INCREASED BORROWING LIMIT FOR THE BOARD

HC Deb 26 January 1982 vol 16 cc804-34 7.49 pm

Mr. Albert Booth (Barrow-in-Furness)

I beg to move amendment No. 1, in page 1, line 12, at end insert— '(2) Before specifying any greater sum the Secretary or State: shall lay before the House of Commons a statement of the estimated annual External Finance Limit for the British Railways Board over a 10 year period.'.

Mr. Deputy Speaker

With this it will be convenient to take amendment No. 2, in page 1, line 12, at end insert— '(2) Before specifying any greater sum the Secretary of State shall lay before the House of Commons a statement of the extent of capital debt attributable to British Railways Board's programme of main line electrification.'.

Mr. Booth

On Second Reading we discussed the British Railways' financial problem. Now that we are or Report, there is a British Railways financial crisis and an acute industrial relations problem. However, the purpose of amendment No. 1 is to require the Secretary of State to lay before the House a statement of an estimated external financing limit for a 10-year period before he specifies increases in the aggregate borrowing of up to £1, 300 million provided for British Rail in clause 1. It is impossible to plan the development of British Rail on a year-to-year basis. It would be impossible to do that at arty time, and it is certainly impossible to do it when a major modernisation programme requiring massive investment has to be carried through. That is not an argument that is necessarily peculiar to British Rail. It may be applied to other major industries both private and public. However, we are now concerned with British Rail and its finances.

The first amendment concerns the external financing limit and the second relates to the electrification programme. The EFL has become increasingly a restraint on British Rail's investment programme, especially that part of it that is dependent on borrowing. That in itself has proved over the past year or two to be a serious limitation.

We appreciate why the Minister wishes to have the right to approve individual major investments and discuss them with British Rail. We make no complaint about that. It is right and proper that the Minister should be concerned to that extent in the way in which British Rail's investment programme develops. However, a matter for major concern is that, whatever approvals may be sought for individual investments and investment programmes, the EFL is now becoming the limitation on the effective development of a major long-term programme.

Although the Government have increased the public service obligation so that British Rail may sustain the parts of the network that are needed for social purposes and that cannot pay their way, there is an element of investment within the PSO. There is also the interest to be paid on the sums which British Rail has had to borrow to carry out part of its investment programme. The PSO increases without there being a commensurate increase in the EFL, but that does not permit any significant increase in the investment programme. The only relief that it gives, arguably, is the extent to which it reduces the interest that would have to be paid if further borrowings were made available. Therefore, the increase in the PSO has added nothing significant to British Rail's ability to invest in a network.

To be fair to the Government, they never claimed that that was intended. They said that the increase in the PSO was designed to help British Rail to deal with the problem of the fall in its receipts as a result of the recession. That leaves us with a major problem in British Rail's investment programme and the extent to which that is cut by the EFL.

The Under-Secretary of State does no service to the serious argument about the limitation on the investment programme brought about by the EFL by reiterating, as he so frequently does, that the investment ceiling will be kept the same in real terms. He is saying that at a time when there is not a possibility, without other major changes in British Rail's financing, of the investment ceiling being reached.

We have arguments about the best way to measure investment expenditure, but I hope that we shall be able to agree tonight that until there is an external financing limit that will allow British Rail to reach the investment ceiling there is little point in arguing about that ceiling. Railway investment has fallen when it should be rising to cope with a specified need to develop the railways.

About £20 million less was spent by British Rail in 1981 on specific railway investment than was spent in 1979. If we consider British Rail's entire investment on services other than rail services, the reduction was much more acute. It is crucial that the Government respond to the major proposition that has been advanced by British Rail.

What is to be the investment pattern for the next 10 years or even for the next five years? In the corporate plan a five-year investment programme was put before the Government. In March 1981 the British Railways Board decided to make public the investment proposals that it had submitted to the Government. Since then it has been possible for everyone who is interested in these matters to examine the way in which British Rail proposes to sustain and develop our railway network.

British Rail said that the implementation of its corporate plan for 1981–85 would require average investment expenditure of about £441 million a year. It said that the implementation of its full rail policy proposals for the decade would involve an average investment of £567 million a year.

The British Railways Board made it clear that the existing programme, which was costing about £306 million a year, was not adequate even to sustain the existing network, let alone to carry through any of the major modernisation programmes that it considered necessary or desirable. It proposed in the policy document that another £72 million a year would be needed for the renewal of assets and recovery against a backlog of deterioration in the system.

British Rail included in the estimates £36 million a year for the electrification programme. The exact figure would have depended on which of the five electrification options the Government decided upon. My hon. Friend the Member for Aberdeen, North (Mr. Hughes) will be seeking to catch your eye, Mr. Deputy Speaker, so that he may deal with the specific electrification issues that are referred to in amendment No. 2.

The crucial issue is not so much the sum involved—£36 million is a relatively small proportion of the £567 million a year which British Rail is discussing—as the efficient implementation of many other parts of the programme. Beyond those proposals was investment in the London and South-East network. I refer to the improvement of the commuter services which I understand the Government have since rejected, the enhancement of the Gatwick and Stansted services and the Government's Channel tunnel proposal.

At that time the British Railways Board believed that it would be possible to persuade the Government to allow it to seek private finance for a number of the elements within the programme—for example, for main line electrification, the enhancement of the Gatwick-Stansted services and the fulfilment of the Channel tunnel proposals. It believed that each element offered prospects of returning real rates of return on investment of more than 10 per cent. That is still undecided.

Although from my political standpoint I would prefer public investment in those elements of the railway service which could make a real return of over 10 per cent., I do not take a doctrinaire view that those decisions should stand still until there is a Government of my persuasion. If those decisions are necessary for the development of the rail service, I would prefer to see them made under financial arrangements that the Government might reach with British Railways than that they should remain at a standstill, as they are now. All those elements of the investment programme, curtailed by the way in which the external financing limit is operated, are being stultified and stopped when it is important that decisions should be taken.

8 pm

The financial stranglehold on that development by British Rail, of which that restriction is so important a part, has contributed considerably to the current industrial dispute. It has considerable ramifications for the immediate financing of British Rail and the way in which the PSO is used in the present year. There is a likelihood that the board will call earlier than otherwise on the borrowing that could be provided under clause 1.

That financial stranglehold influenced the British Railways Board to refuse to pay the original Railway Staff National Tribunal award, which led to British Rail and the rail unions going to the Advisory, Conciliation and Arbitration Service. As a condition of the tribunal award British Rail pressed the unions to give considerable undertakings about productivity in circumstances that, even on the most favourable assumptions, were highly unlikely to produce the results that British Rail wanted.

The people who work in British Rail are a committed work force. They are more concerned than most people that there should be a future for British Rail and a sensible investment programme. They see the contribution that they can make through productivity agreements to the success of British Rail, and to improving its overall services and productivity.

However, those people are sensible and knowledgeable enough about the British Rail system to know that major productivity improvements over the next decade to give Britain a modern and efficient railway service also require as an essential corollary of their productivity arrangements a sensible and major investment programme. In unfavourable circumstances, brought about by the Government not being prepared to make investment commitments, the unions were pressed to make productivity commitments. The British Raiways Board was also not prepared to honour the tribunal award without additional undertakings. That led to a difficult situation.

The unfavourable financial circumstances arose partly because of the massive manpower savings that had been made in the productivity negotiations of British Rail. Between 1970 and 1979 the railway staff had been reduced by negotiation and productivity arrangements—some small and some larger—by 30, 200. That was a considerable achievement. The corporate plan for 1981–85 which the British Railways Board put to the Government and the unions would have involved a reduction of a further 38, 300 posts over that 5-year period. It also involved investment. Understandably the unions were prepared to continue that pace of manpower reduction only with the investment proposed. In fact, the proposed pace was much faster. Twice the previous pace of cutting manpower was called for.

Therefore, the current dispute not only jeopardises what is, by any fair test, the precarious financial position of British Rail, but, more inportantly, what has been a priceless asset, which is the commitment to work well and provide a good service, which has produced a good industrial relations record in British Rail.

The British Railways Board, by refusing to meet the obligations to pay the award, which has been due since the beginning of this month, has faced enormous financial implications. The loss of income to British Rail as a result of the dispute will have to be counted when it draws finance from the PSO. It will not draw finance from industrialists sending freight or from passengers who are trying to travel on British Rail services during the dispute.

Mr. Robert Adley (Christchurch and Lymington)

The right hon. Gentleman has referred to the refusal of the British Railways Board to meet its obligations. Is he suggesting that the unions have no obligations, or that if they do they should not meet them? Will he share his thoughts with us? It is important to know what he feels.

Mr. Booth

That is an important matter. I understand that the British Railways Board was informed by the general secretary of the Trades Union Congress that he was assured by the railway unions concerned that they would resume negotiations immediately, within the rail industries negotiating machinery, on all the outstanding productivity issues, provided that British Rail met its obligation to pay the outstanding balance of the pay awards. Therefore, the two matters are closely connected.

It is my judgment—for what it is worth—as a life-time trade unionist and an ex-Secretary of State for Employment and having read the agreements, that in the last analysis the productivity aims identified in the ACAS talks following the refusal of British Rail to pay the initial tribunal award will have to be settled in the established machinery of British Rail. Such is their complex nature and their implications that they can be handled only by people who are experienced in the industry and with the industry's machinery.

