and reflects the view of the company that its level of borrowing is likely to diminish in the coming years.

Earlier this year my predecessor set the company a tough financial target and that will remain the real determinant of the company's financial arrangements. That target is for the company to achieve by 1985 a current cost operating profit that is, before interests of £18.5 million at 1980 prices.

Clause 5 increases the limit on financial assistance to the Port of London Authority and the Mersey Docks and Harbour Company. I shall be returning to the clause in a moment.

First, however, I should like to say something about British Railways. The increase in their borrowing limit does not reflect any change in policy. Parliament sets a limit on the total amount of borrowing outstanding at any one time and inflation inevitably means that the limit is bound to be reached. But we should not take inflation for granted. When a borrowing limit is reached we should not just increase it in line with inflation, but look carefully at what we are paying for and what we can afford In fact, the overall borrowing of the board and its subsidiaries has, if anything, been falling in real terms. The increase in the money value of its borrowing reflects the increase in the money value of its investments. Nevertheless, the need to increase the borrowing limit from time to time gives Parliament the opportunity to review the position. We have only recently had a useful debate on railway investment.

However, the House will now expect me to report on developments. The trading position has, if anything, worsened beyond what was foreseen in the summer. The losses of passenger revenue are now such that the Government have concluded that they are beyond the measures which the board could take to recoup them within the year. I accordingly announced earlier today that the ceiling on the passenger grant for 1981 is being raised to a level £110 million above the level of the claim accepted at the start of the year.

That is a very large increase. It is a measure of the problems that the board has to face. So the position now is not merely that the Government have fully maintained the level of grant support to the passenger business. This year, as an exceptional measure, we have found it necessary to make a substantial increase, which carries the level of support well beyond anything previously paid.

Let there be no criticism that the Government are in any sense failing in their commitments to the railways. The Government will keep the position and the prospects under urgent review with the board. At the same time, the figures can leave no doubt in anybody's mind that the need for the management and unions to press ahead with changes to improve the financial position is very urgent indeed.

Mr. Donald Anderson (Swansea, East)

Does the Secretary of State not concede that that is no more than a short-term response to an immediate problem and is irrelevant to long-term investment matters—welcome though it is?

Mr. Howell

I am grateful to the hon. Member for his afterthought. Dealing with the short term, there are obviously a number of long-term implications, which I shall deal with during the debate, and about which my hon. and learned Friend the Under-Secretary will have something to say.

Returning to the short term, I pay tribute to what has been done this year in reducing manning levels on the railways. The situation demands the strictest economies in administration, the promptest adjustment of levels of services, the most rigorous steps to control unit costs, and the earliest agreements on necessary changes in working practices. That is the immediate situation.

However, the great difficulties of this year must not prevent us from trying to look ahead. I do not think that the picture is as black as many claim and suggest in the House and, sometimes, outside.

In June my predecessor called on the board to produce a new plan for the inter-city business to achieve a fully commercial performance by 1985, and a start on the necessary changes immediately. I hope that the board will soon be able to put its plans to me.

I applaud the substantial progress during this year in the reduction of posts and manpower numbers on the railway—on this front the board is well ahead with its plans. The traffic losses are bound to require a continuation of these changes, and the completion of the detailed agreements to which there was commitment in this year's pay agreement is certainly urgent, but I pay full and unreserved tribute to what has already been achieved. The unions for their part must recognise the exceptional help that the Government have been prepared to give as evidenced by today's announcement.

I should like to say a word about the non-commercial railway. Here, too, we must have clear objectives. I am firmly resolved that by the beginning of 1983 we shall have a clearly separated grant for the London and South-East commuter services, so that all can see clearly the support for their services, and commuters can see clearly what they are paying for in their fares. It is a pity that we cannot do this more quickly, but it depends upon the board's ability to analyse its costs.

Meanwhile, I have taken the important step of opening for public discussion the objectives to which the board should work on those services. I have said that the board should not plan on ever-increasing real fares for commuters—fares above the rate of inflation. I think that all the evidence shows that the commuter does not want to go on paying higher fares for promises of a better service, and British Rail's own market research confirms that.

We must look for steady improvements in the commuters' top priorities, of reliability, punctuality and cleanliness. When I visited the Southern Region last Friday the general manager was able to report higher levels of reliability and punctuality than have been achieved for 10 years and cleaner trains as well. I inspected some refurbished coaches and saw that considerable improvement can be achieved at modest expense. At the other end of the scale, I saw the London Bridge signalling box—which itself improved punctuality by 10 per cent. when it came into operation—and this will be followed by the major changes that are going on in the large resignalling schemes at Victoria, on the Brighton line, and on the St Pancras line. No one can wave a wand—that is not being suggested—and produce dramatic changes overnight.

The reality is that there is certainly scope for improvement at current levels of investment. There is a way —as we can see from what is going on now—for the capable and dedicated management of the railway to produce steady improvement in what matters to the customer without making ever-rising demands on the traveller or the taxpayer.

Mr. Terence Higgins (Worthing)

My right hon. Friend referred to cleanliness. I fully acknowledge the improvements made in the other two areas to which he referred, but if he would care to visit the Coastway service from Brighton along the South Coast he would find that the standard of cleanliness leaves much to be desired. Ancient rolling stock is used and the standard of cleanliness in terms of day-to-day maintenance is lamentably low.

Mr. Howell

I should like to make as many visits as possible throughout the railway system. I am the first to concede that there is constantly room for improvement, but I thought it right to report that there has been some improvement. However, my right hon. Friend is right to remind me, the House and those outside that higher standards must constantly be sought and that there is room for them.

I hope that in replying to my consultation document all those concerned—and many are intimately concerned—will address themselves realistically to what can be done with the large resources available and to the improvements that are within reach and are, in part, already being gained. It is important to refer to the positive side of the picture, because, inevitably, one hears only the negative side and the weaknesses and difficulties. The considerable gains that are being scored, some of which I have reported to the House, are overlooked.

Clause 5 increases by £200 million the limit on Government financial assistance to the Port of London Authority and the Mersey Docks and Harbour Company. The House will recall that the Ports (Financial Assistance) Act 1981 provided for financial assistance not exceeding £160 million to be made available to the two ports. That figure included £70 million provided for in the Port of London (Financial Assistance) Act 1980 and a £3 million overdraft guarantee to the Mersey Docks and Harbour Company which my predecessor agreed to in December 1980.

To set the scene it may be helpful if I remind the House why the Government decided to provide financial assistance for the PLA and the MDHC to help them deal with their surplus manpower problems, and to enable them to continue operating while the manpower rundown and other measures were in progress. As my predecessor explained on Second Reading of the Ports (Financial Assistance) Act 1981 earlier this year, the position that the Government faced then was that these two major ports of national importance had suffered dramatic losses of traffic and were substantially overmanned.

Without assistance from the Government there was no way in which they could have carried on trading, yet it was unthinkable that the ports of London and Liverpool should simply have been left to go to the wall. The National Association of Port Employers recognised the special nature of the problems in London and Liverpool and, while it expressed reservations about limiting Government assistance to these two ports, hoped that the manpower reductions needed in them would be achieved. It was recognised that it would have helped no one if the Government had declined to provide the necessary assistance for London and Liverpool and the two ports had then closed.

I believe that the ports industry generally accepts that it was in the national interest, and in the interests of all other ports, to remove the threat of closure that was hanging over our two biggest ports, to deal swiftly and effectively with the immediate manpower surpluses, and to work as rapidly as possible towards the restoration of their longer-term financial health.

Mr. Sydney Bidwell (Ealing, Southall)

In relation to the introduction of the new dock labour scheme, does the Secretary of State agree that no fault attaches to the trade unions, which have been anxious to enter into new agreements for a long time?

Mr. Howell

The new dock labour scheme is a matter for my right hon. Friend the Secretary of State for Employment. We are dealing with the fact of surplus manpower in the two ports. That cannot be escaped.

Our overriding aim throughout has been to bring to an end as quickly as possible the dependence of the two ports on public funds to keep them afloat. That remains my aim and, as I shall explain, I have given both authorities clear financial objectives to work towards in the coming year.

Hon. Members may ask again why we are not providing similar assistance to other ports. The answer is that there was an immediate crisis of unique size and scale in these two ports and that in no other port was it the case that the only way of tackling those problems was by means of Government funding. That is still the case. It may seem unfair to other ports that have been tackling their problems without Government help, but I do not think that it would be fair to the taxpayer for the Government to propose an extension of the arrangements. It would certainly not be fair to underpin or give support to schemes for nationalising all ports, or whatever is the official policy of the Opposition.

The Ports (Financial Assistance) Act 1981 was recognised by the House to be an emergency and interim measure—and was criticised on those grounds. It provided sufficient money only to pay for the immediate manpower reductions and to enable the two ports to continue operating, pending the detailed plans for returning to profitability which they were preparing. We received the corporate plans in August. I have now considered them and the comments from the two firms of accountants advising me—Price Waterhouse in the case of the PLA and Peat, Marwick, Mitchell in the case of MDHC.

The corporate plans are, not surprisingly complex documents, which contain a much detailed analysis of the commercial prospects for the two port authorities. They set out the measures that the PLA and MDHC see as necessary for a return to viability. Their main message is that further rationalisation and reductions in manpower are needed over the next few years. The Government therefore accept that further financial assistance is now justified only against that background of enabling both ports to put their affairs in order and cease burdening the taxpayer.

Much has already been achieved in both ports. About half of the assistance provided so far has been designed to help with the rundown of surplus manpower. Earlier this year the Government helped to finance a special supplementary severance scheme in both ports. The scheme was a considerable success, with more than 1,000 applications in each port. In addition, the PLA has successfully carried through a major rationalisation by closing the Royal group of docks, and the MDHC has negotiated significant improvements in its working practices. Such major changes would not be easy to carry through at the best of times. In the present economic climate they reflect great credit on management and work forces in both ports.

Although much has already been achieved, both ports continue to need substantial help for severances and capital investment over the next few years, and to meet operating losses in 1982, but there must be a clear end in sight to the need for operating subsidies. I have therefore told the chairmen of both port authorities that it is my intention that grants for meeting deficits should not be available after the end of 1982. I have asked them to submit to me very quickly detailed action plans for meeting the Government's financial remit and breaking even in 1983. Only when we receive those plans can we specify the exact measures that will be needed next year in each port, or how the package of financial support in each port will be made up.

The figure of £200 million in clause 5 is my best estimate of the maximum amount of money that may be needed by the two port authorities over the next three to four years to enable them to become viable once more. I must emphasise, however, that there is no commitment to make that sum available. As with the earlier legislation, no part of the money is earmarked for either port, or any particular purpose.

It is important that the two port authorities should be subject to the commercial discipline of loan finance in their consideration of capital spending. I have therefore assumed that in future essential investments will be financed by loans, instead of grants as at present. The ports' financial circumstances, however, preclude the provision of loans under the Harbours Act from the national loans fund. I therefore intend making loans available under the powers in the Bill from voted funds, and I have made an allowance for this in arriving at the figure of £200 million. I must make it clear that there is a risk that these loans might not be repaid if the ports' finances do not improve.

Mr. Roger Moate (Faversham)

My right hon. Friend will appreciate that we shall need to study his last statement to understand clearly what he means. Will he explain exactly what he is saying about major capital expenditure by the Port of London Authority, if I may single out that authority, during the next few years? Is he saying that such capital expenditure will come out of the £200 million provision in the Bill?

Mr. Howell

That is correct. It will come by way of loan. The Port of London Authority cannot raise money under the harbours legislation, because its financial position precludes it from doing so. It will come out of the total sum of £200 million.

Mr. Eric Ogden (Liverpool, West Derby)

The Secretary of State will no doubt confirm that under the Ports (Financial Assistance) Act 1981 the money borrowed by the PLA or the Mersey Docks and Harbour Company was to be used solely and exclusively for redundancy and severance payments. That was the understanding at the time, and we asked many questions about it. The Secretary of State now says that large sums of money are needed for redundancy payments and for investment. Is that different from the Act of 1981, in that it can and will be used for investment, and not just for redundancy payments?

Mr. Howell

I do not want to mislead the hon. Member but I do not believe that there is a great difference. The amount available under the March legislation was to cover severance costs, but it was also to cover any operating losses and essential investment requirements. I have already confirmed, in answer to the intervention of my hon. Friend the Member for Faversham (Mr. Moate), that the sum here is my estimate of the maximum amount that will be required to meet the needs and objectives that I have put to the chairmen of the two authorities, both in respect of their essential investment requirements and severances in relation to manpower reductions, and to meet the condition and objective that I have set, which is that there should be no deficits—in other words, a breaking even—by the end of 1982. In my estimate, £200 million is the maximum figure within which the pattern of action plans for the two authorities must be achieved.

Both chairmen had requested—as the House will know—a write-off of their capital debt to the Government. I have looked at these requests sympathetically, but I have told them that the Government cannot agree to this at this stage while there is no clear view of their future profitability. I am sure that the first task for both ports is to concentrate on those measures necessary to achieve a profitable port business. I have also promised to consider providing help with re-financing some short-term debt, though I cannot take a view on this until I see their action plans.

I know that I am asking the House to agree to make available very large sums of public money for two ports. Funds will be provided only to the extent that I am satisfied that they will assist the ports' return to profitability in line with agreed action plans. My Department will continue to carry out regular monitoring of the ports' progress and of their financial performance.

The Government remain committed to the policy that all our ports should compete freely with one another on the basis of price and service. Detailed control and central direction are not the ways to deal with the changes demanded by technological innovation and movements in the pattern of trade. Nor should the Government, in our view, seek to provide assistance where ports themselves are in a better position to find solutions to their problems. But we must recognise that London and Liverpool face particular problems on a scale not matched by any of our other ports.

Both are ports of national importance. Both are having to adjust quickly to a fast-changing environment, as are others, but neither can meet the costs of change from its own resources. The management and work force of the two ports have already achieved much in a short space of time. I believe that both ports can return to profitability given the continued commitment of management and work forces. Much now depends on the determination of the PLA and the MDHC to meet the objectives set by the Government. I think that it is in the nation's interest that they achieve these objectives, that any support from public funds should be designed to assist them to that end, and that where that support is for deficits it should have a clear termination date.

I have given in some detail the Government's purposes and thinking behind some of the key clauses in the Bill. I commend the Bill for Second Reading.

4.36 pm

Mr. Albert Booth (Barrow-in-Furness)

In my view and in that of my right hon. and hon. Friends, the Government are placing the publicly owned transport industries in a straitjacket that is so tight that they will be forced to make savage reductions in services, particularly in their less profitable services, almost irrespective of the social hardship that they may cause and almost irrespective of British industry's need to have an efficient and modern transport system. To that extent, our welcome to the Bill in limited. We welcome it, mainly because it provides an opportunity to debate the Government's policy—or the Government's lack of policy; certainly, the Government's changing position—on transport finance, as they stagger from one crisis to another in various sections of the transport industry.

As the Secretary of State fairly said, the Bill puts financial limits on Government borrowing, to which certain public transport industries will have access, and on certain grants which might be made to major elements of the public transport industry.

Clauses 1 and 2, which deal with British Rail's borrowing and grants, have to be judged against a background of the massive decline that has taken place in British Rail, amounting to almost total collapse of certain important sectors. In that sense, British Rail can be said to be the foremost victim of the Tory Government's financial doctrine, which requires it to sell its assets, particularly any of its profitable activities, leaving it with the loss-making activities. I want to concentrate on the extent to which those borrowing limits will impinge on British Rail's investment programme.

The Government control British Rail's investments in at least three different ways. First, they set its investment ceilings. Secondly, they require the British Railways Board to submit to the Secretary of State any significant investment proposal for individual approval. Thirdly, the Government include British Rail's borrowing within the external financing limits that are set for it. That immediately poses the question of the extent to which the Secretary of State proposes to raise British Rail's external financing limits in the face of the increase in the public service obligation which he announced this afternoon. The PSO is part of the external financing limit, and if it is raised without raising the EFL, it merely means that British Rail's borrowing powers will have been chopped even further, at a time when they are disastrously inadequate to meet its investment requirements.

The inadequacy of the external financing limits is one of the greatest problems facing British Rail in its attempt to plan investment. Goodness knows, it faces enough problems in that area. In 1980—but using 1981 prices—British Rail's investment ceiling was £392 million. However, British Rail was able to spend only £371 million in investment. Of the external financing limit of £790 million, £699 million was taken up in public service obligation payments, section 20 grants and level crossing grants, and that left British Rail with only £121 million of borrowing to go towards its total investment expenditure. With the increase in the public service obligation that has been announced today, British Rail will have hardly any borrowing for investment left, unless there is a major adjustment of the external financing limit.

In 1981, the investment ceiling was set at £398 million. However, British Rail was able to spend only £308 million. In other words, it fell £90 million short of its investment ceiling because of the limits placed on British Rail's expenditure by the external financing limit. Even with those strict limits on British Rail's investment expenditure, the Government are still reducing dramatically British Rail's investment ceiling. At 1981 prices, British Rail's total investment ceiling in 1977, 1978 and 1979 ranged between £484 million and £487 million. In 1981, total investment spending has fallen to £400 million. That includes the continuous welded rail programme, which falls outside rail investment.

Two years ago, investment spending was 19 per cent. higher than it is today, although British Rail now needs to engage in a round of major investment, particularly in the electrification programme. Between 1979 and 1981, the ceiling was lowered from £484 million to £398 million. That is a cut of £86 million in British Rail's investment ceiling and it has been carried out by a Government who, in their 1979 election manifesto, said: We want to see those industries that remain nationalised running more successfully and we will therefore interfere less with their management and set them a clearer financial discipline in which to work.

Mr. David Howell

I should not like the figures that the right hon. Gentleman has given for investment ceilings to stand uncorrected on the record. If I heard the right hon. Gentleman correctly, the figures that he gave were wrong. The investment ceiling stands at £325 million, which is the same level, in real terms, as that set by the Labour Govenment. Therefore, I do not understand how the right hon. Gentleman has reached his calculations.

Mr. Booth

I made it clear that I was citing prices that had been adjusted to the 1981 level. At actual prices, the board's investment ceiling for 1981—one of the controls applied by the Government—is £398 million. That includes expenditure on rail and expenditure on British Rail's subsidiary activities. Therefore, I was using prices that had been adjusted to the 1981 level. Between 1979 and 1981 the ceiling has been lowered in the way that I have described. I have taken account of the continuous welded rail programme, which does not come within the investment limits, but which must be included when making a fair comparison of total rail spending. If I had excluded that, the drop would have been even more dramatic than it is. I assure the Secretary of State that I have checked the figures carefully with the board and I shall be happy to make my figures available to him. Total spending has dropped dramatically.

Mr. Stanley Cohen (Leeds, South-East)

I hope that my right hon. Friend will press the Government to be clearer than they were in the statement about investment in electrification. Little has been said about that, although the issue is vital to the railway and transport industry and to consumers. The Government have been vague and they should clarify the situation.

Mr. Booth

I take that point and I shall turn to it shortly. I should make it clear that our complaint is not only that major impediments have been placed in the way of electrification investment, but that overall investment limits have been effectively cut, by making the external financing limit so tight that even the limited investment ceilings set for British rail cannot be reached. The amount of borrowing left within the ceiling prevents British Rail from reaching that investment ceiling. British Rail cannot finance the whole of its investment programme for the 1980s from money that it generates from its activities.

British Rail's estimate, which has been fairly set out in the document on rail policy that has been submitted to the Secretary of State, suggests that the ratio of money generated to money borrowed to finance the rail programme, is about 2:1. In other words, one third is borrowed money and two thirds is internally generated money. I hope that it will not be argued that British Rail does not need to have access to borrowing in order to carry through its major investment programme. That programme is necessary not to improve the railways, but to save them. Many of the items that are classed as investment are replacements for essential elements in the system.

I shall quote from a speech that the Secretary of State made in a recent debate on British Rail investment. He said: We need a highly efficient railway as an integral part of our national transport network. A little later—although I hope that he will agree that these words are not out of context—he said: it depends on mobilising new investment funds to keep modernising the system."—[Official Report, 26 October 1981; Vol. 10, c. 614.] I entirely agree with the Secretary of State and we are as one on that point. We need a highly efficient railway system as an integral part of our transport network. We shall not achieve that unless British Rail can mobilise the necessary investment.

However, the Secretary of State and his predecessor have torpedoed a major part of the investment programme. I refer to electrification. They have done so by rejecting the joint study made by the Department and British Rail on the major electrification options for the main line network. They have refused to approve any of the five options and have told British Rail to go away and start again. The Government have said that they will set different criteria in order to examine electrification on a line-by-line basis. Therefore, the Government have rejected the major electrification options. Two years' detailed work has been wasted.

In addition, the Secretary of State and his predecessor have not reached a decision on the East Anglian electrification project. That project was submitted to the previous Secretary of State in November 1980. It has been tested and questioned in every way by the Department of Transport. No more questions can be asked. However, a decision is still awaited from the Secretary of State. That project stands on its own and was to be considered outwith the main line electrification programme.

There is no excuse for the Secretary of State's failure to make a decision. It would have been wrong, at any time, to hold up such a scheme. However, when that decision may determine whether we can sustain an expert team capable of carrying on our rail electrification programme, the refusal to decide is a major blow to an industry on which the future development of electrification depends. It also reflects the Secretary of State's failure to respond to the desperate proposition put to him by the chairman of British Rail. He approved the modest extension of electrification from Hitchin to Huntingdon. At least that was part of an electrification project that could have held together the team of specialists that was capable of sustaining the electrification programme.

The Balfour-Beatty Power Construction company has been told by British Rail that it has no more work for it. Notices have been issued to members of the team, and the team will be wound up. It will take a year to put that construction team together again. Not only is that a loss to our railway system; it is a loss to the power construction industry. Without a home base, it is doubtful whether it will be capable of obtaining any part of the £750 million worth of international contracts for which companies will be tendering in the next few years. That is a tragic waste of the expertise that exists in British Rail to research and develop modern railway systems.

If the Government had the foresight to see the extent to which, by investing in British Rail, we could build up many other parts of our economy, certainly in related industries, by selling British Rail expertise around the world, they could make a significant contribution towards solving some of the major problems of the present recession.

The Secretary of State properly spoke about the cooperation of the unions in manpower cuts by British Rail. I agree that there has been enormous co-operation during a tremendous rundown in manpower. But the Secretary of State is not likely to receive very much more such cooperation unless there is agreement on a future investment programme. It is all give by the unions and all take by the Government in this arrangement. The Secretary of State may soon face opposition from the railway unions. If he wants more manpower cuts, he must approve an investment scheme so that the cuts can be made intelligently. The scope for further productivity depends very much on the extent to which further investment in the system will be authorised. Clearly, if there are to be major savings in manpower, there must be investment in electronic signalling, and so on. If the Secretary of State tells British Rail to make manpower savings and operate outdated collapsing stock with even less manpower, he will finally get the answer that that is not on.

I noted with interest the Secretary of State's attitude to the financing of the public service obligation part of the operation. He reminded the House that commuters in the South-East do not want to continue to pay higher fares. I say to him "Welcome aboard". For some time, we have been preaching that the use of the system is sensitive to fare policy. We might even convince him about the low fares policy that is being pursued by the GLC. The scheme in South Yorkshire also has merit.

