Commons Sitting of 12 January 1993

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
DEFENCE

  Arms Sales
  Mrs. Mahon: To ask the Secretary of State for Defence what recent contacts his Department has had with the Indonesian Defence Ministry about arms sales.
  The Minister of State for the Armed Forces (Mr. Archie Hamilton): My Department has a number of contacts with the Indonesian Defence Ministry covering a variety of issues. Those contacts are, however, a confidential matter for the two Governments.
  Mrs. Mahon: Will the Minister confirm that the sale of British Aerospace Hawk combat aircraft to Indonesia is to go ahead? Is he aware that the Indonesian Government have illegally occupied East Timor for many years and have killed more than a third of its population? Does not he feel any shame at all that, despite the lessons of the Gulf, the British Government are continuing to sell arms to a murderous dictator?
  Mr. Hamilton: The point of selling Hawk aircraft to Indonesia is to give jobs to people in this country. There is no doubt in my mind that a Hawk aircraft can do nothing to suppress the people of East Timor. The aircraft is not suitable for that purpose and we have guarantees from the Indonesians that the aircraft would not be used for internal suppression.
  Mr. Nicholls: Will my right hon. Friend confirm that, by third-world standards, the Indonesian regime's human rights record is considerably better than many and is improving all the time? Does he share my sadness that a country which is trying to improve its human rights record, which will be the major player in that part of the world and which has shown that it wants to be friends with Britain, should be constantly denigrated in ludicrous terms such as we have just heard?
  Mr. Hamilton: Yes, and the fact that we do business with Indonesia puts us in a position where we can influence the actions of that Government. We constantly make every effort to improve their human rights record and to improve the situation in East Timor.

  Scottish Regiments and Battalions
  Mr. Salmond: To ask the Secretary of State for Defence what representations he has received in the review of Scottish regiments and battalions; and if he will make a statement.
  The Secretary of State for Defence (Mr. Malcolm Rifkind): A number of representations have been received about the future of Scottish regiments and battalions, all of which have been noted.
  Mr. Salmond: Will the Secretary of State acknowledge that it is becoming abundantly apparent from those representations that the regiments and the infantry are becoming overstretched on current commitments? Given that, will the Secretary of State further acknowledge that a reassessment of the Government's position on regimental mergers in Scotland would be welcome? The Secretary of State will have seen the comments of the hon. Member for Tayside, North (Mr. Walker) that he has already been engaged in such a private reassessment. Is that the case and, if so, will he take this opportunity to share that information with the rest of the House?
  Mr. Rifkind: The hon. Gentleman's supplementary question refers to Army manpower as a whole. I am satisfied that at present we can meet all our obligations without undue overstretch. If I ever came to a different conclusion, it would be appropriate to review the assumptions of "Options for Change".
  Mr. Bill Walker: Will my right hon. and learned Friend confirm that he has always made it clear that Army manpower and the pressures on the Army are subject to constant review in the light of events? That is what I have been saying. Will he also confirm that the Scottish regiments are part of the fabric that makes the United Kingdom united, as is Rosyth dockyard, and that the political implications must also be taken into consideration?
  Mr. Rifkind: I can certainly confirm that the Scottish regiments have made a fine and honourable contribution to the requirements of the United Kingdom armed forces over many years and I am sure that that will continue. As my hon. Friend knows, the future of the dockyards in the United Kingdom is presently under consideration.
  Dr. Reid: What a complacent answer that was from the Secretary of State when neither he nor the Minister of State for the Armed Forces can give me a guarantee that our infantry men and women serving in Bosnia will not receive redundancy notices even while they are there and under fire. Is not it clear that we cannot possibly sustain two extra battalions in Northern Ireland, maintain an extended military force in Bosnia, assign units to an enhanced Western European Union, as the Secretary of State has promised, and contribute to the Gulf on the basis of defence plans that were drawn up before any of those commitments were known? Why does not the Secretary of State now do the honourable thing, carry out a full defence review and ensure that we have the troops necessary to meet the commitments that he and the Foreign Secretary keep making?
  Mr. Rifkind: I would find the hon. Gentleman's indignation less synthetic if he did not represent a party whose conference called for further reductions in defence expenditure amounting to many billions of pounds. He should make up his mid about whether his party's policy accords with the views of its members.

  Arms Sales
  Mr. Nigel Evans: To ask the Secretary of State for Defence if he will make a statement on defence sales to Kuwait.
  Mr. Rifkind: I signed a defence equipment memorandum of understanding with Kuwait on 2 December. This will enable Kuwait to purchase defence equipment directly on a Government-to-Government basis from the United Kingdom Ministry of Defence, which will place and manage contracts with British equipment manufacturers. Negotiations are already taking place for the sale of GKN's Warrior and Piranha vehicles.
  Mr. Evans: That news will be welcomed by the many thousands of people who are involved in the defence industry in this country, especially in the north-west. In 1990, defence sales amounted to £3 billion.
  Will my right hon. and learned Friend note the policy of Opposition Members who are opposed to the sale of arms to non-democracies, thereby jeopardising this country's defence industry and the contract that he has mentioned? That could lead to a loss of jobs in this country.
  Mr. Rifkind: My hon. Friend is right to draw attention to the remarks of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), who, speaking on behalf of the Opposition, opposed any arms sales to non-democracies. If his policy were implemented, the many British industries that will benefit from sales to countries such as Kuwait and Saudi Arabia, and to middle eastern countries, would be gravely jeopardised and there would be many job losses as a consequence.
  Mr. Dalyell: Has the Secretary of State, or any senior Ministry of Defence official, read Kenneth Timmerman's book "The Death Lobby—How the West Armed Iraq"? Given the behaviour of the Kuwaitis towards the Palestinians and many others who built up Kuwait, given the human rights situation and given the legal difficulties over the border with Iraq, would not it be better—in the face of the appalling abyss presented by the alternative —at least to enter into some kind of dialogue with Baghdad?
  Mr. Rifkind: The hon. Gentleman is incredibly naive if he believes that dialogue with Baghdad is likely to prove fruitful. At this very moment, we are witnessing Saddam Hussein's intransigence in refusing to recognise even the authority of the United Nations Security Council.
  Mr. Conway: Will my right hon. and learned Friend take the opportunity to congratulate the excellent management and work force of GKN in Shropshire, which makes the Warrior vehicle—and, more important, Perkins Engines in Shrewsbury, which produces the engine that fires that tremendous vehicle—on the expertise and workmanship that have resulted in such a saleable product?
  Mr. Rifkind: I am happy to do so. The fact that the United Kingdom has increased its share of the world market from 17 to 20 per cent. in the past year is a tribute to the professionalism, experience and dedication of the many hundreds of thousands of people who work in our defence industries, including those mentioned by my hon. Friend.
  Mr. David Clark: Have the Kuwaitis made any requests for defence equipment recently, in view of the Iraqi incursions into their territory? Do the Government believe that the United Nations did or did not approve that equipment and what does the Secretary of State think should be done if the incursions continue?
  Mr. Rifkind: We are currently negotiating with the Kuwaitis about their possible interest in Warrior and Piranha armoured vehicles. They have expressed great interest in taking forward the contracts. As for the recent incursions into Kuwaiti territory, the United Nations Security Council has made it clear that that is unacceptable behaviour and has demanded that the Iraqis return the Silkworm missiles that were removed and cease their transgressions with regard to the frontier between Iraq and Kuwait.
  Mr. Cyril D. Townsend: Does my right hon. and learned Friend agree that, apart from selling arms to Kuwait, we should give the Kuwaitis strong advice about how to protect the defence equipment in their care? Will he and the Government ensure that representations are made—not only to the United Nations, but to the Kuwaiti authorities—about the recent scandalous stealing of equipment by the Iraqis which suggests that the Kuwaiti authorities have been extremely negligent?
  Mr. Rifkind: The equipment in question was in the hands of United Nations personnel, who, under United Nations rules, are unable to be armed. For that reason, the Iraqis who crossed the border were able to remove the equipment. That was unacceptable and the Security Council has made its views known.
  Mr. Dalyell: On a point of order, Madam Speaker. In view of the unsatisfactory nature of the reply—
  Madam Speaker: Order. As it was not the hon. Gentleman's substantive question, I cannot take that as a point of order.

  "Options for Change"
  Mr. Llwyd: To ask the Secretary of State for Defence what cutbacks in defence procurement are envisaged in Wales due to the policies inherent in "Options for Change".
  Mr. Archie Hamilton: The effect on Wales of any reductions in defence procurement will depend on individual companies' success in winning business and on their commercial decisions about the size and location of their manufacturing facilities.
  Mr. Llwyd: Does the Minister agree that the west of Wales has suffered very badly recently, with the imminent closure of RAF Brawdy and Trecwn and today's news that 300 jobs will go at Pendine? Will he assure us that the Ministry will work closely with the Welsh Office to secure some new job opportunities for this highly skilled work force, who are literally without hope?
  Mr. Hamilton: We are already working closely with the Welsh office on Trecwn and Brawdy in west Wales. We keep in touch about the other ramifications of the proposals, but we are not directly responsible for defence

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  manufacturers in Wales. We very much regret the adjustments that were made to the work force which led to the recent job losses.
  Mr. John Marshall: What would have happened to defence procurement in Wales and elsewhere if my right hon. Friend had listened to the advice of members of the Labour and Liberal parties?
  Mr. Hamilton: Exactly. It is always amazing to see the resolutions that are passed at the conferences of the Opposition parties to cut defence expenditure radically, yet during defence questions Opposition Members constantly jump up and down saying that job losses are regrettable and that we should do all that we can to stimulate orders for defence equipment. As my hon. Friend said, the two do not tie together. The effect of a Labour Government, or indeed a Labour-Liberal Government, would be devastating on defence jobs across the country.
  Mr. Alan W. Williams: In the past few days it has become clear that the Pendine proof and experimental establishment in my constituency is under severe threat of closure under the defence review, with the loss of 300 jobs. The base has several unique facilities. It has an excellent cost-efficiency record with the lowest cost per employee of any land unit and it is the only base that makes a profit. Will the Minister assure me that decisions about the future of these establishments will be based on fair cost comparisons? What has he to say to the 300 people in Pendine who are worried about their jobs?
  Mr. Hamilton: Whenever a decision is taken to close a defence establishment, every consideration is taken into account, including the implications for local employment. The fact remains that we are dealing with a receding and reducing defence budget and must find savings where we can.

  Mountain Rescue
  Mr. Canavan: To ask the Secretary of State for Defence what recent representations he has received about his Department's participation in mountain rescue work; and if he will make a statement.
  Mr. Archie Hamilton: My Department has received a number of representations about its participation in mountain rescue work. The open government document, "The Future Provision of Royal Air Force Search and Rescue Helicopters", gives full details of the services that are made available by my Department for mountain rescue work. A copy is in the Library of the House.
  Mr. Canavan: Is the Minister aware that heavy demand over the Christmas and new year period exposed the inadequacy of the existing helicopter emergency service? For example, a fortnight ago the Killin mountain rescue team took four hours to carry an injured man off a treacherous mountainside because all the helicopters were otherwise engaged. As the decision to withdraw the helicopter emergency service from Leuchars from April was taken without any meaningful consultation with bodies such as the Scottish Sports Council and the Mountain Rescue Committee for Scotland, will the Minister act now to ensure meaningful consultations with
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  a view to reversing the closure decision and to replacing the Wessex flight at Leuchars with Sea Kings? Otherwise, there is a real danger that lives will be lost.
  Mr. Hamilton: I cannot comment on the particular case of a mountain rescue team taking four hours to bring someone down, but, in such circumstances, the weather is invariably so bad that mountain rescue teams are the only people who can get to the beleagured person. We should not fool ourselves—nor should the hon. Gentleman—that helicopters can operate in all weathers, because they cannot. The point of mountain rescue teams is that they can operate in virtually any weather whereas helicopters cannot always reach the necessary areas.
  While making changes to the search and rescue operation, we are fulfilling the civil requirement of being able to get anywhere from the base within an hour and that will be adequately carried out by the Sea Kings from Lossiemouth.
  Mr. Menzies Campbell: Will the Minister take the opportunity to commend the efforts of the mountain rescue team at RAF Leuchars which, in the past 24 hours, has been engaged in such tasks as rescuing stranded motorists and ensuring that meals on wheels are delivered to those who need them? Does he realise that such efforts create a very warm relationship between the Royal Air Force and the community and that that relationship is likely to be prejudiced by the withdrawal of search and rescue facilities from RAF Leuchars because it is well known that the quality of cover will be reduced in Fife and that lives may be put at risk? There is still time for the Government to think again and to accept that the best way in which to proceed is to replace the Wessex with the Sea King at RAF Leuchars.
  Mr. Hamilton: To answer the first part of the hon. and learned Gentleman's question, I certainly commend the mountain rescue team at Leuchars and I am glad that it will continue to carry out its job there. I have already commented on helicopters—mountain rescue teams need them to take up their advance parties, but they move independently with the bulk of their people and are not dependent on helicopters for their work. I accept the hon. and learned Gentleman's point about the recent very bad weather—about 60 cars were identified by the helicopters from Leuchars—but the Sea Kings from Lossiemouth will cover most of that area. As the hon. and learned Gentleman acknowledged, they are much better helicopters and can fly in much worse weather.
  Mr. Martlew: Does the Minister accept that his decision last October to close four RAF bases involved in search and rescue will mean an extra response time in coastal areas and in the mountains? It is not good enough for the Minister to say that we shall continue to meet the civil criteria, because his decision last October will mean that lives will be lost. Will he decide today to reverse the closures and satisfy the need for rescue teams in coastal and mountain areas because we are frightened that, if he does not, lives will be lost?
  Mr. Hamilton: Our search and rescue capability is set up for military needs and we have found that we can reduce the military requirement and still remain well within the civil requirement. It must be true that if one doubled the number of search and rescue bases and cut response time to half an hour, the number of people who

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  suffered as a result would probably fall, but that would involve enormous costs. The civil requirement means getting a helicopter there within an hour and we are still able to fulfil that civil requirement.

  Arms Diversification
  Mr. Miller: To ask the Secretary of State for Defence what representation his Department has received about Government assistance towards arms diversification.
  Mr. Rifkind: We receive a variety of representations from time to time on the question of arms diversification. The product ranges in which companies compete is, however, a matter best left to their own commercial judgment.
  Mr. Miller: Against the background of recent arms cuts involving redundancies in my area, such as those at British Nuclear Fuels Ltd., British Aerospace, GEC and Cammell Laird, and in view of the Government's statement at the NATO meeting in Rome in November 1991 that they would support eastern European countries in their diversification, does not the Minister think that it is about time that he gave such support to British companies? Does he agree with the managing director of British Aerospace's military aircraft division that the Government have no policy on spin-off technologies?
  Mr. Rifkind: British industry has not requested Government assistance for diversification. That is perfectly straightforward because it believes, rightly, that it is in the best position to judge what is in the interests of companies and how best to diversify to meet its changing needs. I remind the hon. Gentleman that, notwithstanding defence cuts, £9 billion worth of orders are placed primarily with British industry for defence procurement, so it is a continuing massive source of employment.
  Mr. Ian Bruce: My right hon. and learned Friend has the difficult task of trying to trim the defence budget to close to our target, which is well above what the Opposition parties would try to achieve. Has he had conversations with my right hon. Friend the President of the Board of Trade about the moneys available for communities that will be affected by defence cuts? When we cut miners' jobs, the Government immediately had £1 billion available for the mining communities. It seems strange that we do not have similar plans for the communities affected by defence cuts.
  Mr. Rifkind: As my hon. Friend will be aware, any area that experiences large unemployment can benefit from the Government's regional policy and from the special assistance available to parts of the country that fall within the relevant criteria.

  Nuclear Warheads (Soviet Union)
  Mr. Tony Banks: To ask the Secretary of State for Defence what is his latest estimate of the number of nuclear warheads remaining within the area of the old Soviet Union.
  Mr. Rifkind: We estimate that there are some 27,000 or more nuclear warheads remaining within the area of the old Soviet Union.
  Mr. Banks: There would be a big bang if they all went off together. All sane people clearly welcome the START 2 strategic arms reduction treaty. What financial and technical assistance has been provided to Russia, to Ukraine and to the other countries in eastern Europe to dismantle their nuclear weapons? Goiven START 2 and the end of the cold war, is not it time for the Government to give up the ridiculous Trident scheme? It is a criminal waste of money as there is clearly no enemy against which it will be pitched. It seems to be a case of political penis envy by the Government.
  Mr. Rifkind: On the earlier part of the question, we are providing support to Russia and to other countries in a similar position for dismantling their surplus nuclear weapons. As for the rather absurd comments in the latter part of the hon. Gentleman's remarks, I remind him that not only does the former Soviet Union still have 27,000 nuclear warheads, but even after 10 years and the full implementation of the START 2 agreement, Russia will still have more than 3,000 strategic nuclear warheads, which is more than enough to create enormous devastation around the world.
  Mrs. Browning: Will my right hon. and learned Friend assure the House that we shall monitor the decommissioning and movement of those warheads in the Soviet Union? Will he also assure the House that Britain will maintain an independent nuclear deterrent as long as it is felt expedient to do so and while there are threats around the world from who knows where—not only from the old Warsaw pact countries—which make such a deterrent vital for the safety of our people?
  Mr. Rifkind: My hon. Friend is entirely correct. Measures will be taken to monitor the decommissioning or destruction of surplus nuclear weapons in Russia and in the United States. On the latter part of my hon. Friend's question, the United Kingdom's approach has always been to maintain the minimum deterrent that we require. In the case of Russia and the United States, there were aspirations to parity which resulted in huge increases in strategic nuclear weapons in both countries. Those weapons are now being cut by two thirds. We very much welcome that change, but both the United States and Russia will still have many more strategic nuclear weapons than the United Kingdom contemplates.

  Somalia
  Mr. Hanson: To ask the Secretary of State for Defence if he will make a statement about the progress of the United Kingdom involvement in the military operation in Somalia.
  Mr. Rifkind: The United Kingdom has deployed two Royal Air Force Hercules aircraft together with about 90 RAF personnel to assist in Operation Restore Hope in Somalia. The aircraft are currently based with United States forces in Mombasa in Kenya and since 12 December have been engaged in the transport of humanitarian relief stores to affected areas inside Somalia.
  Mr. Hanson: Given Britain's historic role in Somalia, does the Secretary of State agree that we should be doing far more than we are at present to assist the United Nations relief operation there? Is it not the case, however, that, due to the mismanagement of defence forces alluded

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  to earlier, we are not capable of supporting United Nations resolutions but have to rely on the world's policeman, the United States, to do it for us? Does the right hon. and learned Gentleman agree that the defence review is needed urgently?
  Mr. Rifkind: The hon. Gentleman could not be more incorrect. With more than 3,500 British forces allocated to various United Nations operations around the world, Britain is at present contributing more personnel to the work of the United Nations than any country other than France. That shows the worthlessness of the hon. Gentleman's criticism.

  Surface Ships (Portsmouth)
  Mr. David Martin: To ask the Secretary of State for Defence how many commissioned surface ships of the Royal Navy are based at Portsmouth.
  Mr. Archie Hamilton: There are 23 Royal Navy surface ships, including minor war vessels, base-ported at Portsmouth.
  Mr. Martin: My right hon. Friend is aware of my concern to see the maximum number of ships based at Portsmouth, with the implications that that has for the provision of jobs for the fleet maintenance and repair organisation. May I thank him for receiving a delegation to discuss the organisation's future structure and seek his assurance that, before reaching final conclusions, he will take into account all representations made during the consultation period?
  Mr. Hamilton: Yes. First, I commend my hon. Friend's tireless efforts to ensure that Portsmouth remains a substantial naval base—which it certainly will. It is a matter of great regret that we had to re-examine the whole question of our dockyard capability, and that that has led to the proposal to close the FMRO in Portsmouth. We shall look hard at all the representations made before reaching any conclusions and I am glad that we were able to extend the consultation period.
  Mr. Foulkes: Does the Minister recall that on 24 November, in reply to a question from my hon. Friend the Member for Dunfermline, West (Ms. Squire), he promised an announcement on dockyards and bases by the end of last year? As the continuing delay results in wild speculation from all quarters, and in great uncertainty and extreme concern among the work forces at both Rosyth and Devonport, will the Minister now accept that the dual site solution is the better one, not just for jobs in Scotland and the west country but for strategic reasons? Will he now bite the bullet and tell us that an announcement will be made quickly?
  Mr. Hamilton: I apologise to the hon. Gentleman and to the House that it was not possible to make an announcement by the end of the year. Further representations were made on the viability of the dockyards and it was important to examine that information carefully before reaching any conclusions. I am rather reluctant to promise the hon. Gentleman another date, but I hope that we shall be able to make an announcement shortly.
  Mr. Ward: Will my right hon. Friend confirm that the surface ships belonging to the Royal Navy in Portsmouth
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  will be joined at some date by two new amphibious assault ships which were promised during the previous Parliament? Can my right hon. Friend give us some idea when they are likely to be placed on order?
  Mr. Hamilton: Yes, indeed. A project definition is being drawn up in connection with the replacement of both the amphibious assault ships, with the objective that we should go out to tender later this year.

  Unaccompanied Tours
  Mr. Trimble: To ask the Secretary of State for Defence what was the average interval between unaccompanied tours (a) two years ago, (b) one year ago and (c) currently.
  Mr. Archie Hamilton: The average interval between unaccompanied tours for the infantry in 1990–91 was 18 months. That figure rose to 32 months in 1991–92 as, among other measures, Royal Marine commandos were included, and has fallen to 17 months in 1992–93 due to the unavailability of those units undergoing amalgamation, changing roles or relocating. It is still expected, however, that the target of 24 months between unaccompanied tours will be achieved once restructuring is complete.
  Mr. Trimble: I appreciate that it is hoped that it will be possible to get back to 24 months at some point in the future, but when does the Minister think that that target will be achieved? Is it not likely that in the short term—over the next few years—the figure will still be low and may even drop further? Does the Minister appreciate the impact that that will have on the families of service men? If the pressure on the men and their families is sustained, we may have a vicious circle in which more men leave the service.
  Mr. Hamilton: Yes. The period of amalgamation will be over the next two years. That has led to the present dislocation and to the emergency tour interval shrinking to the degree that it has recently. So long as there are no new long-term commitments in the next two years, we estimate that we shall be able to return to 24 months. I totally agree with the hon. Gentleman's point about the effect of the amalgamation on families, and we are mindful of that.
  Mr. Fabricant: A number of reports in The Scotsman and other newspapers have said that there may be a reprieve possibly for some Scottish regiments. Can my right hon. Friend reassure me and my constituents that any review of Scottish regiments will go hand in glove with the review of the Staffordshire and Cheshire regiments?
  Mr. Hamilton: I do not think that we are talking about a review of the proposals for the amalgamation of regiments under "Options for Change". We still feel that we have the right number of regiments. We do not think that long-term commitments have changed sufficiently to want to change that.