If the dispute is settled with that machinery later rather than sooner, it will be at the cost of damage to the industry when its maximum development is crucial. The industry is coming to a watershed in its investment programme. If major expenditure on replacement is not started by next year, the only alternative will be a rapid rundown of the railway system.

What is needed now from the Government is a commitment not only to maintain the existing network and services, but greatly to improve them. Major investment decisions should be made, certainly the central decision on electrification. Above all we need a programme, not on a year-to-year or line-by-line basis, but for a decade.

The purpose of the amendment is to call upon the Government to lay before the House, before we proceed to use the financial provisions of clause 1, an external financing limit that is based on the concept of a programme for a decade in the development of British Rail.

Mr. Adley

As the right hon. Member for Barrow-in-Furness (Mr. Booth) said, this is a difficult time for the railway industry. I hope that he and the House will accept that I am a friend of the railways. I am a passionate believer that a railway is an essential component of a civilised society. I am also conscious, Mr. Deputy Speaker, of your ruling, which I believe is right. There can be no doubt that the current dispute, to which the right hon. Gentleman referred—not quite even-handedly—must inevitably jeopardise the investment programme of British Rail. The 1980 annual report and accounts, under the heading "Managing Change", puts it succinctly. It states: The plan is explicit about BR's commitment to managing change, tailoring resources to business needs and negotiation changes in working practices. Higher investment will also lead to improved productivity. On that basis, Mr. Deputy Speaker, we must be allowed to touch on the background to the dispute, but, of course, not to enter into the details of what was said, by whom, to whom. It is a matter of judgment and we shall have to rely on your judgment.

This is a sad strike. I hope very much that it will not become a party political issue, and I am sure that the right hon. Member for Barrow-in-Furness would join me in that. There is nothing that he has said recently that could be construed to be provocative, but I understand the pressures that he is under, both from within his party and from within the trade union movement.

The words that I have written down in my notes are similar to those of the right hon. Member for Barrow-in-Furness. I believe, as he does, that if anything jeopardises or influences the future financing of British Rail, we must discuss it tonight. There is no doubt in my mind that this current dispute is jeopardising British Rail's financing programme. The Government and every hon. Member realise that and British Rail realises it best of all. If the strike drags on much longer it will inevitably have a damaging influence on the attitude of Government towards investment in the railway system.

The railways have enough enemies as it is, without having to cope with the problems of a vicious and damaging inter-union dispute. That is what is at the heart of the present problem. As the right hon. Gentleman said, British Rail has a good record on industrial relations. The unions have supported major changes in the structure of the railways, but, as those words that I quoted from the annual report and accounts clearly indicate, the process of investment and the process of managing change, and changes in working practices, go hand in hand.

Understandably, we heard a great deal earlier this afternoon of concern about jobs. We are all concerned about jobs and unemployment. Those of us who look to the railways to provide increasing secure employment in the future in a modern railway system cannot but be immeasurably saddened by the effects that the dispute must inevitably have upon the prospects of secure, longterm employment in the railway industry. ASLEF's action will affect investment, and the Government, who are also the guardian of the taxpayer, are inevitably bound up in investment decisions because they have to assess how much taxpayers' money to make available for major new programmes such as electrification.

The spirit of the amendment moved by the right hon. Member for Barrow-in-Furness is one that I support. The Government have talked about a 10-year electrification programme. Therefore, if one is discussing the external financing limits of British Rail and a 10-year rolling electrification programme, the two go hand in hand and it makes sense to recognise that fact in the legislation that we pass in the House.

I repeat, en passant, a comment that I have made in the past about electrification. The railways have enough enemies. We are constantly told by the road lobby that investment in the railways is unnecessary and overgenerous, but no one, in the House or elsewhere, asks how much profit or loss the M4 motorway made this year. We have never had to see an annual report on the motorway system. The benefits of electrification of the west coast main line are self-evident, and are a self-evident advertisement sufficient for the Government to recognise the importance of electrification in providing this country with a modern and efficient railway system with all the industrial benefits that flow from a modern transport infrastructural system.

8.15 pm

This dispute undoubtedly is threatening the electrification programme. We must face up to that and we must discuss the effects of the dispute upon the electrification programme. I understand that the current dispute is costing British Rail about £6 million a day. I do not know what the Government's view of that is when they assess the external financing limits of British Rail in the current year. I do not know what the Treasury will say. I am sure that the hon. Member for Nuneaton (Mr. Huckfield) will pick me up on this, but I say it because it is self-evidently true: the Government are bent on a policy of encouraging industry to modernise. Modernisation and efficiency should go hand in hand. The British Railways Board is trying desperately to modernise the railway system and to make it more efficient. Included in that is the modernisation of working practices. Therefore, if Sir Peter Parker and his board regard that as an essential component in the modernisation programme, if the Government want industrial modernisation generally, and if the British Railways Board is forced to suffer the effects of the current dispute on its finances, I suggest that that is not a matter that the Treasury can honestly ignore when it assesses British Rail's external financing limits in the current year.

You will tell me that I am out of order, Mr. Deputy Speaker, if I go too deeply into the current dispute. I feel sorry for Mr. Buckton because he is being pushed from behind by people such as Mr. Ronksley and Mr. Fullick, who have a long history of militant action in the railway industry. The railwaymen themselves have had no ballot to decide whether they want to be bulldozed into a strike, and it is now far too late to consider a ballot. I ask myself one simple question. Four people signed an agreement. Did they know what they were signing?

Mr. Deputy Speaker

The hon. Gentleman must not go into what was behind the signing. He can discuss the consequences of the dispute on the finances of British Rail but he must not drift into an argument about what was or was not signed, otherwise he will be out of order.

Mr. Adley

I accept your ruling, Mr. Deputy Speaker and I shall sincerely try to keep within it.

If the two other unions have signed an agreement that they understand, it is essential that the third—

Mr. Deputy Speaker

Order. The hon. Gentleman is straying again. He is out of order and he must not continue to discuss that point.

Mr. Adley

I shall content myself with saying that it is in the interests of those who have the welfare of the railways at heart to see the dispute ended as quickly as possible. It behoves those of us who feel as I do about the dispute to take opportunities when presented—which appears not to be the case tonight—to say what they can to try to encourage ASLEF to realise the damage that it is doing to future investment in the railways.

I am sorry that we shall not have the opportunity of hearing any words of wisdom from members of the Social Democratic Party this evening. They are gracing us with their usual absence. They include among their numbers a former Secretary of State for Transport and a former president of the Transport and Salaried Staffs Association. I hope that it is not too much to expect that at some time they will break their vows of silence and tell us what they think about the dispute.

On a completely different issue, but still related to finance, I should like to ask whether my hon. and learned Friend the Under-Secretary has yet had a chance to discuss with Sir Peter Parker the question of the Ribblehead viaduct. This is a question of £6 million that British Rail could be asked to find to keep a main line railway open. The amount is just part of the costs that British Rail has to bear.

The general manager of Western region informed me today of the huge sum that will have to be spent on the station at Frome because a preservation order has been slapped on it. I do not believe that people always give British Rail a fair deal. They do not realise the enormous sums that it has to pay, year in and year out, to fulfil tasks that are environmentally attractive but that have no bearing on the financing of a modern rail system. I should like to see included, at some stage, within the financing structure of British Rail, sums provided by the taxpayer to do not what British Rail wants to do but what we, in this country, demand of it for environmental and other reasons.

I apologise, Mr. Deputy Speaker, if I have tested your patience and strayed too far into controversial matters. I hope that the investment programme will go ahead, that electrification will proceed and that the 10-year programme that the Government have outlined will become a definite 10-year programme and that it will not keep appearing in dribs and drabs, which is an inefficient way to run a railway modernisation programme.

Mr. Les Huckfield (Nuneaton)

I hope that the hon. Member for Christchurch and Lymington (Mr. Adley) will excuse me if I do not attempt to take up his remarks. I am sure that he will understand that I am genuine in saying that the ability to write books on steam engines does not make him a railway man. Although the hon. Gentleman undeniably has an interest in railway matters, I suggest that he should acclimatise himself with more of the actual workings of current practice on the railways before making some of the statements that he has uttered in the debate.

Mr. Adley

Will the hon. Gentleman give way?

Mr. Huckfield

I do not intend to trespass on your generosity, Mr. Deputy Speaker. I recognise what you said about any reference to the current dispute so far as it affects the Opposition amendment on the external financing limit. As my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) so ably stated, the Government have tried to attach productivity conditions to the determination of the external financing limit. I hope, therefore, that any references that I make to productivity mean that I shall be within the bounds governed by a discussion on the external financing limit.

Mr. Adley

Will the hon. Gentleman give way?

Mr. Huckfield

As the hon. Gentleman is bound to continue getting up and down like a jack-in-the-box, I shall give way.

Mr. Adley

The hon. Gentleman alleges that I am not in touch with current railway practice. How many motive power depots has he visited in the last three months? Does he know what they are?