The Secretary of State spoke of having separate accounts and I can understand why that is attractive to him. However, we must not be misled into believing that, by having separate accounting for the degree of public support for South-East commuters or other rural services, we can treat them as though they were in a different world. They are not. The main line railway network depends to a considerable degree on the feeder system of the other parts of the total railway system. If we cut off the branch lines and parts of South-East commuter land, that will impinge upon the main line business.

The Bill deals with other aspects of publicly owned transport, in particular with the National Bus Company, which is being attacked on three points of the compass. It is being hit by the recession and it is suffering from the reductions in public transport support, and from the effects of the Transport Act 1980. The Secretary of State has set it a financial target of achieving a profit of £18.5 million by 1985. That will require massive service cuts. In its submission to the Select Committee, the National Bus Company reported that it envisaged cuts of about 60 million service miles having to be made.

Mr. Anderson

There is a fourth point of the compass. There is a real danger that in their further privatisation measures the Government will insist that NBC's express and profitable routes should become private, depriving the NBC of its major revenue earners.

Mr. Booth

I should not wish to enter into an argument with my hon. Friend on how many points there are on the compass. I take an amateur interest in navigation and I admit that there are many more points than three. However, I take my hon. Friend's point that the National Bus Company will have to reorganise its services in such a way as to make a considerable reduction in its profits on express routes.

The point that the House must appreciate is that those cuts of 60 million service miles will not be made in the express services. The NBC is expanding in that area. The cuts will all be made in the rural areas or, to a limited extent, in off-peak urban services. The cuts will attack those parts of the country that can least afford, in social terms, to sustain a cutback in their transport provision.

The National Bus Company is to be required to service its entire commencing capital debt each year, which it has had to do from the outset. But the interest payments on that debt have risen in actual prices from £4.8 million in 1969 to £17.2 million in 1980. In operating terms, just to pay interest, it will have to earn £1,065 a year on every bus that it runs, as opposed to £233—at a time when the Secretary of State is realising that people do not want to pay higher fares.

I suggest that the study that he has made of South-East commuter land could be carried out on a wider basis with some advantage to the NBC. Not only will it have to find the greater interest payment, but it will have to do so with less transport supplementary grant support. That grant has been cut by 10 per cent. for 1981–82. If the Secretary of State hopes that the National Bus Company will get anywhere near the financial target that he has set, it will be necessary to raise transport supplementary grant in order to reach some agreement with those counties that have applied for so little towards revenue support services. Unless there is a major change in the transport supplementary grant revenue support regime, he will soon be faced with a financial restructuring requirement for the NBC.

The Bill refers to the Mersey Docks and Harbour Company and the Port of London Authority. The company has an outstanding debt of £63 million on which it pays interest of about £5.5 million a year. It will have to attempt to pay back interest from what by any measurement is a much contracted base of operation. Last year it had a loss of £6.25 million. It can be argued that that loss was the result of special circumstances. However, its trading position has worsened considerably since January. If there were ways of dealing with the problems that it faced last year, they are not necessarily available this year against the financial prospects that the Secretary of State holds out.

I shall refer to some of the changes that have taken place since January. The Manchester Liners' container service, which was acquired by the Tung Group, has been transferred to Felixstowe. The Johnson Scanstar container service operation has been centralised in Felixstowe. That is at the expense of both the company and the Port of London Authority. The shipping companies that form the United Kingdom-East African Conference have decided to put their general cargo into a container service which will operate from the East Coast. That will lead to a withdrawal from Merseyside.

Following the closure of the refinery at Ellesmere Port, the Burmah Oil Company has stopped importing oil into Merseyside. Tate and Lyle, having closed its sugar refinery in Liverpool, no longer imports raw sugar and no longer exports refined sugar. Last but by no means least, there is now the prospect that P & O will no longer operate the Liverpool-Belfast ferry service. These are all changes that are detrimental to Merseyside trade and they have all taken place since 1 January. A short-term subsidy of the trading loss for this year will not put the company in a position in which it is able to meet the Secretary of State's financial targets.

Unless the right hon. Gentleman reconsiders his predecessor's decision, he will continue to try to operate without a national ports policy and without a national ports council. In doing so he will fail to tackle the root problems of the ports.

The position of the Port of London Authority is, in some respects, even more grave.

Mr. Moate

Perhaps the right hon. Gentleman will explain how he would have prevented from taking place the transfers of trade by commercial operators that he has described if he had had a national ports policy?

Mr. Booth

If we had a national ports authority or a national ports council that had the power over port operations that the Secretary of State has over British Rail operations in approving or rejecting investment, a policy could be operated of allowing investment in port developments that would make sense. The investments that have taken place recently in port developments have not made sense. They have created flourishing ports in places where there have been shortages of other facilities, but they have deprived other places, including Merseyside and London, of port activities. They have created industrial and social havoc in those areas.

I know that the hon. Member for Faversham (Mr. Moate) takes a continuing and serious interest in transport matters. However, the Government's refusal to operate a mechanism that would be a proper role for a national port authority does not absolve them from having to take decisions on port finance. On the contrary, the Bill makes it clear that they still have to provide port finance. They will have to do so at a time when they are picking up the pieces and trying to deal with the damage that has been done by the free market approach to transport.

If there is an argument for financial restructuring for the Mersey Docks and Harbour Company, there is an overwhelming case for the restructuring of the Port of London Authority.

Mr. Higgins

Under the right hon. Gentleman's national scheme, what would he envisage happening to the size of the Liverpool labour force, given the change in the pattern of trade to which he has referred?

Mr. Booth

A national scheme would have had to cope with the most massive rundown in the labour force. Intelligent investment in the container system in the PLA, in Liverpool or in any other area will greatly reduce manpower requirements at the jettyside. I faced that problem as the Secretary of State for Employment. I laid before the House a new dock labour scheme. I recognise the relationship between the two problems. It is necessary to proceed by way of a national dock labour scheme as well as by making provision for port investment.

Mr. Robert Parry (Liverpool, Scotland Exchange)

Does my right hon. Friend accept that since the beginning of 1979 the labour force in the Liverpool docks has been cut by nearly half?

Mr. Booth

I accept readily that there have been substantial cuts in the Liverpool and London labour forces. There have been cuts in almost every port labour force other than at Southampton over the past 10 years. Some of the cuts have been drastic. The cuts in London have resulted in a dramatic contraction of the base of activity over the past few years. Since the Government took office we have had the closure of the India, Millwall and Royal docks. The Port of London Authority operation is now confined to Tilbury. It has gone down river to Tilbury and there is nowhere else that it can go. It has arrived at the place where it must make its last stand as an authority.

The Secretary of State says that there will be no grants to cover deficits incurred by the PLA beyond the end of 1982. He should examine his predecessor's record. He said at first that the PLA did not need further financial assistance. Later he said that the only assistance that was required was that of funding the London redundancies. He listened to objections expressed by hon. Members on both sides of the House who tried to tell him that that approach would not work. He was told that it was not realistic and that he would have soon to provide aid for Liverpool as well. In due course that had to be done, but the aid covered redundancies only.

The present Secretary of State is now saying that additional aid must be made available for London and Liverpool. Redundancy terms have spread to other ports. The Government are being pushed stage by stage from their previous stance. When will they take an overall view of the industry and recognise the dramatic changes that it has undergone? Those changes have applied to technology and trading patterns. The Government cannot continue their ad hoc policy.

I do not think that the PLA can become commercially viable by the end of 1982, especially while it is carrying the cost of servicing a debt of £110 million, much of which represents what are now dead assets. It will have to reorganise in Tilbury. It will have to face the massive problem of financing the huge amount of redundancy that has taken place. There has been a huge change in the ratio of retirement pension pay to the size of the work force. It is not possible for the authority to face those problems and at the same time to achieve viability by 1982.

The container revolution is going ahead. That has not been stopped by the recession. There is still traffic moving from general cargo to the container system. It is moving at a greater speed than most of us foresaw. It is proceeding with such thoroughness that it is now conceivable that the number of men required on the jetty in future container operations as compared with the old general cargo operations may be about 10 per cent. of historic labour forces. That is such a dramatic change that it cannot be encompassed within the normal financing arrangements which would be made for redundancies. It is a greater cutback than any of our manufacturing industries have faced, even with the great capital intensive developments in manufacturing. That problem is not peculiar to London.

Mr. James Hill (Southampton, Test)

The right hon. Gentleman has said that the Government should have a complete rethink on the port industry in general. Does he not agree that one of the greatest obstacles to harmony in the ports, particularly in my constituency, is that it is time that the Government in the person of the Secretary of State looked again at the national dock labour scheme and brought it up to date?

Mr. Booth

I agree entirely, but the hon. Gentleman is pushing at an open door. I proposed that to the House when I was a Minister and I still believe that the national dock labour scheme is outdated and will not meet modern terms. I left a power for the Secretary of State on the statute book. It is his statutory duty to lay a new scheme before the House. He has not carried out his duty. I hope that he will do so.

I should like the Secretary of State to consider my final point about the PLA. As he is the Secretary of State for Transport, I urge him to consider and at some time let the House have his views on the role of the PLA in relation to the development of the economy of the South-East of England. He is giving priority in his road programme to the completion of the M25, which will form a natural link with Tilbury. Given that and the proportion of freight to ports that is now carried by heavy lorries, the success or failure of Tilbury will be a matter of concern not only to the dockers but to all those who want to see a regeneration of the South-East region. I say that as one who represents a Northern region constituency which has had some experience of a loss of port activity. When the British Transport Docks Board terminated the commercial activities in Barrow docks, I and others in that area saw the effect on industrial development. Therefore, we are talking about the problems not only for dockers and shippers—they can go to other places—but for those who develop industries and depend upon having access to ports. They are vitally interested in that question.

We shall deal with many more detailed issues in Committee. However, we are starting from a difficult situation. What is clearly needed is a far-sighted, courageous policy to ensure that we have a modern and efficient transport system. The Government stagger from crisis to crisis with temporary stop-gap measures that are unco-ordinated, while the life is being strangled from public sector transport by monetarist policies. In Committee we shall put forward what we believe to be sound Labour policies. We shall campaign for realism in the financing of public transport.

5.14 pm

Mr. Roger Moate (Faversham)

I agreed with the right hon. Member for Barrow-in-Furness (Mr. Booth) when he described the Bill as a temporary stop-gap measure. Some of my criticisms will follow that line. However, I disagreed with almost everything else that he said, particularly his ritual genuflection in the direction of a national ports policy. Even that lacked conviction because he conceded clearly the reality of life and the improvements of trade and traffic in the ports industry.

I should have thought that the right hon. Gentleman could be a little more generous about British Rail and the Secretary of State's policies. He should have welcomed the additional support given by the Government to the passenger operations this year. An increase of £110 million in the public service obligation is a significant contribution. It will be warmly welcomed by all commuters and passengers. I asked the right hon. Gentleman to consider what would have happened if that grant had not been given. Substantial fare increases would have been needed. They have been avoided. I thank my right hon. Friend for that.

I also thank my right hon. Friend for having made it clear that the Government believe that commuter fares should not increase in real terms. We cannot avoid the inflationary increases, but I welcomed that clear statement of Government policy.

The right hon. Member for Barrow-in-Furness described Government policy as a straitjacket. That was a strange word to use. When one considers the Bill and the amount of money that it provides for the nationalised transport industries, one realises that it reflects a rather large nightshirt in which there could be an orgy rather than a straitjacket. The money involved is considerable. In addition to the £110 million, there is an extra £200 million for Merseyside and the PLA. Clause 2 provides for a sum not exceeding £10,000 million, representing the total compensation that may be paid by the Government. That is a cumulative figure but it reflects the enormous public support given to the railways.

Mr. Ogden

The hon. Member for Faversham (Mr. Moate) is usually careful to say exactly what he means and to mean exactly what he says. Will he look at the Bill again and show me one dot or comma that shows that by the Bill the Government are committed to spend one brass farthing? From beginning to end the Bill is dotted and indented with "ifs" and "and" and "may" and "perhaps". It is an enabling Bill. Not one penny of hard cash is committed to any of the enterprises in it. It mentions only measures that are to follow later at the discretion of the Government.

Mr. Moate

The hon. Gentleman may be technically right, but politically he is hopelessly and completely wrong, and he knows it. Whenever did a Bill prescribe a ceiling of expenditure which was not reached or exceeded? I wish that the hon. Gentleman were right and that the money would not be spent. However, he and my right hon. Friend the Secretary of State know that it will be spent. That is why I regret it when it is said that the £200 million is available but need not be spent. It will be spent.

I shall make a few remarks about the railways. I shall try to be brief as I know that many hon. Members wish to speak. We have recently had a debate on rail investment. I regret certain recent developments. I share to a certain extent the views of the right hon. Gentleman on rail electrification. It is absolutely right for the Government to maintain strict control over the programme and to lay down strict conditions. However I feel that my right hon. Friend and the Government are losing control if the breakup of the electrification team is allowed to proceed.

That investment programme must ultimately reflect profitability and show a proper return. However, is it reasonable, on the one hand, to say that passenger revenue is so bad that we must put in an extra £110 million as an emergency measure and, on the other, to say that British Rail must produce evidence of profitability to justify electrification? I do not believe that my right hon. Friend can honestly expect to have any modernisation programme on the railways if we apply such tight conditions in the present economic circumstances. If we are to proceed with better productivity deals and if we receive a response from the railway unions and the management, we have to show willing and take a positive initiative to ensure that the electrification programme proceeds.

Mr. David Howell

I have listened very carefully to my hon. Friend and I agree with a great deal of what he says about the programme. The Government have asked that there should be plans for profitability in the main part of the railway business by 1985. The Government have committed themselves in principle to the 10-year rolling programme for electrification. The Government have asked for the electrification schemes to be brought forward. I am awaiting those schemes, but they have not yet been put before us.

Mr. Moate

My right hon. Friend will know of the newspaper report which stated: 'Every time we answer a question, we get 10 more back,' claimed a senior BR executive this weekend. I understand why my right hon. Friend insists upon a viable long-term programme, but he will not have any type of programme if the teams necessary to carry it out are broken up in the meantime. I have great faith in Sir Peter Parker's business common sense in this matter. It surely makes sense to allow British Rail to proceed with a modest programme in order to keep the teams in being. I emphasise that point.

During the last debate on railway investment I suggested that the Government should pay greater heed to the idea of allowing private finance to be introduced in the form of leasing finance. I suggested that the new locomotive programme should be financed by leasing arrangements, as was done during the early 1970s. By that means British Rail could expand its investment programme considerably without necessarily affecting the public sector borrowing requirement. I believe that the same can be done on railway electrification.

I recall the powerful speech of my hon. Friend the Member for Hereford (Mr. Shepherd) who I understand was describing the plans submitted by the companies concerned which suggested that much of the electrification work could be carried out by using private finance. If that option is open to us, I urge the Government to seize it because if we do not have investment of this type we shall close all the options for a modern railway system. I become extremely worried that we shall lose the initiative which has been built up in recent years. I am not saying that the railway industry is happy—it has not received all the money it wanted—but, broadly speaking, I believe that we have been going in the right direction.

I turn briefly to the matter of the ports and docks. I am very disappointed that again there is a Bill of this type before the House I suspect that my right hon. Friend takes no pleasure in that, but I feel that at this stage we could have expected a more complete and positive package. We are entitled to look back over the past two years and express some disappointment. In two years we have had three Bills on this subject.

In 1980 we had the first port of London Bill. I do not need to quote the remarks of my right hon. Friend the Secretary of State. He made it clear in 1980 that he expected the port of London to operate within these cash limits, which then amounted to £70 million. A year later we had another Bill calling for a further £90 million. We heard the same stern injunctions and fairly optimistic statements that that would be enough to carry it through. Many Conservative hon. Members defended what were, in some ways, indefensible measures because we believed that there was an emergency and that this would be the last word.

The Bill before the House today—the third in two years—seeks a further £200 million. I shall refer later to that figure, because my right hon. Friend must give more facts to the House about it. It is clear that this will not be the last word. My right hon. Friend has said that he is not prepared to accept financial reconstruction at this stage. It is therefore clear that before long we can expect further legislation.

That is a most unsatisfactory way for Parliament to proceed. It is also a most unsatisfactory way for the management and the workers in the ports to proceed. Of course, the ports have faced decline and depression. It has been a very difficult time. Many of us believed, however—here I restrict my remarks to the port of London—that having reached this stage we should be able to look forward to a brighter, more optimistic future. The port of London has a great future. Tilbury has a great future. The riverside wharves have a great future. The port of London is still our greatest port. Those who work in it should by now have a clear future mapped out before them.

All that we have is yet another transfusion—it is becoming almost like a drug—provided by the Government, without any clear sense of direction. The first measure, in an emergency, was perhaps fair enough. A second measure, in another emergency, is perhaps also fair enough. But three in two years begins to look like a habit—and a bad one at that. I am most disappointed. I believe that the way in which the £200 million is being provided is wrong for both London and Merseyside and discouraging for the rest of the ports industry. In this connection, I wish to put a number of points to my right hon. Friend.

I presume that the £200 million, with the emphasis upon provision for severance, means that London and Liverpool are to receive special help in the severance of their dock workers. My right hon. Friend should even be able to give figures. He must have some idea of how many employees, registered and unregistered, are involved at the two ports. Clearly there is to be special treatment for those ports. Although we defended differential treatment on the last occasion, I do not believe that we can again defend the introduction of differential severance rates for London and Liverpool but not for other ports. We defended it last time, but by the summer the industry had been forced to introduce a further scheme at its own expense, not at Government expense, to close the gap because one could not have redundancy payments of £16,000 in London and £10,500 in Bristol.

Yet the Government are doing the same thing again. How can we expect port employers throughout the country to secure demanning and reductions in the numbers of jobs when the employees believe that they will again be able to secure higher redundancy terms if they wait a little longer? This is a most untidy, unhealthy and unhappy situation and I do not believe that it will work. Indeed, I suspect that as our debates continue, in Committee and on Report and with the industry outside, it will become clear that it simply cannot work.

It is unfair that other ports should have to bear the full cost of redundancies through the levy when for London it will be fully financed. At what level will the figure be set? The scheme in London produced about 6,000 voluntary severances at a figure of £16,000. Will that be the figure in future or will it be higher? Again, we are entitled to know what figures my right hon. Friend has in mind.

My right hon. Friend touched upon the subject of capital expenditure. I am concerned that the port of London should be viable and should survive as a flourishing port, but it must be on a fair basis. One cannot expect other ports to accept that the PLA should be subsidised. Yet I gathered from my right hon. Friend that the £200 million will in effect provide further capital subsidies in terms of new investment over the coming years, whereas other ports will have to finance this in the traditional manner.

That is a significant change from what we were told in our previous debates. Frankly, I dispute whether my right hon. Friend is correct in his interpretation of his powers. The Ports (Financial Assistance) Act 1981, upon which this provision is based, does not appear to me to provide powers for major capital spending. It refers to measures taken by them to reduce the number of persons employed. That is quite clear. It goes on to state that it provides for the carrying on of their undertakings while such measures are being taken. I suggest that the phrase the carrying on of their undertakings does not provide, within the normal meaning of the English language, for major capital investment. I hope that it does not. I am sure that both London and Merseyside will need new capital investment. However, it must not be achieved by the sort of blank cheque that my right hon. Friend is securing from Parliament. The sum of £200 million is colossal even in relation to the needs of the two ports. This is not the proper way to proceed.

I emphasise my great disappointment that we are not in a position now to map a clear path for the future for the port of London. We could have done it; we should have done it. This would have involved capital restructuring. It is unrealistic to expect London to continue to carry debts of £110 million and also achieve viability at the end of next year. The whole package lacks credibility and conviction. It causes confusion in other parts of the port industry. At the same time, £200 million of the taxpayers' money is taken without any clear justification. That is a very large figure.

I understand the need at this stage to provide further financial support for the ports. I am, however, disappointed about the way it has been done. I hope that during the progress of the Bill my right hon. Friend will be able to break down the figure and explain it more clearly to Parliament and to the people. In that way he will perhaps make some of us happier than we are at present.

5.31 pm

Mr. Robert Parry (Liverpool, Scotland Exchange)

I welcome the financial assistance that the Bill means to the ports of London and Liverpool. I declare my interest. I am a sponsored member of the Transport and General Workers Union, and the Liverpool docks, or what remains of them, are situated in my constituency. Many of my constituents are employed on the docks.

We would like to ensure that other United Kingdom scheme ports which need financial help are included in the Bill's provisions. The effects of the continuing recession on dock labour scheme ports, aggravated by the expansion of non-scheme undertakings, are putting the future of many ports in jeopardy. The refusal by the Secretary of State for Employment to take the necessary legislative action, which would permit progress to be made towards the introduction of a new dock labour scheme, as required under the 1976 Act, has given licence to the non-scheme undertakings to take cargoes away from the traditional ports. The loss of traffic has created an increased surplus of registered dock workers in ports throughout the country. This is having a serious adverse effect on the operational viability of the ports. The provision of financial assistance should not therefore be restricted to certain ports, as the Bill proposes.

The Secretary of State for Transport has stated that the provisions to increase the limit of money available to London and Liverpool will enable the two ports to carry out capital expenditure programmes and cover running losses and severance payments. The latter item is no doubt included because the provision of financial aid is tied to further substantial reductions in manpower at the two ports. If severance payments are again introduced, as happened in March and April this year—payments that are more beneficial than those that apply in the rest of the scheme ports nationally—and without consultation or reference to the national joint council for the port transport industry, there will no doubt be a reaction by dock workers and port employers similar to that which occurred under the Ports (Financial Assistance) Act 1981.

The important issues of jobs and future employment cannot be dealt with unless there is full consultation and the involvement of both sides of the dock industry. There is no doubt that the ports of London and Liverpool need financial help. By the same token, so do many other ports. Their problems are similar. Provision must be made for all ports that are suffering the effects of the present unsatisfactory situation in the port industry, brought about by the failure to introduce a new dock labour scheme and aggravated by the trade recession.

I wish to deal with a couple of points concerning Liverpool and the Mersey Docks and Harbour Company. At the beginning of 1979, there were 6,007 registered dock workers. Of these, 3,772 were employed by the Mersey Docks and Harbour Company. The latest figures given to me recently are 3,414 registered dock workers employed in the port, of whom 2,262 are employed by the company. As my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) pointed out, there have been tremendous losses this year alone. The Tate and Lyle closure will mean an annual loss of £1.2 million to the revenues of the Mersey Docks and Harbour Company. If the Liverpool to Belfast ferry is not reopened, that will mean a further £1 million loss of income, bringing the total to nearly £2¼ million in less than one year.

The Secretary of State's recent statement makes clear that the granting of this financial assistance to the port means substantial reductions in labour. I understand that a figure of about 500 has been mentioned in respect of Liverpool. I must warn the Secretary of State that if any gun is held at the heads of Liverpool dockers, this will be resisted by the workers. The right hon. Gentleman will appreciate that Merseyside has nearly 20 per cent. unemployment, with 130,000 people out of work. The carrot or bait of severance pay, used many years ago for dockers in Liverpool, will not be taken so lightly now.