  Skills Base
  Mr. Barnes: To ask the Secretary of State for Defence if he will outline measures he proposes to take to minimise the erosion of the skills base in the defence industry; and if he will make a statement.
  Mr. Rifkind: It is for companies operating in the defence business to decide how to preserve and foster the skills that they judge are required to fulfil current and future defence contracts at home and overseas.
  Mr. Barnes: That means that the Minister is again sitting back and watching the destruction of skills in British industry—in this case, defence—which are of a high level and should be developed by the Government rather than destroyed. Last week, it was announced that 1,300 jobs were to go in Royal Ordnance factories. Why do the Government not start intervening in such industries and provide back-up and support so that there may be diversification and conversion into other industries? We have had enough of Governments being free-enterprise freaks.
  Mr. Rifkind: I pointed out a few moments ago that British defence industries have been successful in increasing their market share from 17 per cent. of the world market to 20 per cent. That is a remarkable achievement and shows that the defence industries are capable of adapting to the new international situation.
  Mr. Trotter: May I remind my right hon. and learned Friend of the need to maintain our shipbuilding base and of the importance to that base of ordering the landing platform helicopter carrier? The Select Committee on Defence was recently told by an official in his Department that that requirement remained essential. Can my right hon. and learned Friend give an assurance that the Government's commitment to order the LPH carrier will be maintained?
  Mr. Rifkind: I am aware of my hon. Friend's great interest in the ordering of the LPH carrier. The tenders for that particular ship have been received, and they are currently being analysed. However, that will inevitably take some time.
  Mr. Nicholas Brown: Will the Secretary of State take this opportunity to deny categorically the rumour that he intends to cancel the LPH carrier project, and confirm that he will make a firm procurement decision in the autumn?
  Mr. Rifkind: I have just told the House that we are currently considering the tenders for the order.

  Bosnia
  Mr. Sweeney: To ask the Secretary of State for Defence how much food has been delivered by British troops in Bosnia since their deployment.
  Mr. Rifkind: So far, 147 convoys have been escorted by British troops, delivering 11,775 tonnes of humanitarian aid.
  Mr. Sweeney: Does my right hon. and learned Friend accept that the British troops are performing a valuable humanitarian role in Bosnia and does he consider that the present rules of engagement provide adequate protection for our troops in Bosnia?
  Mr. Rifkind: I agree that the British troops are carrying out an enormously important role. The importance of their role is measured by the success of the vast number of convoys that have reached their destinations. We are equally concerned that British soldiers in Bosnia should
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  have the means to protect themselves, and the rules of engagement have been designed to ensure that they are able to achieve that objective.
  Mr. Winnick: Is the Secretary of State aware that, in paying a well-deserved tribute to our troops in Bosnia, one recognises that it would be intolerable if they were fired on, as has been the occasion, and were not in a position to retaliate? The British troops have a right to defend themselves in carrying out humanitarian aid and delivering relief supplies, which is undoubtedly supported by most people in Britain.
  Mr. Rifkind: That is correct. Under the rules of engagement, they have the right to defend themselves. Indeed, in a recent incident near Tuzla, the 9th/12th Lancers returned fire on those who attacked them. They were perfectly entitled to do that and are entitled to use any of the weaponry at their disposal to protect their own lives or the lives of those for whom they are responsible.
  Sir Geoffrey Johnson Smith: Will my right hon. and learned Friend confirm that it is still the policy of Her Majesty's Government not to involve a substantial contribution of British troops in a combat role in Yugoslavia?
  Mr. Rifkind: Yes, I can confirm that it is not our belief that it would be appropriate for ground forces to be used in a combat role. We share that view with all the other United Nations countries that are participating in Bosnia at the present time.
  Dr. David Clark: If the British troops in Bosnia need more equipment to defend themselves, will the Secretary of State assure the House that he will ensure that they have further light artillery under similar rules of engagement so that they can perform their humanitarian role? Will he also make it clear that the reported build-up of British forces in the vicinity does not mean an inexorable drift into a bloody conflict without any military or political objectives, which could lead to an even greater loss of life than at present?
  Mr. Rifkind: I can indeed confirm that we are not considering any extension of the role of the ground forces currently in Bosnia, who are there to carry out a humanitarian role. Of course we shall continue to monitor whether the equipment available to them to defend themselves is sufficient to meet their requirements. If we were to conclude that it was necessary to enhance the equipment available for their protection, we would not hesitate to supply it.
  Mr. John Greenway: To ask the Secretary of State for Defence if he will make a further statement on the role of British armed forces personnel in the provision of humanitarian aid in Bosnia.
  Mr. Jacques Arnold: To ask the Secretary of State for Defence if he will make a statement on the current situation of the British forces serving with the United Nations in Bosnia.
  Mr. Rifkind: During my own recent visit to the United Nations protection force I was able to see at first hand some of the work that British forces there are doing. By escorting convoys, and creating by their presence a secure

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  atmosphere in which aid agencies can operate, our forces have ensured that areas that have not received aid for many months have now been reached with vital supplies.
  Mr. Greenway: Does my right hon. and learned Friend agree that those who criticise the fact that it is always British and American armed forces who carry out the kind of roles being carried out: in Bosnia and Somalia should reflect that that is to the shame of the countries that are doing nothing rather than a valid criticism of the policy of the United Kingdom Government?
  Mr. Rifkind: Yes, my hon. Friend is correct to emphasise that the United Kingdom can hold its head high as it is making such a crucial contribution in ensuring that food, medical aid and shelter reach the many tens of thousands of people who would be starving during the very severe winter months but for the magnificent contribution of our British forces in Bosnia.
  Mr. Jacques Arnold: Will my right hon. and learned Friend remind himself of the fact that our forces are operating in very difficult winter conditions? Will he assure us that they will be properly equipped to look after themselves and ensure that their capabilities are maintained?
  Mr. Rifkind: I can give my hon. Friend that assurance and tell him that we are considering whether any further enhancement might be required to meet that objective with even more certainty in the weeks and months to come.
  Rev. Martin Smyth: I welcome the understanding that the forces will be properly equipped to protect themselves against winter conditions, but does the Secretary of State not accept that while a Portakabin type might protect against winter conditions, the type of hardened shelter that has been developed in Northern Ireland would protect them better from the shelling that they are enduring now?
  Mr. Rifkind: I am very conscious of the fact that the situation has deteriorated significantly in the past week or so. For the first time, our forces have been subjected to what appears to have been a deliberate artillery attack from what appear to have been Serbian positions. We are urgently considering the proper response to ensure the fullest protection for our forces in Bosnia at the present time.
  Mr. Jim Marshall: Is the Secretary of State aware that there is general acceptance by all countries with troops in Bosnia that the British troops are among the most efficient there? That being so, is it not inequitable that our troops receive less pay there than they would in Germany or Northern Ireland while the soldiers of other countries receive enhanced pay?
  Mr. Rifkind: I believe that the hon. Gentleman's comment is based on a misunderstanding. The allowance that our forces receive in, for example, Germany is to enable them to purchase local goods—which are, of course, quite expensive. In Bosnia, all their requirements are entirely met by the Army. Where their families remain in Germany, they continue to receive allowances to which they were previously entitled.
  Mr. Viggers: Does my right hon. and learned Friend recall that when our troops were first deployed in Bosnia for humanitarian purposes we reserved the right to withdraw them should they come under fire? Does he
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  accept that the situation is deteriorating and that there is a severe risk that the United Nations forces might end up being the fourth side in a civil war? Will my right hon. and learned Friend keep anxiously open the option of withdrawing our forces and perhaps regrouping elsewhere in the area if that is deemed a safer way of maintaining peace?
  Mr. Rifkind: I can understand my hon. Friend's concern. We judge these matters against two criteria: first, whether they can fulfil the humanitarian role for which they were sent to Bosnia; secondly, whether the level of risk that they face in the war zone is acceptable. We shall continue to apply those criteria.

PRIME MINISTER

  Engagements
  Mr. Olner: To ask the Prime Minister if he will list his official engagements for Tuesday 12 January.
  The Prime Minister (Mr. John Major): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
  Mr. Olner: I thank the Prime Minister for that reply. Many hundreds of skilled workers in my constituency are, unfortunately, out of work at the present time. Quite frankly, they are suffering from the Government's failure to support employers. Can we look forward in 1993 to no more false dawns but to positive action on jobs so that my constituents and their families can regain some dignity?
  The Prime Minister: We all wish to see recovery—there is no difference between any hon. Members on that subject. We shall get lasting recovery only if we have the right basics. These include low inflation, modest interest rates and the right exchange rate. They are now all in place.
  Mr. Day: Has my right hon. Friend seen reports that the National Union of Teachers is to organise a boycott of tests for 14–year-olds? If those reports are correct, will he condemn such action as disgraceful and highly damaging,
  The Prime Minister: I am certainly prepared to condemn any such call and any such action. I suspect that teachers will be far too sensible to take any such action. Those tests are vital. They are good for children, parents want to see them, teachers need to know how well the children are performing, and parents have a right to know how well their children are performing. Those tests will provide that information.
  Mr. John Smith: Since the wrecking of the Braer is a major environmental disaster and one which could happen again before the inquiries that were announced yesterday have been completed, will the Prime Minister take interim action now to protect our coastlines? Will he convene an urgent meeting with the oil companies to obtain an assurance from them that only the safest routes will be used for the transport of oil while the inquiries are going on? Will he also agree to proposals that have been made to make adequate radar facilities available in sensitive areas so that the continuing traffic in oil can be monitored while the inquiries proceed?
  The Prime Minister: I will certainly invite my right hon. and learned Friend the Secretary of State for the Environment to examine those matters. They may have many ramifications and I think that I should have them examined before I give the right hon. and learned Gentleman a concrete answer.
  Mr. John Smith: I at least welcome the Prime Minister's decision to refer this to his right hon. and learned Friend, but I ask him to engage himself in this important matter. Will he bear in mind that it is frequently the case in matters of aviation that interim action, such as the grounding of aircraft, may be taken while inquiries are being undertaken? Will he bear in mind the acute anxiety that exists in areas all round the coast at what has happened in the Shetlands? May I invite him to look into it personally and to make an early report to the House?
  The Prime Minister: That may well be. As I indicated to the right hon. and learned Gentleman a moment ago, it is prudent to examine a matter carefully before making a commitment. [Interruption.] Were I to make a commitment without doing so, the right hon. and learned Gentleman would be right to be critical. Of course my right hon. and learned Friend will examine it carefully; he will report to me and we shall report to the House.
  Mr. Nigel Evans: Does my right hon. Friend agree with me that private sector skills have greatly benefited industries such as Rover cars, gas, electricity and British Telecom, following policies which the Opposition have opposed at every turn? Will he confirm to the House today that soon these same private sector skills will be made available to British Rail?
  The Prime Minister: I can certainly offer that assurance, and no doubt my right hon. Friend the Secretary of State for Transport will give further details later this afternoon.
  Mr. Ronnie Campbell: To ask the Prime Minister if he will list his official engagements for Tuesday 12 January.
  The Prime Minister: I refer the hon. Gentleman to the answer I gave some moments ago.
  Mr. Ronnie Campbell: Is the Prime Minister aware that Swan Hunter shipbuilding on the Tyne is now on the verge of complete closure, with the loss of 2,000 jobs and disaster for the north-east? Can he therefore confirm that the new helicopter carrier is still in the programme to be built on the Tyne?
  The Prime Minister: We have received tenders and we are considering them at the present time.
  Mr. Dykes: If my right hon. Friend has time to think about it today, will he agree that legitimate attempts to protect the privacy of prominent and other citizens alike should not be used as an excuse to launch a fundamental attack on the freedom of the press, which is so vital to a thriving democracy?
  The Prime Minister: The Government have now received the report of Sir David Calcutt and we shall publish it shortly. The whole House will then have an opportunity to make up its mind on the contents of the report.
  Mr. Ashdown: In view of the grave news of the breakdown of the Geneva talks as a result of Bosnian Serb
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  intransigence, will the Prime Minister now confirm that the British Government are prepared to act with others to protect against the future elimination of the Muslim homeland, to maintain the isolation of the Bosnian Serbs and to increase the pressure, political and military, to force the Bosnian Serbs to return to the peace table?
  The Prime Minister: I share the right hon. Gentleman's regret at the breakdown of the discussions in Geneva. I believe that Cyrus Vance and Lord Owen have done an outstanding job. They have put forward a fair plan. It is a matter of great regret that the Bosnian Serbs are unpersuaded and unprepared to accept it. Sooner or later there must be a negotiated settlement; the only question is whether it comes now or following further repression, further suffering and further difficulties. The international community will wish to apply further pressure if the Bosnian Serbs continue to reject this settlement.
  Mr. Mark Robinson: Does my right hon. Friend agree with me on the important role that small and medium-sized businesses will have to play in economic recovery? Will he undertake to sweep away the unnecessary layers of red tape and bureaucracy which so tie down some of our small businesses?
  The Prime Minister: I have indicated that it is certainly the Government's intention to do so. We have already made good progress since the election, but I now want us to go both further and faster. I have therefore asked every Department in Whitehall to prepare plans for action on deregulation. I shall be meeting every Secretary of State in early February, with their permanent secretaries, and I hope that we can then draw up a detailed plan for deregulation of burdens on business.

  Homelessness
  Mr. Corbyn: To ask the Prime Minister, when he next expects to meet representatives of London's homeless.
  The Prime Minister: I have no plans to do so, but my hon. Friend the Minister for Housing meets representatives regularly.
  Mr. Corbyn: Is it not about time the Prime Minister met representatives of London's homeless to learn that 40,000 families—about 100,000 people—spent Christmas in temporary accommodation, a 10 per cent. increase on a year ago, that there are 50,000 single homeless in London and more than 2,000 sleeping on the streets, a 10 per cent. increase on a year ago and a fivefold increase on five years ago? Is it not about time money was provided to local authorities to buy and build so that families can grow up in decent accommodation rather than suffering the indignity of bed and breakfast accommodation, and public resources were put where they are needed to provide decent homes for the people of this city rather than building empty office blocks for speculative gain?
  The Prime Minister: The hon. Gentleman neglected to mention the number of empty houses either in his own local authority's stock or in that of many local authorities. Liverpool, Hackney, Burnley, Manchester, Salford and North Tyneside all have a very bad record on empty properties.
  When my hon. Friend the Minister for Housing or I next meet representatives of the homeless we shall be able

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  to tell them that recent figures show a continuing decline in the number of families in bed and breakfast accommodation, nationally by 23 per cent. and by 30 per cent. in London and the south-east. I shall be able to remind them of the £750 million housing package announced by my right hon. Friend the Chancellor of the Exchequer in the autumn statement. That will Further reduce the numbers in bed and breakfast. I might also remind them of the £100 million scheme for sleeping rough which has been amazingly successful.

  Engagements
  Mr. Riddick: To ask the Prime Minister if he will list his official engagements for Tuesday 12 January.
  The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
  Mr. Riddick: Does my right hon. Friend agree that one of the things that the British people expect from the Conservative Government is tough action on law and order [Interruption.]
  Madam Speaker: Order. The House must come to order.
  Mr. Riddick: Does the Prime Minister share my concern about the increasing problem of persistent young offenders carrying out crimes such as car crime, burglaries and joy riding? Will he confirm that the Government will take tough action to combat those problems—unlike the Labour party, which is soft on crime?
  The Prime Minister: I will take scoffing from the Labour party on law and order when they begin to support the prevention of terrorism Acts—[Interruption.]
  Madam Speaker: The House must come to order to hear what the Prime Minister has to say—[Interruption.] All parts of the House, for that matter.
  The Prime Minister: On the assumption that Members of the House did not hear what I said a moment ago, I shall repeat it for their benefit. I will take words from the Opposition on law and order when they stop opposing the prevention of terrorism Acts.
  I certainly agree with my hon. Friend about law and order. I certainly share his concern about the persistent offending of so many young people. I have therefore asked my right hon. and learned Friend the Home Secretary to look urgently at the existing arrangements for dealing with juvenile offenders and to consider what new measures it is sensible to introduce. This is one of the areas of greatest concern in the growth of crime statistics and one with which we are determined to deal.
  Mr. Skinner: To ask the Prime Minister if he will list his official engagements for Tuesday 12 January.
  The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
  Mr. Skinner: Does the Prime Minister agree that the biggest problem facing this country at present is the scourge of mass unemployment? Is he aware that it is costing £9,000 for the taxpayer to finance somebody out of work? That is a total cost of £30 billion out of a public sector borrowing requirement of £37 billion. If the Prime Minister tackled that problem, he would be tackling the
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  economy's problems as well. He has the fate of 100,000 people in his hands—30,000 of them miners—in the course of the next few weeks. He could resolve the problem easily. If he will give a subsidy of only half that which is given to nuclear power he will be able to save all 31 pits and 100,000 jobs, export coal to every continent in the world and resolve some of the balance of payments problems as well. Will the Prime Minister stop dithering and do it?
  The Prime Minister: I certainly agree with the hon. Gentleman about the scourge of unemployment. The difference between him and me would be the right method with which to deal with it and to ensure that there are long-term jobs subsequently available. I note what he says about the problem of the pits, but I have no intention of anticipating the coal review, which will be brought before the House as speedily as possible. While the hon. Gentleman continues to support policies such as a payroll tax on jobs, the social chapter, and a national minimum wage, he is not in the best position to lecture us about job losses.
  Mr. Nicholls: To ask the Prime Minister if he will list his official engagements for Tuesday 12 January.
  The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
  Mr. Nicholls: Will my right hon. Friend take time today to consider the wider implications of the rundown or closure of Devonport dockyards? Does he appreciate that the continuing uncertainty is causing unhappiness not just in the city of Plymouth but throughout the west country? I appreciate that he cannot announce a decision today, but will he at least assure the people of Devon and Cornwall that when the time comes for that decision to be made he will have their concerns very much in the forefront of his mind?
  The Prime Minister: I appreciate the great concern in the minds of the people of Devon—and, indeed, of those of near Rosyth—concerning the decisions that need to be taken about the dockyards. I know that that uncertainty is worrying people. The Secretary of State for Defence will announce our proposals as soon as he can. I assure my hon. Friend that there will be no undue delay.

Statutory Instruments, &c.
Madam Speaker: With permission, I shall put together the motions relating to statutory instruments.
Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &c.),

Statutory Instruments, &c.
  ELECTORAL AREAS (NORTHERN IRELAND)
  That the draft District Electoral Areas (Northern Ireland) Order 1993 be referred to a Standing Committee on Statutory Instruments, &c.
  CONTRACTED-OUT PRISONS
  That the draft Criminal Justice Act 1991 (Contracted-out Prisons) (No. 2) Order 1992 be referred to a Standing Committee on Statutory Instruments, &c.

  SEAT BELTS
  That the draft Motor Vehicles (Wearing of Seat Belts) Regulations 1993 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Nicholas Baker.]
  Question agreed to.

Resettlement Unit (Stormy Down)
Mr. Win Griffiths: On a point of order, Madam Speaker. I seek your advice about a notice that appeared on a notice board in a resettlement unit at Stormy Down in my constituency. It was put up by the Resettlement Agency and I believe that it may constitute a contempt of the House. At present—
Madam Speaker: Order. I hesitate to interrupt the hon. Gentleman, and I do so only because he alleges contempt.
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If there is any question of contempt, he must not continue with the point he is making. It is a serious matter. He must put it in writing to me today without delay. I must ask him to do that, now that he has raised the issue.
Mr. Griffiths: I shall be happy to do that, Madam Speaker, because I regard it as a serious matter.
Madam Speaker: That is the way to proceed. I have given the hon. Member the only advice possible.

Professional Standards
3.31 pm
Mr. Roger Evans: I beg to move,
That leave be given to bring in a Bill to require the observance of the highest professional standards; to provide for enforcement and compensation by means of a system of tribunals; to place a duty upon professions to investigate and pursue complaints against them; and for connected purposes.
I must at the outset declare my interest, as a barrister. I must also assure the media that this is not an attempt to deal with the Calcutt report at an early stage. I am talking about the traditional professions such as those of medicine, the law, architects, quantity surveyors and engineers.
My Bill seeks to deal with the fact that the traditional professions have been reluctant to deal as a matter of professional discipline with the issue of bad professional work or work below an acceptable professional standard. Professional discipline has traditionally been limited to serious misconduct, such as putting one's hand in the till or engaging in a breach of advertising regulations.
Members of the public wishing to complain about bad professional work are left to sue in the courts. That is resulting in a mounting accumulation of problems. Because the professions will not discipline their members, professional indemnity insurance premiums are rising. While that cost is being passed on in part to the public, both good and bad professionals are having to bear that burden.
Because many of the legal claims involved are settled by insurers privately, nobody knows whether the professional whom one engages has a good or poor track record. The legal aid fund is hard pressed and many just claims cannot be brought because of lack of means. The law in any event does not impose a particularly high standard when judging bad professional work—simply the minimum standard of reasonable skill which some section of the professions to which I referred says is good enough.
The time has come for the great self-regulating professions to put their affairs in order and to set up a proper system to deal professionally with substandard work and for fully compensating the public for losses occasioned by bad work.
The proposals for which I seek the approval of the House consist of several points. First, each profession should set up a tribunal with full powers to try and to determine cases of bad professional work and to award full compensation at law to members of the public where professionals are adjudged not to have carried out work to an acceptable standard. Secondly, as these tribunals would comprise the leading experts in the particular profession, the old, lax standard of "reasonable care" would be replaced in law by a new professional obligation to observe the highest professional standards according to the state of the art at the time and the professions would be required to publish regularly, for their members and the public, updated guidance with regard to the standards.
Thirdly—and this is a crucial proposal—a tribunal, when finding a case of bad work, would not only award compensation but would have a duty to discipline the offending professional. Fourthly, the composition and procedure of these tribunals should be specified and set out in detail by way of statutory instrument. However, I
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suggest that a number of important minimum criteria should be set down in the Bill. Each tribunal should have a member who is not a member of the particular profession and should have a legally qualified chairman. The tribunals should sit in public and their record and findings should be made public. To protect professionals against frivolous and vexatious complaints, there should be a procedure of summary dismissal of frivolous complaints. No fees should be charged for bringing a complaint before any one of these tribunals.
Mr. Dennis Skinner: Does this apply to Members of Parliament?
Mr. Evans: The hon. Member for Bolsover (Mr. Skinner), from a sedentary position, seems to indicate that Members of Parliament are members of a profession. That is a quaint and eccentric view of the law, but this modest measure is not intended to extend to Members of the House.
The hon. Member for Bolsover, bearing in mind the problems of his constituents, might like to contemplate my fifth proposal rather more carefully. My suggestion is that each profession should not only set up this system but also pay for its operation and for a proper system of legal representation for complainants—in other words, a scheme of preparation, investigation and presentation—and that the operation and requirements of such schemes should be set out in a code of practice, which would be laid down by the Lord Chancellor and with which the profession would have to comply.
Sixthly—and lastly—the courts of the land should have power to stay actions and to refer cases and issues in actions to the relevant professional tribunal where a breach of this new professional obligation is alleged.
The professions themselves have moved very slowly in the direction that I am suggesting. The General Medical Council, for example, has set up new performance procedures, but there is no suggestion of public hearings or of compensation. The Solicitors Complaints Bureau has been able to award compensation up to the grand sum of £1,000 in cases coming before it after 1 April 1991. These steps indicate recognition of the problem, but they are not enough. I am seeking the leave of the House to bring in a Bill to restore public confidence in the great self-regulating professions by giving them modern powers and duties to set up a system of dealing with bad professional work and of compensating members of the public fully in cases where bad work is proven. That is the purpose of the measure.
Question put and agreed to.
Bill ordered to be brought in by Mr. Roger Evans, Mr. Gerald Bermingham, Mr. Gyles Brandreth, Mrs. Jacqui Lait, Lady Olga Maitland, Dr. Robert Spink, Mr. Michael Stephen and Mr. Gary Streeter.