Mr. Huckfield

I was practically brought up in one. Anyone who has studied the present dispute and the references made to it by my right hon. Friend must have recognised that the British Rail board is operating within tight financial constraints determined by the Government. The corporate programme of the board for 1982–83 asked for an external financing limit of at least £1, 100 million. If it were to carry out the full range of the policy options in the document "Rail Policy", it could ask for £1, 250 million. I understand that the Government have set an external financing limit of £950 million which, although a £30 million increase on last year, represents about a 10 per cent. real cut, taking account of a 12 per cent. rate of inflation, if one accepts the Government's most optimistic figures. I hope that the Government recognise that it is the reduction in the real external financing limit that lies behind a great deal of the dispute.

The board forecasts a planned overshoot on EFL of £200 million in 1982–83 together with a planned overshoot on the public service obligation grant of £202 million. The board forecasts a group loss, after interest paid, of £197 million. Those are worrying figures. The board is saying that, with the reduction in EFL and PSO received from the Government, in real terms, it still plans an overshoot. It will be understood that the board's PSO bid was increased from £644 million to £674 million. Although there has been a recent increase of £80 million to £754 million and although a further increase of £30 million is planned, we are still talking of about a 10 per cent. decrease in real terms.

The Minister will make reference to the fact that the external financing limit is being raised. It does not matter whether he uses 1980 prices or outturn prices. The hon. and learned Gentleman will recognise that in real terms he is talking about a decrease in both EFL and PSO limits. That is the outline of the present dispute. It is the outline to which I wish, in deference to your words, Mr. Deputy Speaker, to tailor my remarks about productivity and some of the current issues.

The Government talk about the need for productivity. They talk in terms of the ability of the board to accommodate itself within these limits if there is increased productivity. I am bound to say that I do not find the board doing much to increase productivity. Most of its actions over recent weeks seem deliberately designed to ensure no productivity at all. If the board sincerely wants to increase productivity, there is plenty that the board can do to ensure that this happens.

I should like to refer to some of the board's statements about the external financing and PSO limits that have been fixed. The rail policy document stated that, within 10 years, 3, 000 miles of track would be unsafe to use and 800 miles would carry speed restrictions. Those are the hoard's own forecasts. I support my right hon. Friend's amendment stating the need for hon. Members to know the EFL constraints that will operate over the next 10 years. Is it the Government's intention continually to decrease EFL and PSO in real terms? If that is the longer term policy, there will be even more difficulty on the railways, particularly if the board takes the attitude that it has adopted recently towards productivity talks. It is, of course, within those limits that I have described that the current arguments about productivity, or what are alleged to be arguments about productivity, are taking place.

I speak in the House as the parliamentary spokesman for the Associated Society of Locomotive Engineers and Firemen. I am sponsored not by that union, but by the Transport and General Workers Union; under an agreement between the two unions I speak on behalf of ASLEF in the House because it does not have a sponsored Member. That understanding is registered in the Register of Members' Interests. [Interruption.] That is the interest that I have. Of course, I speak on behalf of my constituents as well.

If the hon. Gentleman wants to talk about productivity, he must recognise that there is machinery for that productivity and that there is an environment in which that productivity is to be discussed. For example, the pay situation has to be determined within the external financing limit. When the ASLEF case, again bounded by the constraints of the external financing limit, was submitted to the Railway Staff National Council in March of last year, the general secretary of ASLEF, Mr. Ray Buckton, said that to restore the purchasing power of footplate staff to its 1975 level there would need to be an increase of 29.2 per cent. in basic pay. If we look at the pay of footplate staff and exclude the unsocial hours payment, we see that they have slipped to about 68th place in the league table, which puts them £72 behind the front runners.

Mr. Matthew Parris (Derbyshire, West)

On a point of order, Mr. Deputy Speaker. The hon. Gentleman is speaking about the current railway dispute. I imagine every hon. Member has a speech about the current dispute. I listened to your ruling, Mr. Deputy Speaker, on what was said by my hon. Friend the Member for Christchurch and Lymington (Mr. Adley). If we are talking about the dispute, other hon. Members and I are willing to make our contributions, but it is not clear to me what the debate is about.

Mr. Deputy Speaker

It ought to be. I am listening carefully to what hon. Members are saying. As I said, it is in order to discuss the consequences for the finances of British Rail of the present dispute, but not to go into the merits and demerits of what was signed and so on. I am listening very carefully.

Mr. Huckfield

I hope I have not trespassed beyond your ruling, Mr. Deputy Speaker. The point I seek to make—I hope the hon. Member for Derbyshire, West (Mr. Parris) will follow me carefully—is that by 1988 about one-third of footplate staff will have retired. That means that they will have to be replaced in one way or another. That is why we put down the amendment. The British Railways Board will need to know what external financing limits will be set for it for the next 10 years. Obviously the external financing limit will have a great influence on the ability of the board to replace those staff. That is why I gave the figure which I did. I hope the hon. Gentleman will follow me carefully, because I am trying to put a case about the need to know on the part of the trade unions and of the British Railways Board.

Mr. Adley

Will the hon. Gentleman allow me to make a point?

Mr. Huckfield

If the hon. Gentleman wants to make a helpful point, yes.

Mr. Adley

Will the hon. Gentleman remind the House how many locomotives British Rail has and how many members of ASLEF there are?

Mr. Huckfield

No doubt the hon. Gentleman wants to prolong the debate in his own way. If he wants to quote the Richard Hope figures—we all know the Richard Hope figures and we all know Richard Hope's anti-union views—he may divide the total number of staff by the total number of locomotives; he may do all sorts of calculations and no doubt he will come up with all sorts of unfavourable figures. We could come up with favourable figures as well. If the British Railways Board wants to talk about productivity and to discuss some of the figures to which the hon. Gentleman is referring, there is adequate machinery to do it. It is from that machinery that the British Railways Board has extracted the current productivity discussions.

Mr. Robert Hughes (Aberdeen, North)

Will my hon. Friend also point out that in the bus industry there are many more bus drivers than there are buses, because the buses are on the roads a long time but the drivers have to work a shift system? Similar figures could probably be produced for the road haulage industry if the lorries are being used with different crews driving them.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

I am sorry to interrupt so soon after taking the Chair. I heard what my predecessor in the Chair said. We must not go into the details of this dispute.

Mr. Huckfield

Obviously I bow to your ruling, Mr. Deputy Speaker, as I bowed with great deference to the ruling of your predecessor. I was simply referring to the fact that over the next 10 years—this is what amendment No. 1 is all about—the British Railways Board will need to know the external financing limits to be set by the Government because it will need to assess the effect of those limits on recruitment policy and on the wages that it may pay. That is why I made the point that evidence was presented by ASLEF that to restore the 1975 purchasing power an increase of 29.2 per cent. was needed. Even according to the board's unpublished part of its corporate review document in 1980 it admits that real earnings have fallen 8 to 12 per cent. below the national average.

That is the position that the board finds itself in now. If it has to replace about one-third of its footplate staff by 1988, of course it will want to know within what kind of external financing limits it will have to operate its recruitment policy.

The vice-chairman of the board has argued before a Select Committee that there are already recruitment and retention difficulties at the present level of salaries. The Leeds university study of British Rail in 1977 conclusively showed that on British Rail there are the longest hours and the lowest wages in the whole of Europe. That is the present wage pattern. That is why the board and the unions need to know the external financing constraints within which they will have to operate over the next 10 years. That will clearly affect recruitment.

In that context I was pleased to note what was said in Decision No. 75 of the Railway Staff National Tribunal of July 1981, when the tribunal awarded the 8 per cent. and the additional 3 per cent. currently the subject of some contention. The tribunal, which is part of the railways' machinery for settling disputes, at paragraph 190, said: Moreover, all parties have pointed out that already substantial progress has been made as a result of negotiations last year". It was talking about negotiations on productivity. We welcome this development and hope that if our decision gains acceptance further and more substantial progress will be achieved. If the hon. Gentleman wants to refer to productivity within the external financing limits, I point out that the tribunal has already referred to the increase in productivity and has already given its blessing to the improvement, which it hopes will continue.

Increased productivity within the external financing limits was part and parcel of the ACAS understandings that were achieved—

Mr. Deputy Speaker

Order. The hon. Gentleman is now beginning to discuss the details of the dispute. Other hon. Members have not been able to do that, and I must ask the hon. Gentleman to bow to the ruling given before I took the Chair.

Mr. Stuart Holland (Vauxhall)

Two main varieties of costs are involved in an enterprise such as British Rail. One is capital costs and the other is variable costs. It is very difficult for the House seriously to consider any of the provisions of the Bill relating to finance unless it is valid for it to consider variable costs, which involve wages and manning. Otherwise, with due respect to you, Mr. Deputy Speaker, much of the discussion of the Bill becomes meaningless.

Mr. Deputy Speaker

The hon. Gentleman may not have been present when my predecessor in the Chair gave his ruling. It may be wise for me to read out again what he said: it will be in order to discuss the consequences to British Rail finances of the dispute and the importance that hon. Members attach to a settlement. However, I do not consider that the Bill provides an appropriate opportunity to discuss the details of the dispute. That is the point that I was making—that the House must not discuss the details.

Mr. Huckfield

I am struggling manfully, and I thought successfully, to keep within the bounds of that ruling, Mr. Deputy Speaker. I do not want to trespass on your generosity. I simply want to say that the productivity discussions clearly will have to take place within the confines and constraints imposed by an external financing limit. That is why we have suggested in the amendment that we need to know what kind of external financing limit that will be over the next 10 years.