5.37 pm

Mr. Geoffrey Dickens (Huddersfield, West)

I should like to start by referring to matters that affect the public most. We are discussing high finance, but the public are interested in three elements. One is reliability. Most people, when they go to catch a train at a certain time, expect it to arrive at that time or thereabouts. Some passengers are anxious about punctuality. When they catch a train, they want to reach their destination on time. The train often links with a departure from an airport. They also have to arrive at work at a certain time. Most people also expect clean carriages.

Over the last few years I have seen tremendous improvements in British Rail. The greatest improvement has occurred in inter-city links. The carriages, service and punctuality seem to be very good. The stations also seem to be operated efficiently. A considerable sum has gone into British Rail. The £10 billion ceiling set for public money is a king's ransom, but it is money well spent. It is a service to the nation, which has been kept in line with inflation.

Our policy has not changed, but we are still making provision for the same amount of development and procurement for rolling stock and wage levels. This has been necessary to keep in step with inflation. It is a matter not of finding more money, but of finding enough and making a commitment to keep British Rail up to and progressing at the standards achieved over the last few years. If that continues, we should be well pleased.

This is a small island. There is nothing complicated about the spread of our cities. An island such as this ought to have a first-class rail system. I mourn the passing of the days of the GWR and LNER. But I must not dwell in the past, I must go forward. There was competition in the past between the railway companies. Nevertheless, the railways are progressing and the money has to be found.

The Government's commitment to the future of the railways amounts not only to money for investment. Any commitment to the future of the railways must include improvements in productivity. The Government, since they came into office, have made tremendous strides. When we negotiated the 1980 pay award, for instance, we set targets to shed about 38,000 posts by 1985. We have already achieved about 14,000 job losses. Many of those were from the loss-making areas, such as the carriage of parcels, and so on.

We are now in the middle of negotiations for the 1981 pay settlement. The unions are working closely with management in seeking to achieve greater productivity. That is common sense, because their future depends on the success of British Rail. Their success is our success, and vice versa. The relationship between trade unions and management is vital. It is nice to see the nation thinking in that way. A few years ago, the argument was across the table; now we seem to sit round the table to negotiate. That is much better and more sensible. We shall all be the winners in the end. Confrontation between trade unions and management is of no use to anyone.

Things are moving nicely. There are one or two matters on which the trade unions have agreed and are making progress. For example, on open terminals—unmanned ticket barriers—two pilot schemes will start later this year, with the agreement of the trade unions—one in Scotland and one in the West Country. I hope that they will be a success.

Another subject is flexible working hours. Employees of British Rail used to work many hours of overtime on some days, and on other days of the week, because of the overlap on their schedules, they worked less than their required eight-hour day. That was uneconomic. It cost a lot of money. British Rail is now working towards more flexible working hours with a much steadier use of manpower without excessive overtime payments. That seems common sense to me.

We are talking about doing without guards on trains on some local lines—perhaps on goods trains as well. There may be pilot schemes for that. If such a scheme worked, it would save a tremendous sum.

Bearing in mind unemployment, we have to remember that taxpayers' money is involved and that British Rail must run profitably, just as any private company must do.

Mr. Ogden

I am fascinated by the hon. Gentleman's use of the terms "we" and "they". Who does he mean by "we"? Earlier, the Secretary of State for Transport said that the management of British Rail was capable and dedicated. The Secretary of State and the hon. Member for Huddersfield, West (Mr. Dickens) were elected on a ticket of less intervention in management. Now the hon. Gentleman is saying "We have provided all this money; we have obtained all those redundancies; and we are organising this, and they are doing that." Will the hon. Gentleman explain the dichotomy between "we" and "they"?

Mr. Dickens

When I use the expression "we", I am talking about taxpayers—us and the people sitting in the Strangers Gallery. I say that we have provided all this money, because we have.

Mr. Ogden

And the negotiations?

Mr. Dickens

The negotiations are between the management and the trade unions. They are also contemplating combining certain driver grades to make better use of drivers. They are also negotiating about the requirement for two men in the cab—in other words, single manning. Trade unions and management are working together for greater productivity.

As a Government, we are continuing our commitment to BR by applying taxpayers' money to the job. In so doing I hope that we shall continue to give a good and gradually improving service to the public. At the same time, the three elements of reliability, punctuality and cleanliness must be the key words for BR.

The National Bus Company has been mentioned in the context of cutting uneconomical routes, and so on. As one who regularly motors on the M1 from Yorkshire to Westminster, I see many National Bus Company coaches half-empty—sometimes only a fraction fully occupied—travelling along the motorway. But there are many more areas for saving, including the procurement department which purchases the buses. If the coaches had an engine capable of a longer life, with greater periods between services, and if the chassis design were better as regards access to the engine for the engineers working on it, we could save millions of pounds.

Two brothers in my constituency have come up with a particularly good design.

Mr. Ogden

Ah!

Mr. Dickens

I do not mind mentioning it. The Government are giving them modest support through a small business scheme. The design may not get off the ground, because these men lack a track record of running a successful and profitable company. However, they have the design and they have plenty of orders. They have one order from the National Bus Company and some orders from Scotland. The design is good.

I believe that the policy of the National Bus Company is to put a coach on the road for about two years to test the life of the engine and the chassis. I do not think that we can improve on the coach bodies, which are normally made by one of two specialised companies. But we ought to be looking at purchasing policies within the nationalised industries, particularly British Rail and the National Bus Company.

I am pleased that we have matched the progressive investment in BR. The Government have given BR a commitment. We have backed the workers of BR, and it seems that the workers are responding by seeking to improve productivity. If they maintain cleaner carriages and come up with the improvements that I have mentioned, the nation will be more than pleased with the BR service.

5.48 pm

Mr. Eric Ogden (Liverpool, West Derby)

The hon. Member for Huddersfield, West (Mr. Dickens) made a lively speech. If he is to be a member of the Standing Committee, it will be a most interesting and, probably, an infuriating Committee for the Minister to attend. There was much in what the hon. Member had to say. He has no need to apologise for trumpeting the merits of one of the small businesses in his constituency. All hon. Members should do that from time to time. If the particular idea takes off, that would be excellent. I support some of the hon. Member's suggestions.

Not only should BR clean up the carriages, but perhaps the passengers should be more careful not to provide so much mess for British Rail.

I hope that the Secretary of State will at least note some of the comments made from the SDP Bench on this occasion.

The Bill is part of the inheritance that the Secretary of State for Transport received from his predecessor. How much of the Bill is the direct responsibility of the Under-Secretary of State is a matter for him. Some parts of the Bill may be a continuing inheritance for those Department of Transport officials, whom we cannot officially see but who from year to year serve successive Secretaries of State in the same way that they serve successive Governments.

As I am in an ecumenical mood, I commend the contribution made by my right hon. Friend—I appreciate that that is not technically correct—the Member for Barrow-in-Furness (Mr. Booth). Somewhere between the Back Benches and the Front Benches there must be more agreement on this Bill than there is on some other Bills, though the Secretary of State did not introduce this Bill with the flair and energy with which he has introduced measures on previous occasions.

The Bill is a rather strange mixture of Treasury and Department of Transport control. It is an attempt to combine in one Bill the allied but diverse interests of rail, road and the two major ports. A few weeks ago the Leader of the House told us that this Session of Parliament will be comparatively easier than the previous Session. He said that there would not be the same intense pressure to get legislation through that there was in the previous Session. If that be true, why is it necessary to try to combine rail and road financial interests with the financial aid and support for the two major ports, although there may be some similarity between them?

The hon. Member for Faversham (Mr. Moate), the right hon. Member for Barrow-in-Furness mentioned and the House has not forgotten that only a few months ago Government financial aid for the port of London was made available by a Department of Transport Bill carried through mainly on the broad shoulders of the Under-Secretary of State. The financial support that was later made available for the Mersey Docks and Harbour Company was again a Department of Transport Bill presented and carried through by Transport Ministers.

I am concerned—as I believe all hon. Members should be—that Treasury control and influence is coming more and more into the operations of transport and ports. Having said that, I would be churlish if I did not welcome the provisions of the Bill, although they may be only crumbs. Although not presented in a way that I would wish to see, the possibility of finance is provided. The provisions have arrived in a mixed package of road, rail and ports when I would have preferred a clear separation of Treasury and Department of Transport influence and control, and the finances of the ports of London and Liverpool to be considered in a separate Department of Transport measure, which could be called "Ports (Financial Assistance) (No. 3) Bill". Such a Bill should include more than the ports of London and the Mersey, because other ports require assistance. However, the provisions show that the Government can—although very belatedly and perhaps in the wrong way—try to do something to aid some industries.

I ask some specific questions. I may not get answers from the Under-Secretary of State tonight, but they are questions that should be asked on Second Reading rather than waiting for Committee proceedings.

In his introduction the Secretary of State gave some reasons for the financial provisions, but he did not explain why, for example, the present financial limits of the British Railways Board of £600 million to £900 million are to be increased, in clause 1 to £1,100 million at the lower end of the scale and £1,300 million at the higher end. The lower limit has been increased by £500 million and the upper limit by only £400 million. This is not a broad band. The money needed at the end of the term, however long that term is estimated to be, would purchase less than that needed at the beginning. It would have been more sensible to have an increase on a broad band rather than a limited one.

The Under-Secretary of State for Transport (Mr. Kenneth Clarke)

I may not have time to return to the matter when I reply to the debate. The apparent division is only a technical matter. The lower figure is that to which the limits would be taken automatically by the Bill. The higher figure will require the approval of the House by an affirmative order. Therefore, the significance of the second and higher figure is that before it reaches that level the House has a further opportunity to review matters and to consider an increase in borrowing limits. The fact that there are two figures is a procedural device to oblige the Government to come back to Parliament if they wish to go above the lower ceiling. No timetable is envisaged. A limit can be raised by order of the House. Therefore, it is a technical point and there is no hidden significance in the way in which the bands have moved.

Mr. Ogden

I am grateful to the Under-Secretary of State for that explanation, as far as it goes. However, a technical disadvantage of £100 million cannot be allowed to go through without some comment.

I turn now to clause 2. The present financial limit of £3,000 million is to be increased to £6,000 million, with the possibility of an increase to £10,000 million by a later Order in Council. I claim that the Bill provides a possibility. The hon. Member for Faversham said that it is almost certain that that amount of money will be spent. If either of us is right, perhaps the Under-Secretary of State can provide more information, especially as to what proportion of increases will cover prudent estimates of inflation, what proportion will cover new Community regulations, what proportion will cover new British Rail ventures under old or new Community regulations or anticipated new directions from the Secretary of State for Transport, because they will be directly under his control.

Clause 3 is the Treasury guarantee. Technically, there is a Treasury Minister on the Front Bench although I would be surprised if he were to intervene to support the Treasury clause. Clause 3 begins with the word "If', a word seldom used in legislation. The clause reads: If the British Railways Board becomes a member of the European Company for the Financing of Railroad Rolling Stock". Are we correct to assume that the British Railways Board has every intention of becoming a member of the European Company for the Financing of Railroad Rolling Stock? If so, would not the words "should" or "when" have been more appropriate? Perhaps the Under-Secretary of State can tell us the extent of the proposed involvement.

I turn now to the second part of subsection (1) of clause 3, which says that the Treasury may guarantee the discharge of the Board's liabilities". Will the Under-Secretary of State tell us anything about the criteria on which he or the British Railways Board envisage guarantees being either sought or withheld? All hon. Members will welcome the intention of subsection (2) of clause 3, that Parliament will be informed by statements laid before each House from time to time about the terms, conditions and arrangements made under guarantee, even if the House will be informed only after those detailed financial arrangements have been made.

I object to the detailed wording of subsection (4) of clause 3. It says: If any sums are issued in fulfilment of the guarantee, the Board shall make to the Treasury, at such times and in such manner as the Treasury may from time to time direct, payments of such amounts as the Treasury may so direct in or towards repayment of the sums so issued, and payments of interest at such rate as the Treasury may so direct". The word "if' is less welcome than it was previously.

Many hon. Members will assume that that means a degree of intervention by the Treasury—not Transport Ministers—that has not occurred before. If so, this does not support what the Secretary of State said about the capability and dedication of the British Railways Board, because this degree of intervention in the day-to-day direction and control of the British Railways Board has not occurred previously. The Committee should therefore consider whether such control should be looser than presently envisaged.

We can argue in Committee about the sums required to be paid in or out of the Consolidated Fund. However, I should like to say something about the National Bus Company, which seems to be the Bill's poor relation. Financial support for the NBC may be provided by clause 4 to increase the borrowing limits from £200 million to £250 million or such greater sum not exceeding £275 million as the Secretary of State may specify by order. The Secretary of State almost overlooked the NBC in his speech. His intentions seem to be "We shall treat them mean and keep them keen. Therefore, we are reducing what they might otherwise expect". In addition, if there is to be an increase from £250 million to £275 million, this must be done by affirmative resolution.

Any Government Minister should be prudent. Like housekeeping, the running of any Government Department, public or private company or other organisation ought to be proper and prudent. However, the Government should consider in Committee whether it is necessary or desirable to increase the limit from £250 million to £275 million by affirmative order. In view of the experience of the Department of Transport during the last three of four years, the Committee should take the view "Let us increase the limit to £275 million" and leave it at that.

We should note the different ways in which this extra money is to be provided. The provisions of clauses 2 and 3, and the borrowing powers under clauses 1, 4 and 5 are subject to the control of Parliament. But clause 1 states: as the Secretary of State may by order specify". Clause 2 contains the phrase: as may be specified by Order in Council". Clause 3 refers to Any sums required by the Treasury but only provides for a report to Parliament. The provisions of clause 4 will come into force when the Bill is enacted, and perhaps by affirmative order by the Secretary of State. Clause 5 will be enacted by Parliament through the Bill. In other words, the Bill contains four different ways of providing sums of money. Is that necessary?

Mr. Dickens

Perhaps I can be helpful to the hon. Gentleman. The help in clause 3 includes that to 16 European railway systems. It is therefore common sense for that to be a Treasury decision. I suppose there are special reasons why the sums are provided in this way, and what I have said is only one example.

Mr. Ogden

The hon. Gentleman was trying to help, and I am grateful to him. However, I doubt whether any of this money will help any other railway transport system in Europe. I leave that to the Minister to sort out, but I doubt whether the money will help or support any European system, be it on this side of the lion Curtain or the other side.

Mr. Kenneth Clarke

The hon. Gentleman has again been led into a tangle by my hon. Friend's offer of help. He is right to say that there is no question of our providing support for the purchase of rolling stock by any other European railway. EUROFIMA is a Swiss-based company to which British Rail may wish to belong. It finances the purchase of rolling stock by its member railways, and it may enable British Rail to purchase rolling stock by the equivalent of hire purchase on favourable terms, which EUROFIMA can arrange. Any borrowing by British Rail, or any purchase of that kind, will require a Treasury guarantee from Britain. That is one of the rules of EUROFIMA. I hope that short explanation explains why procedurally it looks on the face of it as if the Bill is different from the ordinary method of increasing the borrowing limits of nationalised industries or, indeed, the public service obligation of the railways.

Mr. Ogden

I am grateful to the hon. and learned Gentleman. I suspect that the hon. Member for Huddersfield, West will be equally grateful that the Minister has clarified some of the differences. I doubt whether this will be the last time the question will arise, bearing in mind the complicated provisions in the Bill.

As the hon. Member for Faversham said, large sums of money are referred to. Clause 2 refers to sums that the Secretary of State "may"—only "may"—have to provide in compensation. Clause 3 refers to guarantees that the Secretary of State "may" have to honour should British Rail fail in any of its obligations. Clauses 1, 4 and 5 refer to sums of money that British Rail, the National Bus Company, the Port of London Authority and the Mersey Docks and Harbour Company "may" borrow—not receive—from the Government, although there is a doubtful possibility that they may be able to get grants or loans from the Secretary of State.

In fact, in hard terms the Bill does not commit Government expenditure of even a brass farthing. This is an enabling measure. I hope that the Minister will confirm that

The "ifs", "ands" and "buts" are explicit in relation to the Port of London Authority and the Mersey Docks and Harbour Company. My former hon. Friend, the Member for Liverpool, Scotland Exchange (Mr. Parry)—I hope that he is still my friend—has explained the situation in the ports of the Mersey. However, clause 5 begs certain questions. Of the £160 million to be available under the Ports (Financial Assistance) Act 1981, how much has already been committed? We have heard stories about £60 million for the Port of London and the covering of the £3 million overdraft for the port of the Mersey. How much has been committed to London and how much to Merseyside? What grants, loans and guarantees, if any, have been made? I hope that between now and nine o'clock the Minister will check the claim made by the Secretary of State that some of the money to be provided can be used for purposes other than severance and redundancy.

Section 1 of the Ports (Financial Assistance) Act 1981 states quite clearly that the money could be used

1. "(a) for measures taken by them to reduce the number of persons employed in, or in ports adjacent to, their respective ports, being measures taken with a view to restoring the profitability of their undertakings; and
2. (b) for the carrying on of their undertakings while such measures are being taken."

Many hon. Members will recall that when that legislation was before the House, the Opposition argued that the money ought to be made available for modernisation, development, maintenance, dredging, services and so on. We were told by the hon. and learned Gentleman and the former Secretary of State that the money would be used only for deficit funding, overdrafts and so on.

Before the Bill gets its Second Reading it should be made clear whether the money available can be used for severance and redundancies only, or for development, investment or practical daily operating facilities. If so, this measure is different in degree from any others.

Last year we warned Transport Ministers that financial assistance was too limited in the ports designated. Manchester, Bristol and the Hull ports have all experienced trouble because of the limited scope of that Act. We also warned that the funds provided for the two ports were not adequate.

How does the Minister forecast the division of the extra £200 million? I should like to make a proposal that will not cost one ha'penny of new Government money. A proposal has been mooted on Merseyside that would aid the ports in the area, the urban development corporation and the inner partnership area, and would do what the Secretary of State for the Environment says that he wants to do on Merseyside—help investment, support and employment.

The Government should say today—not tomorrow, or after the Crosby by-election or next week—that for all sorts of reasons concerning port development, employment and regional strategy, the ports of Merseyside would be their preferred ports for the development in the Celtic Sea and the Irish Sea.

There is much oil and gas in the Celtic Sea, north of the Morecambe Bay fields, into the Western Approaches, south from the Isle of Man, past the Irish coast and beyond the ports of the Severn. The natural centre for that development, in the view of every Merseyside Member, is the port of the Mersey. We have shipbuilding, ship repair facilities, chandlering, support services, an airport and enough land in the docks for a heliport. All of this is supported by insurance, banking, commercial services and expertise.

The Secretary of State knows more about the subject because of his previous role as Secretary of State for Energy and he will realise that the exploitation of oil and gas could be better controlled and organised from Merseyside than from any other part of the country.

The Government would not have to put in a ha'penny. They need only say that from their point of view the preferred ports for that development are the ports of the Mersey. That would create incentives and hope that would be worth 6,000 jobs on Merseyside over the next five years—and all without a brass farthing from the Government. Merseyside Members of all parties, the development corporation, the chamber of commerce and, I believe, the Secretary of State for the Environment are all asking for that.

The Secretary of State for Transport ought to be able to make such an announcement tonight. We have a right to ask for it. If it is not made, we shall be entitled to conclude that a decision to concentrate development elsewhere is being held back until after the Crosby by-election.

I have taken more time than usual and I hope that the House will forgive me. This is a complicated Bill, which will have a lively Committee stage. We may not be able to change the policies, but some aspects can be improved. The Bill shows that even if Ministers change Departments, monetarism, the. Treasury and the Prime Minister still rule. The only real hope for the railways, road transport and the ports of Merseyside, London and elsewhere is a change of Government.

6.3 pm

Mr. James Hill (Southampton, Test)

This is the third transport Bill to be presented to the House in the past two years. I served on the Committees that considered the previous measures. The Bill has only five clauses, for which we are grateful, four being technical clauses. However, clause 5, which deals with financial assistance to the PLA and the Mersey Docks and Harbour Company, will have a ripple effect on the atmosphere of port life. Such ripples inevitably spread from any concession provided for Merseyside and London.

I congratulate British Rail on its excellent service from Waterloo to Southampton and Bournemouth. The line has been electrified and coaches have been modernised. We have an efficient and reliable service, and we were even able to overlook the fact that my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) once found some Russian matches in a restaurant car.

I congratulate the chairman and staff of British Railways for maintaining an excellent service through the many distressing disputes of the past few years. The service to my constituency and beyond is efficient and punctual and has all the facilities that we desire in a railway service. As a pro-European, I can confidently compare it with the service in any EEC country. I say to some of my hon. Friends that sometimes congratulations get a better response from the work force of a nationalised industry than constant harping that pays no regard to whether the industry is efficient.

As the representative of a port, I have been caused more heartache by clause 5 than by any other part of the Bill. Anyone who reads between the lines knows that the enormous sums that we are considering—an increase from £160 million to £360 million—are earmarked for the special severance scheme for registered dock workers. Our ports have to modernise in step with Continental ports. Containerisation has arrived, and there has been overmanning in the past because the national dock labour scheme made no allowance for modernisation or evolution in port work.

Whether one loves or hates stevedores, one must accept that they are hanging on for severance pay. The Jones-Aldington agreement was drawn up when stevedores felt that they were being put upon and were at the bottom of the wages structure ladder. They grasped the agreement, as did the port employers, because it seemed that it would bring harmony to port operations.

About 1,000 volunteers in Liverpool and London have been attracted by the severance pay, which goes up to a maximum of £16.000. More than 300 workers in the port of Southampton have accepted severance pay in the past few weeks, but they had been waiting for the increase that put them in line with the terms already offered in London and Liverpool. On grounds of principle, all severance pay should be at the same level. We should all agree that when my right hon. Friend the Secretary of State specifies the rates, they should be uniform.

The port of Southampton has had one of its worst years in living memory. We witnessed the distressing spectacle of the port, which handles international traffic, operating only during the hours of daylight and for only five days a week. There was the inevitable log jam. Container ships that came in had no time to turn round, and therefore no time to dock cargoes. They had to take them to other destinations, trans-ship on the Continent and send them back by the ferry services. Large ships were no longer calling and Southampton was losing traffic worth millions of pounds. That occurred because of a difference of opinion between the Transport and General Workers Union, representing the stevedores, and the British Transport Docks Board over fall-back pay. That is a colloquialism for the lowest amount of money a man can get without working in the port while still reporting for work each day. The fall-back pay was fixed by the board at £94 a week, and the stevedores felt that it should be £105 a week. The board refused the increase and the refusal led to the long period of daylight-only working from Monday to Friday. Millions of pounds worth of traffic was lost and there was a consequent general rundown.

Although in most ports there are a number of unions, in Southampton there are as many as six. What the stevedores managed to get, the other unions also wanted. There was a ripple effect. The crane drivers, who belong to the National Union of Railwaymen, the boilermakers, who although there are only a few of them, have as much effect as though there were several hundred, the cargo checkers and other workers all wanted the same as the stevedores. It is now nearly December and the port of Southampton has been operating at a great loss for some eight months.