Professional Standards
  PROFESSIONAL STANDARDS
  Mr. Roger Evans accordingly presented a Bill to require the observance of the highest professional standards; to provide for enforcement and compensation by means of a system of tribunals; to place a duty upon professions to investigate and pursue complaints against them; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 26 February and to be printed. [Bill 109.]
Orders of the Day
  Opposition Day
  [8TH ALLOTTED DAY]
  Opposition Day

    Rail Privatisation
    Madam Speaker: I have selected the amendment in the name of the Prime Minister.
    3.39 pm
    Mr. John Prescott: I beg to move,
    That this House opposes the privatisation of the railways.
    The debate comes shortly before what we may assume, according to the leaks, will be a new Bill. Perhaps the Secretary of State will speak about that. We look forward to seeing that Bill because the Government seem to suffer considerable uncertainty about what rail privatisation means. The central plank of their policy is that privatisation, and its competition, allows the pursuit of maximum profit, is eventually to the consumers' benefit, and is far better than a publicly owned utility or a public service. Bearing in mind today's reports about British Airways, such an interpretation sounds rather odd.
    We have the example of British Telecom and the crisis in our energy utilities and in the bus industry, upon which it is claimed the new Bill is based. The deregulated bus industry has older buses, charges higher fares and fewer people travel. The service is also inadequate compared with the one that was provided before deregulation. If that is the forerunner to rail privatisation, it is no wonder that many people are getting extremely edgy about the Government's proposal, which Conservative Members are calling a poll tax on wheels. The recommendations and statements make that a likely possibility.
    Confusion reigns and we look forward to the Secretary of State's interpretation of privatisation. I have had the dubious honour of speaking from the Dispatch Box to a number of Secretaries of State and each of them has professed that he will be introducing a Bill to privatise the railways. That has been the Government's badge of honour in Queen's Speeches and in conference speeches, but they have never been able to define privatisation and it is up to the Secretary of State to explain the White Paper and any changes and say what he intends to implement.
    At the beginning of this new year the Government claimed that they would privatise the railways. The new year message by the Prime Minister changed that to semi-privatisation, and the next day the Secretary of State explained that that really meant commercialisation. Most of the press saw that as a conflict, but I say that it is a policy U-turn. The Secretary of State rushed to his constituency to announce that he was making a speech to circulate his latest interpretation of rail privatisation. It seemed to boil down to some form of privatisation and his belief that franchising the system would lead to better private involvement.
    The assumption in all that is that private operation of the railways is far better than leaving it to public operation. That is almost an ideological difference between
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    us. We believe that there can be a good publicly operated rail system. I do not suggest that that has been achieved because there are difficulties, some of which I shall address. However, matters will be made much more difficult if the railways are privatised.
    What is the evidence for justifying privatisation? There is such a system in Argentina, and after a few years of operation there the passenger service is in complete collapse. Sweden is often cited as having a privatised rail system, but only 1 per cent. of its services are privatised and the track and operations remain in the public service. Track subsidies are to be maintained because of very expensive investment. The White Paper says that the track operation must be expected to give an 8 per cent. return. That is one of the factors that will give rise to considerable difficulties, even for the franchise operations. How can the Government expect the massive investment that is needed to give an 8 per cent. return?
    Mr. Stephen Milligan: The hon. Gentleman says that only 1 per cent. of Sweden's railways have been privatised. Would he give the House the benefit of his knowledge on the improvements that have been made to services, the increase in investment and the increase in passengers carried on those services that have been privatised in Sweden?
    Mr. Prescott: On the 1 per cent? That is a railway system that is only a teeny-weeny bit pregnant. Such improvement of services, whether private or public, whether in the 1 per cent. or the 99 per cent., requires considerably more financial resources than we are prepared to allocate to our service. I see the hon. Gentleman nodding in agreement.
    Mr. Milligan rose—
    Mr. Prescott: I have a long speech to make and I want to get on with it.
    Considerable claims have been made about the privatised Japanese service.
    Mr. Peter Snape: I apologise for intervening so early in my hon. Friend's speech, but I am provoked to do so by the intervention of the hon. Member for Eastleigh (Mr. Milligan). Is my hon. Friend aware that when I met the chairman of SJ, the Swedish railway system, in December, he said that he had recently had discussions with the Minister for Public Transport during which he told him—he gave permission to quote his words—that he thought that the Government's proposals were insane?
    Mr. Prescott: More and more people are coming to that conclusion. My hon. Friend shows his considerable experience in these matters.
    In Japan we are talking not about privately owned companies but publicly owned private companies, such as a municipally-owned bus service. The service is not privately run but is owned by the state or the authorities that are running it. It is not what we understand to be a private company, privately owned. Therefore, that is not a good example.
    In France, the system is basically state owned. The only private sector service between Paris and Orly collapsed a few months ago. Privatisation did not work too well there either.

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    Much is made of the fact that the EC is moving towards the privatisation of the railway system. It is not. It is moving towards transparency and a clear distinction between services which receive public subsidies and those to be operated as profitable services. I support that, as I have said in the House before. The transference of accounts and the capital debt structure of British Rail need to be changed so that British Rail may have access to private capital. We are not opposed to that.
    The Secretary of State has often chided me for putting that case, but I think that he has now come to adopt our ideas on leasing, despite having told us, along with other Secretaries of State, that they were unacceptable. However, I shall not taunt him with that. I am glad that Network South East now has 40 more trains financed by leasing.
    Perhaps the Secretary of State is learning that the Opposition want a good railway system and are prepared to look at the matter in practical terms rather than getting caught up with ideology. That can be achieved equally well in a publicly owned system as in a privately owned system.
    There have already been some experiments in the United Kingdom. The proof of the pudding is in the eating. First, the Government started with InterCity. It was made clear that this Administration would no longer pay a subsidy to InterCity: it would have to pay its way. The Government set a 4 per cent. rate of return, but nothing like that has been realised. It has only broken even this year.
    However, InterCity has been forced to try to maximise revenue rather than services. Areas have been cut from the InterCity network simply to maximise revenue. Black pool or Shrewsbury may be next. A number of areas may be removed from the network service. That is wrong. The railways should provide a national service. As soon as they are privatised in that way, with the emphasis on the maximum rate of revenue, there will be difficulties.
    It is interesting that lnterCity's timetable does not include regional services on its routes because it believes that it does not provide such services, which, under the definition of accounts or as a business operation, it does not. But why should a passenger not know that an inter-city service is being run by a regional railway? That is one example of the difficulties engendered by such a silly arrangement.
    Here is another example. When an InterCity train breaks down and a freight train is available nearby, the freight company will say, "It is not our responsibility to provide a train; find your own InterCity train." That is nonsensical: profit is being put before meeting the needs of the community.
    Mr. Michael Fabricant: The hon. Gentleman said at the beginning of his speech that he and his hon. Friends were ideologically opposed to privatisation, and that he believed that privatisation would damage the quality or the value of the service. Does he accept that British Airways was unprofitable at the time of its privatisation, and that it was unprofitable because it did not provide a good service in comparison with other airlines? Does he accept that, because it is now a privatised service, it is now profitable—and that it is profitable because it provides a good service in competition with other airlines?
    Mr. Prescott: The hon. Gentleman had better ask Richard Branson whether he feels that British Rail is competing with his rail companies. The hon. Gentleman made one fair point, however. I concede that British Airways was able to eliminate its losses, largely because it restructured its manpower. There is no doubt about that; I asked Lord King and others, even before privatisation. Management was not particularly involved in the bringing together of British Airways and British European Airways: it made the structural changes, but it did not make further changes along the line. Lord King was able to do that, reaching agreement with the trade unions in order to provide a more effective service.
    The fact that that involved lousy management does not necessarily mean that publicly owned industries have lousy management. There are many examples of private companies with lousy management. What is needed is proper and effective public management. I do not argue that the managements of publicly owned companies are superior to those of private companies; I simply want the best possible management and the best possible practices to produce the best possible service. I do not have an ideology about the matter. I want our country to have the good public railway system that France and Germany enjoy—modern, reliable and with adequate investment. All the evidence shows that that can best be achieved by a publicly owned system. It is up to the Government to make the case for privatisation.
    We have already witnessed some of the results of privatisation. First, we were given Tiger Rail, along with Charterail and Freightrail. The Prime Minister launched that scheme during the election campaign. It lasted less than four months—and who had to come in and pick up the service? Good old British Rail. We were very happy that a publicly owned service could take over when the private sector had failed.
    Charterail provided a good service. The trouble was that it got scared about the track costs. The Government started talking about an 8 per cent. return on track costs, and it was clearly going to be difficult to operate on that basis. That is not to say that a private service cannot work on a publicly owned system; I do not believe that an operation must be either totally private or totally public.
    The next experiment, Stagecoach, was much more successful: it lasted six months. It was launched by the Minister for Public Transport, who is present today. He described it as a wonderful service—although he did not actually use it; he went into the sleeper and lay down on his bunk. It was not a new train, although it was covered in glossy new paint. There is one thing that we can expect from a privatised industry: it may not invest in new plant, but by golly, it will invest in a lot of new paint. That does not mean that it will improve the quality of its service. It looks good, but it does not necessarily feel any better.
    Although Stagecoach lasted only six months, the leasing arrangement was for 12 months. What compensation did British Rail receive from Stagecoach? It did not receive any: it let it go, and negotiated a new deal. Stagecoach became a sort of holiday operator, offering some seats on British Rail. There was no through ticketing; a ticket could not be used on Stagecoach and then on British Rail.
    There was a good deal of publicity for the new Virgin service. There was to be a new train running up to Scotland —or, rather, not a new train but a 125 diesel, running on the most modernised electric lines, on which publicly

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    owned trains travel at 140 mph. His trains, which admittedly would have had televisions, would have run at about 120 mph—about 20 or 30 mph slower than existing fast trains. Despite all the publicity, as soon as he found out that he would not get a subsidy for the track he pulled out. We now wait to see whether the Secretary of State will propose another version.
    Given the Government's belief in privatisation, one would have thought that capitalists could talk to capitalists. The authority at Heathrow was prepared to pay 80 per cent. of the Heathrow rail link; British Rail was expected to pay only 20 per cent. The Government were not prepared to allocate BR the resources to meet that 20 per cent. commitment, which would have been a good deal for the taxpayer. Instead of him having to pay 100 per cent., 80 per cent. would have been provided by the private sector and 20 per cent. by the public sector. Why did not we do that? The proposal has collapsed again because of the problem of the track cost and the commercial ideology of the Secretary of State.
    The extension of the Jubilee line was an example of the Tory Government talking to bankers—their friends in the City. The extension of the line was not London's greatest priority, but it was chosen to save the face of docklands; that is what it boiled down to. It was proposed that the private sector might pay about 5 or 10 per cent. of the total cost. Despite some clever fiddling of the statistics, we still do not know what the total cost will be. However, the extension of the line was promised in the autumn statement as part of the recovery. It is another green shoot on the Jubilee line that has not materialised. That is amazing.
    Yet again, negotiations about the line highlighted the incompetence of the Department of Transport and the Government. Who would have announced in negotiations that they intended to carry out the project and move civil servants from A to B as part of the recovery programme? If I were a banker offering the money, I would say, "Tell me what the deal is. You want it and you have committed yourself to it politically. I will not give you the money that I said I was going to give before." That seems to be elementary negotiating practice.
    The Secretary of State for Transport (Mr. John MacGregor)indicated dissent.
    Mr. Prescott: Then why have we not got an agreement?
    Mr. MacGregor: I was wondering what the hon. Gentleman was talking about when he said that we had made offers in relation to transferring civil servants from the Department of Transport. I do not know what he was talking about in that regard, because I never did.
    Mr. Prescott: That is a clever little dance around the point that does not answer the issue. Why have we not got an agreement on the Jubilee line?
    Mr. MacGregor: We made it absolutely clear in the autumn statement that we had made provision for the Jubilee line. Discussions are being held between London Transport and the administrator for Olympia and York. We have made the objectives clear, and it has been accepted that the discussions must be held on the basis of
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    the arrangements that were made with Olympia and York. I very much hope that a deal between London Transport and the administrators will be completed before long.
    Mr. Prescott: The same answer has been given for the past 12 months. All I am saying is that the Secretary of State has made it difficult for the Government to negotiate with the bankers, who are now likely to say, "We shall not give as much as we offered before." As an ex-trade union official, may I say that it seemed a silly negotiating position for the Government to take. None the less, we wait with bated breath to see whether we get the Jubilee line. One thing is certain: Londoners are suffering from the absence of the line.
    So much for what has happened under the Government's privatisation programme. We are now told that the White Paper is the latest expression of the theory of privatisation. We wait to see whether the Bill is consistent with that. The White Paper certainly proposes the most complex machinery that we have ever seen to ensure that the market works. The cost will be phenomenal, the bureaucracy will be considerable—and simply to do what? To ensure that the market works, when there will be no competition to achieve the best service for passengers. No other country has achieved a good rail system with such stupid thinking.
    I was amazed at the number of quangos to be used. I remember that in the early 1980s the Government made great play of getting rid of quangos and all bodies of civil servants which they considered to be the dead hand of bureaucracy. We now know what the bureaucracy will be because the information is contained in the White Paper. The Secretary of State informs us that there will be a regulator to control access to the tracks. We know from the advert that companies do not need experience of transport but that will be in line with the Department of Transport. There will be a franchising authority to deal with the allocation of franchises, a rail track quango with responsibility for timetabling and maintenance, and a joint industrial board to co-ordinate ticketing and information systems. There will also be a railway clearing house for the settlement of accounts between companies—we last had one of those in the 1930s.
    There will be a health and safety executive, a railway advisory safety technical standards body and a central transport consultative committee to deal with timetabling and facilities but not, of course, fares. There will be an office of fair trading to ensure that it works. The passenger transport authorities will be expected to discuss section 20 grants, local authorities will be required to consult about timetables, the good old Department of Transport and all its civil servants will be responsible for a policy framework —it has not yet achieved that—and the Treasury will control the external financing limits.
    That means that there will be 13 quangos to ensure that the market works properly, set up by a Government who do not like bureaucracy or quangos and who believe in the invisable hand of the market running the railway system. There is no invisible hand but 13 quangos. It is tragic that more people will be established as civil servants to run the quangos and will be paid for by the sacking of people dealing with maintenance, the manning of stations and the operation of the railway system. Civil servants and bureaucrats will take the place of professional railwaymen who are desperately trying to provide a service.

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    It is clear to anyone listening to the evidence given to the Select Committee that no one supports such a scheme. To be fair, however, the Secretary of State gave evidence yesterday and he supported it, but he has to. It is his real test: if he is to be the Chancellor of the Exchequer, he has to appear with flying colours in transport matters. I have not yet seen a Secretary of State do so, but we live in hope.
    The White Paper refers to open access for competition. Where in the world is there open access for competition so that railways can compete with each other? I was interested to read an article by Simon Jenkins in The Times on 6 January. A person was appointed by the Government to be a director of British Rail and to modernise and privatise it. Mr. Jenkins went abroad and, on his return, was amazed about what was happening. He wrote:
    "To want to license rival operators on each line is illiterate. Trains do not work that way."
    That seems a simple enough proposition. He also wrote:
    "Meanwhile that earnest Dr. Frankenstein, John MacGregor, has been working night and day to create Railtrack as the most monstrous nationalised industry ever, thus avoiding the proper rail privatization…"
    He advised the new private train operators
    "to spend all their time lobbying for higher subsidies".
    The Secretary of State has said that open access is in fact an open cheque book. He will be paying subsidies to the private and public sectors to run services, which will cost the taxpayer an awful lot more. We have yet to see what happens with the franchise system.
    As for the Railtrack authority, do we believe that requiring an 8 per cent. rate of return will encourage people to run rail services on the infrastructure? That is what the Secretary of State wants to do, but an 8 per cent. return will add a heck of a mark-up for those who will operate the system. Sir James Sherwood of Sea Containers has already made it clear that he would like some of the lines but would close others because he wants only the profitable ones. He would close the coast line affecting hon. Members who travel on the Southampton and Bournemouth line who will become supporters of the publicly owned system as soon as the private cherry-pickers finish the system and meet its national requirements.
    On safety, I protest to the Secretary of State. I understand that the Secretary of State is to announce that the Health and Safety Commission report on the privatisation of rail was available to us from 3.30 pm. That does not make it easy for the Opposition, who are opening the debate, to read and to digest a report on an important aspect of the privatisation of rail. There was talk about professional standards. The Department of Transport could learn a bit more about providing reports. Even if they were provided only half an hour before the debate, we could make some assessment for the debate. It is a deplorable practice. Yesterday, we did not even get a copy of the statement made in the House by the Secretary of State for Transport. That is the nature of the Department of Transport. In view of my comments, I suppose that I cannot expect a great deal of charity from the Department. If I ever get in, the Department will not expect a great deal of charity from me.
    I remind the Secretary of State of what was said in the Hidden report about the safety of the railway system and about the development of a business culture in the railway system which would undermine it. I quote Maurice Holmes in the Hidden report in January 1988. He said:
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    "there are signs that the past high safety standards at local level achieved by giving a high priority to a 'safe railway' above other issues are starting to be eroded by the change in railway culture. If continued, this will strike at the root of our structure. I would not like a major disaster with loss of life to be the reason that forced British Rail to invest in modern safety aids."
    He said that 10 months before the terrible crash at Clapham. Hidden took the point and made the following comment in his report:
    "investment into safety-related projects, such as ATP, was not being progressed."
    There is worry about the fact that British Rail does not have the estimate of the costs. The Secretary of State has told the Select Committee that he does not yet know the costs of the safety requirements to be implemented after the Hidden inquiry of three years ago. That is totally unacceptable. The Secretary of State only has to ask for that information for it to be provided. I have asked constantly here for that information. The fact that the information has not been given undermines the priority of safety and the recommendations made by Hidden, especially the recommendations about the automatic train protection systems.
    There are matters of grave concern about safety. We have had the Newton crash and the Bellgrove crash. All the inquiries show that the pursuit of saving money, either in maintenance or in track realignment, contributed to the crashes and to the loss of life at Newton, at Bellgrove and in other incidents. It is clear that the business culture began to overtake the priority for safety in the railway system.
    Mr. Gyles Brandreth: I salute the hon. Gentleman for his commitment to old-fashioned socialism. This is marvellous.
    The safety issue is critical. Is the hon. Gentleman suggesting that, with the privatisation of British Airways, safety standards were endangered? Privatisation does not go hand in hand with a lessening of safety standards. Our experience does not suggest that. The hon. Gentleman is scaremongering.
    Mr. Prescott: If old-fashioned socialism means a better and safer railway system, I am happy to claim to be an old-fashioned socialist. If the hon. Gentleman studies the privatised railways of the 1930s, he will see the incidence of deaths and accidents, and the reduction in safety, because they are clear for all to see. It is one of the reasons why we nationalised the railway system, quite apart from modernising it. The evidence is there. If the hon. Gentleman cannot agree with what I have said, may I give some quotes from the grandees of the Tory party?
    Mr. Phil Gallie: Will the hon. Gentleman give way?
    Mr. Prescott: No, because I am having problems with time.
    I quote Lord Ridley, speaking on the "Panorama" programme. He said:
    "Clearly, I think we picked all the plums out of the privatisation pudding"
    That is certainly true. Lord Ridley said that he never believed
    "it was really possible to do very much, if anything, with the railways because they were basically loss making."
    Lord Whitelaw, whose family had experience of chairing a railway system in the private times, said:
    "The old companies made no money."
    How true. Lord Whitelaw then said:

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    "If privatisation was to be carried out, it would have to be a success. And if you say to me, 'am I absolutely sure it will be a success'—No, I am not."
    Even Lord Young, in an article in the Director today —I should not have thought he would have said this—said:
    "like everything else in human nature"—
    he is talking about privatisation—
    "the pendulum swings too far and now I begin to wonder if we aren't trying to privatise some things which basically can't or shouldn't be privatised. I wonder a bit about whether we should be thinking of privatising coal or the railways."
    Mr. Tam Dalyell: On a point of order, Madam Speaker. Here we go again. Reference has been made to reports that are supposedly in the Vote Office. When I went yet again to ask for the report in question, I was told by the very courteous person in the Vote Office that he could not give me a copy until the Secretary of State for Transport had responded and resumed his place. I understand that the hon. Member for Christchurch (Mr. Adley) has a copy. Can you clarify the position for me? Where shall we be if some hon. Members receive reports while others are refused them?
    Mr. MacGregor: Further to the point of order, Madam Speaker. I shall, indeed, refer in my speech to the report. It is a report which will require a great deal of study and which we shall be able to examine thoroughly on Second Reading of the privatisation Bill. As a matter of courtesy, I sent a copy in the normal way this afternoon to the hon. Member for Kingston upon Hull, East (Mr. Prescott) and to the Chairman of the Select Committee. I shall make the report available to the whole House as soon as I have finished my speech.
    Several Hon. Members rose—
    Mr. Prescott: Let me tell the Secretary of State that I telephoned his office today—
    Mr. Martin Redmond: Further to the point of order, Madam Speaker.
    Mr. Prescott: I am sorry.
    Mr. Redmond: The Secretary of State says that the document will be made available after he has sat down. Given that the Opposition have used one of their Supply days for today's debate, will the right hon. Gentleman guarantee that we shall be given another day to debate that document?
    Madam Speaker: That question might be put to the Leader of the House at business questions. It is not a point of order for me.
    Mr. Peter Bottomley: Further to the point of order, Madam Speaker. We are used to the fact that, when statements are made in the House, the accompanying documents are sometimes made available when the Minister has sat down. But it strikes me that we are to hear not a statement but a speech from my right hon. Friend the Secretary of State. May I put it to my right hon. Friend, through you, Madam Speaker, that it might be convenient, as well as a courtesy to the House, if the report were unlocked and made available—
    Madam Speaker: Order. The hon. Gentleman is trying to debate through the Chair.
    I recognise the Secretary of State's courtesy in handing out two copies of the report, but I feel that, given that we are to have a major debate, it would have been courteous to the House had it been made generally available rather than being sent to only two hon. Members.
    Mr. Prescott: Let me make it clear that I did not receive the document.
    Sir Harold Walker: Further to the point of order, Madam Speaker, and with the greatest respect, I very much appreciate your ruling, but would it not have been better had the Secretary of State responded to it? As I understand it, we are having a debate during the course of which there may well be reference to a document that is available but copies of which have been denied to most hon. Members. That is an intolerable state of affairs.
    Madam Speaker: I am grateful for the right hon. Gentleman's support.
    Mr. MacGregor: Further to the point of order, Madam Speaker. I am trying to oblige the House. We accelerated the production of the report so that it would be available as quickly as possible. I wish to make it clear that the debate is not just about that report, although I intended to refer to it in my speech. If it would assist the House, I should be perfectly happy to allow the report to be made available immediately and will give instructions to that effect. I was simply trying to follow normal form. As you, Madam Speaker, know—from all my time as Leader of the House—I am always happy to try to oblige the House.
    Madam Speaker: I am much obliged to the right hon. Gentleman. The report should now be made available to all hon. Members.
    Mr. Prescott: For the record, let me make it clear to the Secretary of State that I telephoned his Department assuming that there might be a statement on the matter. When I inquired, at 1.10 pm, whether there would be a statement on the health and safety report, I was told that there would not. I then asked whether the right hon. Gentleman's officials could provide me with a copy and was told that copies would be made available, not at the normal time of 3 pm, but when the Secretary of State had finished speaking. I explained that that made it difficult for me to assess the report in time for the debate. I have to tell the Secretary of State that my copy never arrived. I do not have it, even though I continued to make inquiries until the last minute. I do not think that the House will appreciate the way in which the Secretary of State has handled this matter, even though I am glad that he now proposes to make copies available.
    I also note that the right hon. Gentleman waited until after he had given his evidence to the Select Committee that is considering the privatisation of railways. He could have been courteous enough to release the report so that the Select Committee could question him on that matter. I think that we all know what the Secretary of State is at: he does not want anybody to have access to a report that will enable him or her to make an assessment on the critical question of safety. That is the conclusion that the House is bound to draw.
    Mr. Peter Bottomley: That is a slightly grudging response to the Secretary of State, who has met the wishes