The difficulty is that if the external financing limit is to be constrained by cash limits, as the public service obligations grant will be, it is difficult for the board or anybody else involved in negotiations to know what the policy will be. It is because we need to inject longer-term certainty into the negotiations that I have referred to a few of the difficult issues, trying to show how we can best inject some certainty into discussions on some of those issues if we know over a longer term of years what the external financing limit will be.

The ACAS understanding was written in that spirit, because the productivity part was entirely separate from the pay part. The ACAS part of the understanding makes specific mention of the fact that, if agreements are reached on certain productivity items, there will be specific payments made within the EFL for them.

Mr. Deputy Speaker

Order. The hon. Gentleman is getting into the detail of the matter again. I must ask him, please, to stick to the ruling that has been given. It is only fair to other hon. Members who have done so.

Mr. Huckfield

I have tried to set the scene in which this set of negotiations and the further series of negotiations will take place.

I should like to refer to the impact of productivity items on the board's financial position. I am sure that the Minister will recognise that it is the impact of productivity discussions on the railways' overall financial situation that will affect the board's longer term borrowing needs and, consequently, the demands that it will make upon the Government.

Because of the comparatively low wages on the railways, including those for footplate staff, and because of the need for a substantial replacement of staff over the next five years, I can see the board's external financing limit needing to be raised, as a large amount of recruitment will be needed. That, again, is why we need to have some certainty injected into our knowledge of the external financing limit over the next 10 years.

Hon. Members who have studied the productivity discussions which have been taking place recognise what the Government have been saying about the need to achieve productivity. If we are to achieve productivity increases to fit in with the external financing limit set, there is much discussion that the board could have which would bring about substantially larger increases in productivity and reductions in costs than in the current discussions on some of the items at present. That is why many of us cannot understand why attention should have been concentrated on one particular productivity item. Far bigger savings and increases in productivity could have been attained from discussion elsewhere.

Perhaps the board has an inkling of what the EFL might be over the next two or three years. That may be why it has chosen to concentrate on this particular item. I repeat that there are certainly items of negotiation that would lead to far bigger increases in productivity and cost saving than this particular item. If the board wants to discuss any of these items to fit in with the EFL restraints there is a perfectly adequate, tried and tested machinery through which discussion can take place.

In the context of the need to know what the external financing limit will be, it is obvious that the dispute will not be settled easily. If it is not settled quickly, I can see the board needing to come back to the Minister for an even larger EFL. That is why many of us cannot understand why, when an award has been made at the Railways Staff National Tribunal and an award and understanding has been achieved through ACAS—having gone through two sets of arbitration already on the productivity item—there needs to be an even further set of arbitration procedures. If the board genuinely wants to talk about productivity increases, there is adequate machinery to do so.

8.45 pm

Mr. Adley

On a point of order, Mr. Deputy Speaker. I was forbidden to finish a sentence when I was asking why, when four people had signed an agreement—three unions and the British Railways Board—three understood it and one did not. Why does there appear to be one rule for hon. Members on one side of the House and another for those on the other?

Mr. Deputy Speaker

Order. The hon. Gentleman might rephrase his point of order.

I made it plain to the hon. Member for Nuneaton (Mr. Huckfield) that it was not in order to refer to the detail of the dispute. I said that it was unfair to other hon. Members who had been stopped from doing just that. I ask the hon. Gentleman to refrain from doing so. We have had enough of the dispute. Let us get on with the subject of the amendment.

Mr. Huckfield

That is what I thought I had been trying to talk about. I was trying to talk about the need for certainty in forecasting and assessing—not least, fixing—the external financing limit over the next 10 years. Partly because the board has had to operate with a short-term time horizon, it has been forced to take the attitude that it has.

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

May I assist the hon. Gentleman, who is having difficulty in keeping his argument in order? The case from the Opposition Front Bench was that the external financing limit may need readjustments to cope with capital investment and the need to modernise the railway. The hon. Gentleman appears to be making a case in addition to that. Without a commitment to productivity on their part, he wants the EFL increased to provide higher wages for the members of the union on whose behalf he happens to be speaking. Is that right?

Mr. Huckfield

I hope that I can answer the question within the rules of order.

Mr. Adley

The hon. Gentleman need only say "Yes" or "No".

Mr. Huckfield

The Minister makes the classic mistake that all his colleagues and most members of the press and others who have tied to assess the dispute make. The dispute is not about productivity. The hon. and learned Gentleman has chosen tonight once more to link pay and productivity. I am sure that his officials brief him daily, so he should know that the dispute is simply about the fact that the British Railways Board made an agreement to pay an additional 3 per cent. and has now ratted on the agreement.

Mr. Deputy Speaker

The House has taken the point. The hon. Gentleman is again getting back to the detail of the dispute. Let us move on to British Rail's external financing limit.

Mr. Huckfield

I have got that point off my chest and into Hansard. I hope, too, that the Minister has understood it. It is most pertinent to the dispute.

The Minister asks whether I am venturing to suggest an external financing limit increase to pay wage increases. The hon. and learned Gentleman should know that the unions will not force that necessity on the Government; the board's behaviour will do so. Because of its completely intransigent attitude—not to mention telling lies on television—and the loss of about £6 million a day, the board will need to ask the Government for an increased EFL. The trades unions will not necessitate the increase.

I finish where I tried to come in. Many of us who take an interest in railway matters genuinely want to know what the Government mean by productivity discussions within the external financing limit. If they mean to bring about the increase in productivity that they say they wish to see on the railways and to keep it within the proposed EFL, perhaps the Minister should intervene and tell the board that it can get the productivity increases only if it is prepared to discuss them through the established machinery. If it is to do that, it will need to know what the external financing limit will be over the next 10 years, and if it is not to be increased, and if there is to be no increase in the request for another EFL estimation, perhaps the board might start by paying the 3 per cent.

Mr. Stephen Ross (Isle of Wight)

I apologise to the right hon. Member for Barrow-in-Furness (Mr. Booth) for not being here when he spoke on his first amendment, which I support. Anything that enables British Rail to plan its future activities and thus make more realistic budgets should promote more efficient railways. Since my party gave me the task of speaking on transport affairs I have tried to press the Government into doing rather more rather more speedily to provide more financing for modernisation, particularly for electrification.

This is a difficult time to discuss the future of British Rail because of the dispute. I do not agree with the hon. Member for Nuneaton (Mr. Huckfield). I can read agreements. I accept that British Rail has been at fault—it should have faced some of these difficulties a long time ago. My reading of the dispute does not accord with that of the hon. Member for Nuneaton, but neither does it accord with that of the secretary of the National Union of Railwaymen. My one qualification on this subject is that my son is a member of the NUR.

I am a supporter of the railways. I want them to succeed and I feel that the present Government have not done enough to help British Rail in the last two and a half years, and certainly not in the last six months, since the change of Secretary of State. It took a great deal of pressing from the House to obtain the East Anglian consent from the Government, who denied that they were even considering it. However, my patience as a travelling member of the public is exhausted by what is now happening. One can see the finances of British Rail disappearing overnight. What is happening is suicidal and must be settled, and settled quickly.

I have twice travelled back to my constituency in a fast coach. I was surprised to find that the journey takes only two hours from Victoria coach station. The journey costs £4 or £2.50 if one has not booked. The general public will be frustrated and thoroughly brassed off with British Rail if the dispute goes on for much longer. What is worse, it has occurred during the worst winter in living memory. If there was a real dispute, surely the union could have waited for a fortnight. The public will say that they have had enough and they will not have any more—they will use the other options.

The Government will, quite fairly, say that the money cannot be made available. It is difficult to stand on this pitch and plead for the railways as I do, but it is common sense that we should be travelling more on public transport and that we should be putting more on the railways. For that reason, I agree with the GLC. What is happening on London Transport is mad and many Conservatives take that view.

Mr. Huckfield

The hon. Gentleman voted against the GLC policy.

Mr. Ross

I voted against it because it was breaking the law.

I support the GLC's policy. I paid my supplementary rate of £60 and I travel on public transport.

Mr. Deputy Speaker

Order. That has nothing to do with the Bill.

Mr. Ross

I wanted to put my support on record.

It is difficult for one who wishes to support the railways and see them succeed to plead for a higher external financing limit for a longer period when the dispute is continuing. It is in our midst at a time when many of us are in despair at the future of the railways.

Mr. Robert Hughes

I intervene at this stage, unusually, not to wind up for the Opposition, but to deal specifically with amendment No. 2 on electrification.

However, first, I want to take the Under-Secretary to task for not fulfilling the undertakings that he gave in Committee. He told us at column 99 of the Committee proceedings that he would write to me about the issue of section 8 grants for sidings and planning permission. He has not yet done so. Perhaps he has been otherwise occupied. Moreover, at column 186 he promised to write to me about the criteria to be used to allow section 36 grants for waterways. That is a more serious matter. He confessed in Committee that he had forgotten that his right hon. Friend the previous Secretary of State for Transport had promised in July to write to my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth) about the extension of these special grants for freight transport. He has still not written to me either. I hope, therefore, that he will fulfil the undertakings that were given in Committee.

I come now to electrification. I am sure that the time for a decision by the Government on the amount of investment to be made available to British Rail for its electrification programme is long overdue. There is common agreement in the industry and between the British Rail Board and the unions that the current rolling stock and equipment that are available to British Rail is inadequate. There is also general agreement in all quarters of the House in this connection.