The Bill will probably give more money for the special severance scheme, but the very basis of the scheme should be examined. My right hon. Friend said that no money would be available for revenue lost after the end of 1982.

The Bill deals with London and Liverpool. But are the other 19 ports operated by the British Transport Docks Board subject to the same conditions? The disputes at Southampton have meant that the chairman of the British Transport Docks Board, Sir Humphrey Browne, will find it increasingly difficult to balance the books as Southampton is perhaps the largest port and the finest jewel in the crown of the British Transport Docks Board. To achieve the financial viability of ports in general, as well as those of London and Liverpool, the Government will have to look at the national dock labour scheme again. As modernisation creeps into the ports the same number of men will have less to do, but the employers will still have to employ and pay them the fall back pay.

When it comes to the crunch, we shall probably find that the dock labour force is either too big, because the men are not taking advantage of the severance scheme in the belief that they may receive more money, or that so many of them have taken advantage of the scheme that the port has to employ temporary dockers. That latter outcome will create a similar state of affairs as soon as trade falls off again. I am sure that my right hon. Friend the Secretary of State will be looking again at the national dock labour scheme in the not too distant future.

I am always extremely cautious about reading aloud in Parliament the letters of constituents, because often their views tend to be biased. However, recently I received a letter from a nearby constituency which seemed to come straight from the heart. The constituent writes: I had written to my MP on this subject during the previous strike and suggested to him that as the local Member of Parliament he should intervene before too much damage was done to the port. I also said that it was now quite evident that with this strike and that of the Civil Servants"— he is covering a lot of ground with that statement— who by holding up exports are ruining the country, it was the unions who are causing much of the unemployment. I do not think that that can be said of a docks dispute. The problem is not the unions; it is the guidelines and rules within which they operate.

The letter goes on: It is absolutely ludicrous that these dockers are paid £94 a week for doing nothing. Are they attempting to make Southampton a Liverpool where they go every week and draw this amount? By not reviewing the national dock labour scheme the Government are creating not only targets for those who do not understand the problems but an impossible industry for anyone to manage. We come very close to that state of affairs when a port such as Southampton makes the front page of Lloyd's List, as it did on 5 May 1981. The headline was "Dockers' clampdown hurts Southampton." Every shipowner throughout the world will have read that and asked himself "What is the good? How can we go there? If we do, shall we get in? If we get into the port, shall we get out?"

Another headline that I saw said: Southampton Port: A world-wide joke? It is not a joke. It is a very efficient, modern port. Millions of pounds have been spent on the container port. It is a great asset to the South of England and to the United Kingdom as an exporting country. We never read that Rotterdam is a world-wide joke. We do not want to read that industrial relations in London, Liverpool or Southampton are a world-wide joke.

Once and for all, we have to get harmony in the ports, and this is a good time to start. My right hon. Friend is in a wonderful position. He has increased the severance pay. He is now introducing a Bill which makes adequate provision for further severance pay. For the first time, he can deal honestly with overmanning in the ports. Having done that, he must bring the national docks labour scheme up to 1981 standards. He must do that, and do it quickly. A great port such as Southampton cannot wait. In many cases it has to move ahead of the Government, because it must attract trade.

Some of the letters which I receive from my right hon. Friend the Secretary of State for Employment, say in so many words, "We cannot do anything about it. We cannot look at the issue at the moment. We would rather have a rundown of overmanning than have a complete rethink of the national dock labour scheme". I should have thought that most shipowners, and certainly most employers who employ dock labour would like to go back to the old system, when they took on and cherished their own workers, instead of the present allocation system. They took on the people that they needed. They were not forced into the terrible business of taking on eight men to do six men's work.

The port of Southampton is still involved in a dispute, which will go on. There is no question about that. I have a letter from the British Transport Docks Board in Southampton, signed by the port director. He says: Since troubles began in February the following services have left the port or are seriously at risk". He then gives a long list, with which I shall not weary the House. There is no doubt that if our ports are to be viable and if we are to carry out the intentions of the last Transport Act to privatise 49 per cent. of the British Transport Docks Board's shares, we must have profits.

My hon. and learned Friend the Under-Secretary, who served on the Committee with me, knows full well that his right hon. Friend intended to float the shares this autumn. There is no way now, in my opinion, of keeping to that timetable. If my right hon. Friend and my hon. and learned Friend have to look into the conditions in the port, the sooner they do so the better. The profit figures will then show again, and it will be possible to realise their dream—and my dream—of privatising the British Transport Docks Board.

6.32 pm

Mr. Donald Anderson (Swansea, East)

At one level, this small Bill is simply a technical Bill, a formal uprating of the borrowing powers of certain public transport undertakings. Yet every previous speaker has quite properly used it as an opportunity to make general remarks on investment in public transport and in the economy as a whole.

The Government's mormal case against public sector investment is couched in these terms: that increased public sector investment leads to higher public borrowing, which leads to inflation and, by a "crowding-out" argument, thus deprives private investors of the resources that they need to generate economic recovery. Clearly, in times of under-used capacity, that is hardly a relevant argument. I believe that the Government will be forced more and more to respond to pressures from all sides to see public investment in a new light, because of the clear relation between public investment and job creation.

We know that the Manpower Services Commission now estimates that it costs the Government £4,380 per annum for every unemployed person in terms of benefits paid and taxes forgone. Government borrowing is therefore pushed up, and the Government are on a steep learning curve in respect of the employment effects of their own cutbacks in public expenditure.

We can test this proposition in respect of the railway industry, by looking at the effects of what would happen if the Government were to respond to the major possible investments in railways over the next five years—in electrification, investment in the London and South-East commuter services that British Rail has called for, the rail-air link to Gatwick airport, and preliminary investment in the British Rail-SNCF single-bore Channel tunnel link. All those projects are viable, all of them are at the starting block, and all of them could give a considerable boost to our domestic economy. Yet, because of the present rules, there is a barrier to their proceeding.

If the Government were to invest over the five-year period in those major transport projects, there would be the following effects. They would generate almost 30,000 jobs by 1985, assuming that the investment was in United Kingdom products. One feature of all these investments is a low import content. The effect on the annual rate of inflation would be less than 0.2 per cent. per annum. The saving to the public purse in terms of the reduction in unemployment, social security benefits and taxes lost would be over £100 million per annum. That is half the cost of the investment itself, and, of course, part of that investment would come, not from the public purse, but from private funds.

Faced with these possibilities for public investment and with the pressures from all sides, including the CBI, for some moderate increase in public investment, the Government have adopted a wholly negative attitude. I responded to the Government's announced increase in the PSO, which is of course welcome, but it is irrelevant to the longer-term case for investment.

The expectations that people who work in the industry and people who are interested in the industry held about 12 months ago of a brighter future for the rail industry have now been considerably dashed. As the result of the Government's responses and lack of decision over the past six to 12 months, there has been quite a sea change in morale in the railway industry. That is the backcloth for the productivity talks, yet the Government nevertheless expect the unions to make a full response to the ACAS agreements at a time when investment is being turned off. The Government refuse to accept this trade-off between investment, morale and the subsequent response of the work force.

We know that the infrastructure of the railway industry is in considerable decay. The signalling systems are collapsing. I understand that the Marylebone to Aylesbury line is in desperate straits and that the workshop situation is also desperate. We understand from the British Railways Board that, as a result of financial constraints, there will be no new investment in 1982. Indeed, the board will be hard pressed to finance the continued investment on programmes already begun. That is the picture of decay that exists in this major industry.

The Government have dragged their feet on all the major commitments that they made during the past year. I shall go through those commitments speedily, because my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) went through them in detail. The Government changed the rules on rail electrification, following the report of the joint working party and the expectations that were aroused as a result of the joint conclusions. The Government's refusal to sanction the Hitchin line electrification has meant that an experienced work force and 200 men working for Balfour Beatty have now been served with initial redundancy notices. That team will be very difficult to replace. What economic sense is there, when the Government repeat time and again that they have accepted the 10-year programme in principle—whatever that principle may be—in refusing to sanction in the interim period, a plan for the carrying over of that work force? They are prepared to countenance the disbanding of that group, knowing, as Balfour Beatty and the British Railways Board say, that it will take not less than 12 months to construct a team with that expertise, and all for a relatively small investment.

British Rail says that the rationale behind the Hitchin line investment was that it was the cheapest option for keeping the experienced team in being so that it could continue from Bedford-St. Pancras to electrification in East Anglia. Investment in electrification would benefit British industry almost exclusively. There would be few imports. As it would mostly benefit existing manufacturers, it would assist areas of high unemployment. I have done some research and know in "South Walean" terms that South Wales Switchgear in Blackwood, the two major steelworks at Llanwern and Port Talbot, as well as several other firms in this area of high unemployment would probably benefit directly from an electrification programme. In addition, the programme would act as a showcase for exports. The Government have been tardy and have allowed the team to be disbanded. They have undermined a substantial part of the progress that could have been made on electrification.

I have mentioned the Anglian electrification programme. So far, the Government have maintained that it should be distinct from main line investment. Many press reports have mentioned that the Government's response to British Rail is that it should put up schemes. British Rail says that it has put up a scheme for electrification in East Anglia. Indeed, the scheme was proposed in November 1980, but the Department's officials bombarded British Rail with a plethora of questions. They ran out of questions about four months ago and therefore they cannot use that as a delaying device.

For the past four months there has been silence. A potentially major step forward in the electrification programme is apparently thought of as distinct from the major programme, yet the Government seem to be doing nothing about it. They have had the papers for more than a year. One wonders whether the Government will seek to change the rules yet again and impose a new profitability exercise on the Anglian line. On normal commercial criteria, the line cannot be profitable. It was never meant to be "profitable". Will the Government seek to change the rules as they did in relation to the main electrification exercise?

Targets are set. We have heard again today that the Government have set a target of break-even by 1985 for the inter-city lines. However, in this Government-inspired recession the effects are felt first by freight services—they have been felt somewhat earlier than expected in 1979–80—and then by the passenger services. Therefore, the Government are by their economic policies destroying the possibility of attaining the target that they set.

Despite all the expectations that have been aroused, even the Channel tunnel—if we are to believe the transport correspondent who wrote in Saturday's edition of The Times—is in question. Apparently, only two options are now available. The jumbo British Steel project is no longer possible and the correspondent said: Hopes of a firm decision on the Channel tunnel in the life of this parliament are beginning to fade after what promoters regard as feet-dragging on the part of the Government Is this yet another missed opportunity? I shall be delighted if the Minister can contradict me. However, the timetable is moving against the Government. There will have to be a commitment by next spring if legislation is to be prepared in time for the Gracious Speech. This Parliament will be over before the Government will be able to give a firm commitment. If the Government can contradict that article, I and many others will be delighted.

I turn to the new uncertainty about the Government's commitment to the network. The Secretary of State's predecessor, now Secretary of State for Social Services, gave a firm commitment to the existing network. He implied that there would be only minor reductions and no substantial reductions. Although the Secretary of State has used the word "substantial", most of us suspect that his interpretation of that word is more expansive than that of his predecessor. Given the pressures on the financing of British Rail "substantial" is likely to mean that the network—or substantial parts of it—will be called into question.

The rail union and the other two unions in the tripartite alliance are affected by the pledge that the former Secretary of State for Employment, now Secretary of State for Northern Ireland, gave of an open door and of access to him. That pledge has been repudiated by the newly appointed Secretary of State for Employment and will no doubt be reflected in the rail unions' response to matters that are asked of them.

I turn to London and to the south-east region. The Minister gave a negative response to the report of the Monopolies and Mergers Commission. The report's conclusions might not have been quite what the Government expected. In their response, the Government have removed the room for manoeuvre that British Rail had. They say that there will be no more money and that there will be no increase in fares in real terms. Yet they say that there will be no reduction in the quality of service. Presumably, that will be interpreted to mean that there should be no closure of individual stations on the line. How will the problem then be met? We are told that it will be met by productivity. The report of the Monopolies and Mergers Commission made one point clear. It said: The answer could not be found in productivity alone … it has to be recognised that achieving improved productivity depends to some extent on investment. Of course, better housekeeping may give rise to some savings. However, major savings will come from increased investment, in signalling—the Minister mentioned the investment in London Bridge—in automatic level crossings and from technological changes at ticket offices and so on. All that requires an undertaking to invest that the Government have not given.

The Government can hardly request increased productivity at a time of economic recession. When the rail industry lost a large part of its work force in the decade from 1960 to 1970 about ¼ million jobs were lost. However, there was no Luddite reaction, because there was a boom and the men were absorbed elsewhere in the economy. The Government have asked now for increased productivity at a time of recession and they can hardly expect the same response.

The picture of an inefficient work force being reduced and of the proceeds being used for investment hardly accords with what we know about the operations of the south-east region and the problems of recruitment in many parts of that area.

Having looked over those areas of investment—the electrification programme in general, the Anglian electrification programme in particular, the Channel tunnel, and so on—where but a year ago there appeared to be a real future for the industry, it is now clear that the picture is very different. The Government are taking a harder line on investment in the industry and a negative response to the proposals, which must deeply affect the morale and the future of the railway industry.

6.50 pm

Mr. Peter Temple-Morris (Leominster)

I wish to speak mainly about British Rail, and therefore it is appropriate that I follow the hon. Member for Swansea, East (Mr. Anderson), who made a valuable contribution to the debate. He made some good points and it will not surprise him, therefore, when I say that I agree with much of what he said. In our transport debates, not only in this Parliament but in the previous Parliament when roles were reversed, there has always been a reasonably constructive approach and a measure of agreement has been reached. There has been a continuity of policy on British Rail and in other areas. Most of the problems that we now face were faced by the Secretary of State's predecessor and his predecessor in the Labour Government.

As I am speaking about the subject in a bipartisan way, this is an appropriate moment for me to welcome the hon. Member for Liverpool, West Derby (Mr. Ogden) in his new incarnation. It would be remiss of Conservative Members not to congratulate him, not only upon his new incarnation but on his somewhat rapid elevation to the "Front Bench". I trust that I am referring to the transport spokesman of the new party. If it increases its numbers to the extent that it has been doing recently, it will rapidly run out of portfolios. It is just as well, therefore, that the hon. Gentleman made his decision when he did.

Mr. Ogden

I should be churlish if I did not thank the hon. Gentleman. The reason for my move to the "Front Bench", from my customary place for the past 17 years square in the middle of the Labour Party ranks with my back against the wall, is simply that in my old party it was safer to have my back against the wall. In this party it is a little different. There is no significance in the fact that I am speaking from this Bench. My comments in the debate did not commit my party. They were entirely my personal comments.

Mr. Temple-Morris

Whatever party the hon. Gentleman speaks for, or whatever part of the House he speaks from, his speeches have always been typified by a moderation that we hope will continue.

The hon. Member for Swansea, East spoke about public sector investment. I should like to refer to a few of his points and then reiterate them in my remarks in my own way. He related public sector investment to the Government's overall economic thinking. But I hope that he will have the grace to agree with me that there is no doubt that the public purse is not a bottomless pit. Equally, there is no doubt that if any nationalised industry or any other industry is totally secure in the knowledge that it will always receive public support to the extent that it needs and for the deficit that it creates, industry will not perform with the efficiency that we expect. We must try to create a position in which it can perform efficiently. We must try to obtain the maximum from the nationalised industries. Their performance in the past has proved that that is possible. I know that there are differences of opinion about that.

Our discussion today concerns productivity and public subsidy, and the balance between the two. I appreciate that Opposition Members look more towards investment and that we tend to look more at the productivity angle, but a balance must be achieved and I hope that an accommodation can be reached between both sides of the House. Anyone who knows anything about other countries—where not only are there planned economies, but no discipline whatever in the public sector, not to mention the productivity and living conditions of the work force—knows what that can create.

In terms of the public sector here, now or in the future, I should be the last to put my remarks in an absolute form. I realise that there is a case for public sector investment where there is high unemployment. It is not for me to go beyond the parameters of the debate into wider economic arguments, but it is no secret to any hon. Member that these matters are being ardently discussed in various places at present.

The hon. Member for Swansea, East made one good point that I take on board—I hope that my hon. Friend the Under-Secretary of State will take it on board—concerning the balance between public investment and productivity. In order to get it right, we must not destroy the morale of the British Rail work force. That worthwhile point should be borne in mind.

One of the Government's errors—it goes far beyond transport matters—is that far too often the hearts and minds of men tend to be forgotten in the macro-economics argument. I have said that before and on one occasion I voted against the Government on such a matter. I know that my hon. Friend the Under-Secretary of State will bear that morale point in mind and that he will do his best for British Rail in the difficult economic circumstances.

I come now to British Rail in general. I am convinced, and I know that many of my hon. Friends are convinced, that it has a vital future in the energy sense, in the environmental sense and in the European connection. I am concerned that the timetable for the Channel tunnel is turning against the Government. The project, has been subject to considerable delay, not just by this Government, but equally there is no credit to be taken by the Opposition. If we were not to follow that path now, I should be distressed.

I know that unity on the matter does not prevail among Conservative Members any more than it does among Opposition Members. My hon. Friend the Member for Faversham (Mr. Moate) and I have disagreed in Committees considering Transport Bills before now. As a convinced European as well as being a supporter of British Rail, I am in favour of the project and believe that we should encourage it. I hope that the Government will be bold. The British Rail plan is a basic plan which is tailored to basic needs and can be privately financed. I hope that our approach will be even bolder than the basic one-bore tunnel plan. I know that there is scope for an increase there and that that will not be the end of the story even if it is accepted. When my hon. and learned Friend the Under-Secretary of State replies, I hope that he will deal with that matter. I appreciate that consultations are taking place. However, my right hon. Friend should deal with the suggestion that the timetable is moving alarmingly against Her Majesty's Government. It has been put to him that the issue will continue through this Parliament and into the next one. That has been said by the hon. Member for Swansea, East and it is a view that I share.

There must always be a balance between subsidies and productivity. It seems that a greater reality is striking home. That applies to management and especially to the work force. I appreciate that there is a fear of unemployment. That must be acknowledged by anyone who has any human feeling. However, those who are in work must realise that efficiency is paramount if new jobs are to be created. They must recognise that we must be sufficiently competitive as a country if we are not to sink. That is the nature of the political and economic argument.

There is now a better climate. We have avoided confrontation in British Rail of the sort that we have witnessed in other industries. Fortunately, in the past few years there has not been too much major confrontation. By and large, British Rail's record is extremely good.

I pay tribute to Sir Peter Parker. He is an outstanding chairman. The longer that he sees fit to remain in that capacity the better. He can communicate with and lead the work force as well as management. It is a work force that has one of the best traditions in Britain. It is in every respect a noble work force. I have said that before in transport debates and I am glad to say it again.

As I have said, the work force must recognise realities. It has been extremely awkward in its time when progress has been sought. I am delighted that no strike took place this year. Reason prevailed on both sides. The test has still to come. That will lie in the final productivity agreement that is obtained from the unions. Confrontation was unnecessary and the climate prevailed in which some form of agreement was possible.

The sooner that we get a confederation of railway unions the better. We have been plagued in our dealings with British Rail generally and British Rail has been put into almost impossible positions because there have been three unions with which the Government and BR have had to deal. There is talk from the union side that a conferderation is about to materialise. That will be part of the better climate that I think is prevailing. I would be the last to take extreme action from the employers' side that might create a strike and make it even more difficult to bring the unions together. Bearing in mind the leadership that Sir Peter Parker can give British Rail, the future of the industry, with the trend of developments and environmental and energy considerations running in its favour, will be extremely good. That future will be enhanced if the unions come together.

It is necessary to show confidence in British Rail. There is within the organisation the sort of leadership that can avoid the lamentable happenings at British Leyland in recent times. There was near confrontation. That involved one of the major aspects of the company's activities. To slip back into a mini-confrontation of increasingly disastrous proportions over tea breaks strikes me as being sad. That is the sort of behaviour that the management of British Rail will avoid.

There has been considerable progress on productivity within British Rail. It was agreed that a target should be set following the 1980 pay settlement and that became the shedding of 38,300 posts by 1985. To reach such a settlement and agreement is a considerable achievement. By the end of 1981 British Rail is expected to have shed 14,250 posts. Parcels and other loss-making services will contribute very much to that result, but that performance must have a bearing when we talk about the morale of the unions and their reaction to the formidable target of having about 38,000 fewer posts by 1985.

We do not know the outcome of this year's wage settlement, but it is clear that progress is being made in certain areas. For example, we have open terminals. The fact that ticket barriers are not being manned is a relevant consideration. There are two pilot schemes, one in Scotland and one in the West Country. There is flexible working which has a bearing on the reduction of overtime claims.

We no longer have guards on the trains on the St. Pancras-Bedford line. That general issue has been with us for years. The objective has finally been achieved on a line that has been electrified. That shows that when faith is shown in the system there will be progress in other directions. I hope that we can all agree about that.

Guards are being taken off freight trains and there are proposals for pilot schemes. Last but not least, an extension of single manning is being discussed. British Rail wants a relaxation of the rules that provide for two men to be in the cab. It is forecast that an agreement will be reached before long. That will be critical. If agreement is reached on that issue, many of the other matters will fall into place fairly speedily.

In my view, nothing would bring about greater confidence within the work force of British Rail than progress on electrification. We have been bottom of the international electrification league among developed countries for many years and our position is becoming worse and worse. My hon. Friend the Member for Faversham talked about the disbanding of the electrification team, which we read about in the newspapers last weekend. That development must worry everybody. It will have a devastating effect on morale. My right hon. Friend the Secretary of State intervened to say that the team was being disbanded because the Government were patiently awaiting the production of schemes. He suggested that schemes were not being presented.

It is a matter of concern when we hear that when any scheme or suggestion is submitted further questions are raised and there is further delay. Any suggestions for electrification in the initial stages of a 10-year rolling programme must be regarded as forming part of a constructive attitude. When the Government consider public sector investment, they must surely realise that there are few better candidates for such investment than the electrification of British Rail. The British Rail work force and others will lose confidence in the 10-year rolling programme if developments such as the disbanding of the electrification team recur.

The 10-year rolling programme is grand in its conception. It sounds marvellous. To be fair to it, it was warmly welcomed by Sir Peter Parker, but it is full of "ifs" and "buts". It is up to the Government and British Rail to establish confidence in the rolling programme which would create the willingness of the work force to work out productivity deals. It is pivotal and a major factor in achieving the confidence of the work force and the consequent productivity.

I have spoken for long enough on this important matter. I am grateful to the House and to you, Mr. Deputy Speaker, for listening to me.

7.11 pm

Mr. George Foulkes (South Ayrshire)

It is a great pleasure to follow such a refreshingly positive speech about British Rail from the Government Benches. I did not disagree with one word that was said by the hon. Member for Leominster (Mr. Temple-Morris). Like him, I am an enthusiastic and unashamed supporter of our railway system. I say that as a willing taxpayer contributing towards it and as a regular user of British Rail network.

An extensive and efficient railway network is essential for the industrial development that we desperately need. It is essential for the development of our tourism and of leisure. That is so self-evident that I am depressed when I hear some of the negative remarks that are made about the railways.

The railway system is environmentally preferable to the haulage of goods and transport of individuals by road, whether by lorries or motor cars. With regard to energy conservation, it is extremely beneficial compared with the alternative systems.