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    of the House. Most of the hon. Gentleman's speech has been a good sign that the "Clintonisation" of the Labour party should not spoil it.
    Mr. Prescott: I thought that we were debating the serious matter of what Britain will do with its railway industries. Conservative Members may think that it is a laughing matter, but it is not a laughing matter to the thousands of railway workers and passengers in the United Kingdom. The question of how politicians will play their part in improving our railway system is a serious matter. That is what people expect of us. I am seriously trying to say—not in an ideological way—how the railway system can be improved.
    The 14 years of the Tory railway system has been a bad record, and it is there for people to see. The Tory Government started by thinking that they could control the whole railway system by a financial framework. Of course, that has meant that fewer resources were available to British railways. Railway systems abroad, which are of a higher quality, are paid subsidies which are two to three times the amount that our system receives.
    We have gone through an obsessive amount of management changes to prepare for profit centres. The Hidden inquiry made it absolutely clear that managers were exhausted by reorganisation and should not be subjected to more. British Rail have made it clear that £1 billion is the minimum investment which is needed for the next ten years. To be honest, neither political Governments have provided enough investment in the railway system, and I have made that point constantly. We must develop a long-term plan for the railways with adequate financial investment.
    The railways are not as safe as they were before, and the quality of service has deteriorated. I do not have time to quote from the report. However, I refer hon. Members to the statement that has been made by the passenger bodies today which makes it clear that there will be a serious cut back in railway services simply because inadequate financial investment is available.
    I shall now look at the freight industry. In the past few years, the Government have made about £60 million available for section 8 grants to encourage freight to go from road to rail. As a result of the closure of freight by the Government, we now have a policy of forcing companies to move freight from rail to road. The latest statements from two cement manufacturers, West Country Drinks, Highland Light Oil Traffic and Privatised Steel say that the amount of traffic that is being forced on the road is the equivalent of half a million lorries. To take freight off the railways and put it on the road is not a good way to run the railway system. The requirement simply for a financial rate of return on rail freight characterises the whole nature of our railway system.
    Our manufacturing industry is in collapse because we have not invested sufficiently in it. The manufacturing industry made it clear that 30,000 jobs are at stake. That is precisely the figure that we are talking about in the mining industry. We should get equally angry about the consequences for our manufacturing industry of job losses.
    If hon. Members say that there is not an efficient railway system, I refer them to the Financial Times analysis of all the European railway systems. That report confirmed a study done ten years ago which showed that British rail has a level of efficiency—the amount of
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    manpower as against the productivity of the service—which is as high as the two or three most efficient railways systems in Europe. That shows that British Rail has a good level of efficiency, whatever the argument.
    The trouble is that we do not have enough resources to maintain the quality of the system. The British rail system has one of the highest levels of efficiency in Europe. So the argument cannot be about labour or efficiency. I hope that no one will make that argument, because, clearly, the evidence is against it. The Labour party's argument is that we need an alternative railway system.
    We believe that the railway system should be publicly owned for very good reasons. First, every good, successful railway system in Europe is publicly owned. I do not see any reason why we should not be able to emulate that system. Secondly, it is necessary to maintain social services, as is recognised in Europe. The profitable services can maintain the less profitable services. It is called cross-subsidisation, and is an essential principle in transport. During the early stages of privatisation, I remember that many Conservative Members said that cross-subsidisation was nonsense. However, cross-subsidisation is an essential part of any bus, rail, or air transport system if a network service is to be maintained. A publicly owned system is better for the environment as it is in the interests of the environment to subsidise the transfer of freight from road to rail. That is what the section 8 grants were about.
    The scale of investment is considerable. The investment figure for the west coast line is more than £1 billion. No private entrepreneur will be able to provide that kind of money. The channel tunnel rail link amounts to £3 billion or £4 billion. There could be a combination of public and private money. However, the private sector will not participate without some guarantee from the public sector. That is the reality of financing that kind of investment.
    Safety is improved by through ticketing. The Hidden report said that there should be a strong, central chain of command for a good, safe system. If many operators are responsible for different safety aspects, that is not the way to introduce a good, safe system. Through ticketing was one of the first things to go to the wall when the bus companies were privatised.
    We should also bear in mind that private companies will not want to maintain railcard provision for pensioners. Private companies will simply want to maximise revenue. They will not be interested in the bureaucratic complications of maintaining railcard systems that occur naturally in a publicly owned system.
    If the Secretary of State is arguing for private involvement, he should bear in mind that there has been a history of private involvement in a publicly owned railway system in respect of consultation and joint public and private deals. Management have brought in people from the private sector.
    It seems that certain routes might be the standard bearers for privatisation. If the Secretary of State wants to experiment on the Chiltern or Southend lines, I hope that he will give the public sector management a chance to compete and to show how good they are. He should at least give the public sector management a level playing field and the same finance rights and access to the market so that they can show that they can perform as well as private sector management. If, as seems to be the case, the

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    Secretary of State wants to experiment, he should at least be fair and not condemn the public sector. We would resent that unfair ideological view.
    I believe that I have established the case that public and private financing could be possible, particularly in leasing agreements in respect of parts of Network SouthEast and the bond arrangements for financing the channel tunnel link. As the Secretary of State knows, I spelt that out in my document "Moving Britain into Europe". The Department of Transport bought three copies of it at £25 a time, and I am most grateful for that. Perhaps the Secretary of State learnt from that document how to use private capital. I hope that he has sent a copy to the Treasury.
    The Opposition believe that there is a need for private capital because all the money cannot come from the taxpayer. Private capital will help to produce a modern railway system. It will help with investment, and it will help our manufacturing industry. Large publicly owned companies are an important element in the manufacturing sector. The manufacturing sector may not mean much to Conservative Members, but it is crucial for growth and creating wealth. It is also crucial if we want to reduce the balance of payments deficit and to stop importing manufactured goods and instead make them here.
    Ownership is not the critical issue, although we would clearly prefer public ownership. The issue is to provide adequate financial support for the railway system. There should be a long-term investment plan for the railway system and a clear identification of social service payments and the objectives for the industry. We must create confidence in the railway industry for the future.
    The issue is the modernisation of our railway system, not privatisation. Privatisation will inevitably mean the doubling of fares and less investment in rolling stock and track. It will also mean a less safe railway system and more subsidy and support. It will mean greater bureaucracy, fewer rural services and a system which will not be accountable for the quality of services.
    That is why we propose that a publicly owned railway system, modernised in the way that we suggest, would serve the interests of passengers better, would serve our national interests, and be better for the environment. I urge my hon. Friends to support the motion.
    4.23 pm
    The Secretary of State for Transport (Mr. John MacGregor): I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:
    'recognises that progress has recently been made in improving British Rail's services; believes that further necessary improvements for rail users can best be achieved by creating the opportunity for introducing into the railways private sector ownership, management skills and capital; and therefore supports the Government's proposals as set out in the White Paper, "New Opportunities for the Railways".'.
    We have just heard the hon. Member for Kingston upon Hull, East (Mr. Prescott) make one of his typical speeches. He has plenty to say, but he totally lacks consistency. For a start, he accuses us of doing a U-turn on policy and then bases most of his speech on criticising the policies in the original White Paper. I will return to that later.
    Of course, I must commend the hon. Member for Kingston upon Hull, East in one respect: he is honest to a
    784
    fault. However, it is a very big fault, especially for an Opposition Front-Bench spokesman these days. Uniquely among his colleagues, at least the hon. Member for Kingston upon Hull, East is honest enough to admit that he is still a socialist. His colleagues are all moving on. They call it "Clintonisation" and my hon. Friend the hon. Member for Eltham (Mr. Bottomley) has also just called it that. In reality, that means abandoning all the policies that they have always stood for in order to buy votes wherever they fall.
    The hon. Gentleman talked about negotiating on the Jubilee line. He negotiates his position in the Labour party and he negotiates policy in the Labour party in public, on television, all the time. But at least he has made it clear that he does not approve of this process of Clintonisation.
    I wondered why we were having this debate on rail privatisation at all today given that we are about to have another full debate on the Bill. Could it be that his presence here gives him a cast-iron alibi for his absence from a meeting with the Clinton camp on which his shadow Cabinet colleagues are so keen?
    It is, of course, the same old story: everyone is out of step except the hon. Member for Kingston upon Hull, East; a horde of Clinton clones marching in one direction and Andy Capp stubbornly marching in the other. I thought that the hon. Gentleman protested too much about his ideology today.
    Mr. Michael Connarty: I thought that the debate was supposed to be about privatisation, Madam Speaker.
    Madam Speaker: That is not a matter for the Chair at this point.
    Mr. MacGregor: The hon. Gentleman is extremely sensitive. I have only been speaking for about 50 seconds or one minute. I will tell him very soon what the relevance of this is.
    The hon. Member for Kingston upon Hull, East protested a great deal about his ideology. As my hon. Friend the Member for Eltham suggested in his intervention, the reason is that the hon. Gentleman will not let go of his prejudices, just as he clings to clause four. He cannot begin to understand that our practical and pragmatic approach to improving our railways is the right way to get better services for the passenger, the freight customer and the taxpayer. That is because he believes that everything must be done according to the letter of the original socialist textbook—[Interruption.] Just let me finish. There is clearly great sensitivity on this point on the other side of the House. The hon. Gentleman refuses to see the evidence that has been before us now for more than a decade; he sticks by the letter of the socialist textbook. That evidence is that the market, whatever form it may take, produces better services for our citizens. In a great many of our industries we have demonstrated in the last decade that it produces better services, greater innovation and more competition, and at lower cost.
    Mr. Snape: Will the Secretary of State accept from me that, coming from a member of the Cabinet that gave us the ERM and the poll tax, we need no reassurances about the pragmatism of his party?
    Mr. MacGregor: We have a council tax which I think will prove to be an excellent form of local government finance. It has all the benefits and has taken account of

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    most of the lessons of the old rating system as well as the community charge. I believe that our policies are very soundly based in our principles and in our approach to the private sector and privatisation. As I shall be demonstrating, we will be introducing them gradually over a period and, I believe, in a pragmatic and practical way.
    Mr. Ronnie Campbell rose—
    Mr. MacGregor: No, I will not give way; I have already given way twice.
    The hon. Member for Kingston upon Hull, East believes that public utilities always are and have to be the best, because for his purposes they are the best. He has made that clear again today. He talked at one point of maximising services rather than revenue. What he meant was keeping the service running whether or not there were customers for it and absolutely independent of the cost to the taxpayer of so doing. There is a reason for that. He wants as many people as possible—
    Mr. George Foulkes: The Secretary of State is reading this.
    Mr. MacGregor: If that is the case, I must be a mind reader. I know that I claim to have mind reading as one of my hobbies and I must have been a mind reader to know that the hon. Gentleman would be talking about maximising services rather than maximising revenue, and that is exactly what I have just been referring to.
    The reason is that the hon. Gentleman wants as many people as possible working in publicly owned industries, irrespective of whether such a work force is needed. He wants public employees to have security in their jobs whether or not they do them well. He wants state-owned businesses to be run in the interests of their employees, but —this is a crucial point and it underlines much of what the hon. Gentleman said—he has no regard whatever for the cost to the taxpayer who foots the bill.
    The hon. Gentleman mentioned two European countries. One was Germany. He should know that there is the same anxiety to produce better services and the same concern about the monolithic nationalised industry and its cost in Germany as we have been demonstrating. That is why the German Government propose to privatise German railways—
    Mrs. Gwyneth Dunwoody: It will take about 12 years.
    Mr. MacGregor: I went over that point in the Select Committee last night: our time scale to complete the whole privatisation process will be about the same. I made it quite clear all the way through that we are building it up over a period, and it makes absolute sense.
    The hon. Member for Kingston upon Hull, East made great play of France. He may not realise that 20 per cent. of the total cost of running the French railways comes from meeting the interest payments on their debt. Frequently—or on several occasions, at least—the French Government have written off the debt because the burden was becoming so great, so the cost to the taxpayer is very high. Because of the many improvements in British Rail, to which I shall come later in my speech, the interest payment for British Rail is very much lower. I would not wish to come to the House to defend a situation in which 20 per cent. of the cost of a nationalised industry is sheer
    786
    interest payment. That is something that we would certainly wish to avoid.
    Mr. Robert Adley: I am sure that my right hon. Friend would not wish to mislead the House in any way. Just for the record—and it is no use my hon. Friend's Parliamentary Private Secretary, the hon. Member for Colne Valley (Mr. Riddick), grumbling at me; my intervention may be regarded as unhelpful, and I am sorry if it is, but I merely want to put the record straight —will my right hon. Friend confirm, before he compares what is happening in Germany with what is happening here, that Helmut Kohl set up a Government railway commission which had a brief to study the relationship between the railway and the state, that it took 18 months to consider its proposals, that there was thereafter a lengthy debate in the Bundestag as to whether they should proceed and which proposals should be chosen and that the 10 years thereafter, to which my right hon. Friend has rightly referred, do not in any way include proposals that bear any relationship to the specific proposals in his White Paper?
    Mr. MacGregor: There are quite a number of similarities. I am not sure whether my hon. Friend the Member for Christchurch (Mr. Adley) has had the opportunity to do so, but I have had several discussions on rail privatisation with my opposite number, the German Minister for Transport. We have been discussing it since last July and he announced his proposals in the same week as I announced our White Paper.
    As my hon. Friend the Member for Christchurch knows—and the hon. Member for Kingston upon Hull, East criticised us for this—we have discussed and debated the form of privatisation of British Rail for some considerable time. We have then produced a White Paper and we have had thorough discussions on the White Paper. We are carrying out a substantial consultation process on a large number of policy aspects and we will have a thorough scrutiny of all aspects of the Bill as it goes through both Houses. I believe, therefore, that there will be thorough scrutiny of the matter in the House. I repeat that there are many similarities.
    Mrs. Dunwoody rose—
    Mr. MacGregor: No, I must get on.
    I can condense much of the approach of the hon. Member for Kingston upon Hull, East along the following lines: that it would be a great business if it were not for the customers. All the way through his speech he hardly referred to the customers. He talked about public service, about obligations and about money coming from the taxpayers; I hardly heard the word "customer" on his lips. It is fortunate for the customers that the hon. Gentleman is not running the railway. In sharp contrast, our policies are all about getting a better deal for the customer, for the passenger and for the taxpayer, as we have done with all earlier privatisations.
    The hon. Member for Kingston upon Hull, East referred to the fact that nowhere else in the world had the kind of policy that we propose for British Rail been implemented in practice and in full. This criticism has been made of our privatisation proposals over the past decade.

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    It is interesting that all round the world many Governments now follow the policies that we have successfully pursued. I believe it will be the same with the railways.
    Mr. Ronnie Campbell: Surely the Minister is not saying that fares are not going to rise. In electricity, gas and British Telecom we have seen enormous increases in bills to customers and we are going to see the same in British Rail as well.
    Mr. MacGregor: The hon. Gentleman knows that fares have risen under British Rail as a nationalised industry. There are a number of reasons for that, one of which is that if one is undertaking a substantial capital investment programme, as British Rail is, the cost has to be shared by the user and the taxpayer. It has been occurring in recent years in British Rail as well for the reasons that I have just given.
    Mr. Connarty rose—
    Mr. MacGregor: I want to get on. The hon. Member for Kingston upon Hull, East did not give way a great deal and I have already given way a lot in my first 10 minutes. When we get to Second Reading I shall again give a comprehensive description of our proposals and show how they fit into the Bill. Today, I would like to make two important announcements about two aspects of our policy.
    First, I wish to restate our objectives. We have seen considerable improvements in British Rail in many parts of our country in recent years and again I pay tribute to the work of the chairman, the board, management and employees. The recent changes called "Organising for Quality" have taken British Rail further in the direction of commercialisation and have improved the efficiency of the organisation a good deal. There are currently record levels of investment in British Rail, higher than in the last three decades, and in the autumn statement we added another £239 million to the external financing limit of British Rail on top of the leasing proposals. The key difference and the key point about the leasing proposals is that it is possible to do them in anticipation of privatisation because the risk of the leases will be transferred to the private sector. Therefore, it does not break normal public sector
    I have to say to the hon. Member for Kingston upon Hull, East that, had the country had the misfortune to have a Labour Government and had the hon. Gentleman tried to carry through his leasing proposals, which were based on keeping them entirely in the public sector, they would have counted against the public sector guarantee whereas ours do not. That is a fundamental difference and he has failed to understand it so far. That is why we have not been following his approach.
    Mr. Foulkes: The Secretary of State is talking about investment. He will be aware that there is great concern about investment in track and rolling stock for the west coast line from Glasgow to London. Such investment is absolutely necessary. I use the line regularly and I know how increasingly inadequate it is becoming. When would the right hon. Gentleman expect British Rail to be able to make the necessary investment in that line?
    Mr. MacGregor: It has started. I make two comments immediately. First, we have record levels of investment at present and it is for British Rail to decide priorities. There must be a limit to the amount of money from the taxpayer which can be put into British Rail. The hon. Member for Kingston upon Hull, East seeks to imply that he would not have a limit and would pour in unlimited sums or much larger sums than we are investing. Secondly, the prospects of faster investment will be enhanced if we can secure privatisation, or when we secure Royal Assent, because it will be possible then to seek private finance as well.
    Although there are currently record levels of investment, no one could argue that the present services are perfect, that the culture—which remains that of a monopoly nationalised industry—cannot and should not be improved and that we could not get better value for the substantial taxpayers' money going into the system.
    I do not find, as I go round the country or as I listen to colleagues in the House, that people are satisfied with British Rail. They clearly are not. The public also know that monolithic, old-fashioned nationalised industries are not the best way of providing services efficiently and responsibly.
    Our proposals are designed to deal with these criticisms, to get that improvement in service which the customers are still demanding and to get the better value for money by breaking down the monolothic structure of the industry. Our proposals start from the belief that the private sector, spurred on by competition, is far more likely to be responsive to customers and to change the culture. The private sector can provide better and more efficient services. We have applied the philosophy successfully across the economy to many privatised industries. It is as relevant to transport as to any other part of the economy: on the roads, in the air, in our airports and in our seaports.
    Mr. Dalyell rose—
    Mr. MacGregor: I think I had better move on. I have already given way a great deal.
    The hon. Member for Kingston upon Hull, East has a well-known tendency to say the first thing that comes into his head without pausing to reflect whether it might be remotely right or not. He has been doing it again today and he has done it twice in the recent past. I see that he is saying that our rail proposals are dead and buried and that the Prime Minister's reference to semi-privatisation means the first U-turn of the year. The hon. Gentleman is totally wrong on both counts and I will deal with both?
    Mr. Prescott: A semi U-turn?
    Mr. MacGregor: It is a strange corpse that will be emerging in a week or two in substantial living form. I refer to the privatisation Bill. We have had inevitable delays while the paving measure has been going through Parliament. As soon as we get Royal Assent to that Bill, which I hope will be very soon, we shall publish the main Bill, which will be long and full. As it passes through both Houses, it will provide many opportunities to make clear our proposals in more detail than I have time for now.
    At the same time, we shall be publishing a series of documents about particular aspects of the policy, as we have done in recent months. We have already had a consultation document on the franchising of passenger

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    services. We have had an extremely useful response and I hope to announce a list of pilot franchises in the near future. I call them pilot franchises because they are not, of course, real franchises; we cannot have real franchises operated by the public sector until we have Royal Assent and the authority to set them up. That will involve the franchising authority, the tendering process and so on. That is for 1994. But it is useful, on the basis of the responses to the consultation document on the franchising of passenger services, to structure British Rail and to set up pilot franchises so that they are ready and from which we can gain experience.
    In connection with the franchising of passenger services —this bears on the remarks of the hon. Member for Kingston upon Hull, East about the existing staff of British Rail—I hope that the staff will bid for the franchises. We are positively encouraging management buy-outs and will assist them in the process. There is a clear indication that we shall have quite a number. [Interruption.] We shall be encouraging managers who are currently with British Rail, in the public sector, to play a full part in the franchising by bidding for the franchises. I cannot make the position clearer than that.
    We have issued proposals on the British Transport police and we are considering the many responses that we have had. We have issued a paper on the rail users consultative committees, which have been broadly welcomed. We shall soon be producing important documents on charges for access to track and on the management and ownership of rolling stock in the newly shaped industry. We have been proparing, and will continue to prepare, our plans in close co-operation with the chairman of British Rail and his staff.
    So it seems to be an extraordinary corpse that is "dead and buried". The movement is very much alive. We cannot implement our proposals until the legislation is passed. We shall begin in 1994 and there will be a planned programme of franchises and sales from then on.
    Mr. Dalyell: What about the new health and safety regulations that are said to be necessary in relation to the transport of hazardous substances? What regulations will have to be introduced for the transportation of nuclear materials? The report says:
    "In view of the potential loss of British Rail's existing tight control, it is considered necessary to introduce new health and safety regulations along the lines of those already in force for the transport of such materials by road."
    Does the right hon. Gentleman agree that that will involve a number of instruments coming before the House?
    Mr. MacGregor: I shall deal with that document at the appropriate point in my speech because there is much more to be said about the document in general than the point raised by the hon. Gentleman.
    As for the accusation of a U-turn, or even a semi U-turn, the policy remains as set out in our proposals following the publication of the White Paper. I have made it clear from the beginning that it is not possible to privatise British Rail in the classic sense of a once-and-for-all flotation through the stock exchange. For a start, much of British Rail makes losses and substantial subsidies are, and will continue to be, required. Where possible, we are selling to the private sector, and we are injecting private sector skills, management and capital, where in the foreseeable future that is not a realistic
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    possibility. There is nothing different about that compared with what we said in the White Paper. Indeed, I said in my foreword to that document in July:
    "Privatisation is one of the great success stories of this Government. It has taken different forms in different industries, but common to all privatisations has been the harnessing of the management skills, flair and entrepreneurial spirit of the private sector to provide better services to the public. The time has come to extend these benefits to the railways. This calls for a new approach. British Rail makes large losses. It cannot, therefore, be sold as a complete concern in the same way as other industries which we have privatised."
    So it is absolutely clear that we are following through our original proposals. They do not represent privatisation completely, in the sense that many privatisations have been understood up to now. The passenger services are not being sold, but are being franchised and that is why it is right to refer to it as a semi-privatisation.
    It means essentially that we shall be injecting the private sector into the railways. Hence, exactly as outlined in the White Paper, we shall sell what can be sold—principally the freight businesses and stations—while the passenger services will be progressively franchised. In other words, there will be contracts, won in competition with the private sector, to run services in return for subsidising where it is required, or for a fee where it is not. BR's monopoly will end.
    The track and signalling will remain in public ownership, although in the long term privatisation of that is not ruled out. Railtrack will obtain its services in the private sector to the maximum possible extent through contracting out. There will be contracts between the providers of services and the operator of the track. That is the scheme that we set out in the White Paper, the scheme on which we have been working and the scheme that we shall be putting before the House. We believe it to be the most practicable way of getting private sector disciplines and competition into the railway industry.
    I have explained our proposals and I hope that Opposition Members will agree that there is not a shred of a policy that is dead and buried. Nor is there a shred of a U-turn in what we are doing. As I said, I shall be setting out again our proposals in full on Second Reading, but today I shall deal with some of the criticisms of the hon. Member for Kingston upon Hull, East and some of the concerns that have been expressed in recent weeks.
    Mr. Stephen Day: In referring to franchising, my right hon. Friend has not dealt with an aspect that is of particular importance to my constituents. One section of the railway which, by common consent, will never attract any franchise interest is local commuter services, which are vital to my area. Ministerial statements have been made about the protection of subsidies going to those services. Will my right hon. Friend explain what mechanism will be provided to assure me and others like me that that subsidy and those services will continue?
    Mr. MacGregor: I can make two points to reassure my hon. Friend. The first is that it will be eligible for franchising—not for sale—and I believe that many commuter lines will benefit from franchised services. The second is that, as we have made clear throughout, for socially necessary lines, which include a large number of commuter lines, subsidy will continue. An element of the competition is that franchisees will be able to hid for the subsidy and in that way we shall ensure that we get the best