British Rail is quite clear on the subject of maintaining and raising the standard of service. It says in its rail policy document, paragraph 4.12: The greatest danger facing the industry is therefore that funds would be insufficient to sustain even the present inadequate investment programme, and that the critical year 1981 will be passed without the necessary commitment to replacement. None of us in British Rail would derive satisfaction from operating a railway which provides quality standards becoming steadily less and less acceptable to our customers. Bare survival may be the lowest objective which an organisation can adopt but it is an insufficient diet for a great national industry". The document goes on to say, in paragraph 4.13: The single most significant decision is Electrification. A favourable decision covering how quickly to proceed and when to start would give hope to all of us in BR, would point us in the right direction for all of the preliminary planning and design work, would enable us to place long lead time orders, would encourage many manufacturers and contractors to make preparations and would give hope to some of the areas worst hit by unemployment. It is moreover a watershed decision—whichever way it goes it would be extremely costly to reverse". It is astonishing that we are no further forward. We are no nearer getting a decision today than we were when the rail policy document was produced in March last year. So far, we have had the decision, which I welcome, for the go-ahead of the line to Norwich, the Anglia electrification. That decision was with the Government for over 18 months. As the Under-Secretary reminded us in Committee, that proposition slightly pre-dates the main electrification programme. It is not as though the electrification programme was first projected into the decision-making process in March 1981. In fact, the discussion began well before then. In May 1978 it was necessary for the then Secretary of State for Transport and the then chairman of the British Rail Board to appoint co-chairmen of a group with the following terms of reference: To review the case for a programme of mainline electrification, to analyse the various relevant considerations and formulate the issues for discussion". The review was carried out jointly by the Department of Transport and the British Rail Board, and the final report was published last year. The technicalities, finances, and the advantages were all considered in great detail. Indeed, the report makes it clear in paragraph 3: We are satisfied that the work done, which was scrutinised in detail by both the Department of Transport and the Railways Board, gives results that are reliable; further refinement would not alter the conclusions to be drawn". 9 pm

Clearly, the Government's hesitancy in committing capital investment is holding up the decision. Everyone understands that major investments must be justified. No one is suggesting that the British Rail Board should simply ask the Government for X million pounds, that the Government should say "Yes" and that that should be the end of the matter. Of course such investment must be justified. On any test, electrification merits investment. It would reduce dependency on oil—the railways use 3 per cent. of the oil consumed by transport—it would assist the United Kingdom's manufacturing industry in winning orders overseas in an expanding market and would be in keeping with the Government's policy of purchasing locally and more effectively to enhance the competitiveness of British industry.

A decision on electrification would raise morale in the industry and the standard of service. It is to everyone's advantage to proceed quickly, yet we are still wasting time. The Government are not coming clean. When the joint working group was set up, there was a clear understanding that when it reported on the general strategic principles—and if there was agreement between the Department and the board of British Rail—the board would not have to provide a line-by-line financial appraisal in justification. However, the Government have gone back on that and are demanding a line-by-line appraisal.

Paragraph 11(i) of the joint report states: A programme of electrification would require commitments, from the supply industry and the workforce as well as railway management, which the ad hoc approval of individual projects could not command. That is a clear sign that we should not proceed on an ad hoc basis. However, in June the then Secretary of State for Transport made the worst possible choice of those available to him. The report on electrification made it clear that the best course was to go for the largest and fastest programme, to be completed in 20 years. That is detailed in paragraph 13. At the other end of the scale, in paragraph 14, a programme was suggested that could be completed in 15 years. The report also suggested—as almost all reports do—a middle position of a medium-sized programme. The scale of the programme to be adopted depends on finance and the number of electrification teams available.

The previous Secretary of State seems to have totally ignored the three years' work that went into the report. In June, he said: I am therefore inviting British Rail to prepare and submit a 10-year programme of schemes for electrification only of those potentially profitable main line routes where it is clear that the benefits could justify the investment. These should be presented together with the new commercial plans that are now required for the businesses. The approval of each successive electrifcation project will be conditional on the profitability of the investment in question and on the achievement of necessary improvements in productivity."—[Official Report, 22 June 1981; Vol. 7, c. 22.] The then Secretary of State took the opposite view to that adopted by the report of the Department of Transport and British Rail. He went against the report and compounded his felony by insisting that the inter-city businesses should achieve full commercial performance by 1985. However, as the Minister knows, as a result of the recession—for which the Government are responsible—the public service obligation has had to be subtantially increased this year. I do not know how on earth those inter-city businesses can be expected to become commercially viable within the next three years. There is an urgent need for decisions and I cannot understand why the Government are delaying matters.

Paragraph 10 of the joint review of main line electrification refers to the importance of decisions. It states: Such a strategic decision would give a base for the many individual decisions, for example, on the plans for designing new rolling stock, on renewing and modifying the track and signalling, on the disposition of depots, and on the traffic which the railways should aim to secure, all of which can be affected by the form of traction envisaged. It is clear that the decision on electrification goes much wider than simply replacing stock.

Secondly, the British Rail document "Rail Policy, " says at paragraph 4.4: The watershed year is 1983. If major expenditure on replacement is not started by then the inevitable consequence will be a rapid rundown of the whole railway system. We could postpone until that date, continuing with some replacement and with much 'make do and mend' at present investment levels, but not beyond. In 1981 we must have started the design and planning work and have placed orders for materials if major re-equipment is to commence in 1983—so the year for decision is 1981. Yet here we are in 1982 with no major long-term decisions taken.

British Rail is in no doubt that if it is to achieve its main policy objective, the Government should approve its full electrification proposals as soon as possible. It is not as though the sums of money are unreasonable or beyond the Government's capacity to bear. As the Minister will know, from 1981 to 1991 British Rail estimates that £36 million per annum is required for electrification. In my view that is too modest a programme. It is a fraction of what we now spend on unemployment. That sum is about £13.5 billion, yet we cannot give British Rail £36 million a year to invest in electrification. We can and we must afford £36 million a year. However, all that we got from the Under-Secretary of State during a brief discussion in Committee was that proposals were put to British Rail in June and a reply is awaited.

That is not good enough. The Government must show a much greater sense of urgency and commitment. If there is widespread cynicism or low morale among British Rail staff today, the prime responsibility rests with the Government. If staff are resistant to change in work practices, that is due to the Government's insistence that they will release money only if British Rail sheds much of its work force. British Rail employees have heard that since the days of Dr. Beeching. The argument is that a more compact railway system and a smaller work force will mean more secure and better paid employees. That has not happened. We hear the same demands years later and the same promises from the Government. With over three million unemployed no one could blame railway staff if they were to say that enough is enough.

The only way in which we can begin to restore morale and to prove that railways have a future is to approve the electrification proposals soon and to commit the Government to further electrification projects. I cannot speak for any other hon. Member, but my constituents will not be satisfied if the east line electrification system terminates at Edinburgh.

I can best sum up the present position on electrification if I quote a leader in The Guardian of 23 June 1981, which said: In the event, the statement made yesterday in the House by Mr. Howell, the Transport Minister, has turned out to be little more than an agreement in principle. British Rail will now be required to put up proposals again in a new form, after which the Government will decide case by case and electric line by electric line whether public investment is justified. This leaves British Rail and the companies that would expect to do the electrification work in the worst of all possible positions. Major industrial decisions, like a motorway programme, or power station building, or railway electrification need a reasonable element of certainty over a period of several years if they are to have any chance of being completed with even modest efficiency. The leader went on to say: The unpublished No. 10 Think Tank's report on electrification and Professor Walters, the Prime Minister's economic adviser, are both reported to be highly critical of the assumptions on which the electrification proposals are based. But strategic industrial decisions cannot be made on the basis of short-term analysis. It is a grave weakness of our system that, in marked contrast, say, to France or Japan, we seem congenitally unable to set a long-term strategy and stick to it. It is the Government's failure to have any long-term strategy that is condemning British Rail and undermining a system that is a vital part of our nation's infrastructure, and it is the Government's grave weakness that is contributing to the total collapse of British industry and preventing recovery.

A start can be made on electrification if only the Government will cease to be so obstinate in their adherence to monetarism. The need for electrification, the financial advantages to British Rail and the benefits to industry and the economy are amply demonstrated. It is time that the Government made a start, gave their commitment and approved at least the 10-year rolling programme for British Rail electrification.

Mr. Bob Cryer (Keighley)

I wish to speak briefly in support of both amendments but particularly in support of amendment No. 1, to which my hon. Friend the Member for Aberdeen, North (Mr. Robert Hughes) has just spoken. The idea of a 10-year rolling programme is excellent. It gives British Rail much greater certainty and allows it to plan. It also enables the workers of British Rail to see that the management can look ahead instead of living from hand to mouth as it is doing at the moment. It also removes the suspicion which has been engendered that British Rail management has been informed by the Government by means of a nod and a wink that to have increased investment for electrification it must achieve some significant "productivity" improvement. That, I believe, lies behind the present industrial conflict between British Rail and ASLEF.

It is remarkable how the board has plucked one from 19 productivity areas in front of the two sides for discussion and chosen to make an issue of it. There is no doubt that this sort of 10-year rolling programme is a possibility because the railway industry until the immediate present has had an excellent record of understanding and working together. That understanding is being destroyed by the attitude of the Government which is being inflicted on the management. I suspect that, in spite of its harsh words, the management has undertaken the task of attacking ASLEF with some reluctance, although its present attitude shows little sign of that.