I shuddered to read in The Times today that it was suggested that a business man should be appointed to look at British Rail. It would be an examination similar to the one that was undertaken when the mad Dr. Beeching carried out that dreadful chopping of the railways some years ago. I hope that the Minister will categorically deny the report and tell the House that there is no intention of bringing in anyone like that to deal with British Rail. As the hon. Member for Leominster said, British Rail has an excellent management and a chairman.

The concept of the term "loss" as applied to British Rail is unfortunate. As has been said by a number of hon. Members, we are talking not so much about a loss as about a commitment that successive Governments have sought from British Rail through the public service obligation. It is the public service obligation that we put on British Rail that costs the taxpayers money. It provides us with the services that we request, and we must pay for them.

Many of the current problems of British Rail, as is said in the annual report, are a mirror image of the economy. It is suffering from the recession and the downturn in the transport of freight and of passengers. That is because of the recession in industry and of individuals' inability to afford to travel. The best thing that the Government could do for British Rail, as for many sectors of our economy, would be to make a big improvement in the economy.

We have heard some positive remarks about the intercity services. I echo those remarks. The inter-city services are improving. I have experience of that. However, the British Rail network is effectively crumbling at the edges. Outwith the inter-city network, in the feeder services to the cities and the peripheral services, there is a serious reduction in services on Sundays and in the evenings and in timetabling. Those reductions are creeping insidiously into the good services provided by British Rail. That reduces the attractiveness of the services and, together with the increased prices, results in a downward spiral of the railway system. The crumbling at the edges is not the wish of the British Rail management, still less of the British Rail unions. The crumbling at the edges is the result of a lack of investment and commitment by the Government.

The hon. Member for Leominster efficiently and eloquently gave a catalogue of the improvements in productivity that have been brought about by British Rail management with the co-operation of the unions. He paid a gracious tribute to the unions for what they have done. However, he then talked about the need for electrification. I agreed with everything that he said, but he failed to link the two though they are linked.

There was a bargain between the Government and British Rail. A bargain has two sides. The side of the bargain to which British Rail and the unions were committed was to improve productivity. The other side of the bargain to which the Government were committed was to increase investment. British Rail and the unions have kept their side of the bargain, but the Government have not. They have not given a commitment to investment in the most important matter—electrification. Such a commitment would improve the morale of the unions and everyone else in the railway system, including the management. Therefore, the Government have let down British Rail management and the unions on that side of the bargain.

At the Labour Party conference, which I attended, we all talked about the importance to our economy of increased capital investment. Every time we spoke about it, the first capital investment programme that came to every speaker's lips was electrification of the railways. I had an opportunity to watch on television the Social Democratic Party road show. When the members of that party talked about public investment, the first thing that came to their lips was electrification of the railways. The same thing happened at the Liberal Party and Conservative Party conferences.

The consensus was that electrification was desirable. It would boost the economy, improve the service and help our energy needs by shifting from oil consumption to electicity. However, we have not seen the action. We have been long on talk and short on action. I hope that the Minister, because of the bargain struck by the Government with the British Rail management and the unions and because of the talk by all the parties about the need for electrification, will give us a little hope in his reply.

I turn now to the electrification of the Ayrshire lines. That is different from main line electrification because the Strathclyde passenger transport executive is principally involved. British Rail has said that it is willing to go ahead with its commitment and its part of the expenditure. The Secretary of State for Scotland has given some reasonably helpful signs of his support. The ball is now in the court of the Strathclyde regional council.

If the electrification of those lines does not go ahead, Strathclyde regional council will have to consider seriously the alternatives to electrification. In my view, there are three options. The first is to do nothing to the Ayrshire lines. Eventually, as sure as night follows day, that rolling stock will fall apart. It is in a grotty state at the moment. Any continuation will result in its falling apart.

Secondly, the present diesel multiple units could be upgraded. That would still involve the regional council in substantial expenditure. It would not improve the service in the way that electrification would. It would be a short-term solution only and would put off the ultimate decision when electrification or permanent upgrading would have to take place.

The third possibility is for Strathclyde, which is worried about the revenue consequences, to hand back responsibility for those lines to British Rail. That, however, would undermine the whole concept of the passenger transport executive, although there are some arguments in favour of it.

As several of my hon. Friends have said, electrification brings a number of positive advantages. Electrification in Ayrshire would provide construction jobs on the lines in an area greatly in need of new jobs. It would also provide jobs in the building or refurbishment of rolling stock in Glasgow. It would use steel from the British Steel Corporation's plants in Scotland. It would speed up and improve the service. More people would use an electrified service in Ayrshire than use the present deteriorating service.

If my colleagues in Strathclyde region are worried about section 20 payments, which I appreciate are escalating enormously and represent a great burden for the ratepayer, I suggest that, if they do nothing to the railways, those payments will be enormously increased. There is no stopping that, given the way that things are going at present. But if they electrify the railway and improve the services so that more people use the line, the contributions are likely to be reduced. In the long term, it is a sensible investment. Therefore, I hope that Strathclyde will decide in favour of electrification.

Under pressure from Ayrshire Members of Parliament, the Secretary of State has now offered a grant of 75 per cent. towards the capital cost of the electric multiple units. That will go a long way to help in the repayment of loan charges. In his letter the right hon. Gentleman also said that he would be happy to submit the fixed elements of the scheme … for assistance to the European Regional Development Fund. Can the Under-Secretary of State say whether, in addition, EUROFIMA might have a role to play in financing the rolling stock on the Ayr line if British Rail were to join that body?

I see great possibilities for electrification in that area. It is somewhat different from the main line electrification, but it involves the same kind of benefit to the area and to the service. I therefore hope that my colleagues in Strathclyde region will take an early decision in favour of the project.

My last point on main line electrification relates to the Kilmarnock line, which is not included in British Rail's proposals for main line electrification. I hope that representations will be made by my right hon. and hon. Friends on the Front Bench and by the Government, as local Members of Parliament have already made representations, to persuade British Rail that the Kilmarnock line should be included. The line is an important means of access to Prestwick airport from the south through the Barassie-Kilmarnock link. It is an important alternative to the main line south from Glasgow in times of difficulty. It is also important in terms of access from Kilmarnock to Glasgow and from the Cumnock and Doon Valley district, which I represent. That area at present has no railway station, but if Auchinleck station were reopened—a matter on which I and my colleagues are currently pressing the regional council—60,000 people from that area would have access to a railway station. If British Rail provided an improved service on that line, there would be a great increase in railway use because of the rise in fuel costs and the difficulty of road access. I believe that there would be a resurgence in use of the Kilmarnock line, which would benefit not only the Cumnock and Doon Valley area but Kilmarnock itself. My hon. Friend the Member for Kilmarnock (Mr. McKelvey) is unable to be here, but he has asked me to express his support for such a development. There is therefore great potential in electrification if the Government will grasp the opportunity.

I turn briefly to two points relating to the morale of workers within the railway industry as a whole—a matter which has been mentioned by a number of hon. Members today. Morale among workers in British Rail subsidiaries is very low. The morale of those working in Sealink and British Transport Hotels is extremely low, because the Government are giving them no encouragement whatever. Indeed, they are doing the reverse. If the staff make a success of anything, it is sold off. There is no encouragement for the workers to make a success of those enterprises. There is an incentive to do the opposite. If they wish to retain management of their undertakings, it is beneficial not to make a profit, because, as soon as they make a profit, the beady, greedy eyes of the Minister find their way to it and hive it off to the Conservative Party's friends in the private sector.

I realise that my next point is not the direct responsibility of Transport Ministers, but I am sure that the Under-Secretary of State takes a close interest in it, as, no doubt, does the hon. Member for Galloway (Mr. Lang) who I see on the Government Front Bench today. I refer to the report of the Monopolies and Mergers Commission on Sealink. I understood that the report was due earlier this month, but we have so far heard nothing of it. It is important for the morale of those working in Sealink that we should know as soon as possible what the position is. I hope, of course, that the bid by European Ferries will be ruled out by the Monopolies and Mergers Commission and by the Government. If it is seriously interested in competition, a Sealink service on the Stranraer-Larne line in competition with the Cairnryan service operated by European Ferries seems manifestly in the public interest, particularly now that the link between Liverpool and Belfast has ceased and shows no immediate prospect of resuming operations. I therefore hope that there will be some action on that matter.

My last point relates to British Transport Hotels, and in particular to the Turnberry hotel. The decision to sell off that hotel is one of the most despicable decisions that the Government have taken. There has been a great deal of public investment in it. My right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) recently visited it and was very impressed. There is a new conference suite and an indoor sports complex. Moreover, the annual report of British Rail shows that British Transport Hotels was gearing up to make a profit for British Rail. It had delegated responsibility to its managers. It had set up profit centres and was working towards making a profit. Morale has been severely depressed by the Government's attitude. As soon as it reaches that positive position, the potential for making money is hived off to the private sector.

Mr. Kenneth Clarke

As I am unlikely to have time to dwell at length on the subject of the Turnberry hotel when I wind up the debate, perhaps I should make these points clear to the hon. Gentleman.

First the deal leading to the privatisation of the Turnberry hotel was the creation of British Rail. It was not a Government decision at all. Preparations for it even predated our general decision on privatisation.

Secondly, how does the hon. Gentleman reconcile his demands for investment of various kinds in the main rail business with his total resistance to any money being raised on the subsidiary businesses? Those undertakings have been a drain on the main railway for years. They have been cut off from outside investment by being under the railway umbrella and thus will themselves benefit from privatisation while releasing money for British Rail. British Rail has kept a stake in the new company. It seems to have had £4.5 million to spare for acquiring shares. The National Union of Railwaymen has also acquired shares. how does the hon. Gentleman reconcile his attitude to this aspect with his earlier remarks?

Mr. Foulkes

I am grateful to the Under-Secretary for that intervention. But it contains two examples of doublethink. First, he pretends that British Rail came up with the proposal willingly, when in fact Ministers behind the scenes made it clear that if British Rail did not come up with some kind of proposal the Government would make it do something even worse. The Government twisted the arm of British Transport Hotels and British Rail to come forward with this proposal.

The second piece of double-think is that the Government tell British Rail that it cannot have further investment for its hotels and then use that argument to say that, if the private sector is involved, investment occurs. Investment is not obtained because of the limit put upon it by the Government. Those are two pieces of doublethink that the Minister's intervention has allowed me to expose.

I had hoped to hear the Secretary of State—I hope that the Under-Secretary will remedy this—say something about an "integrated transport policy". Those three words sometimes become almost a totem. There is, however, some meaning in them. What is needed is a rational policy of integration of air, sea, rail and bus transport, ensuring that there is no competition where this is harmful but that there is competition where it is helpful. We need to make sure that rail and air services link up sensibly and that there is no stupid rivalry. What we have from the Secretary of State is not an integrated, but a disintegrating, transport policy—a complete shambles.

7.31 pm

Mr. Michael McNair-Wilson (Newbury)

I hope that the hon. Member for South Ayrshire (Mr. Foulkes) will forgive me if I do not pursue his line of argument. I should start by apologising for not having been present throughout the debate. I hope that this will not bear too heavily on the remarks that I wish to make. I welcome the new Secretary of State for Transport, especially because he has a Treasury training, which I believe will be of the greatest value when he examines the problems of British Rail and the National Bus Company.

I wish to concentrate on the National Bus Company and clause 4 of the Bill, which increases the financial limit of its aggregate borrowing. All hon. Members now present are, I am sure, aware that the National Bus Company came into existence in 1968 when Mrs. Barbara Castle was Minister of Transport. Under the terms of the commencing capital debt, it was prescribed that the debt should be repaid over the period from 2 January 1975 to 2 January 1984. One might have thought that this condition suggested that the amount of capital debt would be a fixed sum and that by the time 1984 was reached there would be some reasonable hope that the figure could be paid off. In fact, the capital debt of the National Bus Company has increased, if not annually, at least considerably, since 1968. It had a capital debt in 1971 of £99.6 million, in 1975 of £121.6 million and in 1980, according to the annual report, of £150 million.

Within the financial structure of the National Bus Company its entire capital debt is repayable debt which its creator who, I remind the House, was Mrs. Castle, assumed would be paid back from the profits which the company would make. In fact, the National Bus Company has been unable to make such repayments out of its profits. Its repayments have had to be met by taking out loans at high interest rates, which have served only to increase the financial burden of the company, no matter how efficient its management

I was a member of the Select Committee that published a report on the role of British Rail in the 1976–77 Session. That report, in paragraph 288, stated, about the financial structure of the National Bus Company: The National Bus Company is in the position of having its entire capital treated as a repayable debt. Since there is no prospect of such repayment from profits, the repayment instalments are met by taking out further loans at high interest rates, thus placing an increasing burden upon the company each year, whatever level of efficiency is attained by management. A comparable private sector business would generally display a capital structure composed in part of equity capital, in part fixed-interest capital and in part repayable loans. Both the National Bus Company and Scottish Transport Group—on whom similar obligations have been placed—have suggested that a more workable structure, in line with that of the private sector, could be adopted. The National Freight Corporation is also under a similar burden, described by its Chairman as 'a practice reminiscent of medieval usury'". Paragraph 289 states: At the other extreme, two public sector businesses have received 'public dividend capital', i.e. capital equivalent to equity capital in the private sector. One of these is in the transport sector, the British Airways Board. At the end of 1975 some £280 million capital was held in this form. The intention is that interest should be paid according to profitability, as in a private business. However, very little interest has in practice been paid by British Airways on this capital, which in the short run could be regarded as a 'hidden subsidy'". Paragraph 290 adds: Apart from the common element of loans from the National Loans Fund—interest on which is dependent upon the conditions of each loan—capital structures and repayment provisions appear to vary widely from one nationalised transport industry to another. The rationale for this is not clear, and in many cases arbitrary factors appear to be involved. One might say that those words about arbitrary factors being involved apply peculiarly to the National Bus Company. I have suggested that it it operates a financial structure not only different from private industry but different from other nationalised industries. As it was set up in the period of a Labour Government, it is difficult to understand the choice of this extraordinary financial burden that it has to carry year after year and which, this year at least, has tipped it well and truly into the red. My right hon. Friend, who brings Treasury knowledge to the job, will therefore realise with just how much enthusiasm I welcome his appointment and how much I hope that he will do something to clarify this nonsense.

Its capital structure distorts the National Bus Company's financial performance. It damages the morale of those who work in the company. No matter how hard or efficiently they work, they still seem to find their company ailing and its financial burden increasing virtually year after year. In the past 10 years the National Bus Company's interest on its capital debt and its long-term loans has increased from £5 million in 1971 to £17.2 million in 1980. That may be one reason at least why the National Bus Company turned in a loss of £11.8 million in 1980.

Mr. D. N. Campbell-Savours (Workington)

Will the hon. Gentleman accept additionally that it has the effect of preventing fair and reasonable competition with those companies that have been licensed as a result of the Transport Act 1981?

Mr. McNair-Wilson

That may be a different point. The National Bus Company's own express coach services are doing well. I shall not therefore pursue an argument that I do not consider to be in the hon. Gentleman's interest but is an argument in mine.

The Bill provides a further £50 million of borrowing to the National Bus Company. I presume that, like so much of its borrowing, this money will come from the national loans fund. I should like to know from my right hon. Friend at what interest that money is to be loaned. Whether the £50 million will provide new cash for National Bus or will end up, like so much money in the past, providing repayments for the interest that it has to find on its capital debt, must be anyone's opinion.

The company may also require the additional £25 million over and above the £50 million to produce the necessary cash that it needs. But whatever is the case, this £50 million or £75 million will increase the National Bus Company's financial burden and will do little or nothing to ameliorate that burden. And so one may say "ad infinitum", for, because of its financial structure, I see no way by which the National Bus Company can ever repay its commencing capital debt and can ever get out of the hands of the lenders, even if the lender is the national loans fund.

I hope that my right hon. Friend will have the courage to stop what I can only describe as a nonsensical tail-catching exercise. I hope that he will look at the structure of the National Bus Company with a view to reconstituting it on lines which, even if they cannot be made absolutely comparable with those in the private sector, would at least be in line with the more favoured sections of the nationalised industries.

I add a local point. This autumn I visited the Newbury depot of the Alder Valley Bus Company which is the local subsidiary of the National Bus Company. Alder Valley sometimes calls itself Kennet Bus, and, on occasion I find it difficult to know where Alder Valley begins and Kennet Bus ends. But for the purposes of my speech, I shall refer to it as the Alder Valley Bus Company.

Those who met me told me that the company's earnings annually were about £1 million, and that its outgoings were about £1¼ million, of which £180,000 was its share of the National Bus Company's interest repayments. In other words, every bus operated by the Alder Valley Bus Company carries £6,000 a year of interest repayment. Needless to say, as the figures show, Alder Valley is running at a loss.

For Alder Valley to be able to continue to run the services that currently it runs, it must go to Berkshire county council for financial assistance. In other words, as a result of the financial structure imposed upon the National Bus Company in 1968, we have saddled it with a debt that it cannot pay, on which it pays increasing interest out of revenue which is ever harder to find and which, as it falls short of what it requires, must be made up by ratepayers.

This is an extraordinary situation. It is so extraordinary that I cannot believe that my right hon. Friend the Secretary of State will allow it to continue. Therefore, in supporting his Bill, I do so seeing it as a short-term measure, a bridging loan perhaps, until such time as the National Bus Company's finances can be put in order, and in such a way that it is not asked to carry this absurd burden of debt.

7.44 pm

Mr. William Pitt (Croydon, North-West)

I have been present in the Chamber throughout the debate, but I have found little to give comfort to the hard-pressed commuters in my constituency, nor to those in London and the South-East in general. But it would be churlish to oppose the measures proposed in the Bill, if only because so little money is invested in transport in this country and transport undertakings are allowed to spend so little to improve transport. However, I am curious, as are other hon. Members, about the rather expensive, and third, change of heart that the Government have had over the docks. I should be very interested to listen to a further explanation this evening.

I shall confine my remarks specifically to rail transport in London and the South-East. I welcome the increase in the public service obligation grant to British Rail. It is welcome news about immediate revenue, but again it offers no hope regarding long-term investment. If we are to believe the Secretary of State's replies to proposals that BR put to him, it seems very unlikely that we shall get long-term investment.

In the Secretary of State's own words, his board's market research has shown that what the customer wants is most is better punctuality, reliability and cleaner carriages. I ask the Secretary of State to travel up to London on some of the carriages, which are not necessarily particularly dirty but terribly overcrowded, on some of the southern region commuter routes to Victoria and other London Stations.

In his reply to BR's proposals, the Secretary of State made it clear that, first, there would be fewer carriages. How it is possible to achieve economies from eliminating guards without providing the necessary new rolling stock with sliding doors is a question that is carefully ignored. At present, the annual turn-out of electric multiple units is 220, which would give us, in all, 22 10-car sets. Admittedly, most of these would be for London, but when most sets have a half-life of about 20 years and the other part of their life is very suspect, one sees very little prospect of any real change in the plight of the commuter who does not have a proper and decent train in which to travel.

While commuters would welcome refurbishment of old stock, one cannot take guards from the back of old stock unless one can put sliding doors in that stock. As far as I am aware, the existing BR commuter stock is incapable of being converted to take such doors, which means that if we want to take guards off the back of old stock, we must put new trains in place of that stock so that the trains can be efficiently and properly run without guards at the back.

I gather that we are to have what are described in the jargon as higher load factors. That is what the customer understands as more standing and overcrowding. This means that planned crowding is being incorporated into already unplanned overcrowding when trains are late or when they have to be cut for various reasons—mechanical, meteorological or otherwise.

Productivity will give little increase of comfort to South-East commuters because there is very little productivity that can relieve their plight on crowded trains, largely because most of the productivity there depends on how many men are on the trains. I have already explained my view on that matter.

There will be no money to improve travelling conditions—for instance, in much-needed station modernisation. Here I enter a little plea for Norbury station. After a normal rainfall, the platforms there are often awash with rain. On a particularly unpleasant day, passengers have to paddle through two or three inches of water to board their trains or leave them. With no more money for the modernisation of stations in the coming financial year, it seems that people using Norbury station and other unmodernised stations will have to continue paddling. Perhaps they should be issued with galoshes as they buy their tickets.

On a serious note, it is illuminating to compare the subsidies received from the Exchequer by various types of commuters making a specimen 25-mile journey to central London. The British Rail commuter enjoys a daily subsidy of about £1.50 through the public service obligation. I add, as an aside, that if that subsidy were increased just, for example, to £1.75 per commuter per day, such a commuter would gain immeasurably from the investment that that increased subsidy could provide.

However, the person who drives a car into London and parks free of charge in a company car park avoids parking fees of about £700 a year and taxation of about £1.25 a day. If the car in which he drives is an average—size company car, the daily subsidy from the Exchequer—not from his employer—amounts to more than £9 if he pays tax at the standard rate and more, obviously, if he pays tax at a higher rate.

That means that the commuter to London who uses a company car is subsidised to six times the extent of the subsidy given to the person who has to come into London by rail. The worst case is the company car user who parks on the street. He is probably subsidised to the extent of £12 a day for his car and £1.25 a day for the space he uses, which is approximately nine times the subsidy enjoyed by the rail user.

Clearly, in that case the tax regime under which company cars are operated is unfair and objectionable. It is especially nauseating to the hard-pressed, mortgage-paying commuter to be lectured on the evils of subsidised fares by members of the Institute of Directors and other such bodies, all keen supporters of the Government, who are not only provided with company cars but with petrol with which to run them, virtually untaxed. There is one set of standards for commuters and another set for those who enjoy pleasantly subsidised company cars.

I offer one policy to the Minister that he might consider carefully—the tightening up of parking in London. The number of traffic wardens has fallen from 2,100 in 1975 to 1,300 in 1981. Some may not believe that, but it is the fact. That is not because there is no work for them—far from it—nor because none can be recruited. It is because the Government are playing the numbers game with levels of public service staffing. The systematic contempt of parking regulations by motorists, because the chance of receiving a parking ticket is so remote, and the means of avoiding payment is so easy, is a matter that demands attention from the Government. It is a national scandal that 5 million parking tickets issued in London during the past 10 years have gone unpaid.

If the Government put their system of levying fines in order, that could provide a source of funds from which to raise the level of investment in public transport. We would especially wish that that money was used to improve productivity and provide reliable equipment. It is incredible that the Government should be so doctrinaire in their approach to public transport that London, still the financial centre of the world, expects to spend less to support the provision of a decent public transport service than almost every other capital city.

The Secretary of State has shown himself insensitive to the needs of commuters in calling for more crowded trains, fewer new carriages and more productive use of railway staff without the necessary investment. The transport services of London and the South-East, both those of British Rail and London Transport, have declined in quality and will continue to do so unless more money is spent on them.

I speak not only about the passenger transport services. In South London especially we suffer from the juggernaut, which is not the subject of the debate. As I remember saying earlier, if we had built the rail link to Nine Elms we might have enabled railway investment to grow at a greater rate, because much of the heavy goods that now trundle up the Brighton Road and the A2—and other roads that were not built for juggernauts—could have been moved to the railway tracks, most of which already exist and could have been used more profitably than they are now.