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    compettive element into the subsidy. But the subsidy will continue and the franchisees will have to guarantee to provide certain services in the contract with the franchising authority. My hon. Friend can reassure his constituents entirely on that score.
    Mr. Brian Wilson rose—
    Mr. MacGregor: I am anxious to make progress and I must insist on the hon. Gentleman being the last to intervene.
    Mr. Wilson: It will interest the people of Cheadle and elsewhere to know whether the right hon. Gentleman is giving an assurance that the track of 11,000 miles will be maintained. Such an assurance from him will relieve many worries among hon. Members in all parts of the House.
    Mr. MacGregor: I had intended to deal with that issue later, but I will deal with it now. We have made clear throughout—there is no change—that we expect most, or a very high proportion, of the national network to continue—[Interruption.] Let me be absolutely clear about it. One cannot give a guarantee for all time. Indeed, the hon. Gentleman would not wish to give such a guarantee. Were he to give a guarantee for all time, he would not be taking account of economic and commercial realities.
    There may be cases where the economic demand has changed, where there is little demand for a service and where proposals can be put forward for the closure of that service. That has happened in the past 10 years, when demand has fallen away, and it could happen in the next 10. If it does, we shall follow very closely the existing system and the statutory procedures for dealing with closures. They must be followed closely. There must be some adjustments to deal with the new system.
    However, when the Bill comes out it will be seen that it is very much on all fours with what has existed in the past. The existing procedures will continue. There is absolutely nothing wrong or hidden. We expect the vast majority of services to continue for a long period—[Interruption.] I am being very precise about this. There may be occasions on which, as in the past 10 years, there is agreement that there is no longer a demand for a service. In those circumstances, there may be proposals for closure. If so, the statutory procedure will apply in the usual way. The socially necessary lines to which I have referred include commuter and rural services. In those cases the subsidies will continue, as we have made absolutely clear.
    I turn now to the question of safety.
    Mr. Wilson: Will the Secretary of State give way?
    Mr. MacGregor: I really must move on. In any case, I could not have been more explicit. I have made it absolutely clear that, in all cases of social necessity, subsidies will continue.
    On the question of safety, it will probably be for the convenience of the House if I refer to the report that I am publishing this afternoon. It was my intention to publish it later in the week, but the process has been accelerated. Publication of the report and of the Government's response has been a very fast process. Far from trying to conceal the report, I am only too delighted to have this opportunity to say something about it.
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    Throughout, I have stressed the paramount importance that has been given to safety matters in our privatisation proposals. That was emphasised in the White Paper that we published in July 1992. I utterly reject the accusations about safety that have been made. What my hon. Friend the Member for City of Chester (Mr. Brandreth) said in his intervention was absolutely right: British Airways simply cannot be accused of ignoring safety requirements in the event of privatisation. Indeed, the situation is quite the reverse. It would be commercially disastrous for companies such as British Airways or for franchise passenger services to acquire a bad reputation in respect of safety. Of course, such undertakings will attach paramount importance to the question of safety, as will the Government. That must be made absolutely clear.
    I am grateful for the opportunity to refer to the definitive report of the Health and Safety Commission on the appropriate future safety arrangements for the railways. [Interruption.] Given his interest in safety, the hon. Member for Kingston upon Hull, East, instead of shouting across the Chamber, might listen to what I have to say about this extremely important matter. Over the next few months there will be ample opportunity to discuss the report.
    The House will be aware that the Health and Safety Commission is the independent authority responsible for safety on the railways. Its report, which was foreshadowed last July in the White Paper, in which we asked for a detailed and thorough study of our proposals, contains 38 detailed recommendations, including proposals for new regulations under the Health and Safety at Work etc Act 1974, which would provide the statutory framework for the new arrangements. I am pleased to tell the House that the Government accept the commission's recommendations in full. I am satisfied that the commission's proposals will provide a robust and practical framework for ensuring that the benefits that privatisation will bring to the railways will in no way diminish the safety of passengers using or of employees working on the railways.
    It is very important that it is the Health and Safety Commission, which is independent and which I am sure the hon. Member for Kingston upon Hull would never criticise in that respect, that has produced this report and I have said that its proposals will provide a satisfactory framework. In particular, the Government accept that considerable care will have to be taken—this point is made in the report—to set up systems to ensure that new operators are properly equipped and organised so that they may give confidence that risk will be effectively controlled right from the start and that important matters will not fall between the safety arrangements of the various parties.
    We also agree that it is vital that the process be properly planned and managed, having full regard to the capabilities and morale of staff who have to make it happen, and that it is essential that British Rail's specialist expertise be retained to ensure proper validation of the new organisations. The proposals are designed to achieve those ends and that is why they have our full commitment and support.
    Mr. Prescott: This is disgusting.
    Mr. MacGregor: The hon. Member for Kingston upon Hull, East says, "This is disgusting." What he really means is that he is extremely disappointed that I have been able

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    to come to the House this afternoon and say that we have a report providing an assurance in respect of safety and that all the recommendations will be implemented in full. I hope the hon. Gentleman agrees that this is a major issue and that it is right that I should devote attention to it. If I had not done so, the hon. Gentleman would have spent the afternoon levelling safety accusations against me. In fact, he is disappointed that I have been able to say that we accept in full the recommendations contained in the report.
    Mr. Prescott: What the Secretary of State has said is absolutely outrageous. We have protested about the fact that the document was not available. We have not been able to make our judgment, but I am sure that the Health and Safety Commission will say a number of things and enter a number of qualifications. The report says:
    "The consequences of failing to achieve adequate systems of control will be seen in increased risk on the railway system and in the likelihood of an increase in the numbers and severity of accidents."
    Presumably it goes on to justify the stated opinion concerning safety. It is not fair for the Secretary of State to criticise the Opposition when we have not had access to the report. A document as important as this one should have been the subject of a statement to the House. We should have been able to subject this report to proper critical analysis. The Secretary of State should at least be courteous enough to recognise that we have not had an opportunity to read the report. It is totally unacceptable that he should characterise our protests as being outrageous. If only for the sake of decency, perhaps he would like to withdraw that remark.
    Mr. MacGregor: It is hardly appropriate for the hon. Gentleman to use the word "disgusting" when I am telling the House about the report and its recommendations on this crucial matter. I have emphasised that, as the Bill goes through the House, there will be endless opportunities to discuss the details. The report is very detailed and there will be full parliamentary debate.
    The report sets out the guiding principles, which the Government accept in full. The commission's central recommendation is that there should be a "cascade model" of safety validation for railway operators. In layman's language, this means a system that properly establishes the different levels of responsibility. It is proposed that each railway undertaking should produce a railway safety case, which would set out the undertaking's safety policy, risk assessment, safety management system and maintenance and operational arrangements insofar as they relate to health and safety issues.
    These railway safety cases would be validated by the infrastructure controller—that is, Railtrack. At the top of the cascade, the Health and Safety Executive would validate Railtrack's railway safety case, including Railtrack's system for validating operators' safety cases. British Rail's safety organisation will be maintained as a unit and will be transferred to Railtrack.
    I am aware that some people have criticsed the number of bodies that will be involved in our privatisation proposals. The Health and Safety Commission, as the independent safety authority, is, of course, one of those bodies. I wish to emphasise that the commission is already, under current circumstances, the safety authority. Thus, we are not adding a new body; we are ensuring that we
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    have the full machinery that we need to fulfil all safety commitments. I do not believe that anyone in the House would wish otherwise.
    The report has been fully discussed with British Rail and I myself have had a meeting with the chairmen of the Health and Safety Commission and British Rail for the purpose of going over the key issues. I can tell the House that Sir Bob Reid is fully satisfied and that this afternoon he is welcoming the report and endorsing the proposals. I am today asking the chairmen of the Health and Safety Commission and of British Rail to press ahead with implementation of the commission's proposals.
    Clearly, I do not have time this afternoon to go into any of the detailed recommendations, but the House needs to know that the report concludes:
    "It is considered that the recommendations in this report, if implemented, will provide the necessary assurances for the public and the work force."
    As I have said, we have accepted the regulations and agreed them with British Rail and will implement them. The regulations will replace British Rail's internal rules for the carriage of dangerous substances. It is accepted that the carriage of such substances should be subject to statutory regulation, especially with new operators entering the field, and that will be done.
    Mr. Dalyell: Does the Secretary of State accept that there is a special case for the carriage of nuclear substances?
    Mr. MacGregor: I have already said that we shall be implementing the recommendations in full by way of regulations.

    I express my warm appreciation to the Health and Safety Commission for its skill and hard work in carrying out such a detailed and thorough study. The way in which it has carried out its task has been exemplary and ensures that our safety regime has been thoroughly validated at professional and expert level and has been agreed by all concerned. That was a major priority in our privatisation proposals and it has now been successfully accomplished. We shall now proceed with the implementation.
    The hon. Member for Kingston upon Hull, East accused me of trying to conceal the report. On the contrary, I wanted it to get as much attention as possible.
    When I last spoke to the House, I said that I had had meetings with the major rail unions about our proposals. The issue on which they most pressed me, and an issue on which they all felt strongly, was pensions. I have made clear to them that I fully understand the importance that they attach to the pension arrangements. It has been raised by a number of hon. Members in the House and many right hon. and hon. Members have written to me and to my hon. Friend the Minister for Public Transport about pension matters.
    The union pressed two views on me: that the BR pension funds should be secure, and that for the future some form of joint industry arrangement should be developed from the present pension funds. I shall be publishing a paper on pensions within the next two weeks, but I am able to say now that the Government agree that there should be a joint industry pension scheme to succeed the present BR scheme; that there should be arrangements to ensure that pensions. to which railway staff are now entitled are safeguarded; and that their future pension benefits should be no less favourable than in the present BR scheme.

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    We do not think that participation in the joint scheme should be compulsory for future employers in the industry for all time. We consider that those employers should be compelled to protect the accrued pension rights of those in the industry. The paper will explain the sort of joint industry scheme that we have in mind.
    I wish to deal separately with the rights of railway pensioners. The industry is not to be privatised as one. That is why a joint industry scheme is necessary. It would be impractical to allocate to new parts of the industry all the people who have retired or deferred their pensions. Therefore, we propose one of two options. The first is that the appropriate part of the existing fund should be set aside and administered separately for the pensioners. The fund would not be guaranteed, so the pensioners would depend on the skill of the fund managers for their benefits. Alternatively, part of the fund could be taken over by the Government who would undertake to pay index-linked pensions. That option would provide a firm guarantee, but the benefits would not improve in real terms as they might under the first option. We want to hear the views of the BR trustees, whom we shall consult closely on these matters, and the pensioners themselves about those options.
    I cannot in this speech go into such an important topic in depth. The paper will deal with such matters as how the new scheme should be governed. We shall, of course, study the comments of the industry when it has considered the paper. It is likely that amendments will be required to the Bill, particularly in order to procure future arrangements for pensioners. Amendment will obviously depend on the responses, but it seemed to us better to consult first rather than be too prescriptive. I hope that what I have said will reassure the members of the pension schemes. I am also able to tell the House that I have discussed the proposals with the chairman of BR and that he is broadly content.
    The House will know that the pension law review committee chaired by Professor Goode is due to report by June. I hope that we shall be able to take account of its thinking in establishing the joint industry scheme.
    The hon. Member for Kingston upon Hull, East accused us of producing complex proposals and spoke about quangos, ignoring the fact that some already exist. The vast majority of the organisations about which he spoke are in being and would certainly exist under any scheme that he would propose. I have never suggested that the reforms would be simple, because British Rail is already a large and complex organisation. This process of radical change is bound to be complex, but it is certainly not over-complex and there are good reasons for all the proposals that the hon. Gentleman criticised.
    In other areas of transport we do not generally expect the provider of services to run the infrastructure as well. Therefore, the split between Railtrack and rail services is well precedented. The simple arrangement of private sector operators running services on track provided by Railtrack and the public sector providing the infrastructure is at the heart of our proposals. Obviously, that means the setting up of Railtrack. Other supporting organisations will make the system work.
    We currently pay subsidies of £1 billion a year to British Rail. In future, subsidy will be paid to franchisees. That should assure my hon. Friend the Member for Cheadle (Mr. Day). There must be someone to specify the service,
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    to nominate funds and to ensure value for money. That is what the franchising authority will do, but in public. All that activity takes place now, but behind closed doors within British Rail. One of the strangest criticisms of the setting up of the franchising authority is that the public must not know how much subsidy goes to some lines lest people be shocked. Our proposals are a positive advantage in terms of open government and open discussion about where taxpayers' money is spent.
    The regulator will protect consumers' interests, prevent anti-competitive behaviour and ensure that operators have equitable access to the railway. All privatised industries with any element of monopoly have a regulator to provide such protection and the railway should be no exception. Some people have even criticised the establishment of rail users consultative committees as adding another layer of bureaucracy, quite ignoring the point that such committees already exist. To ensure that there are as few different bodies as possible, I have proposed that those committees should report to the regulator, who will, after all, be the guardian of the consumers' interests.
    I have already dealt with the safety authority. It cannot remotely be criticised for being a separate body, because it is that already. Our proposals do not amount to the great bureaucracy which the hon. Member for Kingston upon Hull, East accused us of creating. I should like to nail one or two other canards, although I have already dealt with some in answer to questions. It has been said that there will be widespread closures of passenger services. I have said repeatedly and say it again that we shall subsidise socially necessary services. As I have said, subsidy will continue to be paid through the franchising director to franchisees who will bid for it for lines that cannot operate without it.
    One of our main aims is to get better value for money over time. The franchise contractors will deal with fares. Where there is an element of monopoly power, as there is on the London commuter routes, the franchise contracts will fix the fares. The regulator will control the fares of open access operators with monopoly powers. Elsewhere the franchising director will need to consider the proposals of potential operators when judging their bids to run franchised services. A fixed formula might be incorporated in the franchise contract to limit fare increases. We shall be able to debate all those issues later, but I have made the position clear about closure of lines, franchises and subsidies.
    As I have said, we shall maintain the formal statutory closure procedure, offering no less a safeguard on proposals for closure than the existing one. Plainly, there will need to be some changes to the existing procedure to reflect the changed structure of the railway, and the details of the scheme will be set out in the Bill.
    The hon. Member for Kingston upon Hull, East spoke about the timetable. A few days ago the old railway traditions of interest from the clergy were observed when Canon Hugh Montefiore suggested that there could be no national timetable. There will be such a timetable and Railtrack will be responsible for providing it. Some critics say that it will not be possible to buy a through ticket, but that criticism is answered in the White Paper because such tickets will be available and the Bill will provide for them. Those are just a few of the misunderstandings that I have sought to correct. I hope that they will not be repeated in the House or outside.
    Shortly, on Second Reading of the main privatisation Bill, we shall be able to debate all these matters again. I

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    believe that we have got the structure right and I am absolutely convinced that in order to bring about further improvements in British Rail passenger and freight services it is right to introduce more competition and choice and inject private sector management skills and capital.
    As the Bill goes through Parliament we shall be able to discuss all the issues and make adjustments where we consider that they are justified. But the clear message is that privatisation is necessary to inject private sector discipline into the railway industry. It will happen, but not in a great unseemly and ill-thought-out rush. We are making our preparations steadily and deliberately. There is no U-turn. I look forward to introducing the Bill to the House and to getting on with it and that is why I support the amendment in the name of my right hon. Friends.
    5.9 pm
    Mrs. Gwyneth Dunwoody: One should have sympathy for the Secretary of State. He reminds me of a person in a glass maze in a funfair, eternally seeking a way through but always bumping his nose on another piece of glass. He took over an incredible dog's breakfast of a product and he is finding it impossible to organise a sensible or even acceptable policy to move towards privatisation.
    Britain's railway system, which grew up in an age when rail was a new form of transport and able to attract great investment, went through a period when private industry was no longer able to produce a profit. Any railway system anywhere in the world will demonstrate only too clearly that we need a state railway system, subsidised by taxpayers, integrated and planned on the basis of people being able to move easily from one form of transport to another and providing a service. I was struck by the fact that the Secretary of State believed that, somehow or other, it was wrong to maximise service. Surely the main function of a railway system is the transportation of people and goods in a manner which is convenient and useful to them. When it ceases to perform that function, it is an anachronism.
    I am sorry to say that the proposed privatisation of British Rail is an unalloyed disaster because it has not been thought out. No one has produced, either today or on any other occasion, an adequate reason—certainly no adequate economic reason—why the proposed changes will improve the service. It is clear that any transport system must have money from the taxpayer if it is to operate efficiently. The Secretary of State congratulated himself on the time he had taken to bring the changes about, but at no point did he explain why he was not prepared to publish a Green Paper, consult widely with private and state industry and produce a proper workable plan.
    We are rushing ahead with a Bill which answers none of the basic questions. Already the uncertainty created by the risk of privatision is leading to a flight away from the carriage of freight within the industry and causing the private firms which provide the rolling stock openly to declare that they are facing a long period of industrial blight and cannot look forward to order books with even adequate amounts of work. The Railway Industry Association went public with the information that 75 per cent. of its private firms are working at only 75 per cent. of their capacity now, expect almost empty order books in
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    1994 and will be unable to provide within a reasonable time either work or rolling stock for any new system, privatised or non-privatised.
    We now have the worst of all worlds. The Government are committed to privatisation but have not thought it out. They cannot provide an economic argument or even produce a practical plan for supporting the existing system. British Rail, whose reorganisation has already led to enormous uproar and which is facing real problems of morale, is being told that it must nevertheless face yet another period of uncertainty. All the men and women who work in the industry, who in the past five years have experienced enormous changes and have responded with enormous alacrity and great good will to the demands made upon them by the British Rail management, are now told that, regardless of how much better their productivity is or how much effort they have put into improving it, they are to be subjected to yet another period of violent change. Some will be told that they will lose their jobs or that their pensions are at risk, and the majority will look forward to a period of uncertainty and change which is not justified on political or economic grounds but only on grounds of pure dogma.
    It is no accident that increasing numbers of ex-Conservative Members of the House are voicing real worries about the future of the railway system. They know that, there is a direct link between the support of the electorate and the provision of a proper transport system. They understand that, without a transport system which enables people to go to work safely and to give a good service, the Conservative party will pay in terms of votes and political support. Those arguments have so far been completely ignored, not just by the Secretary of State but by the Government, who should know better.
    I am not surprised that the report "Ensuring Safety on Britain's Railways" has been dealt with in the slightly cackhanded manner that we have seen today. One has only to look rapidly at some of the things that it says to realise why there are real worries about privatisation. The report says:
    "BR will specify to any potential new operator the safety-related conditions of access".
    It goes on to lay down various pieces of machinery. On page 22, paragraph 3.7, it says:
    "At present BR is obliged to control and is responsible for all aspects of railway safety; it controls the infrastructure and operates all services. In any scenario which divides this control by introducing new independent operators the body which controls the infrastructure will continue to hold a dominant position."
    Whatever is introduced, the report lays down the need for machinery which will respond to the real safety needs of the passenger.
    The Secretary of State has a responsibility to explain why a fragmented system will produce a better service for the passenger, but he has never once done so. He has told us that subsidies will continue because he knows that any private operator who comes in will look immediately for a good return on capital invested. A private operator will want property, facilities and all the things that can be taken out of the existing system without necessarily putting back the expensive services which are at present the function of British Rail. Whatever the Secretary of State says, private operators will not rush into buying new trains and providing new services. Private operators will not want the difficult bits of Network SouthEast or the

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    commuter lines around Manchester. They will know all too well that those are difficult and expensive services with many problems.
    The Secretary of State should be prepared to say that, whether one is talking about safety, subsidy, investment or an integrated planned transport system, privatisation is not the answer. British Rail does not do all that we want it to do, but instead of accepting that some of its problems arise from lack of investment, the Government come here and say that it would be much better if it were sold off in bits to any private franchisee wishing to take on the service. That is totally irresponsible, as I believe many Conservative Members know. Many hon. Members at all levels understand the importance to their constituents of a transport system which delivers people, safely and at a reasonable price, to the place where they want to go. People want clean, safe railways which do not just deliver them to certain mainline stations, but provide subsidiary local services at the desired times and places. All those facilities could be available if the Secretary of State were prepared to tell the Treasury, "The only thing basically wrong with the existing system is lack of investment and support."
    I ask the Secretary of State in all sincerity not to think of our transport system as an ideological ball to be tossed in the air to show how much more Conservative the Government are than any of their predecessors. Destroying the present integrated system will not produce a better result for the passenger or for the economy—it will simply pile confusion on confusion and hazard on hazard. Unless the Secretary of State asks the Cabinet to think again, it will not be only Opposition Members who find themselves in grave difficulty when the Bill is presented. All Members who generally want to protect their constituents' interests will have to ask themselves a simple question—whether the Bill will improve the transport system or make it worse; and if it will make the system worse, we can surely all unite in defeating it in no uncertain manner.
    5.21 pm
    Sir David Mitchell: There is something of an enigma in the Opposition's attitude to British Rail. They have spent the past 10 years lambasting its management; now they oppose the most effective way of lifting it into the 20th century.
    Yet British Rail is not so very bad. Britain runs more trains at over 100 mph than any other EC country; BR has the fastest fleet of commercial diesels in the world; and in InterCity it has the world's only profitable main line railway. Privatisation will provide many opportunities for BR to build on those achievements and to improve passenger services. Of course that will mean change, and change means fears and uncertainties, but I think that we can draw some confidence from what has happened in other public services when the private sector has been introduced.
    I hope that Railtrack will draw on the experience of local government, which has made a great success of contracting out. Local government is taking on the role of enabler rather than that of doer, and huge benefits have resulted. I hope that my hon. Friend the Minister will
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    confirm that he proposes such action, for private contractors will be able to invest in the most modern machinery, outside Treasury control.
    In local government, contracting out has led to changed working methods, more modern equipment, higher productivity, larger pay packets and lower costs. I should like an assurance that Railtrack will not perpetuate British Rail's current institutionalised position as doer rather than enabler. We need a culture change, and I believe that that is the way to achieve it.
    On the subject of franchising, large subsidies have been made available—£300 million for London Commuter Services and £700 million for Regional Railways. We can learn from the example of the bus industry, which was given subsidies on condition that it tendered competitively to the county or metropolitan councils first. That saved £40 million per year. I believe that similar benefits can be gained from franchising with competitive bids, for the minimum public subsidy.
    Investment is a vital aspect. I find myself in a minor alliance with the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) in that I fear that there is a danger that BR will not invest in rolling stock because it does not know whether it will hold the franchise, and the franchise companies will not invest yet because they do not know whether they will have it either. There is a danger of a gap in the flow of orders to the railway manufacturers. I believe that the best solution would be for the manufacturing industry, or the City financing institutions, to set up leasing companies to build new rolling stock which they expect a future operator to acquire—whether that operator is BR or a franchise company.
    I ask my hon. Friend the Minister to take the initiative, and to see that such an operation is set up, so that the manufacturing industry does not experience a continuation of the current drying up of orders. It is likely that orders will run out in 1994. Such an arrangement would also make new rolling stock available to a future operator when it is needed.
    I wish to make two points about freight. First, BR appears currently to be preparing the freight sector for privatisation by making its existing operation leaner, fitter and more viable—and hence more attractive to private sector bidders or a management buy-out. It is achieving that by pricing off non-viable freight traffic. However, as the Government's whole case for privatisation is that the skills of the private sector, its productivity, its capital and its lower costs all mean that it can win more traffic off the roads and get it on to the railways, surely there is a case for introducing open access now. I fear that the traffic now being priced off is the very traffic which ought to be and would be retained on rail in a private sector operation.
    I know that my hon. Friend the Minister believes that transferring more freight on to rail will provide substantial benefits, including environmental benefits. If those benefits are to result from private sector involvement, we should surely allow open access now so that the private sector can bid for the services which BR is currently pricing off and not making available to the private sector. I hope that my hon. Friend will announce this week that he will require BR to provide open access to freight operators immediately, rather than waiting until a future time when a significant part of rail freight will have been transferred back to the roads. That would be a very bad start to a major opportunity for the private sector to extend its activities on the railway.