The Minister must know that over the past 20 or 30 years there has been a marked increase in productivity by British Rail and a marked loss of jobs. If British Rail really wants to demonstrate an increase in productivity associated with the electrification programme, it must demonstrate to people who work for it that the money is forthcoming, for example, to replace all the unfitted goods wagons which still run around the British Rail network.

If electrification is to be introduced, that must involve higher running speeds, but the running speed on electrified or non-electrified railways is not governed by tractive effort when there are unfitted wagons. It is governed by the fact that wagons do not have continuous brakes, and that lack of a continuous braking system has existed since the 1830s and the development of the British railways network. That sort of investment is vital if the benefits of electrification, with higher track speeds and therefore greater track capacity, are to be available to British Rail.

British Rail workers must know that the Government are prepared to invest that sort of money, not directly for electrification but for the consequences of it, arising from the claims for an increased track capacity. Yet that has simply not been forthcoming.

9.15 pm

British Rail cannot manage the upkeep of track, let alone embark on the replacement of unfitted goods wagons with those fitted with brakes which operate continuously, changing from the vacuum to the air-braking system which is more efficient. There must be a programme that it can look ahead to.

The Government have simply been using investment as a cats-paw to play with the railways and influence the board in trying to obtain the sort of conditions that are now wreaking great havoc on the railways. ASLEF is not prepared to make massive concessions after a unilateral decision of the British Railways Board to seek the destruction of the eight-hour day. The board unilaterally decided on that issue to put the travelling public to great inconvenience. ASLEF does not want to strike. The intransigence of the board occurred unfortunately because of the Government's attitude in laying down conditions for investment and that brought about the conflict.

This sort of rolling programme would give confidence to an ailing industry. From the 1955 modernisation programme, railwaymen have been told year after year to accept productivity improvements. The drivers accepted a guard in the rear cab and the removal of guards' vans. There are still guards' vans on trains because the Government have not provided sufficient investment to get rid of unfitted trains. They accepted alterations in working practices over many areas, saw the closure of thousands of miles of track and were told time and again to accept the conditions and then have a viable and confident industry which would maintain future jobs.

What has happened? In the past two and a half years particularly, the investment programme has been subject to a number of conditions. Electrification was first to be on a broad programme and then on individual routes which had to establish a criterion of profitability. Therefore, the board had to reassess all the schemes it had drawn up at the Government's request for a broad planning programme. The result is uncertainty which would be met, to some degree, by the amendment so that British Rail was given certainty over 10 years. The railwaymen have been told that BR's future is certain if they accept productivity demands, demanning and so on, but that has not been shown to be the case.

The Minister knows that the British Railways Board appears to be moving back to its old habits. I refer not to the industrial front but the closure front where it is proposing diversions of inter-city trains from the Settle to Carlisle line because the Ribblehead viaduct needs massive sums of money spent on it. Apparently, that has just been brought to its attention. Although that railway has been maintained since its opening in 1884, BR has suddenly discovered that a massive sum of money is required.

It is suggested that that is a means of closing that line by the back door. Although British Rail denies that, one knows that behind it the Government are holding tight to the purse strings. We are not simply asking for a block grant to be handed over without any criteria, as happened with De Lorean in Northern Ireland. Some of us are critical on how that situation was handled. We simply ask for a sensible approach by the Government to encourage investment in much-needed areas of British Rail. There is no doubt that the money would be spent usefully. It would improve an important national asset, give confidence to railwaymen who lack it now, because of the criteria laid down, create more jobs and develop a technology that we could sell abroad. Britain is ahead of many other countries on railway technology.

In the 1960s some said that the railways should take second place in the queue. They argued that we should switch to motorways and to road haulage. Those arguments have not been borne out. Other countries are extending railway transport and we have been able to extend our exports of railway technology. There is potential for the future but that depends on the Government saying to British Rail "We shall give you the confidence that you need by supporting a 10-year programme." If the Government took that approach, I am sure that further developments in productivity talks would be possible.

The Government's harsh attitude has led to confrontation, and ASLEF is rightly taking the view that the British Railways Board has unilaterally and unjustifiably decided to adopt confrontation. That is not what ASLEF required. It was prepared to continue to discuss productivity and manning among the other items included in the list of 19 to which I referred earlier. Unfortunately the Government's attitude has been inflicted on a management that has been shown to be too supine.

I hope that the Minister will accept the amendment because I feel that it will give confidence and certainty to a network that we all wish—some perhaps academically—to support. In 20 or 30 years we shall probably be saying "We shall need the railways and we shall need them more than ever." If we do not give them the certainty of investment that they require, the present erosion will increase. About 10 years ago some of the bridges on the Settle-Carlisle line were raised when they were modernised for electrification. That is a sorry comment to make because electrification is hardly a possibility. The line seems to be facing a rundown. We shall very much regret any further rundowns. The railways need development and a buoyant future and the amendments seek to achieve that objective.

Mr. Holland

I too speak in support of the amendments introduced by my right hon. Friend the Member for Barrow-in-Furness (Mr. Booth), particularly that with regard to comparative long-term planning and electrification.

The importance of long-term investment planning, as opposed to short-term reaction to events, lies partly in two effects, one the direct benefits to the rail service in efficiency, in speed, in reliability, especially in the commercial goods sector, and also the indirect benefits to the rest of the economy, of which the Government do not appear to be aware.

If an investment programme were to proceed and were to proceed over a specified 10-year programme, several of our industrial producers which otherwise would be in difficulty would be able to benefit from the certainty of contractual arrangements to supply the electrification programme. One is talking here of specific companies, of the GECs and the BICCs which have faced considerable difficulties in the heavy engineering area of their companies precisely because of the uncertainty that has been introduced by the current economic crisis for their long-term planning.

What the Government have not in general appreciated—it is typified by their attitude towards transport policy—is that short-term policies of demand management aiming, for example, to wring inflation out of the system, as they claim they are able to do by monetarist policies, do not cope with the underlying structural causes of an economic crisis, and do not cope with the difficulties for companies of undertaking investment where frequently this has to be paid off over not only a 10-year period but a 20-year period.

Large companies with long-term planning horizons cannot adjust either to the short-term demand management imperative of a passing monetarist Chancellor, nor even to the views given on a short-term demand management by a Government during a whole parliamentary lifetime. Forward planning of investment frequently involves five to seven years elapsing between a project being a gleam in the designer's eye and actually entering into production.

In the mid-1970s we found that a company such as GEC, which we were led to believe was opposed to planning agreement relationships with the previous Labour Administration, in effect was opening itself up to the prospect of a planning agreement precisely because the heavy electrical end of the company needed greater certainty of future sales to modernise and invest in equipment.

That is quite apart from the general external effect of an investment programme on the real economic side and on the financial side spanning more than the short term. For example, in the early 1960s it was commonplace, and taught almost without question in economic courses throughout the country, that the direct costs of running a public transport system did not measure the indirect benefits to society as a whole.

Those costs and benefits have to be evaluated and measured. If we are to run our railway system at a loss, as every major country is doing, and if we are to introduce some kind of rationale and justification for that loss, we need to be able to trace some of the indirect advantages to the economy from the direct loss registered in the system. That is directly relevant to the amendment and to the external borrowing requirements of British Rail.

In view of these arguments I do not accept that the House is in a position to evaluate the proper external benefits relating to the Bill without knowing what role the Government anticipate British Rail will play in the transport system and the economy as a whole. If we are unable to make forward estimates of, for example, the volume of freight that will be carried by British Rail, apart from inter-city passenger transport, no rational policy can be made for justifying a deficit in relation to the external advantages to other sectors of the economy or to society.

That is one of the limits of the Government's present approach. The Government appear to have ruled out any long term financial planning while at the same time insisting on what amounts to a Mafia type relationship with the British Railways Board and with the railway unions—that is, unless they accept a reduction in variable costs in the short term, in effect wages, there will be no long-term investment programme.

But there are two ways of approaching the role of labour and of labour and the wage bill in running a transport service. One is, broadly, that adopted by the present Government, to undertake a policy against labour and the trade unions. The other is to involve labour and the trade unions in the forward planning over the 10-year period of the transport service itself.

That suggestion is hardly illusory. In other debates Ministers have frequently referred to the economic successes of some of our main competitors abroad, one of which is Japan. What seems to be lacking in the general monetarist reasoning of the Government, which is reflected in their attitude towards wage bargaining in the public transport sector, is that in an economy such as Japan's the workers are, in effect, guaranteed lifetime employment. Instead of the bludgeon of unemployment and redundancy designed in the short term to rationalise the structure, the work force is brought into the forward planning of the transport system. That is also the case in France where it relates both to the electrification programme and to the issue of a 10-year planning forecast. The French have a programme contract system, which is similar to the planning agreement system proposed by the Labour Party of which I am proud to be a member. The programme contract system sets long-term objectives for the role of transport in the French economy and society. It sets that role not behind closed doors but so that terms of reference of the debate and the prospects for the rail services in France are publicly debated and become a subject of public discussion. In France, for example, one can hear of the programme contract for—

9.30 pm

Mr. Deputy Speaker

I am sorry to interrupt the hon. Gentleman, but he seems to be straying from discussing the amendment, which is concerned with the annual external financing limits for British Rail.