I wish the private car to be put firmly where it belongs—not clogging up central London or the suburbs, while moving towards central London, so that people can get in to work. It should be used for long-distance driving and pleasure. If the Minister was to take that suggestion on board, it would produce not only a useful source of revenue for a much-starved British Rail, but would provide a more pleasurable existence for thousands of people who do not necessarily travel by train but who are fed up to the back teeth with being clogged up in traffic jams and inhaling carbon monoxide fumes when they are trying to go about their daily work.

7.54 pm

Mr. Sydney Bidwell (Ealing, Southall)

I start by declaring my interest as a Member sponsored by the Transport and General Workers Union. I also remind the House that we have a Select Committee on Transport that has been hard at work since it was set up. It is a new feature of Parliament that Select Committees are now involved with every Department of State. What will happen if we are sensible is that we shall emerge with an exhibition of not too many differences and a concentration on practical considerations.

The Leader of the House, in the debate on the Queen's Speech, spent about 10 minutes telling us how much more proficient Parliament is compared with the position before the new system developed. If he puts that emphasis upon our work, one hopes that the Prime Minister and the Secretary of State for Transport will also do so. The Secretary of State will find that—I shall not say that it is the finest body of men ever put together—the Select Committee on Transport has assembled Members of the House with a considerable background and experience in transportation. If we speak unanimously, logic says that the Government must pay close attention to us.

We are engaged in a major study of urban transport and the London traffic mess. We are handicapped in this debate because we must not make direct reference to the current GLC fares scheme. However, the broader aspects of that problem must be part of a consideration of London's transport system. It involves a certain amount of philosophy. We welcome the hon. Member for Croydon, North-West (Mr. Pitt) to debates on transport. He will find that he has much to learn when he rubs shoulders with those of us who have been involved in transportation debates for a long time. A consensus must emerge. The Secretary of State has already heard in the debate—which necessarily gave rise to wide-ranging thoughts about transport problems, the sufferings of commuters and those who have juggernaut lorries trundling past their front door, with whom we sympathise deeply—about the wide circumstances that arise from a limited Bill that we shall examine with more care in Committee.

If the Secretary of State had considered carefully the evidence of the National Bus Company, he would have seen that it has a considerable argument about its longstanding and long-running capital debt, about which it has been complaining for a long time. One hopes that, whatever else arises from the existing circumstances and the Government's attitude towards assistance to the National Bus Company, it will not lead, as one participant has already suggested, to putting old vehicles on the road. A proud record of the National Bus Company has been the turnover of new vehicles. Those vehicles are always kept up to date, which must lead to a better and more efficent system. That policy is followed in the case of company cars for directors. The economy of the matter suggests that if there is a large turnover of cars, they will be more efficient and will break down on fewer occasions.

That is the proud record of the National Bus Company. However, it is now affected by other considerations, such as the doctrinaire Transport Acts of 1980 and 1981. Some of us served wearisome hours in Committee considering those measures. The new Secretary of State has some Treasury experience. Although I do not know whether that commends itself to most hon. Members, it may be that he has blown in as a refreshing breeze. The proof of the pudding will be in the eating. His predecessor was regarded as a hard case and an avid Tory. However, we have not seen much evidence of that during these long exchanges.

I must not pre-empt the Select Committee's report, which I hope will contain some sensible conclusions. However, its members have travelled in the United States, Canada and Western Europe in search of truth and knowledge. They wanted to know whether they could learn from the experiences of other civilised countries. We have learnt a great deal. The Select Committee will report to the House. It is not a handmaiden of Government, rather it is a Government tool. Ultimately, we shall present practical proposals based especially on what we have recently learnt from our visits to those other countries.

It is fair to say that we are not hooked on the doctrine of privatisation. We seem to be hooked on the idea of some form of integration, but that may not necessarily be the old-fashioned ideas of the Labour Party. Over the years, our debates have involved certain sloganising about integration and co-ordination of all forms of transport. But what was appropriate in the 1920s, 1930s and 1940s must be re-examined in the light of events. In any case, we need a heavyweight surveillance of transport in all its forms, and that is particularly so of London.

The question of London will be examined and re-examined in the light of the evidence that the Committee has taken. In particular, we must consider the illogicality of the GLC's domain. The bulk of the London Transport railway network system is to the north of the Thames. There is a long history of curtailing underground development south of the Thames because the Southern region was the pioneer of electric traction.

I was amused by what the hon. Member for Huddersfield, West (Mr. Dickens) said about the old days of railway competition. There is no railway competition. From 1921 onwards, one could never talk about railway competition. The various railway companies reached agreements and pooled ideas. At that time, we had such things as the railway clearing house. The railway system was over-ripe for nationalisation when the Labour Government nationalised it in the post-war period. A lot of nonsense is talked about these matters. We are certainly not looking for fierce competition between the various modes of transport, although views may differ on accent and emphasis.

I am glad that hon. Members, particularly my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth), laid emphasis on the affairs of the National Bus Company. The bus and taxi workers must be involved if our transport system is to develop. Those workers must be willing partners in any new concept.

Some hon. Members may have seen the article in The Sunday Times alleging that British Rail had clashed with the Secretary of State over an electrification plan. It should be borne in mind that the leaders of the railway workers confront these problems in the interests of the people they represent. They want not only a modernised railway system, but better pay and conditions for the work force.

It may well be that the Government will get co-operation from the workers by shedding some jobs. But as a former railway worker, I have never been enamoured of the idea that productivity could mean having no railway workers on the trains. As the hon. Member for Croydon, North-West said, there is still a powerful case for retaining someone to be in charge of the train other than the driver. That was the origin of guards. I was a freight guard for many years, but I often worked on passenger trains.

The vast majority of our road workers are freight workers. In spite of what the hon. Member for Croydon, North-West said, the bulk of the nation's freight transport will continue to be carried by road. However, I concede that a powerful case can be made for a change to rail—for example, with regard to explosives and certain other traffic.

The Government must deal with the workers involved in the industry. They are dealing not with unorganised workers but with people who have a rich tradition of trade union organisation. They expect to be consulted all along the line. The transport workers are not unprogressive. They realise that the transport system of the 1920s is not suited to the 1980s. They will be co-operative, but the Government must be realistic. They must recognise the importance of the transport workers to the economy. It should be remembered that as we speak thousands of workers are involved in our transport system, many of them throughout the night. If we want their sons to be involved as well, we must give them a fair crack of the whip.

8.8 pm

Mr. Peter Fry (Wellingborough)

First, I apologise to the House and to my right hon. Friend the Secretary of State for missing his speech. I have been acting chairman of the Select Committee on Transport for most of the afternoon and early evening. Hence my late arrival.

Secondly, as on previous occasions, I declare my interest in the National Bus Company.

It is a pity that the hon. Member for Croydon, North-West (Mr. Pitt) has left the Chamber. I did not intend mentioning the London problem, until I heard the hon. Gentleman trot out every environmental prejudice that I have ever heard in my life. I do not know how many of the hon. Gentleman's constituents are members of the Institute of Directors, but, even if they received no subsidy at all, there would be little additional money available for the rest of his constituents who daily commute by rail.

The message that seems to come from the new alliance is "God help you if you own a car, because we will clobber you." I hope that that interesting message wings its way further north before Thursday morning. It was interesting that, yet again, we heard a recital of the ways in which more Government money should be spent, with only an airy-fairy indication of how it should be provided.

Various comments have been made about the fact that the Secretary of State has come from the Treasury. Like my hon. Friend the Member for Newbury (Mr. McNair-Wilson), I welcome my right hon. Friend to his new post. When my right hon. Friend first saw the Bill, he must have said "Good heavens, am I a member of a Conservative Government? If ordinary people look at the Bill, they will see an initial increase of £3,000 million to £6,000 million payable to British Rail, with provision for another £4,000 million by order. Is this the skinflint Government that will not invest in public industry?" There are signs in the Bill which clearly show that the Government are investing, dare I say it, far too much money in public industry.

I am particularly concerned about the £200 million grant increase for the Port of London Authority and the Mersey Docks and Harbour Company. I shall not venture, as the hon. Member for Liverpool, West Derby (Mr. Ogden) did, into the affairs of the Mersey company, but everybody knows that the Port of London is dead, and the problem is that we have to pay the corpse millions of pounds of taxpayers' money because it will not go away. It is high time that the Government settled the Port of London problem, grasped the nettle and accepted that the port is finished. The taxpayer must be relieved of the responsibility.

Mr. Nigel Spearing (Newham, South)

The PLA is not finished. London is still Britain's biggest port.

Mr. Fry

The main expenditure in the Bill relates to British Rail. As I understand it, the Bill is merely a continuation of previous legislation and effectively tops up the amount made available for what is known as the public service obligation of British Rail—what Sir Peter Parker is fond of calling his "contract" with the Government.

As an EEC member, the United Kingdom is bound by regulation 1191/69, which allows member States to support certain transport undertakings. There is no dispensation in that interesting document to pay for anything like the public service obligation. It specifically allows for payments in respect of any route or installation. They are specific words. British Rail is paid annual vast sums which are not specific. I hope that my right hon. Friend will answer that point, but perhaps we shall learn the answer in due course.

We are presumably supposed to adhere to regulation 1191/69, which provides that support should be the least costly to the community". The regulation continues: The adequacy of transport services shall be assessed having regard to the possibility of having recourse to other forms of transport and the ability of such forms to meet the transport needs under consideration. That brings me to the money being made available for British Rail. It is no great secret that large portions of the British Rail network, loosely called "the country services", are hopelessly uneconomic. I appreciate that my right hon. Friend's predecessor—for whom I have the greatest admiration and regard—went on record in the early part of his office saying that there would be no cuts in the British Rail network. I have felt that that statement may subsequently have been a slight embarrassment to British Rail, which knows perfectly well that an enormous amount of taxpayers' money subsidises lines which are little used, particularly by passengers.

If the Secretary of State and the Government are serious in their attempt to check the unnecessary expenditure of public money, it is high time that they reconsidered the economics of country lines. We must maintain the intercity service and the community networks for our major conurbations. However, if we are to adhere to the EEC regulations, is it not time that we considered alternatives to the existing expensive rail services which are not being used? I hope that my right hon. Friend will consider the matter afresh.

As a member of the new Select Committee on Transport, I know that it has reiterated the decision of the previous Select Committee on Nationalised Industries regarding the finances of the National Bus Company. It is strange that we are contemplating an enormous increase in the amount of money to be made available to the rail user over the next few years, whereas most of those who travel by public transport will receive a very small subsidy.

I appreciate that it is difficult to make comparisons between rail and bus travel. If one considers passenger mileage, which is probably the best comparison, one discovers that the rail user is subsidised four times more than the bus user. However, the majority of people who use public transport travel by bus. I do not believe that the present situation should be allowed to continue. It is not only the National Bus Company that finds life difficult. Every bus operator finds it difficult to make a profit, particularly with the problems of replacing worn-out vehicles.

The Bill concerns subsidising, and we are talking about subsidising the transport sector.

Mr. Ogden

The hon. Gentleman seems to be under the impression that the Bill will physically provide money for British Rail, bus transport or the "corpse". However, the Bill provides not a single ha'penny for those organisations. It provides the possibility, with the good will of the Government and the Secretary of State of the day, that organisations may borrow money from somebody else or, in a limited number of circumstances, may obtain a loan or grant from the Government.

Mr. Fry

The hon. Gentleman will surely agree that the PSO will represent the greatest chunk of money in the Bill. I appreciate that my right hon. Friend the Secretary of State will discuss with British Rail next week the size of the PSO for the next year. I do not deny that that is necessary, and I am not suggesting that British Rail breaks even or that it should receive public money. However, there is a large discrepancy between the support given to British Rail and the rail user—we must be particularly concerned about the transport user—and the support given to bus services.

British Rail is subsidised far more than bus operators. Problems will continue in relation to bus services, no matter how many experiments are introduced by the Secretary of State, until the nettle is grasped and we decide how far to subsidise public transport as a whole. I am trying to point out the differences between the amounts given to rail users and those available to bus users. If the Government are serious about providing an effective transport system, they must answer that question.

The most important aspect of all is that the moneys are not payments for transport—they are social service payments. No Government have ever faced that fact. They always pretend that the money is for transport expenditure, but it never has been and never will be. Despite the passes for old-age pensioners and young people the cost of transporting them is the same, no matter how much the bus company or British Rail has to charge them.

There is an opportunity for the Government and the new Secretary of State to look again at the subsidies for public transport. I hope that the Secretary of State will bring the analytical mind of an ex-Treasury Minister to bear on the problem. The country is crying out for a transport policy that accepts the realities and is not based on myths such as those I have tried to explain.

Mr. Booth

I am appalled at what the hon. Gentleman is saying. Is he aware that our total subsidy for public transport is probably lower than that of any other EEC member and that the amount that BR collects in fares as a proportion of total operating expenses is probably higher than any other railway system in the EEC? Is he suggesting that the other EEC Governments live not in the real world but by myths?

Mr. Fry

That is not what I am saying. The money spent is not transport expenditure—it is social services expenditure and should be treated as such. Looking at it in that light might lead to equal treatment for the various forms of public transport.

The Bill follows historic precedents. British Rail is subsidised enormously, although every year it and the Secretary of State have words about the level of the Government's contribution. Because the National Bus Company has to break even each year, it ends up with mounting debts. That is not very sensible.

There are transport costs which are constant, no matter how efficient the operator, but if that operator has certain social obligations to provide a service, whether rail or bus, there is also an obligation on the Government to underwrite that as a social services, not a transport, cost.

It is not that I believe that there should not be a degree of subsidy. No rail system could run without a subsidy. But we could run the inter-city and commuter lines without such a large subsidy if we considered the future of the country lines. More money would then be available for investment. The right hon. Member for Barrow-in-Furness (Mr. Booth) was right when he said that British Rail had been starved of investment. There should be money for electrification. It would take only £20 million a year for five years, rising to £30 million a year for another five years, for British Rail to have a fine, modern system,

However, for years we have been stuck in a mould of financing public transport—a mould which the Bill perpetuates. We shall continue in the same way until one Secretary of State grasps the nettle, looks at the question again, and realises that subsidies for most public transport should be the responsibility of another member of the Cabinet.

8.24 pm

Mr. Bob Cryer (Keighley)

I shall be intereste in what the Secretary of State says about the way that the Bill affects the external financing limit. If the public service obligation grant is increased, will that be within the framework of the external financing limit which will then force British Rail to cut down its borrowing requirement? What British Rail needs is the ability to undertake extensive investment. I shall cover one or two points and then give examples of the effect that the lack of investment is having.

We have heard about the need for electrification, and British Rail has announced that its electrification team is to be broken up. It will take at least 12 months to reassemble the team, and it is possible that its expertise will be scattered throughout the world, with former team members gaining employment in other countries where the electrification of railways is going ahead, making the team irrecoverable for at least 12 months.

The hon. Member for Wellingborough (Mr. Fry) spoke about the country areas, where services are much appreciated. They are maintained by ageing diesel multiple units. The same is true of urban areas outside the London region. British Rail wants to provide good services to its passengers and to attract more passengers, but it cannot do it if maintenance work is pared to the bone so that, if there is a difficulty with 20-year-old DMUs—and I accept that a portion of the fleet has been refurbished—maintenance facilities are scattered so far and wide that often it is difficult to get out maintenance fitters to do the necessary work. It is a frequent experience at my own station of Keighley to join a diesel multiple unit which is being locomotive-hauled because there has been no time or opportunity to repair the DMU at its base at Morecambe. This is a very costly exercise, and it is only necessary because of the lack of investment by British Rail on replacing its fleet.

There are two experimental vehicles in operation—one is a multiple unit and the other is a rail bus. But I have no doubt that the Minister will say that he has received no plans from British Rail for an investment programme to replace the DMU fleet.

British Rail's difficulty is that it is living from hand to mouth and has to wrest every penny from the Government even to maintain existing services, without embarking on a massive investment programme necessary to replace the fleet. However, the Minister can help. He can say to British Rail how much he will welcome proposals from it for such a replacement programme. One of British Rail's difficulties is that, because it is not sure how electrification will be proceeded with, some areas will have their multiple fleets replaced by electrification. If the area north of Hitchin, for example, is extended by electrification a number of diesel multiple unit links will be released for use elsewhere.

If the Minister is prepared to say that the Government are willing to finance the investment necessary to replace diesel multiple units, British Rail will be able at least to plan with some certainty. That is an opportunity which I invite the Minister to take. Services in West Yorkshire badly need replacement vehicles.

I want to illustrate how the curbs on investment imposed by the Government on British Rail work out in practice. The Eastern region is near break-even point, give or take a few million pounds. But other regions are looking for ways to make ends meet. I suspect that the London Midland region has decided that it will make ends meet by closing the Settle-Carlisle railway—76 miles of country route of the kind referred to by the hon. Member for Wellingborough who, from what I gather, is a bus and road spokesman—to take away expenditure which it would much prefer to embark upon to maintain a valuable railway system.

Such a decision will affect my constituency. It will reduce services at Keighley station. It will mean a diversion of the Nottingham-Glasgow services. British Rail proposes to introduce this change in May 1982. It will mean passengers in the Leeds and Keighley areas of West Yorkshire no longer having direct services to Glasgow and as far south as Nottingham. In addition, there is the proposal to remove entirely all inter-city links between Leeds and Nottingham. It is not just the country routes which are affected.

What is the reason for that proposal, apart from simply wanting to get rid of the cost of maintaining the line? The reason, according to British Rail, is that the cost of maintaining the Ribblehead viaduct—which it has suddenly discovered, although it has been working on it for the past 20 years—will be several million pounds, if it is to be made structurally sound. In my view, British Rail is using that as an excuse to offload its debt in order to break even—a requirement that the Government place on it.

To close the line would be an enormous tragedy. The railway provides services, not just between Settle and Carlisle, but also in my constituency. The biggest revenue-earning point is Leeds, so there will be a diminution in British Rail revenue. The line also enables people, in a scheme which is unique in this country, to go without cars into the Yorkshire dales, with bus-linking schemes at some of the stations. It is an experiment which has proved extremely successful, and it was pioneered by the Yorkshire dales national park. It takes thousands of people into the dales to enjoy the beauty without the accompanying problems of thousands of cars, either parked or crowding the roads.

If the services are diverted, as British Rail proposes, and lower standard services are substituted, I believe, as do many others, that it will be a back-door method of closing the Settle-Carlisle railway. My hon. Friend the Member for Carlisle (Mr. Lewis) is present and would willingly endorse what I say. Because of the beautiful nature of the line and the extraordinary scenery that it passes through, and because of the nature of the dales rail experiment—which has been successful, has revived several stations, and is much appreciated by the people of the area and further afield—the Government should say "Yes. Investment is needed in the short term—not a long-term scheme, but here and now."

This is another example of how big public organisations such as British Rail tend to skimp when they are short of money. Seven years ago, for example, Ribblehead viaduct was not waterproofed—to save money. It can be argued that the present difficulty is a consequence of that decision. I understand that the London Midland region has already halted all track replacement expenditure and all further work on the Ribblehead viaduct and associated viaducts along the line.

We are talking about a national asset. I am sure that the story can be repeated elsewhere. It behoves the Government to provide additional expenditure so that a region of British Rail should not be put into the position of having to break even, as it is being asked to do by the Government.

I want to comment on the whole British Rail network, with particular regard to what the hon. Member for Wellingborough said. He seemed to be very critical of the support that the Government give to the non-paying services run by British Rail under the public service obligation. We have an 11,000-mile network of passenger services in this country. They are a vital national asset. Our oil reserves are finite. Whether or not additional oilfields are found to extend our oil reserves from 25 to 30 or 35 years, they are finite. The railways represent a vital form of transport for our people. If the Government allow the 11.000-mile network to be diminished in any shape or form now, because of temporary financial difficulties which they have imposed on British Rail, it will be a loss for future generations. We shall need virtually every mile, and more, of the passenger network.

8.35 pm

Mr. David Gilroy Bevan (Birmingham, Yardley)

I have listened with great interest to the debate and I am amazed by the amount of accord that seems to exist on both sides of the House on the basic issues.

My background is that I was honoured, before being elevated to this honourable House, to chair the West Midlands county council transport and highways department. Before that, I chaired the West Midlands passenger transport authority and before that, the city of Birmingham transport authority. Therefore, I have a deep and abiding interest in public transport. We found it possible to integrate public transport, although it is said that that is not being done elsewhere.

I pay tribute to the Labour Government. Much as I opposed the Transport Act 1968 at the time, it gave us an opportunity to integrate and we found that we could put together schemes at very little cost. We built five new suburban railway stations—the first in the country—and refurbished another seven stations. We provided completely refurbished stock. We joined one side of the city to the other, from Four Oaks to Longbridge. We created over 50 marshalling service facilities at Tysley and upgraded all the suburban railway services.

The cross-city line led to a 3,000 per cent. increase in passenger utilisation. There will come a time when the refurbished stock, with new brakes, new exhaust systems and internal furnishings, will come to the end of its life. Some of the stock was 20 or 30 years old when we refurbished it. Therefore, at some time the refurbishing question must be faced. I note with interest that as a prerequisite to firmly joining—I hope—EUROFIMA we shall at least have a Government guarantee that our membership will be paid. Indeed EUROFIMA is an organisation of 16 countries that will examine similarities in stock and possible areas of standardisation. We shall then be able to examine the possibility of buying standardised stocks at cheaper prices than our techniques and our buying facilities in this country might allow. When the Secretary of State has had a chance to analyse the tests on the two-car train—and whether it can stand the various stresses that will be placed on it—and when he has seen the proposals for the new multiple unit, the time will be right for renewing stock. After all, it must be borne in mind that that will have to be done.

When I go to the local station that I had the honour of planning—"Birmingham International" station, near my constituency—I might have to wait 20 minutes or half an hour for the excellent train because urgent attention should be given to refurbishing and repairing railway lines. Line maintenance and replacement should be given the first priority. Electrification is also important, and the Government have committed themselves to that over a steady 10-year programme. In addition, new stock is necessary.

I agree with Opposition Members that the railways are part of our national heritage. As the hon. Member for Keighley (Mr. Cryer) rightly pointed out, it is essential that our public transport system should not be wound down. The newly appointed Secretary of State has said that he does not believe in railway cuts and intends to keep the lines and services in existence.

I come back to the comments of my hon. Friend the Member for Newbury (Mr. McNair-Wilson). I well remember the Select Committee on which he served in 1966–67 because I had the honour to give evidence to it in the House. He mentioned that the Transport Act 1968 was created in an unfair manner and gave an unfair form of accounts to the National Bus Company. That is true. It also allowed the heart and guts to be taken out of the NBC in the cities. I know that, because it was my job to negotiate the purchase of the Midland Red Bus Company in the West Midlands for about £4 million, which the National Bus Company had to pay back.

I give another warning. We are now in a position where morale in British Rail may be low because of privatisation, although some areas should properly be privatised. Let us not be guilty of doing the same thing with the National Bus Company. As soon as we have given it the extra money—we are increasing its borrowing limit by £50 million to £250 million—let us not force it to sell its motorway express undertaking, which is giving the very profitability that will reduce the amount of subsidy and borrowing that will be necessary in the future. I hope that we do not immediately siphon off those areas and merely leave the parts that cost the money and need the subsidy.