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    Secondly, the extent to which freight is carried by rail depends chiefly on the charges made for the use of track. What will be the basis of those charges? It used to be the marginal or extra costs, with the main sector user carrying the structural costs. Will that still apply? As privatisation and franchising are introduced, every user will attempt to offload the costs to other users. I am expressing the anxiety that there will be a tendency to try to shift costs on to freight which previously were borne by the main sector operator. Will my hon. Friend the Minister publish the criteria on which freight will he charged for the use of the railways and ensure that there is an appeal procedure against overcharging? Otherwise, I fear that far too much freight will be priced off the railways because the costs being attributed to freight are disproportionate to that which they should be.
    I hope that my hon. Friend the Minister will reply to those points when he replies to the debate.
    5.30 pm
    Mr. Nick Harvey: The Secretary of State said that he could not understand why we were holding this debate today. His press department must have given him the recent cuttings and he must be aware that, whether it is privatisation, semi-privatisation or commercialisation, the Government's policy is wrong.
    As the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said, this proposal has been on the agenda for some time. It has exercised the Secretary of State's predecessors, who have contemplated it, tussled with it, thought better of it and discarded it. There has naturally been some speculation that perhaps the right hon. Gentleman would do the same. He has confirmed today that he intends to press ahead very much along the lines of the White Paper published last summer. In doing so, he is setting about something quite new and he is right to say that it is nearly privatisation. It does not compare with anything that we have seen before in this country or with another train regime in the world.
    We have not heard to my satisfaction any clear statement of the benefits for passengers. I think that the Secretary of State said that BR managers would be allowed to bid in the franchising operation. If I am right, that is new and not what I have understood him to say before. Will he go one step further and confirm that BR, as an entity, will be able to bid in the franchise process? That single factor would give some credibility to the project.
    The Secretary of State placed different emphasis today on the time scale. I welcome the suggestion that the process might take as long as the German process, which took 12 years. In a previous debate the Secretary of State said that it was his aspiration to get the majority of the network into the hands of private operators within the lifetime of this Parliament. On another occasion he said that private sector interest in these opportunities was such that he was holding back the floodgates until the spring of 1994. I welcome the change of emphasis which I believe that I detected today in suggesting that the timetable might be more relaxed.
    In whatever form it finally happens, and at whatever time, the problem is that privatisation is happening after years of underfunding by consecutive Governments, as even the hon. Member for Kingston upon Hull, East (Mr. Prescott) acknowledged. The confusion and delay of
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    the past five years have prevented forward planning. There has been a hiatus in investment by British Rail, any possible private players in the rail system and local authorities.
    The question that I ask is whether the proposals that have been made, which were restated today, are practical and possible to implement. It is difficult to find anyone outside the House who knows anything about the rail system and is prepared to express confidence in the arrangements. I sincerely doubt whether the proposals can create a national rail network capable of meeting and providing a socially necessary service.
    The Secretary of State is charging pig-headedly onward in the face of opposition not only from Opposition Members but from leading Conservative luminaries who have held his post in the past, from the chairman of British Rail and from the majority of members of the Transport Select Committee. If the Government proceed at full steam, they will stoke up a heap of trouble in suburban and rural areas, where voters are predominantly Conservative. The comment of the hon. Member for Crewe and Nantwich that there will be a high electoral price to pay for this will prove correct.
    Mr. Milligan: The hon. Gentleman's stinging attack on the Government's policies is bizarre as his party supported at the last election the principle of franchising the railways.
    Mr. Harvey: My party has had a lengthy debate on these issues, which is probably more than can be said for the Conservative party. We would have been perfectly willing to entertain any sensible suggestions—we have no ideological objection to private involvement in the railways and we would have liked the Government to make believable or credible proposals—but the White Paper is a recipe for chaos and anarchy on the railways, which we cannot possibly support.
    It is perhaps a pity that more notice was not taken of those who urged a sensible approach which would have enabled private operators to be involved. No doubt entrepreneurs will snap up the profitable routes. They may be able to improve some services because they will get access to the capital markets and will be freer of the Treasury rules. My concern is for the majority of rail passengers who use lines which need some subsidy but which will continue to lose money even after privatisation. Such lines, even with some subsidy, will prove pretty unattrative to the private sector. Despite the Secretary of State's refernce to holding back the floodgates, there is no real evidence that there is a market.
    It will require substantial funding to keep those services operating to the standards that the public demands. The catch–22 is that if franchisees take on routes and begin to improve their performance and financial returns, the Government will gradually reduce and withdraw the subsidy. Is that not a disincentive to anyone who might be interested in making a go of those lines? If the Government proceed with the proposal to franchise whole geographical areas, might not the new operators of those zones or areas start wanting to cut the loss-making services?
    The Government have said vaguely that they will safeguard socially necessary services and have restated that again today, but we have not had a clear definition of a socially necessary service. The fear must be that more and more services would be cut and replaced by inferior bus services. The Secretary of State squirmed over

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    guarantees and safeguards. He said at one point that the majority of lines would be safeguarded, and at another point that almost all of them would be. If Government support to the non-economic franchisees is strictly cash limited, there may be pressure on the franchising authority to decide that various services are no longer socially necessary.
    One can foresee the pressures which would build up against some of those lines. The new transparency will mean that the full costs will be exposed, making some of them more vulnerable. The cross-subsidy will disappear, at least in the form in which we know it. The cost of upgrading lines to the new, tougher safety standards will be higher. The infrastructure costs in general are higher in rural areas because more is spent on avoiding hills and on tunnelling and bridges. There has been a decline in standards in many rural areas for many years as British Rail has been forced to tighten its financial belt and has been starved of vital resources.
    One of the main concerns about the Government's proposals is the requirement for Railtrack—the new quango—to make a return on the system, which will make the future viability of some of the branch lines especially suspect. It is a matter of considerable interest to me as I come from the south-west which has a number of small rural services.
    In 1981, my predecessor steered on to the statute book private Member's legislation which enabled British Rail to reopen on an experimental basis some of the rural lines which had been lost in earlier rounds of cuts. The White Paper states that the franchising authority will be allowed to decide whether those routes should be franchised. If they cannot be shown to be profitable, it is unlikely that there will be any prospect of their being franchised. At the moment those lines are not subject to statutory closure procedures, but they have proved their point. At the point of the privatisation of British Rail, which is seemingly to happen in the next few months, the Government should now safeguard those lines and subject them to the same closure procedures as all other socially necessary lines.
    The regulator and franchising authority will be the bodies to provide and qualify what the safeguards will mean. There is also concern that they will be much more centralised than the current responsibilities exercised by British Rail. At least since the organising for quality arrangements, British Rail's set-up has placed management decision making and accountability at a more local level for passengers. So far as I am aware, there is no provision under the new arrangements for local authorities to take on more responsibilities.
    Mr. Snape: Just the opposite.
    Mr. Harvey: Yes, just the opposite—there is no provision for them to take on any more responsibility for service planning.
    The track authority and the regulator are not even required to consult local authorities. In view of local authorities' scant budgets and the difficulties under which they operate, it is unclear how they would be able to play a part in that work. Even the role of the passenger transport authorities in the provincial conurbations may be threatened by the proposals.
    We welcome the confirmation that there will continue
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    to be statutory national and regional committees for rail users' interests, but we want them to be independent of the regulator. Let us consider the example of another privatised industry. The Gas Consumers Council is independent of the regulator and its work is much more effective than that of organisations trying to act under the wing of the regulator. Crucially, we want passenger bodies to be able to comment on franchising specifications; otherwise, it is almost pointless for them to exist.
    I welcome the Secretary of State's stronger comments today about keeping network benefits such as through ticketing and timetabling. May we hope that they will be incorporated into the legislation as a requirement on any operator rather than being something that the regulator is merely invited to consider? May we hope that they will be referred to in the awarding of franchises?
    The Prime Minister has harked back to the golden age of steam—I imagine that he has his copy of Bradshaw's timetable next to his collection of Wisden—but I wonder whether he really hankers after the time when people were able to operate their brightly coloured trains, fiercely competing against each other. Has he considered the possibility of trying to get from Huntingdon to Holyhead in such circumstances because he would find it very difficult? Unless operators are required to work to a common timetable instead of being left to their own devices, we shall have a recipe for utter chaos. The White Paper recognised the principle of a network—we heard more about that today—but it should be incorporated into the legislation as a requirement on operators.
    We have not heard what will happen to the discounts enjoyed by various passengers. What will happen to student cards, pensioners' cards and any concessions for the disabled? Will the operators of the new franchised services be compelled to recognise those discounts, or will it be left to the operators' discretion and commercial judgment?
    The proposals cause much concern, and I have outlined those which are of especial concern to people in rural areas. The proposals have serious environmental implications, and I fear that there will be less passenger and freight traffic on the railway. As a result, the environmental assistance that the railway could potentially bring to our national life could be lost.
    We need a coherent national rail strategy. We must decide what role the railway can play in our economic and social life and in our environmental policies. We have not had such a debate, but it should have taken place before we embarked on the process that we are discussing. Rail must be given a level playing field with the rest of the transport network. My party has continually argued for that. We welcome the fact that cost benefit analysis will now be used in assessing rail investment, but could it not be extended to the awarding of franchises and to the principle of charges to be levied on operators when they use the track?
    Just before Christmas I and members of two other parties were privileged to visit the new light rail set-up in Singapore. We saw an example of a Government having embarked on a major programme of investment, having built a service to the community and then offering private operators the opportunity to run it on a franchise basis. What a large contrast there is between that and what is now being proposed here.
    Mr. Peter Fry: Is the hon. Gentleman not aware that every light rail system being built in this country is virtually 100 per cent. supported by public money, either directly or through guaranteeing the amount of money that local authorities borrow and on which they pay interest, through the revenue support grant? The hon. Gentleman said that the Government have not taken the correct approach with light rail, but that is untrue: all such schemes are being handed to private organisations which will run them.
    Mr. Harvey: I did not say that. My point was that it would be helpful to the future of the rail network if that approach were extended to the rest of the network. It would be more credible to expect private operators to want to run rail services if they did not have to pay for the many years of underinvestment in the rail network and to pay for what is likely to prove a most unattractive—even prohibitive—charge for using the track. It contrasts completely with the example that I gave where the infrastructure was built and provided free of charge and on which the operator was to make a return.
    There might have been circumstances in which my party could have supported a Bill on railway private operations—we have no ideological objection to private operators using the rail network—but there is no such Bill. As the Secretary of State rightly said, this is not a classic privatisation. In fact, it is a classic miscalculation—one which the Government make at their peril and which will haunt them for many years to come.
    5.48 pm
    Mr. Robert Adley: The House has heard a thoughtful speech from the hon. Member for North Devon (Mr. Harvey). Indeed, he was gracious in mentioning his predecessor's interest in rail matters. I spoke twice in Barnstaple during the general election, which may account for the fact that the hon. Gentleman is here. Both speeches were about matters of public transport rather than party politics, which was rather the theme of the hon. Gentleman's speech. I mention, in a friendly way, that I happen to have here the Register of Members' Interests and I notice that the hon. Gentleman has not yet registered his visit to Singapore. He had better put it in the register before some unpleasant journalist picks up the point and makes trouble for him.
    I have had discussions with the right hon. Member for Yeovil (Mr. Ashdown) on the subject. It is fair to say, as the hon. Member for North Devon has said, that his party is not dogmatic about the future of the railways. I hope that I am not dogmatic either. I am bound to say to the hon. Member for Cunninghame, North (Mr. Wilson) that to hear his hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) accuse my right hon. Friend the Secretary of State of being dogmatic and then to look at the single-line Opposition motion makes one realise that it is rather like the pot calling the kettle black.
    I say equally to my right hon. Friend the Secretary of State that the Government amendment and everything that he says makes one underlying assumption—that, whatever the state of the railways at the moment, things can only get better. I have grave doubts about that proposition. The Government amendment
    "recognises that progress has recently been made in improving British Rail's services".
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    I start my remarks with a point I have boringly made many times before in the House. In my view, party politics and public transport policy are very uneasy bedfellows. The railways are a vital part of the nation's transport infrastructure. If my right hon. and hon. Friends regard my enthusiasm for the railways as a crime, I plead guilty. However, when the party political shouting across the Chamber dies down and scrutiny of the Government's proposals begins, many more questions will be asked and will need to be answered than we have even touched on this afternoon.
    Few would say that British Rail is perfect. I have never heard anybody say that it is perfect, so the proposition that there should never be any change to its structure or even partial ownership is an unwise position to take. However, I believe that we must have an analysis of the problem first.
    That was why I intervened in my right hon. Friend's speech and mentioned Helmut Kohl's Government railway commission. I did so to make the point that if the Government are seriously trying to improve part of the nation's transport infrastructure, they have a duty first to analyse the problem. Is it caused by levels of investment? Is it caused by fluctuations in the public service obligation grant? Could taxation policy be used to advantage the railways and to forward a policy of transferring traffic from road to rail? Is there a level playing field? Are the Department's current road and rail investment criteria satisfactory in a country that is overcrowded and in which congestion and pollution are serious factors? None of those issues has even been discussed. They are not mentioned in the White Paper in any detail, nor, I suspect, will they even be touched on in the Bill.
    The Labour party says no to any sort of privatisation. My right hon. Friend, if I may say so, reminds me of a schoolmaster at Uppingham, the late V.T. Saunders. When one entered his classroom for the first time, he said, "In this classroom, there are three ways of doing things: the right way, the wrong way and my way, and here you do things my way."
    I commend yet again to my right hon. Friend the example of other members of the Cabinet recently. The Secretary of State for National Heritage produced a Green Paper on the future of the BBC. It was a very green paper. It was open-minded, it showed a willingness to listen, it was undogmatic and it allows plenty of time for consultation. Just before Christmas, my right hon. Friend the President of the Board of Trade produced another very Green Paper on the abuse of market power. Those are important documents. They need to be considered outwith the clamour of party politics. I regret very much that my right hon. Friend's proposals for the railways are being handled totally differently in the House from the way in which some of his Cabinet colleagues are going about discharging their ministerial duties.
    The White Paper is a wholly inadequate basis for legislation. We have had the franchise document, which is a monument to Whitehall jargon. I suspect that the quangos that are mentioned therein would give Philip Holland nightmares, as those of us who have had the pleasure of serving in the House with him know.
    I hope that my hon. Friend the Minister for Public Transport will tell me whether I am right when he replies, but I think that I am correct in saying that we were promised eight consultation documents—[Interruption.]

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    May I have a glass of water? I am grateful to my hon. Friend the Member for Hertford and Stortford (Mr. Wells). Will he please put a napkin over his left wrist?!
    We were promised eight consultation documents. We have had two so far. Am I to understand that six more consultation documents are to come forward? Will the documents be produced in the next two weeks before the Bill appears? If so, do my right hon. and hon. Friends really feel that they are doing justice to the House by introducing major legislation when six of the eight documents that we were promised have not yet been produced?
    I have no intention of peppering my speech with endless quotations. However, I received this morning from the Freight Transport Association a single sheet of paper which, I imagine, hon. Members interested in the subject will also have received. The opening sentence reads:
    "Infrastructure charging is the factor likely to influence most the success of any privatisation or open access regime for rail freight."
    Nobody has any detailed information on what the charges will be to run trains. My hon. Friend the Member for Hampshire, North-West (Sir D. Mitchell) made that crucial point.
    The hon. Member for Crewe and Nantwich (Mrs. Dunwoody), as those of us on the Select Committee on Transport know, mentioned the state of British manufacturing industry. That is private sector industry. David Gillan, the director of the Railway Industry Association, has said that his members are
    "staring annihilation in the face."
    That is not a happy situation for a Conservative Government to bring about.
    My hon. Friend the Member for Hampshire, North-West has rightly referred to the haemorrhage of freight from rail to road. What is going on? Letters have obviously passed between the Secretary of State and the chairman of British Rail. The end product is nothing less than a haemorrhage of traffic from rail to road in contradistinction to the Government's stated policy. The Government want to transfer traffic from road to rail, but what is happening at the moment is that the traffic is moving in reverse. The Government cannot be happy with that. What are they doing about it?
    I now turn to the question of passenger franchises. I hope that my right hon. and hon. Friends will not ultimately prove guilty, in Harold Macmillan's famous phrase, of selling off the family silver. Granting franchises only on lines that have been subjected to substantial public sector investment will not do. My hon. Friend the Minister for Public Transport kindly took me with him as part of his baggage to York recently. He made a very good speech and during the course of it—he will tell me if I am misquoting him—he said that on the Chiltern line, about which he used to receive endless complaints from passengers, he is now receiving accolades. That is excellent.
    The Minister for Public Transport (Mr. Roger Freeman)indicated assent.
    Mr. Adley: My hon. Friend nods his head and I am grateful to him.
    That example surely shows two things quite simply. First, if one puts investment into the railways, one improves the service. Secondly, the ownership is totally
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    irrelevant to the satisfactory or unsatisfactory level of services. If that is the case, what are we doing with the Bill? How can we be sure that we shall actually provide a better railway for our constituents?
    I again agree with the hon. Member for North Devon. He and I have made this point before. Excluding British Rail from quoting or bidding to run trains is just plain daft. Those at British Rail are the only people in this country who have experience of running trains. It is rather like suggesting that we shall reorganise the health service and the hospitals with doctors being excluded from providing patient care.
    It is interesting to consider Sweden. Although there are very few analogies between what the Government propose and what the Swedes are doing, what has happened there is that SJ, to which the hon. Member for West Bromwich, East (Mr. Snape) referred earlier, is being allowed, of course, to quote for the running of services. It has kept 99 per cent. of those services itself, but it has achieved a 30 per cent. reduction in costs, so the passenger has benefited and the Swedish taxpayer has benefited. SJ is running virtually the entire railway system, but its rail track is being heavily subsidised and only one third of track costs, as opposed to 100 per cent. of costs under the Government's current proposals, are required to be paid by the train operators.
    I urge my right hon. Friend to take a serious look at what is happening in other countries and to consider the effect of his proposals before he continually lambasts me and any Conservative Member who dares to criticise what he proposes. In my view—and I think that it is a view shared by many people, especially those with current knowledge of railway operations—the separation of the responsibilities for the control of track and signalling on the one hand and for operating trains on the other is a potential disaster. Leaving aside all the organisational problems that will arise, that is a fundamental flaw in the Government's proposals. They really must reconsider.
    We have been given a political timetable based purely on electoral considerations—on the desire to get some paint on trains by the end of 1994 so that we can say, "We're doing jolly well, aren't we?" If that is done, it will be irrelevant to the operation of the vast majority of railway services; and if it is done at the cost of undermining the integrity of the network, the Conservative party will pay a heavy price.
    My right hon. Friend the Secretary of State announced to the Select Committee yesterday that, over the next three years, £150 million would be available to British Rail for leasing. He told us this afternoon that leasing could only be introduced in the autumn statement because it would be for the benefit of private sector companies and would not affect the public sector borrowing requirement. But if leasing money is available to British Rail now, the PSBR is presumably affected. The fact of the matter is that the unwillingness to allow leasing to take place has been a piece of Treasury dogma and has acted against the interests of our railways.
    Let me ask my right hon. Friend to nod when I ask him this question: does he recall that he and I had a telephone conversation a few weeks ago, at the end of which he said, "Okay. Will you put forward some alternative proposals?"? He is not nodding. We had the conversation, however, and that is what I agreed to do. I put forward my alternative proposals but, frankly, my right hon. Friend did not have the courtesy to respond personally to my letter. So for the benefit of my hon. Friends, let me—
    The Comptroller of Her Majesty's Household (Mr. David Lightbown): It was a private discussion.
    Mr. Adley: My hon. Friend says—
    Mr. Deputy Speaker (Mr. Michael Morris): Order. The Whip is not in the Chamber.
    Mr. Adley: I am sorry, Mr. Deputy Speaker. But it was not a confidential discussion to which I cannot refer. It was perfectly fair for the Secretary of State to say, "Okay. Put forward your proposals", and I have done so and shall do so now—very briefly, Mr. Deputy Speaker.
    The first point that I made in my letter to my right hon. Friend was the same as that made by my hon. Friend the Member for Hampshire, North-West: we should end the freight monopoly now. Then we can end the passenger monopoly and allow private sector operators the right to operate trains on our existing railway system. Then we can go on to create integrated railway operating companies based either on British Rail's current sectorisation or on geography—the lines on which some of the older companies were organised. That is a detail that can be worked out, but we must have integrated companies. The fourth stage—the ultimate stage—would be to bring in private sector capital and management, if that was appropriate and if it could be done.
    That is the way in which I should like the Government to go about bringing in the private sector initiative, energy, ambition and imagination that all Conservative Members recognise are missing from the railway system at present —although, in defence of the present railway management, I must say that there has been much improvement in that regard. The hon. Member for North Devon has said that that was the Prime Minister's known preference. It was widely reported as such and nothing causes me to deny that the hon. Gentleman's belief and those reports were incorrect.
    A moment ago, Mr. Deputy Speaker, you chided me for responding to a sedentary intervention from a Whip who was not technically in the Chamber. Any competent Chief Whip who can command a majority of 65 over the main Opposition party can drive legislation on to the statute book; that is not in doubt. But what will happen then? I think that I can claim to have invented the phrase, "the poll tax on wheels". I voted against the poll tax because it always smelt wrong to me. Someone—Lady Thatcher—said, "We've got to do something about those left-wing councils and reorganise local government finance." Many people told her that her plans were unworkable or unfair, but, in the end, it was a case of, "Eyes and ears closed, head down and charge!" We are getting precious near to that position with the Government's proposals for the railways.
    At the moment, there is just a hint of unease among some of my hon. Friends—a small cloud, no larger than a man's hand. Shrewsbury, Cleethorpes and Blackpool have lost their direct services to London already—
    Mr. Austin Mitchell: Not yet.
    Mr. Adley: It is only a matter of time, although I know that the hon. Gentleman has been fighting hard. There is one train left, I think.
    Mr. Mitchell: Yes.
    Mr. Adley: It will be Penzance, Middlesbrough and Swansea next—and large swathes of Cornwall, Scotland
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    and Wales. Do people really imagine that through trains to Penzance will continue indefinitely, even if there are connecting services from Plymouth? Those through services, which are an essential feature of the rail system, will inevitably be placed at risk if the franchising proposals take effect.
    At 4.49 pm, my right hon. Friend the Secretary of State made an important statement on the question of line closures. He said that railway services would continue subject only to "economic and commercial realities". Those were the words that he used. He did not mention social need. He never mentioned environmental or congestion factors. He added later to his remarks—
    Mr. MacGregor: I referred to socially necessary services several times during my speech. My hon. Friend must not distort what I said. I made it clear that, as economic conditions change, and if there is no demand for a service, closure proposals may come forward and will be considered in the normal way. I want to make it absolutely clear that nothing in what we propose is different from what has happened in railway practice for a very long time. That is what I said.
    I also referred to socially necessary subsidies which are proposed on a substantial scale and I have talked about environmental issues on other occasions—indeed, on the question of level playing fields, we had quite a discussion about that in the Select Committee last night. I am perfectly prepared to have endless discussions with my hon. Friend, but I hope he will not distort my comments on the position regarding closures.
    Mr. Adley: I am grateful to my right hon. Friend, but I noted that, at 4.49 pm, the phrase that he used was "economic and commercial realities". He added to it later. I think that the record will show that that is what I said in the first place.
    When electricity was being privatised, we in the south-west were told that our fears about increased regional charges were totally unreal—that the Government would see to it that they did not materialise. But when an industry is nationalised—for better or for worse—
    Mrs. Dunwoody: Privatised.
    Mr. Adley: No, nationalised. When an industry is nationalised, the Government have some control and can give instructions to ensure that the things that they want done are done. Let us compare that state of affairs with that pertaining in the privatised electricity industry. My right hon. Friend the President of the Board of Trade is like an inverted harlot—he has responsibility for the coal industry but no power. That is what happens, and the brave and kind words of my right hon. Friend the Secretary of State for Transport may become wholly irrelevant if, in 10 years' time, the vast majority of the railway passenger services in Britain are no longer operated by the nationalised industry—[interruption.]
    Several Hon. Members: The Whip is going.
    Mr. Austin Mitchell: Clump, clump, clump.
    Mr. Adley: Yes. I think that I have made my point.
    Previous speakers have referred to the activities of the Select Committee. I should like to congratulate the Government on one thing: they have created some remarkable alliances. The Select Committee received a