Mr. Holland

With due and unqualified respect, although I am subject to correction, I understand that this country happens to be a member of the EEC, that the EEC happens to have a transport policy and that transport policy is affected by what happens in the member States. The amendments relate to a 10-year financing programme, enabling direct projects such as electrification and indirect benefits to be registered.

This matter is directly relevant to the external borrowing of British Rail. Recently in this country we have seen two major confrontations on transport policy. The first is the case of London Transport and the second is the dispute with the Associated Society of Locomotive Engineers and Firemen.

In France, the transport of the equivalent capital city, Paris, is intimately integrated with the transport of the surrounding national railway network. I beg your tolerance, Mr. Deputy Speaker, to develop this point, which is concerned with finance and financial limits. Passengers in Paris are able to travel with one card on the equivalent of British Rail and London Transport. The subsidy undertaken by the French Government, not simply by Paris Transport, is equivalent to 85 per cent. of the total costs.

That cost has been introduced as a negotiated cost, merited to be borne by the national exchequer in view of the estimated benefits in an efficient public transport system, which thereby reduces the necessity of carrying passengers or goods by road. The external financing requirement is made an open subject for public debate. One can hear about that debate by turning on the radio or reading about it in the newspapers and in the declarations made by the interested parties in the debate.

The contrast with the discussion that we are having here in the mother of parliaments on the external financing limits is staggering. The Government are coming forward with a figure that appears to be plucked from the air, made on their guesstimate of what the short-term situation may be rather than informing the House adequately what the direct and indirect benefits of such finance would be. The amendments are directly relevant in demanding that the country has a right to know the Government's perspective for both national and urban transport planning over at least a 10-year period.

I strongly recommend that, if they are unaware of this, Ministers should instruct their officials to inform them further on what happens in France. It would be of interest to many hon. Members if Ministers made a further statement about the external borrowing requirement and made a comparison with what happens in another EEC country, which at least has a rational approach to transport planning rather than the ad hoc and reactive groping in the dark that passes as a substitute for transport policy in the Government's approach.

The variable costs in planning cannot possibly be estimated with any accuracy over the medium term in relation to the real financial needs of any transport service—urban, such as London Transport, or national, such as British Rail—unless those who are concerned in the management of the enterprise have some idea of what they will be over the medium term. It is clear that no trade union would wish to commit itself indefinitely to a particular target rate or norm, irrespective of the rise in the cost of living and a possible decline in the standard of living.

It is consistent with Labour Party policy that trade unionists should be brought into the negotiation of planning agreements in the transport sector with, for example, British Rail, as with London Transport. Again, it is one of the features of democratic forward planning that I strongly recommend to the House. In that context, we would introduce a degree of rationality into the debate. There is no formula for automatically solving the problem. There are different interests, and there are bound to be conflicts of interest. But, instead of a short-term reactive position—where we are offered either some unemployment now or more unemployment in the future unless there are wage and manning reductions without any regard to improvements in investment in the service—it would enable the transport system in this country to be run in a framework that could be negotiated with the active participation of the labour force in the planning process itself, which would certainly benefit the public and the consumer.

Mr. Kenneth Clarke

One theme that unites all the speakers in the debate, and with which the Government wholly concur, is that most of us are looking towards the future of the railways and we all have certain common aims in view. Every hon. Member—and certainly the Government—believes that the long-term aim is to have a modern and efficient railway system, able to provide the best possible service to the public at reasonable cost and able to play a leading part in the rational transport policy towards which it is possible for the country to go. Every hon. Member was united in that and I believe that, allowing for the fact that the hon. Member for Nuneaton (Mr. Huckfield) is obsessed with the short-term problem of acting as the spokesman for ASLEF in the current dispute, he—when he lifts his horizons a little higher—will be committed to the long-term future of a sound, healthy, modern and efficient railway system.

The Government's broad approach to the railways, which is highly relevant to the amendment and to the 10-year future referred to in it, is that it will require a commitment from all the parties involved to keep the railways healthy and serving their transport purpose. It will require a commitment from the British Railways Board and management to improving the business performance of the industry and achieving the highest management standards; a commitment from the trade unions and work force to reducing overmanning, improving productivity and helping to reduce the avoidable costs of the railway; and a commitment from the Government on a proper basis of financial support and essential investment in the railway system, matching its needs with the need to assure value for money for the public.

It is the Government's view that those commitments need to be honoured by all three parties if we are to have a modern railway system. We should synchronise our progress on those three fronts to the extent that British Rail improves its business performance, the trade unions improve productivity and working practices, and the Government honour their commitment on financial support and investment.

Despite the difficulties under which everyone is labouring, there has been some worthwhile progress in the last few years. British Rail is, of course, operating under difficult constraints and against a background of a serious recession. So, too, are many private industries, but I appreciate that the railways are acting under financial constraints and that times have not been easy over the last two years.

Trade unions must face up to the need to change long cherished practices and manning arrangements. They have made good progress over the last 12 months. British. Rail has made progress on productivity and all trades unions involved will have to accept eventually that steam engine practices have no part in the modern railway of the future. The Government have honoured their commitment of financial support, again against a difficult background of an economic recession and severe restraints on the public purse.

I should like to deal with the main thrust of the amendment so far as I can understand it. It is based apparently on the belief that the railways are starved of finance and that they have an uncertain financial future. It can be demonstrated, I believe, that, despite the difficulties of the last two years, the Government have dealt with the railways generously and fairly. It is mythology that financial constraints over the last two years have been tighter than those that the railways previously suffered. References to monetarism are mere use of a shibboleth introduced into debates on all subjects Despite the financial constraints, the railways have been treated generously. It is not true that they have been, or that they are likely to be, deprived of the money that they need to run a modern railway if, for their part, they can improve business performance, raise productivity and make their contribution to dealing with the problems.

I should like to refer to the main control that all Governments have exercised over nationalised industries, including British Rail—the overall control of the external financing limit on the total level of public sector borrowing and grants. The Government did not invent this system. The Labour Government also exercised it. I do not believe that any responsible Government will be able to abandon all controls on the external borrowing requirements of a major nationalised industry.

In looking 10 years ahead, one has also to look back to the last two years. Under this Government, the external financing limit has been adjusted in each of the last two years in order to compensate the railways for sudden and unexpected falls in traffic that they suffered because of the economic recession. In September 1980, the external financing limit then set by the Government was raised by £40 million to £790 million to compensate the railways for the first losses of traffic they suffered, particularly in freight business. In the last year, the Government adjusted the external financing limit from £867 million to £920 million, again to compensate the railways for the loss of revenue that they were suffering because of the recession.

Having set external financing limits, the Government adjusted them in each of the last two years precisely because we accepted the need for adjustment as revenues had been lost for reasons outside the railways' immediate ability to adjust costs downwards to compensate for what had happened. We have been flexible in compensating for the unavoidable cost of the recession. Apart from the adjustment of the external financing limit in each of the last two years, the overall level of the EFL also compares favourably with the external financing limit imposed on British Rail by the previous Government. There has been an easing of financial constraints under this Government.

I should like to give comparative figures expressed in real terms allowing for inflation. At average 1981 prices, the EFL for 1977–78 was £687 million, for 1978–79, £785 million, for 1979–80, £743 million, for 1980–81, £847 million, for 1981–82, £895 million and for 1982–83, £848 million.

The hon. Member for Nuneaton claimed to detect a cut in the figures for the last two years. I have already stated that last year's EFL was raised from £867 million to £920 million because of lost revenue during the year when British Rail was unable to cut costs as rapidly as was necessary to compensate. Next year, the figure we have set—I now move to current prices—is £950 million which is roughly the same, allowing for inflation, as the figure set for last year. There is no cut at all. It is 9.5 per cent. above the EFL for last year. The hon. Gentleman is wrong to say that there has been a cut.

Mr. Les Huckfield

I am grateful to the Minister. It depends which price one uses as to which figure comes out. Is the hon. and learned Gentleman saying that in all those cases he excludes the specific allocation for the closure of collection and delivery services? Or is that included in the figures?

Mr. Clarke

The figures include that. Last year we made a special provision towards the cost of the closure of the collection and delivery of parcels service. That was not, in the event, required by British Rail. The increase from £867 million to £920 million last year was for the purpose of compensating for loss of revenue. The railways did not need the sum provisionally allocated to them for the closure of the collection and delivery of parcels service.

9.45 pm

The hon. Member for Nuneaton said that it depends on the price base used. That is why I was specific throughout. I realise the figures that I have put on the record are complicated; they require study. I heard the hon. Gentleman today earlier splitting hairs in an ingenious way on behalf of ASLEF to get it out of its broken understandings that have caused the present dispute. I am not going to accept what he says. I shall draw the general conclusions that I insist can be drawn from any anlysis of the external finance limit figures for the last two years.

The limits are higher in real terms under this Government than under the last Government; they have been adjusted by the Government because we accept that special, unexpected problems have hit the railways because of the recession. It is mythology to claim that the external finance limits have been squeezed vicelike on the railways to deprive them of finance. At a time of overall crisis and reduction of external finance limits for nationalised industries as a whole quite rightly, whilst I am defending the decisions we take—I am not criticising them—we have been generous to British Rail and eased, so far as was practicable and consistent with our duty to the taxpayer, the constraints it has been under at a time of difficult recession.