The hon. Member for Croydon, North-West (Mr. Pitt), in a flippant speech—on which I congratulate him—"bashed" the motor car. But in transport we should get the mix right between trains, freight, buses and cars—jeopardising no one as far as possible. That is not abusing the transport system as, for example, the West Midlands metropolitan county council is doing at present, where there are the most ridiculous and extreme reductions in fares. A child can travel anywhere in the city at a 2p fare and can create much nuisance and vandalism. That is an abuse and that is why the Government must find subsidies.

Surely this Bill is good news. It includes an increase in British Rail's borrowing powers of £200 million to £1,100 million; an increase of grant to the board of £6 million with another £10 million to be given as and when necessary; the joining of EUROFIMA; and the increase to the National Bus Company. Surely the proposals on the docklands must be admired, whether in Merseyside, the City of London or the Isle of Dogs as an enterprise zone. We are getting to grips with the matter. Money is being made available to transport. I congratulate the Government on getting the balance right and I hope that the good work will be kept up. Like all hon. Members, I hope that the Channel tunnel will be built and I should like a car extension in the future, if possible. I should also like rolling stock to be refurbished.

There are lessons to be learnt from the 1968 Act. One may be that it is necessary, for example, that the monster that we created in the form of the metropolitan county councils should be wiped out and that we should return transportation areas to the areas that existed over meaningful distances when we formed the passenger transport authorities. I congratulate the Government and wish the Bill well. I am certain that it can only be good.

8.45 pm

Mr. Ron Lewis (Carlisle)

I must declare my interest because I am a member of the National Union of Railwaymen. I am sure that my union will be delighted with some of the remarks uttered by the hon. Member for Birmingham, Yardley (Mr. Bevan). If a Division takes place, I hope that the hon. Gentleman will express his feelings by supporting the Opposition.

Transport, especially rail transport, seems to be demoted to the bottom of the league table by most Governments. I have the honour to represent what was one of the best railway cities in the United Kingdom. In the days before nationalisation seven railway companies ran to the Citadel station at Carlisle. British Rail used to be the largest employer in the city. I regret to say that that is no longer so. Since the Beeching proposals, we have been well down the rail transport employment league table.

I take up the remarks of my hon. Friend the Member for Keighley (Mr. Cryer) about the possible closure of the Ribblehead viaduct. In April the joint branches of the railway unions in Carlisle heard that the viaduct was to be closed. They saw through that closure the beginning of the end of the Carlisle-Settle railway.

Railwaymen are rightly suspicious. There is always the tendency to start a gradual rundown and to use that as a reason for final closure. My constituents are worried. I met them, and arising from that meeting I contacted the general manager of the London-Midland railway. I asked him whether he could tell me what was happening about such a rare piece of railway line. The deputy manager informed me that there were difficulties. He said that it would cost slightly more than £4 million to make the Ribblehead viaduct operational. He added that no decision had been made on the region's advice. He assured me that when a decision was taken he would advise me so that my constituents could be informed. That is where we stand.

The general cry from both sides of the House and from the three or four parties whose representatives have contributed to the debate is that we must have more Government investment in better transport, whether by bus or by rail. We appreciate what has been done for the railways, but my union feels that, unless there is more investment, British Rail and many of its lines will be dragged to a complete halt within a few years because of outdated equipment and machinery.

I am told that it would cost about £4.5 million to put the Ribblehead viaduct in operation. I believe that we can save that wonderful piece of railway line to which I have referred. As my hon. Friend the Member for Keighley said, it is one of the most picturesque stretches of the London-Midland region's network.

Therefore, I make a plea to the Government on behalf of my constituents. It is nothing short of criminal that the Government should quibble over a mere £4.5 million to repair a viaduct that has stood for 114 years, but give the go-ahead for the spending of £35 million on a spaghetti junction. Where is the difference? Spaghetti junction has been in operation for only 10 to 12 years, yet £35 million can be found for it. When it comes to investment on the line, we should not forget that employment is involved and that it will make a lot of difference to people in that far corner of the North-West. I appeal to the Minister to have another look at that matter. I hope that British Rail will also reconsider it.

Mention has been made of the qualities of the chairman of British Rail. I endorse everything that has been said about his personal qualities. I believe that Sir Peter Parker is respected by most railwaymen. However, I also believe that he would be more greatly respected if he acted as did the chairman of the British Gas Corporation and staked his claim for more investment to save British Rail.

I hope that the Minister will not treat the matter with his characteristic disdain. I know what he will say. He will say that the Government give the money, but it is a matter for British Rail. However, not only the Ribblehead viaduct but a number of other areas are gradually declining because of lack of money. I hope that the chairman of British Rail will show his grit, as did the chairman of the British Gas Corporation, when he meets the Minister next month and that he will join the unions in going all out for more investment in British Rail.

8.52 pm

Mr. D. N. Campbell-Savours (Workington)

The House will be grateful to my hon. Friend the Member for Carlisle (Mr. Lewis), who has so eloquently put the case on a matter that is of considerable concern in Cumbria. He has championed his cause not only in the House but in the county. I also thank my hon. Friend the Member for Keighley (Mr. Cryer) for the way in which he effectively reinforced the case.

The hon. Member for Southampton, Test (Mr. Hill) spoke about heartache. A part of the Bill that will lead to increased heartache is that which increases, in my view insufficiently, the facility for financial borrowing of the National Bus Company. The National Bus Company has major financial difficulties which stem from a number of factors. One is the decision last year to reduce the external financing limit of the National Bus Company. Another is the cuts in the transport supplementary grant and their effects on revenue support. The Government have made a commitment to phase out that support.

There has been a reduction in the commitment by many county councils, certainly Conservative-controlled county councils, in their transport policies and plans to suggest a sufficiently large amount of money to maintain the services necessary fully to service their constituents. The reason for that is that they have to make a contribution. They find that unacceptable in the light of the other requirements of the Government to cut back on local services and local spending.

Cuts in bus grants were introduced by the Secretary of State for Transport in the Labour Government who has departed for another political party. He was, of course, introducing or requiring those cuts at a time when the other changes on transport legislation—as with the cuts today—had not been introduced. There is also the operating profit requirement that the National Bus Company should make a profit of £18.5 million by 1984–85.

Finally, there is the matter of competition which was introduced in the Transport Act 1980. I shall address my remarks to that subject because the requirement for competition which has been imposed on transport undertakings throughout the United Kingdom has led to much of the difficulty experienced by the National Bus Company today. In my view, that will lead to demands for an increase in EFL and certainly to demands for higher borrowing, more than is suggested in the Bill. If greater amounts of money are not borrowed, or if the EFL is not increased, taking into account the requirement for profitability by 1984, it is clear from evidence which I am told was given to the Select Committee that 60 million service miles will be cut out of the national bus programme by that time.

In referring to the changes in competition, I remind the House of a debate which took place in March 1980, soon after I was elected to the House. During the Report stage of the Transport Bill a number of exchanges took place which were the subject of much public comment in Cumbria. They stemmed from answers and undertakings given to me one and a half years ago by the Under-Secretary with regard to services which existed in parts of my constituency and other parts of the county. I shall quote my own words and the Under-Secretary of State's reply.

I referred to the fact that in my area there were a number of small villages, including Aspatria, in the Home Secretary's constituency, Brigham, Broughton Moor, Ireby, Bothel, Lamplugh, Deanscales and a number of other small communities where bus services were losing money. I asked the Under-Secretary what action the Government intended to take to ensure that those routes would be preserved. He replied: Its non-profit-making rural routes will be supported, like others, by revenue support and transport supplementary grant. They are not adversely affected by the Bill. After a number of other interjections I asked the Minister. What will happen to undertakings in counties such as Cumbria if certain routes are removed from the municipal undertakings and given to private enterprise? The Under-Secretary replied: They will not be removed."—[Official Report, 24 March 1980; 'Vol. 981, c. 988–90.] In the county of Cumbria that response was seen as an undertaking and a promise to my electorate and to the electorate of Cumbria that, whatever the effects of the Transport Act 1980, they would not damage those rural routes.

In that debate I referred to some enterprising young operator who might turn up and apply to take over the profitable routes of CMS. It was in response to that that the Minister suggested that the routes in my constituency would be adequately protected.

Eight months ago, the enterprising young operator turned up and applied for the profitable routes of Cumberland Motor Services, as had been forecast in the House. I understand that the commissioners refused the application, but that, on appeal, the Minister intervened and overturned the commissioners' judgment. The result was that Yeowart's Coaches, the enterprising operation, was able to set up on the profitable routes of CMS. The matter was not heavily publicised and little was heard from anyone apart from CMS locally to suggest that a number of minor routes would be lost as a result.

Last week I received a letter from a Captain James, of Hallgarth, Eaglesfield, Cockermouth, saying: The people of this village are appalled by the news that the No. 25 bus service to and from here is to be cancelled on November 28th 1981. This will cause considerable hardship and inconvenience to a large number of our people, many of whom are old-age pensioners and have no means of getting their requirements other than by bus to Cockermouth. He continued: Whilst most of us appreciate that a service of any kind must be profitable, we cannot understand why a whole community must be cut off because some competition has been introduced which does not even affect this area in any way, so we ask you to reconsider cancelling our bus service. That gentleman's letter to me was but the tip of the iceberg. Further examination revealed that Cumberland Motor Services had withdrawn six rural routes in West Cumberland. So that the Minister cannot escape from the reality of the legislation that he introduced, although I am sure that it has dawned on him, I quote from the views put to me by Cumberland Motor Services: these cuts are as a direct consequence of the abstraction of revenue and the cost of the resources needed to limit that loss of revenue created by the new town service in Whitehaven operated by Yeowart's coaches. In fact, with the exception of Services 62, 63 and 64 the other services were on the original list of examples of services that could be at risk, as given at the Traffic Commissioners' hearing in connection with Yeowart's original application. In other words, when CMS asked the commissioners not to grant the application, the possible loss of those routes was given as a reason why it should not be caused to lose the funds which it used for cross-subsidisation. The letter continued: I also wish to confirm that the withdrawal of Service 25 will effectively leave the village of Eaglesfield without public transport other than for the odd school journey which serves the village by way of diversion of other services. As far as normal social, work and shopping journeys are concerned the village will be depleted of services. That was followed by a letter from Allerdale district council. Again, that is an authority to which I referred one and a half years ago in objecting to the introduction of the legislation. Allerdale district council stated: The effect of this approval has resulted in Cumberland Motor Services lodging counter proposals to make up an estimated loss in revenue which might result by the introduction of Yeowarts service. The Company propose to withdraw certain services not only in the Whitehaven area, but also in Allerdale. My Council are very concerned as Cumberland Motor Services proposals, if successful, will mean the complete withdrawal of some rural services with the consequent effect this will have particularly upon school-children who rely on these services and commuters, generally. In other words, the legislation introduced by the hon. Gentleman, and defended by him at the Dispatch Box with undertakings to my constituents that the rural routes would not be lost, has led directly to the loss of six rural routes. I submit that the Under-Secretary of State totally misled the House of Commons, the people of this country and my constituents who have now lost the vital services which they should have.

Mr. Kenneth Clarke

As the hon. Gentleman knows, that has nothing to do with the Bill. He will also realise that I shall not have time to reply to his comments when I reply to the debate as we cannot have an Adjournment debate on bus services in Cumberland in the middle of a debate on the Transport (Finance) Bill. I undertake to reply to him, but I hope that he and his constituents will not take my silence on the matter today as acquiescence in the description that he has given of transport services in Cumberland.

Mr. Campbell-Savours

The hon. and learned Gentleman may be aware that I had to check before rising to speak that this matter was not sub judice. An application has been made to the High Court to set aside the judgment. This matter is very much to do with the Bill because we are discussing the financial arrangements governing the operation of the National Bus Company. The Minister, in the form of the Transport Act 1981, introduced provisions that led to competition with municipal routes and caused a loss of revenue that directly affects my constituents. I hope that if I put down a parliamentary question the hon. and learned Gentleman will give a written and reasoned reply to the points I have made.

9.5 pm

Mr. Donald Dewar (Glasgow, Garscadden)

I cannot claim to have any great knowledge of bus services in Cumbria. I listened, however, with great care to my hon. Friend the Member for Workington (Mr. Campbell-Savours). I would have thought that, prima facie at least, there is a case for the Minister to answer. I am disappointed that the hon. and learned Gentleman cannot find time in the half hour that he will be allowed to say a few words on the subject. I hope that he will find an early opportunity of commenting on what seems a sad case of the unfortunate by-products that can arise from this Government's legislation.

I do not pretend to be knowledgeable about the details of the Cumbrian situation. I am, to some extent, tonight a refugee from Scotland I am glad, however, to be speaking in this wider debate. The public transport system and its financing is a matter of enormous importance in the part of the country from which I come. The problems of inadequate investment, higher fare structures and falling passenger totals are ones with which I am familiar. They are causing enormous problems in every part of the United Kingdom.

There has been reference to the measure as a split Bill. This creates difficulty when hon. Members are trying to hold a coherent discussion. I should like to say a few words about the ports. I was fascinated by the great certainty with which the hon. Member for Wellingborough (Mr. Fry), who made a brief appearance in the Chamber to make his speech but who has not returned, declared the demise of the port of London. The hon. Gentleman said that it was a corpse that would not go away and objected to pouring money into it. I would have thought that this was, to say the least, a controversial view and a message of defeatism that would not be endorsed by a large number of people in London and the country as a whole.

I accept that there is a case for help for London and Merseyside. Those ports face a great crisis. The Secretary of State said that they were unique. My view is that they have great problems. To call their problems unique may be over-optimistic. There are a large number of other ports that face similar problems. One has only to look at the situation in Bristol or, if I may be parochial, the Clyde Port Authority. The same storm is gathering force around those ports as we have seen in London and Merseyside.

The Secretary of State outlined criteria justifying the help that he offers. The right hon. Gentleman said that in London and Merseyside there had been a large manpower rundown. In 18 months, the Clyde Port Authority has lost 33 per cent. of its employees, amounting to 600 jobs. The number of registered dockers has fallen from 569 to 382. The second criterion was a dramatic decline in traffic. Here again, the Clyde, like so many ports, has suffered blows. We have lost Manchester Lines with a loss of revenue of £700,000 to the authority. Sea Trains have gone from Greenock with a loss of revenue of £1.7 million. A port that was handling 1.6 million tonnes in 1970 is now down to around 500,000 tonnes. In a decade, the put-through has gone down to almost two thirds. I would count that as a dramatic decline in trade by any standards.

While there is no immediate threat of closure—the third criterion—it is fair to say that the operating profit in 1979 of £2.5 million went down in 1980 to £46,000, a false figure due to £1 million of non-recurring items. In 1981, we face an unambiguous loss of £1 million.

I rehearse these facts, rather in shorthand, as a cautionary tale. The Clyde port—this applies no doubt to ports on other estuaries and in other areas—is vital to the economy of the area. Merely in terms of the dredging operations for the shipbuilding industry, for example, and of the attraction and servicing of industry, it is essential that a port survives on the Clyde. While I make no objection to the help that the Secretary of State is offering to Merseyside and London, I believe that he must face up to the fact that almost inevitably he will be forced very shortly into extending the scheme and this approach on a national basis.

There have been some sneering remarks—and perhaps a shrugging aside—about the possibility of a national ports policy. Whether that comes by ad hoc decisions or by sensible planning in advance and decisions about investment and rationalisation, in any event the Government will be involved in the development of these ports and will not be able to wash their hands of the matter.

I turn to the problems of British Rail and the proposals in the Bill as to its finances. For a very long time we have all been aware that there have been increasing problems in maintaining services and investment in the rail network. Almost a cliché of British politics is a phrase that Sir Peter Parker coined, I think, about the crumbling edge of quality. If anyone takes the trouble to read Sir Peter's evidence to the Select Committee on the Treasury and Civil Service, on 6 July, he will see that that phrase returns and Sir Peter makes the point that if the present course on investment is maintained—the decision is the Government's, not British Rail's, because it is the resources that are made available and the permission to spend which are necessary—that crumbling edge will become more than a minor embarrassment; it will become a major threat to the viability of the whole railway network.

During the debate many hon. Members have underlined exactly that point very eloquently. When my hon. Friends the Members for Carlisle (Mr. Lewis) and for Keighley (Mr. Cryer) talked about the Ribblehead viaduct, I detected some laughter on the Government Benches—as though a viaduct was some ancient monument of no practical importance. I recognise that it represents a good deal of finance—about £4 million—but it is a very important part of the link between Scotland and England on the West Coast, and it is just one dramatic but important example of the dangers of ignoring the problems involved with having a proper financial basis for the development of our railway network.

If I remember rightly, what Sir Peter said on 6 July to the Select Committee was that if we maintained our present course, if the present rather stingy approach continued, we would see an enormous increase in the number of speed restrictions. He suggested that about 800 miles of track would be subjected to speed restrictions. He suggested that about 3,000 track miles would be under threat during this decade. He specifically suggested—I am again instancing a Scottish worry which is always with us in railway terms—that the West Highland line might be closed within one or two years.

I see that the Under-Secretary is already laughing—as though the West Highland line was a matter of no importance. I recognise that it is a problem, and that it is always on the margin so far as the rail network is concerned. But I want to see the present network of 11,000 miles maintained. If people think that I am raising some sort of bogy and that there is no serious threat to it, they have only to read the speech made by the hon. Member for Wellingborough, who obviously takes great interest in transport matters and presumably has the ear of Ministers. Despite all his special pleading it is clear from what he said that he was prepared not only to contemplate but to advocate very substantial reductions in the rail network on financial grounds. I believe that that would be a great tragedy for all of us.

The Bill will increase the borrowing limits of the British Railways Board. That is fair enough. A written answer today informed the House that the PSO will increase by £110 million. One's first thought is that it means more money for British Rail. However, the Minister must spell out the implications of that increase. My experience is that if the PSO increases but the EFL remains the same, there will not necessarily be increased financial room for extra investment in the British Rail network. If the external financing limit remains static and the PSO takes up a larger share of it, the capital borrowed for investment will be squeezed rather than increased, especially as the external financing limit covers both freight and passenger services. The money that comprises the upper tranche of the EFL has beeen used more and more to cover the freight losses that are so disastrously heavy as a result of the recession manufactured by the Secretary of State and his colleagues.

One cannot assume that if the PSO goes up that will help British Rail's investment problems. It may help British Rail to compensate for declining passenger revenue, which is another inevitable knock-on consequence of the general recession that every British industry is facing, but there is no direct correlation between the measures announced today and an increase in direct investment that is so badly needed in the British Rail network. We shall wait to hear what the external financing limits of British Rail will be. Unless there is a generous approach to that, the problems to which all hon. Members have referred during the debate will be as great and acute as ever.

I have talked about the possibility of line closures and the protection of the route network. As a Scottish spokesman, I wish to mention the Kilmacolm line. That line, which is near to where I live, will be closed on 1 January 1983. The Scottish Transport Users Consultative Committee unanimously recommended that the line should not close because of the social hardship that would result. That decision had to be taken by the Minister. He has not increased confidence in the future of the rail network by deciding to close it.

Of course, the matter is not so simple. We have often heard the sound of the buck being passed sharply. The Minister is trying to say that if the passenger transport executive in Strathclyde can find extra cash it can keep the line open. That illustrates what I said about British Rail. The passenger transport executive cannot find the cash because of the cash limits and the EFL. It is hopelessly circular and essentially dishonest for the Minister, who must make the decision, to say that he will close the line, implicitly because of some failure by members of the passenger transport executive to get themselves off their backsides and save the line in the period allowed. However, the executive cannot do that because the Minister responsible for them—the Secretary of State for Scotland—will not take a sensible view about what is in the public interest and what the cash limits of the Strathclyde PTE should be.

In the financial year 1981–82, the Strathclyde PTE will pay £22.7 million to British Rail for its section 20 expenses out of a total of £45.2 million received from the region. It is a massive burden and it is the only regional authority in Scotland that pays anything under section 20. The knock-on effect upon its other services is very great.

My hon. Friend the Member for South Ayrshire (Mr. Foulkes) mentioned electrification—I shall deal with that shortly—and specifically the Ayr line. My complaint about that is simple. It is that Ministers have erected a plausible facade that covers a basically dishonest approach. The Government have announced that they will give a 75 per cent. grant towards the upgrading of EMUs that might be used on an electrified line in Ayr. They have said that for the second part of the expenditure on overhead lines, gantries and so on, they will go to Europe and hope to get something like a 30 per cent. grant. The rest of the £18 million that falls under that heading will presumably have to be found by the Strathclyde PTE.

I do not know whether the additionality system would apply and whether that would be added to the EFL of the Strathclyde PTE. In any event, a 75 per cent. grant will be made for rolling stock. There is the suggestion that we may go to Europe for some sort of funding on the other cost. The other £26 million for basic track and signals, which makes up the total of £63 million, will have to be found by British Rail.

From what the Secretary of State said, Strathclyde can now go ahead with the electrification programme. But there is not a hope in hell of Strathclyde getting on with that programme unless something is done about its cash limits and a ceiling placed upon its borrowing requirement. The vital missing ingredient, which makes the rest a sham and a near-fraud, is the refusal of the Secretary of State for Scotland to do anything to allow Strathclyde to find the money to make up the budget necessary to get the programme under way.

The message we must hammer on every door, particularly the door of Dover House, is that this electrification will give a reasonable return on capital, create jobs and do much to revive the British Rail network in the West of Scotland, which is being stopped because of the spending limits imposed on the Strathclyde PTE.

I recognise that much work has gone into general electrification. I do not pretend to be as expert as some hon. Members about option 3 versus option 5 or the working parties that studied this subject. But I find it disappointing that at a time when the Department of Transport has been involved in extensive studies that have come forward with recommendations, Ministers should start trying to shift their ground and alter the rules that were laid down at the beginning by suggesting that instead of looking at network costs and return on capital, we should do it on a line-by-line, almost a mile-by-mile, basis, thus effectively shelving the matter for a considerable time.

There has been a good deal of comment about the electrification team that is now under sentence of death following the issue of redundancy notices by Balfour Beatty. The hon. Member for Faversham (Mr. Moate) was courageous in his protest and absolutely right. If we are to have a modern railway system, we must move towards electrification. That means that we must preserve the design team and start making progress on the ground. I am disappointed that there Has been so much dragging of feet and that very little has happened over the last few months.

There has been much discussion about morale in the railway industry. My hon. Friends the Members for Carlisle and Ealing, Southall (Mr. Bidwell) both spoke with authority about that. There is no doubt at all that there is a crisis. I know that from talking to people who work in the industry as well as to their representatives. Anyone at British Rail headquarters in Scotland will admit that for a number of years investment has been about 30 per cent. less than was needed merely to maintain standards, let alone to push the threshold forward. Sir Peter Parker, in his evidence to the Select Committee, almost as a throwaway line, said that this year British Rail is eight months behind on normal track renewal. There is no doubt that the crumbling of standards and general disintegration and deterioration will become a major problem unless halted by a courageous Government who recognise what is in the public interest.