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    joint delegation from the railway unions and the CBI, because when we looked at the written evidence that they had supplied, we found that it was very similar.
    Those who understand most the complexity of railway operations have the gravest doubts about the practicality —not the politics—of the Government's proposals. Surely we on this side of the House must all be concerned when Lords Ridley and Whitelaw are singing the same song down the Corridor. We must all remember that, when we talk about British Rail's passengers, we are actually talking about our constituents, and that, unlike the electricity and water industries, British Rail is neither a monopoly nor a profitable operation but part of the nation's transport infrastructure. It may be too late; I do not know. I can only plead once again with my right hon. Friend not to stop the discussions on alternative methods of introducing private sector capital and incentives. I am in favour of the introduction of such an incentive, provided we end up with a practical, workable proposition that produces a better railway.
    Much play was made earlier this afternoon about the document on safety. I shall read the first sentence of the conclusion, and ask my hon. Friend a specific question. The report says:
    "New regulatory controls and new arrangements within the railway industry will be needed if safety standards are to be maintained through the period of implementation of the Government's policy on liberalisation and privatisation, and afterwards into the future."
    Who will pay for that? Will it be paid for entirely by Railtrack or by the operators? If it is to be paid for by the operators, what thought has been given to the effect that it will have on the economics of their objectives? We do not yet even have a Railtrack charging regime.
    This afternoon the Government announced the acceptance of the Health and Safety Commission's report. What will be the effect of that on those commercial organisations which might want to run trains? As I said earlier, I have no doubt that a few painted coaches can be introduced on to our railways by 1994. If, however, they are bought at the cost of a totally undermined network, that will be too high a price to pay.
    I know that my right hon. Friend finds some of my criticisms irksome. When he finds them particularly irksome, he descends to ridicule. He is a member of the Magic Circle. I am sure that Tommy Cooper would have liked the Government's proposals. My concern is not with the Magic Circle or with laughs and jokes, or even with magicians. I simply want to ensure that at the end of the privatisation process the Conservative party, the Government and the nation do not end up in tears rather than with laughter. On that basis, I plead with my right hon. Friend to consider alternative means of achieving his proper and sensible objectives, which I support.
    6.12 pm
    Mr. Peter Snape: First, I should like to declare an interest as a member of the Rail, Maritime and Transport Union. I worked in the railway industry until I left my desk at Preston to fight the 1974 general election campaign. I understand that my desk is still waiting for me if things go awry in the future. If the railway industry is privatised, I fear that my employment prospects will not be too good. As the hon. Member for
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    Christchurch (Mr. Adley) said, if privatisation of the railway goes ahead, it will prove to be a political disaster and have severe electoral repercussions for the Conservative party at the next general election.
    The hon. Member for Christchurch is enthusiastic and extremely knowledgeable about the railway industry. He should not worry too much about the ridicule that comes from some of his hon. Friends. Many of them seem to be more concerned about their prospects for advancement than about the future of the railway industry. The hon. Gentleman should not worry about the Whips Office. I say that having spent a few years in that particular office. Regardless of the size of the Whips, the hon. Gentleman should be aware that their bark is invariably much worse than their bite.
    The Whips' job is to steamroller Government legislation through the House, no matter how stupid or contradictory it is to the legislation which they steamrollered through the House in the previous 12 months. Let the Whips get on with it. The hon. Gentleman should stick to his view—I know that he will stick to it —about the future of the railway industry. However, I disagree with the hon. Gentleman on a couple of matters, and I shall come to those in a moment.
    I should like to refer to the vexed question of investment. Over the years, I have sat through or participated in—and sometimes both—every railway debate. I am heartily fed up with the whole argument about investment and the yahoo philosophy which we have heard from successive Conservative Ministers. They pick a particular year and say, "But we are"—they keep saying I—"investing more money in the railway industry than we have ever done before." Of course, that means that all those who use the railways, the taxpayers generally, make a regular investment in a particular year.
    More often than not, especially in the past 14 years since this Government were elected, investment in the railway industry has failed to keep pace with the needs of the railway industry. I shall give a graphic illustration of that. Early in my railway career I worked in some signal boxes in the Stockport area in Greater Manchester. I worked on parts of the west coast main line to which one of my hon. Friends referred earlier. The signal boxes were constructed by the London and North Western Railway in 1888.
    I still travel to and from Stockport from time to time. I have a habit of watching, with some degree of privacy, Stockport County, which is not something that one boasts about too often. The signal boxes are still there. The only difference between now and their construction is that, instead of operating semaphore signals which were lit by oil lights, the levers operate coloured light signals which have been cut off halfway down to stop the signalmen forgetting that and ending up through the back of the signal box window. That is the only difference that has resulted from all those years of modernisation and investment.
    I will not use the phrase "level playing field", which the hon. Member for North Devon (Mr. Harvey) widely used, because it is one of the most overworked clichéin political life. The situation on the west coast main line is the equivalent of travelling north on the M6 motorway. One arrives in south Manchester to find that the motorway ends and the road network reverts to the turn of the century with a policeman on point duty every 50 yards. That is the effect of the chronic lack of investment in one

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    extremely busy British Rail main line. The same effect is repeated in other parts of the country, especially on, routes that are not so busy.
    Let us have no nonsense about the railways being stuffed full of investment. Traditionally, investments have fallen behind, especially in the past 14 years. To illustrate that, I remind the House and the Conservative party that the past major countrywide investment in the railway industry resulted from the 1955 modernisation plan. It took about 15 years to implement that plan arid was concluded in the early 1970s. The problem now is that much of that investment was made in life-expired equipment.
    Mr. Michael Stephen: Will the hon. Gentleman give way?
    Mr. Snape: I shall give way when I have finished making my point.
    Signalling projects which were installed in the 1960s come up for renewal about now. Locomotives which were purchased from different private sector operators—some of them were built by the former British Rail Engineering Ltd.—also come up for renewal now because they have run many millions of miles. However, that equipment is not being renewed; it is being patched up. The results of that patching up can be seen in the delays and dislocations to services that exist from one end of the country to the other.
    Mr. Stephen: Will the hon. Gentleman accept that a few weeks ago I visited the signal box that controls traffic from Victoria and Waterloo stations in London? I saw an extremely modern signalling system which enables the signalmen to control a huge volume of traffic in and out of London stations every day. That signalling system is probably one of the best in the world.
    Mr. Snape: The problem is that the hon. Gentleman has just walked in, so he has not been listening to the debate.
    Mr. Stephen: I listened to both Front Bench speeches.
    Mr. Snape: The London Bridge signal box to which the hon. Gentleman refers, and to which I have paid various visits over the years, is fairly modern. It is riot a particularly modern design. It is part of what is known as the NX system, the entrance/exit system, by which the signalman operates the signals by switches on the panel. The system has been superseded in the past decade by a much more modern and sophisticated one. I readily concede that the London Bridge signal box, which was installed in the late 1970s, about 1978—I will not be dogmatic about the exact year—uses technology which has been superseded. That is not to say that there is anything wrong with it or that it is unreliable. However, the hon. Gentleman has picked on a comparatively modern powered signalling installation.
    I am not simply concerned about the legacy of the London and North Western Railway to which I have referred. A little further south on the west coast main line there is a very modern installation at Crewe. However, within five miles of that installation is a signal box called Basford Hall junction which, again, was installed by the London and North Western Railway in the late 1880s. My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) will be familiar with that signal box. The
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    piecemeal, patchwork quilt modernisation is the direct result of a lack of investment in the railway industry, particularly over the past decade or so.
    Will the Government's proposals find any friends among those who are interested in railway matters, use the railway industry and believe in public and private sector operations? The answer is that they will find no favour among those people. As the hon. Member for Christchurch reminded us, organisations as diverse as the Confederation of British Industry and the Railway Development Society, of which, like other hon. Members, I have the honour to be a vice-president, have already expressed their concerns and opposition to the Government's proposals.
    Seventy user groups have banded together under the umbrella organisation Platform to express to the Government, even at this late stage, their fears and concerns about the future of the railway industry. The Select Committee on Transport, which has done the industry and the House a great service so far, has had to advertise in the well-known railway publication "Modern Railways" for those in favour of the Government's proposals to come and give evidence to the Committee. I understand that the Committee has not exactly been overwhelmed by the rush. Extra catering has not been laid on as a result of the appeal. As I understand it, no one has yet come forward to support the proposals that the Government say that they will set before the House in the next few weeks.
    According to the press, certain individuals have given evidence to the Select Committee to the effect that they might like to participate in the newly privatised industry. I understand that Mr. Richard Branson is going to offer incentives to drivers to go faster to reach their destinations on time. That should terrify my old mates in the signal boxes to which I have just referred. However, it is an interesting concept.
    Before Mr. Branson's aeroplanes leave New York, I wonder whether the pilots are given a memo from the chairman saying, "When you arrive over the United Kingdom, you are to ignore the aircraft of competitors that are stacked over Epsom and head straight for runway 28 north at Heathrow." To say the least, that would cause one or two raised eyebrows among the air traffic control staff. That is the level of debate conducted by the supporters of the nonsensical proposals before the Select Committee.
    Mr. Branson goes further. He has said that he wants to lease trains from British Rail, although, of course, at his price and not an economic price. When one negotiates with a nationalised industry and it asks an economic price, it is holding one to ransom. If it does not ask such a price, it is giving the country's assets away. Such industries can never win so far as the Conservative party is concerned.
    Initially, Mr. Branson proposed to take some 17 or 18–year-old high speed trains which have covered a considerable number of millions of miles in service. As my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) said, Mr. Branson intended to give them a quick refurbishment and install new seats. He does that with his aeroplanes. They are also quite old, although he does not normally boast about that aspect of his operation. He will give those trains a respray and refit their interiors so that they look nice. He will then unleash his high speed trains on the east coast main line.

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    As my hon. Friend the Member for Kingston upon Hull, East reminded the House earlier, the nation has spent millions of pounds electrifying and updating the east coast main line so that it can be used by electric trains. I hope that my railway experience does not give me the right to sound remotely patronising, but the accelerative potential of diesel trains is not quite the same as that of electric trains. As a former signalman, I must tell the Minister that slipping a couple of albeit brightly painted diesel trains into the middle of a rather intensive electric service is not conducive to good punctuality or productivity.
    Such a prospect is already being viewed with horror by those responsible for planning timetables and the diagramming of the east coast main line. However, Conservative Members will promptly denounce those people as unfit to participate in the debate because, as we have already heard, the main qualification for a job to administer the proposals is not to know anything about the railway industry in the first place.
    Mrs. Dunwoody: My hon. Friend has forgotten the basic difference between Mr. Branson's proposals and those of British Rail. Mr. Branson has promised us young ladies with short skirts and television.
    Mr. Snape: In the Labour party it is safe only for my hon. Friend the Member for Crewe and Nantwich to say such things. Such a thought would never cross my mind and such words would never fall from my lips. However, my hon. Friend's comments show the depths of the stupidity involved.
    Mr. Branson is not alone. Mr. James Sherwood has given evidence to the Select Committee. Those of us with rail experience know a little about Mr. Sherwood. I seem to remember that he sailed off with Sealink some years ago to Bermuda to equip the ships with a quick flag of convenience before demonstrating his patriotism elsewhere.
    Mr. Sherwood wants to run double-decker coaches on British Rail. That is not a new idea. The much-maligned Southern region of British Rail ran double-decker coaches in the 1950s. However, the problem is that we have a comparatively small loading gate in Britain. That is what comes of being the first in the world to run a railway system. It became a little cramped upstairs on those double-decker coaches. Indeed, someone with a head like Mr. Sherwood would have had difficulty getting downstairs.
    There was another operating difficulty with double-decker coaches on the inner suburban services of the former Southern region. As they were rather cramped, it was not possible to install an adequate number of doors in the coaches. Therefore, loading and unloading was difficult. The advantages of cramming people into double-decker coaches were dissipated by the amount of time that those trains had to stand at station platforms. I do not suggest that such difficulties are insurmountable. However, I doubt whether they have even crossed the minds of the two captains of industry who have already given evidence to the Select Committee.
    Much mention has been made of the freight business. The hon. Member for Hampshire, North-West (Sir D. Mitchell), a former Transport Minister, gave us the benefit
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    of his views about rail freight. He was not a bad Minister at the Department of Transport—at least, not in comparison to the low standards of the present Administration. However, he showed why he was not a particularly good Minister. He said that the remedy for the loss of freight from British Rail was to throw open the freight market to all and sundry and so allow private operators to run the trains.
    The Government have been in power for 14 years, although it seems a lot longer. During that time they have appointed all the current members of the British Rail board, including the present chairman and his namesake and predecessor. The Government have laid down the policies and parameters under which the board and chairman have operated. The Government now claim that what is wrong with British Rail is that it is in the public sector.
    It does not seem to matter that the Government appointed the people who have run BR. Presumably the Government's appointees would be twice as good if the responsibility for running a public operation was taken from them and they were thrust into the embrace and climate of the private sector. That is the myth that was perpetrated once more this afternoon.
    Ministers and civil servants who believe that they can second-guess managers in the public sector caused the public sector to get things wrong in the first place. The ownership of Railfreight is not the problem. The problem is that in the midst of the longest recession that the country has ever seen, Railfreight still has a legal obligation under this Administration to make an 8 per cent. return on its assets. Therefore, it has had to shed much of its traffic. If one owns a small haulage company and runs a lorry from Southampton to Glasgow, one would cut someone's throat for a return load. Yet British Rail has to charge 8 per cent. on that return load—Railfreight is forbidden by law to make a loss—so of course the traffic has been filched from the railway. There has been no recognition by the Government of the economic problems that they have caused. It is a similar story to that of the passenger train. They now blame British Rail and its various sectors for losing money, yet the recession means that fewer and fewer people travel.
    With regard to the railway industry as a whole, we have seen under this Administration change for the sake of change. It started off under Sir Bob Reid mark I with sectorisation. That has some advantages, but it also has some drawbacks. It identifies profit and loss-making services as a general concept, but it makes it easier for the Government of the day to subsidise those services which they regard as socially necessary, such as the bulk of the services, operated by Regional Railways.
    The problem about identifying those costs, as we have seen in so many other industries, is that if responsibility for running the trains is divided between two organisations, those costs have to be identified and people have to be employed to pay the other organisations for the cost of operating those services and to calculate that cost. Under sectorisation, despite the lack of money for investment, the various sectors are employing accountants and others—
    Mr. Nigel Spearing: Just like the health service.
    Mr. Snape: Yes, like the health service. They are employing these people to make the calculations so that

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    one sector can pay another sector. Peterborough is a case in point. I have forgotten the exact price, but one of the platforms at Peterborough is owned by Network SouthEast. Derby is a similar case, but I will use the example of Peterborough. If an InterCity train uses a Network SouthEast platform at Peterborough a sum of money not far off £50 is paid by one sector to another. Imagine that multiplied umpteen times during the day in umpteen different localities and imagine the number of people who have to be hired to make those calculations —at the expense, of course, of those operating the railway system.
    We can no longer afford a comprehensive railway network in many parts of the country because railway employees have been redeployed or made redundant so that railways on a fixed or falling budget can employ people to do these sums.
    That was very soon superseded. Having got that system in place, we came along with "organising for quality"—O for Q, as it is called. One has to be careful how one says that because if one says it quickly it gives the impression that one is giving the Government's view of the railway industry. Organising for quality means that the earlier system, a great deal of the nation's money having been spent on it, was virtually superseded. And we are now about to supersede the O for Q system by privatising—I beg the Minister of State's pardon; semi-privatising. That will be another upheaval.
    Do not the Government and the Conservative party stop to think sometimes about the damage that constant, non-stop change does to an industry such as the railways? Do they not stop to think that, whether or not Mr. Branson offers them incentives, most drivers want to get to their destination on time? Although many of the younger Conservative Members were brought up at a time when their mums used to terrify them by warning them that they would be thrown into a trade union branch meeting if they did not behave themselves, let me assure them that most drivers really do want to get to their destination on time without any incentive from Mr. Branson or anyone else.
    In the face of this chopping and changing with regard to the railway industry, is it any wonder that morale from top to bottom is at the lowest ebb that I have ever seen it in the 30-odd years since I started to work in the railway industry?
    Mr. James Couchman: I have been listening very attentively to what the hon. Gentleman has been saying. He has said nothing whatsoever about the present quality of service. He should ask my constituent commuters if he wants to find out what a wonderful railway British Rail is at present operating. The North Kent line offers misery to every person who travels into London each day on Kent link and Kent coast. I hope that he will say something about how he would like to see British Rail improve its present services to those commuters who suffer daily in my constituency.
    Mr. Snape: I am sure that the hon. Gentleman's intervention will look marvellous in the Kent Bugle, or whatever his local newspaper is. His party has been in power for 14 years. If the railway service in North Kent is lousy, is not that partly as a result of 14 years of mismanagement by the present Administration, of which he is a loyal member, I know, and a would-be Minister, no doubt? Does he never stop to think, as a supporter of a
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    Government who have appointed every member of the British Railways Board and the last two chairmen, that his own Administration might bear some responsibility? Does he agree with me that the lack of investment to which I referred in the north-west and the west midlands could also apply to the North Kent line?
    I do not know it particularly well, but I know that the North Kent line was modernised as part of the 1955 modernisation plan, to which I have already referred. Of course, many of the assets have time-expired. If one is operating signal boxes that are even 30 years old, let alone over 100 years old like the ones to which I have referred, one will get unreliability, failures, and problems which cause delays to trains. If one operates trains which are 25 or 30 years old, some of them built from bits and pieces of other trains that were 70 or 80 years old, one can expect them to go wrong from time to time.
    If the hon. Gentleman were driving a 25-year-old motor car between his constituency and the House, he would not be surprised if he had to ring the Automobile Association from time to time to tow him up here. Yet he presumably expects the much-maligned, currently publicly owned British Rail to run an immaculate service on the North Kent line. I will hazard a guess that once the first real snows of winter arrive his constituents will be queuing up to use the North Kent line, because the roads on which millions of pounds of public money are spent under every Government each and every year will very soon become impassable. There will be a lot more complaints then and if the train is five minutes late the driver will be soundly cursed. The fact that the company car is in the garage because it cannot be used never crosses the minds of people who criticise British Rail and its staff.
    Money has not been made and is not being made available in sufficient quantity to enable lines such as the one to which the hon. Gentleman referred to be properly modernised. If he thinks that Richard Branson or James Sherwood, or anyone else, will come along with a pocket full of gold in order to buy up those trains that run on the North Kent line and modernise the signalling, he is living in a dream world.
    Mr. Stephen rose—
    Mr. Snape: No, I am not giving way to the hon. Gentleman. I have given way to him once, even though he has not been here most of the time. He has been on his train for long enough.
    If the hon. Member for Gillingham (Mr. Couchman) believes that someone other than the taxpayer will pay to modernise that line, he is living in cloud-cuckoo-land.
    I turn now to local rail services, particularly in my own part of the world and the west midlands. Will the Minister of State tell us when he replies to the debate whether, if the passenger transport authorities are to be the franchising authorities, that will be their only role, or whether they will be allowed to bid for services in their own area and to operate those services directly on behalf of the people whom they represent?
    I remind the Minister of State that passenger transport authorities, such as Centro, consist of elected local authority members from his party as well as from mine and from minority parties. Are they deemed to be suitable people to acquire these assets should they wish to do so? After all, something like 60,000 passengers per day are carried on Centro-supported services in the west midlands.