Mr. Robert Hughes

Would the hon. and learned Gentleman answer this question? He made the case that the external financing limit has been increased over the last couple of years to take account of the loss of revenue because of the recession. What about the part of the external financing limit that is available for investment? How much has that been increased? It is not a question simply of extending the external financing limit to suit conditions. It is the real money available for investment that counts.

Mr. Clarke

I shall come to the investment ceiling last. I would like to deal with another matter that has been raised and which is relevant to finances—the public service obligation for the passenger services. That bears on many of the points made, particularly by the hon. Member for Vauxhall (Mr. Holland), about the fact that many passenger railways throughout the world are run at a loss.

The Government accept that a great part of the noncommercial railway, including rural lines and the commuter lines in London, are not under any commercial remit and require a realistic level of subsidy from the taxpayer because there are broader reasons for supporting them than just the narrow commercial return from those lines. Again, the public service obligation paid to the railways has been increased by the Government. It was recently raised—I think the announcement was on the occasion of the Second Reading of the Bill—in mid-year for the first time since the system was introduced in response to European Community regulations in the early 1970s. The Government raised the public service obligation by £110 million in one fell swoop to £755 million for 1981.

I shall not bore the House with more comparative figures. I shall merely say—and it can be checked—that this is by far the highest ever public service obligation payment in real terms that British Rail has received. What it amounts to is that the Government are paying over £2 million each day in subsidy for the passenger services of British Rail. That is not an ungenerous amount. Not only is it the highest ever, but it shows our support for the railways.

Going on to investment the right hon. Member for Barrow-in-Furness (Mr. Booth) objected to the first point he knows I always make but it remains a valid point and I am still at a loss to know what his answer to it is. The only cash ceiling on investment that successive Governments have imposed is the so-called investment ceiling. In 1981–82 that works out at the staggering sum of £427 million at outturn prices, which in real terms is exactly the same investment ceiling as that imposed on the board by previous Governments, including our immediate predecessor.

It is true that the business performance of the railways is such that they are being squeezed within their external finance limit by the business losses that they are making on freight in particular, on inter-city and on their noncommercial railway business, and that they are having difficulty in investing up to that investment ceiling within the terms of the external finance limit.

I have already described what the Government have done to expand that external financing limit. We have been flexible on it to compensate particularly for unexpected losses of revenue, for which it is impossible to cut costs in time. We do not compensate British Rail for unexpected increases in cost, which it is its management duty to restrain and which it is trying to restrain, although unfortunately its costs continue to rise steadily on its intercity business.

It is certainly not the Government's business to start extending the external financing limit to finance pay settlements in a way that was urged upon us by the hon. Member for Nuneaton. We have responded by easing some of the financial constraints on British Rail. We should like to see it invest up to the levels required. If the business performance can be improved and the losses contained, if less can be drained away, if losses on freight and inter-city can be reduced, and if the performance even of the non-commercial services can be improved, the more able British Rail will be to invest up to its investment ceiling within its present external financing limits.

That is true of any business. It is not unique to the nationalised industries. Any industry that goes through trading difficulties needs a generous bank manager, which British Rail has in the form of the Government. Secondly, there is a limit to the extent to which it can continue to do various things, such as investing to the level that it would like, until it can reduce its losses and improve its business performance. Like any other business, British Rail has a duty to generate some of the sums that it needs for investment out of its own resources.

Mr. Stuart Holland

The Minister said that his argument bore no relation to monetarism. He is apparently unaware that he has just given the classic monetarist argument: run a public service despite the externalities, despite the impact on the rest of the economy, as one runs a private firm; run it in a recession by cutting back. It is precisely that which is dragging this country down an almost bottomless pit of monetarism. The case for electrifying the railways is precisely that it would stimulate industry as well as improve the service.

Mr. Clarke

I know of no private business that can have a subsidy of £2 million a day to run its socially necessary services in London, including the area represented by the hon. Gentleman, as well as in the rural parts of the country. I know of no private business in the financial state that British Rail is in that could have had the easing of its financial constraints in the past 12 months that I have described. It is because the Government realise that there are long-term transport needs that we wish to see the railways go towards the future that I have described, and that is why we have eased the constraints in the way that we have.

The hon. Gentleman cannot argue that we should go all the way in the other direction. If we suspend or relieve some of the financial constraints that would otherwise fall on British Rail, because we believe that there is a general public benefit, the hon. Gentleman cannot interpret that to mean that we should abandon all financial discipline, that the cost is no object and that £2 million a day is not enough, that investment should not be appraised and that investment ceilings should be exceeded. The hon. Gentleman cannot interpret it to mean that the external financing limit should be lifted to such a level that it can accommodate the necessary investment demanded by British Rail, the services and the kind of attitudes expounded by the hon. Member for Nuneaton, which is "Incidentally, we also want the pay increases, without being able to deliver the productivity that we promised last August."

Mr. Les Huckfield

The Minister keeps referring to pay increases. It is not pay increases that I am asking for or that ASLEF is asking for, particularly. It is pay increases as recommended by the Railway Staff National Tribunal, which includes a British Railways Board member as an assessor. In other words, the board's own contribution has been made to that arbitration. That is who is saying "Give them the increase", not I.

Mr. Clarke

The approach to the pay increases over and above the 8 per cent. that everybody received last year, the increases that should apply in the future and matters such as the 39-hour week and the extra 3 per cent. is that they should be paid for by improved productivity so far as possible. That was the understanding of British Rail, of the National Union of Railwaymen and of the Transport Salaried Staffs Association. It was the understanding that ASLEF left everybody else thinking it had reached, but on which it is now attempting to renege.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. We must not go too far down that line.

Mr. Clarke

It was with order in mind that I was proposing to progress a little further on the finances and withdraw from the current dispute. I apologise to the hon. Gentleman. We shall lead each other astray again outside the terms of order and of this debate and into the current dispute, which we should not do.

A great deal has been said this evening and throughout our Committee proceedings about the effect of the supposed excessive constraints that our present arrangements—the EFL, the PSO and the investment ceiling—are imposing on maintenance, renewal and investment in the British Rail system. Many of the arguments do not appreciate that much of the maintenance and renewal of the network does not count as investment at all. Certainly the arguments about investment ceilings and so on do not bear on track renewal and signalling maintenance, which matter so much to keeping a modern railway and stopping the service declining.

In 1981 alone about £500 million was spent on those items. They are not at the moment being excessively confined. It is also not always appreciated that by no means all the investment of British Rail is financed by borrowing. Half the point of the amendments that are being tabled to the Bill is that it is believed that the borrowing ceilings are in some way directly related to the level of investment, whereas a lot of the investment is supported by grant. That bears on fears about the Settle—Carlisle line and so on.

Investment in the non-commercial railway is covered by the public service obligation grant that we already give. Again, there is no question of our imposing monetarist, artificial financial rules on the investment in the noncommercial railway. The public service obligation grant contains an element known as the replacement allowance for the renewal of assets in the non-commercial railway business. That, again, amounted to no less than £80.3 million in 1981. That reduces the railways' need to borrow.

I shall not enter into the details of the Ribblehead viaduct with my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) and the hon. Member for Keighley (Mr. Cryer). They are partly concerned because of the great railway history of the line. I believe, as British Rail has assured us, that the decision to switch inter-city traffic from there has nothing to do with the condition of the viaduct. It is—as British Rail has made clear publicly—because it believes that it will improve the return on the inter-city services by taking them by Manchester and the alternative route.

In so far as there is a need to maintain the Ribblehead viaduct, the need to maintain the investment, structures and so on is entirely covered by the enormous public service obligation grant that we give to British Rail—£755 million, or £2 million a day. Within that British Rail has to finance the non-commercial services that we oblige it to run.

Mr. Stuart Holland

The Minister cannot have it both ways. On the one hand, he is saying that the Government are paying out on what amount to cost benefit terms. On the other hand, he is saying that the industry must cut back and be run like a commercial operation. This is the basic premise of the monetarist reasoning. Would he care to answer the points that I was making—for example, concerning the benefits that electrification would have on the private sector, because there is no public enterprise supplying the electrification equipment? In practice, that will mean that 100 per cent. of all public expenditure in that sector would go straight to the private sector.

Mr. Clarke

What I have just said applies to the noncommercial railway. Successive Governments—the Labour Government as well as our own—have accepted that inter-city and freight should be commercial businesses and should achieve agreed business performances and commercial targets over a period of time. Of course, we accept that in a time of recession it has proved more difficult for British Rail to attain those commercial targets. Nevertheless, for the commercial railway different rules have always operated.

Successive Governments have set commercial targets for British Rail. I have explained that the public service obligation covers the non-commercial railway. We do not take a commercial view of the commuter and rural services and the essential social links. But we are following the same policy as our predecessors on the commercial railway. We have eased the financial restraints on them and thereby given them more time, because of the difficulties that they are having in coming through the recession. But the commercial railway will eventually achieve health only if it can improve its business performance and productivity and thereby get the investment that we are all talking about.

Perhaps that would be a convenient time, therefore, to turn to electrification and the points made by the hon. Member for Aberdeen, North (Mr. Hughes).

It being Ten o'clock, the debate stood adjourned.

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