The record of the railways and BR employees in the shedding of labour over the past 15 to 20 years is remarkable. It has been done in a spirit of tolerance and goodwill. In Scotland, British Rail has about 17,000 employees, and the number is dropping by about 1,000 a year.

The ordinary employees—not those in the hierarchy or those with a vested interest in causing trouble—are beginning to feel that they are on an endless downhill track. They are making sacrifices, but the public are not being asked to invest in the success of the system. They are told that their sacrifices are essential, but it looks to them as if no one else is prepared to do his bit.

There has been speculation in The Times about a new Beeching-style inquiry, dreamt up by the Central Policy Review Staff, which I sometimes wish had never been dreamt up itself. That is not likely to improve the general atmosphere.

If the Secretary of State is a reasonable man, he will accept that, if there is to be any chance of achieving a successful conclusion to discussions about productivity, open stations, more flexible rosters and the reduction of manning on freight trains, the Government must convince the public about their commitment to the railway system. We are a long way from that.

Let me give one example of the mistaken decisions that have been taken. I refer to an area where, I concede, we are on weak ground in arguing for help for the railways. The lines above Inverness will always be a problem in terms of passenger use, but they are of immense social importance.

On narrow accountancy criteria, those lines are on the verge of dropping off the BR network, but a little investment in them would produce a high rate of return. For example, more efficient level crossings, radio signalling and even, mundane though it sounds, a cheaper and more efficient heating system on the trains would result in admittedly negative, but nevertheless real, savings and a high rate of return on the money that was ploughed in. There are many such examples throughout the railway system, and no sensible Government should pass them by.

The Opposition welcome the Bill as far as it goes. It is a technical measure, necessarily so in many ways; but it begs the big questions, and the difficulty is that we cannot go on begging those questions for much longer. The railway people, commuters and the country generally demand answers, and so far we have had a thin diet of answers.

The Under-Secretary must tell us something more positive about the Government's commitment to a realistic investment policy that will put British Rail on an efficient basis and allow it to do the job that the travelling public demand.

The Government should soon increase the EFL, because the rise in the PSO is not enough and may even be a complication. Something must also be done to ensure that people believe that the network will be protected and that the electrification programme, which is economically so valuable and has a central part to play in our general economic revival and a vital part to play in the revival of the railways, will be tackled with energy and put in hand without any more of the shilly-shallying, prevarication and buck-passing that have characterised Government policy in the past two years.

9.30 pm

The Under-Secretary of State for Transport (Mr. Kenneth Clarke)

The hon. Member for Glasgow, Garscadden (Mr. Dewar) has made his debut in United Kingdom transport debates. He captured the mood of a substantial part of the debate with his understandable concern about the state of the transport industries at a time of considerable financial difficulty. He went on grossly to overstate his case, using inaccuracies in a way that can only serve to depress those who read these debates outside and who may believe some of his allegations. In their desire to put forward their case, hon. Members have worked themselves up to a state of excitement, often about matters with little or no factual basis.

In half an hour I cannot answer all the specific transport questions that have been put to me. Tomorrow night there is an Adjournment debate on the Carlisle-Settle line. We know of no proposals to close the Ribblehead viaduct, and there is no question of the Government having refused £4½ million. The diversion of the passenger service which has set off all the fuss was taken on commercial grounds by British Rail and has nothing to do with the physical condition of the viaduct.

The hon. Member for Workington (Mr. Campbell-Savours) expressed understandable concern about the state of village services in his constituency. I shall have to write to him about those bus services. He repeated the case of CMS about the basis on which it cross-subsidises its services. Ministers looked at that case on the evidence put to the traffic commissioner and to the inspector on appeal. The evidence was not sufficient to satisfy us that the granting of the new licence to Yeowart's, which seemed to us a desirable innovation in transport in Cumbria, was the cause of the threat to rural services that the hon. Gentleman described so dramatically.

The hon. Member for Garscadden spoke about the problems of the Glasgow to Kilmacolm line. He accused my right hon. Friend of using near-fraudulent arguments to attribute part of the blame to Strathclyde regional council. But that council withdrew financial support from a line which previously it had supported. In giving reluctant consent to the closure, my right hon. Friend delayed it to 1 January 1983 to give the council time to reconsider its decision. No doubt the other Scottish matters will be taken up by the Secretary of State for Scotland.

We all accept that British Rail faces a difficult financial time. We are in the middle of a recession, and that business is not unique in being affected by it. British Rail's difficulties are not due to any reduction of financial support by the Government. On the contrary, the Government have tended to increase the financial support for the railways. British Rail has suffered sharp drops in revenue on both passenger and freight services, and it has not yet succeeded in reducing its costs.

Nevertheless, despite those financial difficulties, it does no good to dismiss the substantial investment in all parts of the network. It is leading to an improved performance in important parts such as the London and South-East services. Both British Rail and the Government would like a more efficient, better invested modern railway, and whilst there is a long way to go we are moving in the right direction. It is not right to make speeches such as that of the hon. Member for Swansea, East (Mr. Anderson) which became increasingly pessimistic as he surveyed a whole picture of gloom and decay. We have quite a reasonable railway and, as my hon. Friend the Member for Leominster (Mr. Temple-Morris) pointed out, with partnership between railway management and railway unions it should be possible to achieve the future for the railways that we all desire.

The Bill centres on the question of financial support. The right hon. Member for Barrow-in-Furness (Mr. Booth) described the railways as being in a financial straitjacket. He then plunged into detail in an attempt to identify what he thought were the constraints. The detail is something of a maze and it is difficult to secure agreement on figures. However, in almost all areas the Government have been flexible and have improved financial support to the railways.

The trouble is that the railway is the system that we have and one which we inherited from the Labour Government, and there are a number of controls exercised by the Government over the finances of British Rail. The first is the so-called external financing limit which governs the total amount of grant and borrowing available to the railways from public sources. That has been revalued recently and at the moment stands at £920 million for 1981–82. It has been increased by the Government to take account of British Rail's trading difficulties in the recession. There is no doubt that it is not as high as some people would like. But at a time of serious economic crisis £920 million for one year's EFL is a fairly large proportion of national resources to direct towards the railways.

I move to the grant that subsidises the losses on services that the Government and local government regard as socially desirable and necessary. That is measured by the so-called public service obligation. In response to the question of my hon. Friend the Member for Wellingborough (Mr. Fry), I can say that that is a European Community imposed system whereby the Government lay an obligation on British Rail—it was done in 1974—and pay a certain sum to enable the railways to discharge that obligation.

Only today my right hon. Friend the Secretary of State announced an increase in that grant for this year of £110 million. It is the first time that the grant has been upvalued in the course of a year. The total grant to the railways from central and local government will be £850 million this year. That is more than £2 million a day by way of subsidy going into the railways. Roughly, it means that the present level of subsidy to British Rail to support passenger services costs about £15 each year for every man, woman and child in the country, and that is before anyone has bought a ticket and chosen to make a journey by train. For every 60p that British Rail received in rail fares in 1980, it received 40p in grants from the Government.

On the PSO and the grants and subsidy, British Rail is not being constrained. My right hon. Friend announced only today a substantial increase.

The other control on British Rail is the investment ceiling imposed by the Government. I do not criticise the right hon. Member for Barrow-in-Furness because I have the advantage of substantial advice in finding my way through the maze, but he was confused when he said that the ceiling had been reduced. The Government impose an investment ceiling, and that remains in real terms at the exact level set by the previous Government. We have not reduced it. The figures keep varying as they are updated for each year. My latest figure is £427 million for 1981–82.

The word "ceiling" was used by the right hon. Member for Barrow-in-Furness to describe the spending on investment by British Rail. They were board figures and a board ceiling that he gave. It is true that the board's spending on investment is not at the moment reaching the ceiling imposed on it by the Government. It is investing at a lower level because of the pressures on its external finance limit. But the only way in which that can be looked at is that British Rail is finding it difficult to get up to the level of investment that it would like and up to a level that the Government would allow because the declining business performance of the railways makes it difficult to achieve that within its EFL. It is because of this lost revenue, the failure to control costs and the level of pay settlements in line with the productivity return that British Rail has difficulty in investing to its ceiling within its EFL.

Mr. Booth

The hon. and learned Gentleman implies that my case is unsound because my figures are wrong. I insist that he says which of my figures is wrong. I quoted separately the ceilings and the actual expenditure. I made it clear that my expenditure figures were based on the average 1981 expenditure adjusted to uniform limits. I was talking about the total expenditure dropping from £475 million at 1981 prices in 1979 to £400 million in 1981. That is the drop in investment expenditure. If we take actual prices rather than constant prices, the board's ceiling in the same period was set at £398 million, and it spent £308 million, but only if one excludes the constant welded rail expenditure. However, one cannot properly exclude that. I ask the Minister to accept that as fair, because the convention was to take that out at the end of 1979.

Mr. Clarke

The right hon. Member for Barrow-in Furness keeps changing his phrases. I am talking about the Government ceiling, which is imposed by the Government as a limit on investment. It remains unchanged in real terms. He uses the phrase "board ceiling", which is not relevant to any Government control. He describes the board's actual expenditure. Plainly, he is not talking about Government controls because, as he says, we took continuous welded line replacement out of our controls and our investment ceiling. The Government's investment ceiling has not been reduced. The reason why the board has not felt able to invest up to that ceiling in recent years is the decline in the business performance of the railways within the EFL, and that is not a Government-imposed restraint.

The investment performance enables the railways to achieve a great deal. Hon. Members have talked about the decay of the railways. The newly elected hon. Member for Croydon, North-West (Mr. Pitt) described the state of the London and South-Eastern services, as did the hon. Member for Swansea, East, who was perhaps less at home with the details of the matter. Nevertheless, when one considers what is going on in the railways within the present levels of spend and within Government controls, one can see that British Rail is bringing the advanced passenger train into service; it has 95 high-speed trains in service; there is a continuous programme of introducing new electric rolling stock on the Southern region; it is spending a large amount on signalling at Victoria, on new signalling on the Brighton line, and on signalling in the West of England. Refurbishment is going on all the time.

It does no service, nor does it improve the morale of the staff of British Rail, to gloss over that and to say that somehow the railways are going to the dogs when, despite the difficulties, the railway management is succeeding in investing and producing substantial improvements in some parts of the service.

Many questions were asked about electrification, which is the key issue now facing British Rail. Many people are anxious that progress should be made in that regard.

Mr. Moate

rose——

Mr. Clarke

I shall not give way, because I have two more industries to cover, and I am still on British Rail.

There was a lot of interest in electrification. There has been absolutely no change in the Government's position from the statement that was made on electrification by my right hon. Friend the Member for Sutton Coldfield (Mr. Fowler) on 22 June. His statement was welcomed at the time as a challenge to the railways. We are now waiting for the railways to put forward the revised business programmes for inter-city and freight, and we are awaiting submissions on particular routes, to show whether they are profitable. Even in transport, involving the kind of figures that I have mentioned, one cannot wave away the idea that investment should be demonstrated to be profitable at a time of great financial difficulty.

We have committed ourselves in principle to a 10-year programme of electrification. Now there is understandable concern about the timing. I can only say that the phrase that was used, that the new programmes and timetable for electrification will be produced by British Rail in weeks rather than months, was a phrase which, to the best of my recollection, was used by the chairman of British Rail, and not by my right hon. Friend the Member for Sutton Coldfield last year. It appears in the Official Report only in the statement given by the rail council, after it had met my right hon. Friend and myself on 22 June. It was with the same disappointment that was felt by British Rail that we heard on 12 October from the chairman that the programme would not be ready before the end of this year. Indeed, some of the programmes for individual schemes will not be ready until the middle of next year.

Mr. Ron Lewis

rose——

Mr. Clarke

I shall not be able to answer the questions that have been put to me if hon. Gentlemen keep asking more questions.

The Hitchin and Huntingdon scheme has been mentioned. Indeed, it appeared recently in the press. We knew that British Rail wished to begin work on that line when the chairman wrote to us on 23 July, asking us to agree in principle to the electrification of that section of the East Coast main line. He did not say at the time that there was any threat to the future of the Balfour Beatty team, although Balfour Beatty got in touch with us and began to alert us. British Rail then raised the question with us again, when we had a meeting with board members on 30 September to consider progress on electrification. We have had exchanges with them ever since. However, we have not yet received the new business plans or a submission on the Hitchin-Huntingdon line in any form other than the letters from the chairman.

It makes no sense to look at that short section of the East Coast main line in isolation from the proposal to electrify the rest——

Mr. Ron Lewis

rose——

Mr. Clarke

We look forward to receiving British Rail's full submission as soon as possible. So far, we have received only letters. I am sure that British Rail will be anxious to come forward with a full submission soon.

We remain committed to electrification. We are also trying to make progress on the Channel tunnel. The hon. Member for Swansea, East and my hon. Friend the Member for Leominster expressed concern about the Channel tunnel's timetable. The Government have aroused interest in the Channel tunnel. We have made it clear that we are interested in propositions and they are now coming forward from a wide range of contractors and engineers. We are anxious to make progress, to reach an agreement in principle with the French about a desirable form of Channel link.

However, the Government have not dragged their feet. Hon. Members must appreciate that France has a new Government, who are now in discussions with us as a result of the recent Anglo-French summit meeting. The French Government are scrutinising all our proposals for a Channel link in order to try to reach that agreement in principle. We had hoped to reach that agreement before the end of the year, but it is understandable that the French Government should wish to go into such matters in detail. As soon as he can, my right hon. Friend the Secretary of State will make a statement or announcement to the House in the new year.

In that short explanation of the position, I hope that I have made it clear that it is wrong to say—as several hon. Members have insisted—that the Government's relationship with the railways and the unions is all take and no give. We have maintained the investment ceiling and extended the external financing limit. Today, we have raised the public service obligation. We have committed ourselves, in principle, to a 10-year programme of electrification. We have been encouraging about the Channel tunnel and we have also said that some productivity and improvements in performance should be given in return.

I am prepared to acknowledge that British Rail is making reasonable progress towards the productivity improvements that it set. We took the first productivity targets from British Rail's corporation plan, and it cannot be argued that those targets are impossible. British Rail is now well on time with the targets. However, British Rail is in the middle of important and difficult negotiations about productivity improvements, the manning of engines, the rostering of crews and open stations and so on, which flow from the pay settlement. We shall stick to the terms of our electrification agreement and I am sure that British Rail will stick to its terms. In that way, we shall soon achieve the productivity improvements, the business programmes and submissions for particular lines.

Mr. Foulkes

Will the Minister rule out the possibility described in The Times today, that some business man will be brought in? That report casts a great shadow over both workers and management in British Rail. I am sure that all hon. Members will want the Minister to rule out that possibility.

Mr. Clarke

I am grateful to the hon. Member for South Ayrshire (Mr. Foulkes), because he has reminded me that I had failed to answer that point. I read today's report with astonishment. The review of British Rail's finances was first suggested to the Government by British Rail. The chairman of British Rail has agreed with my right hon. Friend about the desirability and need for such a review. The idea that it will be some type of Beeching review is extraordinary. The phrase has crept into today's press stories. However, my right hon. Friend has reiterated the previous Secretary of State's commitment that the Government have no desire to see any substantial cut in the network. We agree with British Rail that there is a need to review British Rail's objectives, the finances to serve those objectives, the way in which the railways are run and their efficiency in achieving those objectives.

I shall turn briefly to the subject of the National. Bus Company. I should hate to give credence to the description given to the National Bus Company by the hon. Member for Liverpool, West Derby (Mr. Ogden). He described it as the poor relation of the nationalised industries. I know that he was not saying that in a critical spirit, and I agree that we often do not pay the National Bus Company the attention it deserves.

The Bill includes a modest increase in the borrowing limits of the National Bus Company. The hon. Member for Workington (Mr. Campbell-Savours) said that the increase was not enough, but it reflects the NBC's decreasing reliance on borrowing and its expectations that it will not need to borrow. For that reason, the increase in the borrowing limits, compared with former levels, is not in line with inflation.

Several hon. Members raised the question of the interest on the capital debt about which many National Bus Company subsidiaries and their managers are anxious and have been pressing hon. Members throughout the country. The National Bus Company would obviously prefer all its interest charges and commencing capital debt written off. No Government have ever felt able to agree to that, because the charges on capital and the cost of servicing the capital are as much a cost of any business as wages, fuel and other operating costs. We could not put NBC at an unfair advantage vis-a-vis its competitors by wiping off all its capital debt at the taxpayers' expense.

Nevertheless, the interest charges, complained about by some subsidiaries, are worth examining. Hon. Members should bear in mind that the charges amount to less than 3 per cent. of the NBC's total turnover. Although there is a campaign about the interest charges, they are not rising. They have been declining in real terms as a charge on the National Bus Company for some time. However, we have agreed to set up a study, with the assistance of Touche Ross, to examine the way in which those interest charges are divided between the different companies.

When looking at the problems of the National Bus Company, which has been given fairly tight financial limits and demanding commercial targets at which to aim, we must not talk ourselves into the belief that the NBC is deprived of support or that the Government are not giving subsidy to desirable services that local authorities and politicians of all parties agree must have some support from public money. The NBC received more than £90 million of public money from the central Government in 1980 in the form of new bus grant, fuel duty rebate and local authority revenue support. A further £20 million was provided by local authorities for concessionary fare schemes. It is not true that we are phasing out the transport supplementary grant. In each year's settlement we accept a given level of revenue support expenditure by each local authority. Unlike some Labour-controlled councils, such as the GLC, West Midlands and Merseyside, we have some regard to the taxpayers' and the ratepayers' ability to pay for the level of support that we accept. I am sure that that commends itself to most taxpayers as a basis for financing bus services.

Mr. Stephen Ross (Isle of Wight)

rose——

Mr. Clarke

I shall not give way to the hon. Gentleman, because he has not been present during the debate. I usually give way to him when I reply to a debate, because he is normally present for the debate. I have only eight minutes to talk about ports.

I shall not spend much time on the usual panacea of the right hon. Member for Barrow-in-Furness that we should have a national ports policy. He was no more successful in explaining to my hon. Friend the Member for Faversham (Mr. Moate) what that meant today than he has been before. It seemed that he was opposed to the Government approving a profitable investment in our flourishing ports, such as Felixstowe and Medway, because he thought that in that way we might reduce the embarrassments at London and Merseyside. I do not accept that.

The right hon. Gentleman should not be so proud of his legacy on the national dock labour scheme. He left behind legislation that implied that that scheme should be extended to large amounts of dock-related work throughout the country. I recall that his proposals then would have made much work subject to the dock labour scheme at Newark-on-Trent, near my constituency, which is rather a long way from the sea. That was not the general tenor of most of the speeches by my hon. Friends with port interests.

I should like to answer the general allegation, which had credence on both sides of the House, that the Bill is somehow a change of stance by the Government from previous Bills. This is the third, as I know only too well. My hon. Friend the Member for Faversham and I have been through them all. The last Bill, which was published in May 1981, was at the time declared to be interim legislation until we had the full corporate plans from the ports and were able to take long-term decisions about their future.

I remind the House of what I said at the stroke of midnight on 14 May 1981 on Third Reading. My words were the last words in the House from the Government on the Bill. I said: The Government will therefore now be considering whether to continue providing assistance pending receipt of the full plans from the PLA and the Mersey Docks and Harbour Company in the summer. We hope in the summer to be able to make decisions on the longer term future of these two authorities and to be able to chart a clear and early return to profitability. Meanwhile, this Bill provides the means for the ports to continue in business until those long-term decisions can be taken."—[Official Report, 14 May 1981, Vol. 4, c. 996.] I made it clear in Committee that there would be another Bill this Session once we received the corporate plans and the advice of the accountants and were able to take clear decisions for the future. My right hon. Friend now has the corporate plans and the accountants' advice and the Bill is the result of that information and the Government's commitment to the ports in future.

The basis of the support is not very different from what has existed. Basically, it will cover severance, because there are still surpluses of labour in the docks. Meanwhile, it provides support to cover operating losses to keep the ports open while severances are taking place. There will be provision for essential capital investment.

There was provision in the previous Bill, as there is in this Bill, for essential capital investment. The capital investment that is needed will require the consent of my right hon. Friend. My hon. Friend the Member for Faversham thinks that this might give an unfair advantage to London and Liverpool vis-a-vis the other ports. All support for capital investment, if any be given, will be by way of loan. Precisely the same level of interest will be charged as that which is chargeable under Harbours Acts loans, which are available to other ports. The bankrupt condition of the London and Liverpool ports means that they would not be able to qualify for Harbours Acts loans without Government support, which they would otherwise receive.

Several hon. Members have referred to severance schemes. No decision has been taken to have a special severance scheme. The underlying problem in both ports continues to be an excess of labour when compared with traffic. There was criticism of the scheme that was operated last year but that scheme was successful in London and Liverpool in bringing both ports back to a healthier condition. It was followed by the recent NAPE voluntary scheme, which was operated throughout the country. That scheme up-valued severance in line with inflation. There was bound to be some up-valuation sooner or later.

Although we were criticised for the way in which we separated the two schemes and the two ports, the recent National Association of Port Employers scheme was successful. Most of the other ports that have been referred to and described as being in difficulties, or potential difficulties, took good advantage of the NAPE scheme last summer. Clyde had a substantial surplus of registered dock workers and was getting into some financial difficulty earlier in the year. The port is not expected to have any surplus registered dock workers following the special NAPE scheme severances.

There is a clear difference between Clyde and London and Liverpool. Clyde has reserves. It is not faced with a threat to cease trading. No ports save London and Liverpool would have to close tomorrow if the Government withdrew support. We are not closing the ports. We are providing the opportunities of further severances and further productivity improvements. In fairness to other ports, we are saying that London and Liverpool must break even on revenue account by the end of 1982. There will be no support for further revenue losses beyond 1982.

I do not accept that that is a draconian or impossible regime to place upon the ports although it might be described as difficult. It is a modest step in returning to viability and it is one on which we hope both ports will be able to improve.

Both ports have been asked by my right hon. Friend to produce action plans to show how they will achieve the targets that my right hon. Friend set for them. In due course we shall provide support up to the ceiling that the Bill will impose upon Government funds.

I shall underline some of the issues that lie behind the reality of all transport debates. Several hon. Members referred to the loss of traffic that the Mersey Docks and Harbour Company has suffered in recent times. The hon. Member for Liverpool, Scotland Exchange (Mr. Parry) knows a great deal about that. The hon. Gentleman listed some of the traffic that has been lost.

My hon. Friend the Member for Southampton, Test (Mr. Hill) detailed some of the damaging effects that Southampton has been experiencing as a result of industrial trouble. The right hon. Member for Barrow-in-Furness seemed to imply that the problem caused by shippers moving their traffic to other ports could be solved if we adopted his national dock policy. That is not so. The movements of traffic represent shippers' decisions to move their traffic in and out of ports that give them the service that they require. We are a trading country. It is important that our importers and exporters should have the ability to move their goods to where they do best. In the end it is up to those ports to win their traffic by productivity improvements such as those agreed in Merseyside and the sensible move out of the Royals and down to Tilbury that London has achieved. That will determine the future of an overall policy. Meanwhile, the Bill shows sound support for public transport and for the ports. It is based on financial reality. I do not believe that many of the criticisms have faced up to the financial realities.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).