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    There are 770 of those services and the passenger transport authority has invested £100 million in them over the past 20 years. Does that investment, that confidence, in the local rail services in the west midlands not entitle them, as elected councillors, to some say in the west midlands railway industry of the future?
    Let me conclude—[HON. MEMBERS: "Hear, hear."] Conservative Members say "Hear, hear." I look forward to hearing some of those eager young Turks, anxious as ever to get to the Front Bench, making any sort of case, intellectual or otherwise, for the privatisation of British Rail. My hon. Friend the Member for Kingston upon Hull, East was criticised for proposing a one-line motion today, but it is quite a simple debate. Earlier the Secretary of State talked about value for money for the taxpayer. Neither I nor anyone else who knows anything about the railway industry believes that the taxpayer will be given value for his money as a result of proposals based entirely on the ideological prejudices of the Conservative party and not at all on the future needs of the British railway industry.
    6.40 pm
    Mr. Matthew Banks: It is a great pleasure to follow the hon. Member for West Bromwich, East (Mr. Snape). I hope that my contribution to the debate will not be too great a contrast to his particular style. He was right to draw attention to the motion on the Order Paper,
    "That this House opposes the privatisation of the railways.
    This is not a classic privatisation. Nor, in my view, is it even a semi-privatisation. It is a deliberate and gradual introduction of private sector competition into the railways. It has my wholehearted support, and I am certain that it has the overwhelming support of Members on the Government side of the House.
    I should like to comment particularly on the speech of my hon. Friend the Member for Hampshire, North-West (Sir D. Mitchell). I agree entirely with his remarks about Railfreight, and I look forward to hearing the comments of my hon. Friend the Minister of State when he replies to the debate.
    The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)—who, sadly, is no longer in the Chamber—and the hon. Member for West Bromwhich, East referred to the west coast main line, a line which is vital to my constituents going both north and south. I recognise the enormous investment required in that line, not to mention others, to bring it up to the standard that I should like to see. I travel to my constituency in Southport not just by rail but also by road and air. Unfortunately, I have to report to the House that when I travel by rail to Preston I am consistently late, sometimes by up to an hour. I fully recognise that there are many reasons for that—one of them being, particularly in Cheshire, that many of the signal boxes and other parts of the infrastructure are Victorian and in need of replacement. As my right hon. Friend the Secretary of State said earlier, a great deal of work is already being undertaken. In the current year, out of a record investment of £2 billion, some £1 billion is being spent on this kind of investment.
    I referred to the proposals contained in the White Paper as a deliberate and gradual introduction of private sector
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    competition. It is particularly important to make that point. As I listen to the contributions of Opposition Members, I sometimes think that they are concerned more about the railway and some of the vested interests in it than about the interests of their constituents and of the travelling public. That, too, is a vital point to make in such an important debate.
    Although it might have been possible for my right hon. Friend the Secretary of State to bring forward a Green Paper some time ago, the fact that he has brought forward a White Paper and a genuinely consultative franchising document emphasises to me the importance that he attaches to pressing ahead with the task in hand. I very much welcome his comments of a few days ago, when he said that the introduction of private sector competition would go full steam ahead. Recently, Opposition Front Bench spokesmen have referred publicly to their agreement with the White Paper's analysis of what is required for Britain's railways. Where we seem to part company is in that they disagree with the market-place structure proposed. In my view, a market-based structure is vitally important and the Government should press ahead with what they intend to do.
    I am particularly concerned that there has recently been enormous misrepresentation in the media about the so-called concerns of Conservative Members. As I look around the Chamber today, and as I talk to my colleagues, with one or two sincere and honourable exceptions, I find widespread support for what my right hon. Friend the Secretary of State for Transport is undertaking. As a member of the Select Committee on Transport, I am particularly concerned that throughout the Committee's investigation a number of obstacles have consistently been put in our way. I regret that the Select Committee has not always taken the opportunity to come forward with constructive questions and criticisms in the way in which it might have done. We have heard much about British Rail putting obstacles in the way of those who wish to run private services on its tracks. When the Select Committee visited Crewe, we were presented with the most complicated of graphs, designed to show us how difficult it was to run extra services into Birmingham New Street at peak times. No doubt there are enormous obstacles, but obstacles have been encountered in every privatisation that the Government have initiated and succeeded in pushing through. There are obstacles in these proposals, and they have been overcome.
    Mr. Wilson rose—
    Mr. Banks: I intend to make a short contribution. The hon. Gentleman will have plenty of time in his winding up speech—far more time than I have.
    The obstacles put forward at that particular time demonstrate that many of the managers in British Rail are trying to prevaricate and to prevent a proper investigation by the Select Committee; they are getting in the way of my right hon. Friend's pressing ahead with the principles of introducing private sector competition, as I very much hope that he will. I look forward to seeing a Bill introduced in the next few weeks. I also look forward to the announcement in the next few weeks of the first shadow franchises.
    I spoke earlier of the limited introduction of competition, which indeed this is. Talk of privatisation is way off the mark. I mentioned the media and I would like

    821
    specifically to comment on that aspect. Last week I was asked to do a radio interview. When I called the BBC back as requested, after leaving a meeting, I was told that I was not needed as they had enough comment. When I left the Select Committee yesterday, I rang the "Today" programme as requested but was told that they needed no comment from me as they had spoken to my hon. Friend the Member for Christchurch (Mr. Adley). With the greatest respect to my hon. Friend the Member for Christchurch, with whom I enjoy the best of relations, I do not believe that his views are representative of the views on the Government side of the House, and it is important that I make the point in this debate.
    Mr. Adley: The hon. Member for Harrow, East (Mr. Dykes) has just walked into the Chamber. Does he agree with my views on this? Does he share them?
    Mr. Banks: With respect, I did not give way to the hon. Member for Harrow, East (Mr. Dykes), who has only just walked into the Chamber. I have no idea what his particular interest in transport may be. He has only just arrived and it is 10 minutes to seven. Had he wished to contribute to the debate, he would no doubt have been here earlier. Of course I wish to give way to my hon. Friend the Member for Christchurch, but I do not think that it is his place to suggest what he has suggested. The media have recently given completely the wrong impression of what the Government are trying to do. It is a sensible, pragmatic, step-by-step approach—an approach which I wholeheartedly support and which has enormous support on this side of the House.
    We often hear far too much about the railways and people who work in them, but I hope that we shall see franchising operations in 1994–95 even though we may see only one or two of them. I made the point in the debate on the White Paper that it did not concern me if only one or two private companies were running services at that time. My right hon. Friend the Secretary of State has already made it clear in this debate that we are looking at a period of 12 or even more years to make sure that over a period of time the opportunity exists for private sector operators to come in.
    The hon. Member for West Bromwich, East and others mentioned that few people seemed to have come to the Select Committee and said anything positive. No mention was made of the positive remarks by Sea Containers, Central Railways and the Virgin Group.
    I mentioned obstruction by British Rail.
    Mr. Wilson rose—
    Mr. Banks: The hon. Member for Cunninghame, North (Mr. Wilson) is fairly new to the Front Bench and he ought to listen. If he listens, he might learn what I am going to say. I am not giving way.
    Central Railways has been trying to run services from Coventry to the channel tunnel for some time, but every step of the way people from British Rail have been putting obstacles in its path. That is a classic example of people with vested interests trying to scupper the proposals. I have news for them: it will not work. There is widespread support for what the Government are attempting to undertake and it does not matter if it takes a number of years to see the proposals come to fruition. The fact is that they will, and ultimately they will benefit the consumer—the travelling public.
    822
    The hon. Member for North Devon (Mr. Harvey), for whom I have great respect, mentioned a number of very sensible proposals. The difficulty with Liberal Democrat proposals is that, while their Front Bench spokesmen here may say one thing, the Liberal Democrat conference voted down what the hon. Member was suggesting. Representing Southport and knowing the Liberal Democrats as I do, that situation is not new to me.
    There are a number of obstacles which need to be overcome. I have mentioned rail freight charges and I very much hope that my hon. Friend the Minister, when he comes to reply, will comment on the future of the Railtrack authority. My hon. Friend the Member for Harwich (Mr. Sproat), who is momentarily not in the Chamber, spoke eloquently in the debate on the White Paper and made it clear that in his view any rail track authority should be completely independent. I do not believe that the proposals being put forward by the Secretary of State will work as well as they might unless and until an independent rail track authority is proposed.
    Bearing in mind the enormous spending constraints that British Rail is at present under, I believe that these limited proposals are a step in the right direction. To draw a comparison with the benefits of private competition in the water industry, until that industry was privatised our beaches in Southport failed to meet EC bathing standards. Since North West Water went into the private sector, outside the constraints of Government spending, it has been able to find the £85 million needed to invest in a new pumping station and now the Southport and Formby beaches meet EC standards.
    This is the right way forward. The proposals have enormous support on the Conservative Benches and I have no hesitation in supporting them.
    6.54 pm
    Mr. John Gunnell: I think that I am the first speaker for some time to follow an hon. Member like the hon. Member for Southport (Mr. Banks), who has shown support for the Government's proposals. I am sorry that the "Today" programme did not give him the opportunity to demonstrate his support and I hope that they will arrange a debate between the hon. Member for Christchurch (Mr. Adley) and the hon. Member for Southport on this matter and on the findings of the Select Committee.
    What characterised the speech of the hon. Member for Christchurch was the fact that he showed an enormous knowledge of the railway system, which we know he has, and he also showed care for the system. We know that the whole railway world respects his knowledge on the subject. In dealing with these proposals, I have not come across anyone who cares about the system and also supports the proposals. Nor have I come across anyone who is particularly knowledgeable about the railway proposals and supports the privatisation proposals as they stand. They must be examined seriously, and I hope that the message to think again on them will be taken today.
    I want to raise the question of investment in a specific way. If I am going into my constituency from the centre of Leeds, one of the major routes that I might follow is that which would take me past the old Hunslet Engine Company, a distinguished company, some of whose products, dating back a very long time, are still to be found in operation on railways in the developing world. Some are

    823
    to be found in museums in a variety of places. I am glad to say that the company is again producing material for railway transport. It is producing rolling stock, and would wish to continue producing rolling stock. When I was the leader of West Yorkshire council, I was responsible for some £250,000 of investment to ensure that the road system around the company was adequate to its needs and those of other users. When I was a member of the Leeds development corporation, I was involved in securing city grants for that company when it was putting in new lines for the construction of rolling stock.
    I have recently received a letter from the chairman of the holding company, Telfos Holdings, which owns the engine company. It is worth referring to the letter. He writes:
    "May I raise with you briefly the threat to the continuing employment of the majority of the employees at our Jack Lane, Hunslet facility, better known to you as the Hunslet Engine Company, due to the inability of the West Yorkshire PTA to clearly establish with Government their, (i.e., Government) policy with regard to enforcing future franchises under rail privatisation, to take over rolling stock purchased, or in particular, leased over a long period by PTAs or British Rail.
    West Yorkshire wish to obtain from Hunslet some 39 additional passenger cars (Model 323) to those currently being built by Hunslet for various PTAs, including West Yorkshire. They wish to lease these cars and the finance is available subject to the clarification of continuity of use of leased rolling stock by any future franchisees on the relevant routes to ensure revenue to pay the lease costs which otherwise would fall on the local tax payer/authority.
    This particular order, plus some in the pipe-line (subject to franchisee obligations as above) would fill a void in Hunslet's order book; without these orders the future is bleak with the very survival of the plant in question."
    In reply to my hon. Friend the Member for York (Mr. Bayley) yesterday, the Secretary of State referred to the £150 million which is being made available to British Rail for leasing purposes. It has been referred to several times in the debate. It is far from clear to the company whether that leasing arrangement will apply to PTA rolling stock. A reply from the Minister about that would be appreciated.
    But even if those orders are saved, there is still great uncertainty about the future of investment in the rail network. As has been said, industry leaders are particularly concerned about the shortfall of investment for the future. A company named Steer, Davies and Gleave, having made a study of likely rail investment in the future, has produced a graph depicting a dropping off of investment, so that by the end of 1993 there will be no investment in track work, that by the end of 1994 there will be no investment in signalling and telecom work and that after 1995 there will most likely be no investment in railway engineering companies.
    The House will appreciate that, representing a Yorkshire constituency, I have great interest in the subject. There are in the region four companies with important roles to play in railway engineering. I have referred to Telfos Holdings. We have ABB in York, RFS in Doncaster and Procor in Wakefield. All depend for their future on investment in the railways. Only by such investment will their employees have any security. The future looks bleak for them.
    British Rail estimated that it needed £13 billion investment by the year 2000. It is clear, following the
    824
    autumn statement, that that will not be forthcoming. Indeed, not only is there great uncertainty about the investment that will be available to British Rail, but the privatisation proposals do not give the railway engineering industry confidence for the future. Unless greater certainty can be engendered in the industry, more jobs will be lost in the companies to which I have referred and in others throughout the country.
    That, in turn, will result in the skill of the work force being diminished. Let us face the fact that should the Government's current proposals turn out to be successful, the franchisees in need of rolling stock will have to look overseas, for our skilled force will have been lost. I hope that the Government will heed our warnings and appreciate how low are the order books in the industry now, let alone what the position will be in the future.
    The industry must be given confidence by the Government that it will be able to operate under the privatisation proposals and that it is worth its while preparing to become franchisees. We are not convinced, from the evidence presented to the Select Committee, that companies capable of operating the system will want to become franchisees. Unless the Government can engender confidence and certainty, a worrying prospect lies ahead for the railway engineering industry.
    There are other serious consequences from the proposals. It will be difficult for Britain to compete in the single European market if our railways are not up to European standards. Huge investment has gone into the European rail network, while United Kingdom investment in our railways has been minimal. In the United Kingdom 12 per cent. of costs are met by the public purse, compared with about 60 per cent. of costs in other European countries such as France. That has resulted in the quality and extent of our railway network being much lower than theirs.
    So it is difficult to see how British companies relying on rail to serve the European market will be able to compete. Pressure on the roads will continue, and it is not surprising that firms which today intend to play a full part in the single European market are considering means of transport other than rail.
    Mr. Stephen: The hon. Gentleman may agree that the present state of our railways, despite huge public investment, is due more than anything else to the fact that all nationalised industries under any Government are bound to suffer from political interference. They are always having to look over their shoulder at the man from the Ministry, who sometimes says no but who more often than not will not say anything, making it impossible for management to manage effectively. So the hon. Gentleman should welcome the Government's proposals to bring an element of private competition and enterprise into the railway system.
    Mr. Gunnell: It should be clear from what my hon. Friends and I have said that we are not opposed to the use of private capital in the development of the railway system. The constraints that Government have placed on British Rail in the past have made it difficult for BR to operate. Many of the complaints that have been voiced about BR have arisen because of those constraints. The need to provide an 8 per cent. return—maintained and extended to Railtrack—does not exist elsewhere in Europe.

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    That is another reason why our channel tunnel proposals fall far short of what is needed. I may be accused of being parochial, but the level of service on the east coast main line, despite its being the most modern line capable of taking high speed trains, does not include a passenger service to west Yorkshire. There is nothing planned for such a service. We anticipate there being only a skeleton service on the east coast main line.
    Until we can be assured of through trains on the east and west coast main lines to the channel tunnel, we shall be handicapping companies wishing to use rail. How can they have equality in the single market without equality of rail services? Our prospects in Europe are being handicapped by the lack of rail investment, and I fear that the Government's latest set of proposals will not help, and may even hinder, the process, making it even more difficult for our companies to compete in Europe.
    In any event, will the private sector want to invest to bring channel tunnel trains direct to the north? Many have forecast that, once the channel tunnel is open and in use, sufficient traffic will be generated from London and the south-east to fill the tunnel's capacity. Should that happen, what incentive would the private sector have to make sure that firms in the north had direct access to the tunnel? A second tunnel might be needed. The present set-up has not provided, and the proposals that are before us will not result in the provision of, the investment that is needed to ensure for the regions, particularly the northern region, equal access to the European market.
    Why is there so much opposition to the privatisation proposals? Why are former Conservative Members such as Lord Ridley and Lord Young so sceptical about them? Lord Ridley is clearly a case in point. No doubt he had the job of examining the proposals. The hon. Member for Southport does not share my view that many distinguished Conservatives are concerned about these proposals. When I was a member of the Audit Commission I sat alongside Sir Robert Wall, a distinguished Conservative in Bristol, where he is a leading member of the party. Like the hon. Member for Christchurch, Sir Robert believed passionately in the railway system. Indeed, he credited his earlier discussions with people having helped to prevent railway privatisation from becoming a serious proposal when the Thatcher Government were in power. Conservative Members should listen to those who care about the railway system.
    We should also take note of this comment of the Confederation of British Industry:
    "The overriding concern of CBI members is not primarily one of ownership but of how the quality and level of railway services can be improved…Far from encouraging private sector interests, there is a real danger that privatisation will be a blueprint for bureaucracy. We urge the Government to think hard before moving ahead with the legislation."
    It seems to me that that is characteristic of the views of those who wish to use the railway system. It is certainly characteristic of the views of rail users who have expressed their opinions on the proposals.
    These are complex proposals. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) drew attention to the number of bureaucratic bodies that will be established under the privatisation legislation. It seems to me that market forces are being created artificially through the interaction of bodies that the Government are setting up under their privatisation proposals.
    What we have here is a gamble. No one can say that what is proposed will work. Obviously the Government
    826
    hope that it will work. We on the other hand hope that they will listen. Many of us believe that this is a gamble the nation cannot afford. People's concern about the cost of the railway system is understandable.
    I should like to close with a comment about the situation in west Yorkshire, where I was as leader of the council very concerned about the question of value for money. We looked very carefully at the cost of the subsidies that we were providing for railway services between Leeds and Ilkley. We recognised that by replacing the rail service with a bus service we could have saved a very great deal. Indeed, that applied to every rail service in west Yorkshire. Taking into account the number of passengers carried, the rail subsidy was enormously higher than a bus subsidy would have been, but we knew that other factors made it extremely important that the railway service be retained. Our policy was to develop the rail network—to open new stations, to invest in the railways —so that more passengers would be provided with a service. The railway subsidy was still greater than that which would be required for a bus service, but it resulted in the maintenance of a network for the future. As a result, the number of commuters using already-congested roads was kept down. Indeed, the roads have become even more congested since then.
    We must recognise that the gamble with the railway system that these proposals represent may well lead to fewer services. Indeed, that has already been acknowledged. More congestion on the roads will lead to more road accidents, including deaths, and to more destruction of the countryside. Is this a gamble that we should take? I urge the Government to think again.
    7.16 pm
    Mr. Peter Fry: Following the Labour party's electoral experience of last April, when it realised what the public was not prepared to risk, I would expect Labour Members to know about gambles that people should not take.
    One of the interesting aspects of this debate is the not-too-subtle criticism of anybody who might support the Government's policy. The suggestion is that nobody who knows anything about the railways could possibly be in favour of what the Government are putting forward. That indicates a degree of intellectual arrogance. Those who criticise Government policy are always more vocal than those who agree with it. The latter expect the Government to stand up and make their own case.
    One problem that has been highlighted this afternoon is the lack of forward orders for wagons and so on. Indeed, that problem confronts the bus industry, too. We are in a recession. People are not looking forward and investing enough. That is not just because of the Government's proposals, and the argument that it is is false.
    I have been a Member of the House for a long time and I think that some people forget the background against which this debate and, indeed, the situation of British Rail must be considered. Over the years I have sat on Committees under Governments of both colours and have seen millions and millions of pounds of taxpayers' money spent in writing off debts incurred by British Rail. Hon. Members know that British Rail has a difficult financial past, and that it has had to struggle with debts that it could not repay. The British Railways Board brought forward plan after plan, but not one of them was ever taken to a

    827
    successful conclusion. Despite the enormous improvement that we have seen in British Rail's management in recent years, the enormous subsidy has risen again, the public service obligation grant having reached £1 billion.
    It is pointless for the Labour party, or anybody else who opposes the Government's proposals, not to accept that something has to be done. Any Government would have a responsibility to determine whether there was a better system of ownership or management.
    My hon. Friend the Member for Christchurch (Mr. Adley), who is no longer in the Chamber, made a point about not allowing British Rail to try to secure any of the franchises. He drew an analogy by saying that it was like preventing doctors from being able to bid for work in the health service. That is quite wrong because individual managements and groups of managements will be able to tender. I remind my hon. Friend that trusts in the health service and health authority tenders provide health care more efficiently. The argument that somehow British Rail management is being disfranchised and rendered unable to get a franchise is totally wrong and is an inaccurate reading of the Government's proposals.
    The hon. Member for Kingston upon Hull, East (Mr. Prescott) was particularly scathing about private sector attempts to run road-rail freight. The hon. Gentleman has a short memory. British Rail never ran a successful road-rail freight operation in my political lifetime. In 1968 the Secretary of State for Transport did away with the lorries owned by British Rail because BR was so inefficient and incompetent. Since then BR has never had an effective road-rail operation. The only way forward is by continual experiment and we hope that the private sector will find a solution.
    One cannot deny that there is some concern over what is loosely called rail privatisation. The debate and the Government's publications make it clear that it is not privatisation in the classic sense: it is what I would call creeping privatisation. However, there would be no argument about the matter if British Rail was profitable. People worry that unprofitable services will go, but if they do not taxpayers will have to continue to foot the bill.
    Spending public money is not always a guarantee of a good rail system. A few years ago when I was on a Select Committee we visited Canada and discovered that each time a person boarded a train there the taxpayer paid $70. The Canadian Government drew the inevitable conclusion that they had to reorganise the system and reduce subsidies. Much has been said about the German railways. The speeds of German trains cannot match those of British Rail. German rail finances are disastrous and the subsidies are enormous. One of the ways in which the German system survives is to have a veto over the use of coach competition. Thank goodness there is no such veto here.
    Some people ask whether privatisation will make more lines profitable. The obvious answer is that an improved management will be able to tackle overmanning and will have the freedom to raise capital and to borrow on the open market. As in other privatised industries, such measures will undoubtedly help.
    Mr. Peter Bottomley: In almost every other privatisation more investment has been anticipated and
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    experienced. The one phrase that is missing from the first paragraph of the White Paper is "greater investment". Was that deliberate?
    Mr. Fry: Perhaps it was cautious, which is a change for the Government. I do not necessarily assume that there will not be investment, but it is important gradually to create an environment in which there can be. At the moment there is not a great queue of people who want to invest in British Rail as it is, but the aim of the Government's policy is to introduce a regime which could well attract investment.
    The railways, in common with other forms of public transport, contain an element of social service and there is a real worry that that may be reduced. Many people who speak about a social service mean that those who pay for it will not be the people who use it. That has bedevilled public services in this country. It is difficult to quantify and to allow for social service in public transport, especially in British Rail. I shall give an example. Some commuters in the constituency of my hon. Friend the Minister for Public Transport and in mine use InterCity, which does not receive any subsidy or public service obligation payment because the trains run on InterCity track. However, many people who live in London and the south-east and who work alongside our constituents have their fares subsidised by the PSO payment.
    Some years ago a Select Committee looked at that matter and suggested that an alternative system of paying PSO might be required. As that does not seem possible under the present system, I would welcome any change that would benefit my constituents and those of my hon. Friend the Minister. Such a change might make it possible for commuters who do not use their cars to receive the same subsidy regardless of what part of the country they come from.
    The core of the Government's policy is franchising. I gave a somewhat wry smile when I heard about that because during the passage of the Bill that led to the Transport Act 1985 I moved an amendment which suggested that franchising was one of the ways forward in privatising the bus industry. However, the Government and the Opposition violently opposed the idea. Not much later franchising came into being in London. It has operated excellently and has introduced competition to the only industry that the Government have nationalised—London Transport. I am satisfied to note that the Government have gone some way towards sharing my opinion of eight or nine years ago.
    We need franchising because there will be no way forward unless we can offer security of tenure on some routes for some years at least. As the hon. Member for Woolwich (Mr. Austin-Walker) said, if that is not done there will be no investment. Investment can be encouraged only if the operator feels that he has a future and the possibility of a profit, or at least sufficient income to make his investment worth while.
    The crucial decision will be how long the franchise is to operate and whether the bid is to be positive or negative —that is, whether any PSO will still be needed. Surely it is right that any PSO payment should relate to individual routes and services and should not be the generalised payment that it is at the moment. Under an individual route system one could see exactly where support is needed and how much it should be. That would allow local

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    authorities and passenger transport authorities to determine the needs of their own areas and decide whether to contribute.
    Local authorities should have a role in running public transport. Why should I and other British taxpayers be expected to pay fairly large subsidies to services that are used by comparatively few, perhaps in a remote part of the country? Such subsidies should be localised and we should attempt to bring local authorities into play and see what contribution they can make. A franchising system that concentrates on specific services and routes will make the subsidy more transparent and it will be much easier to maintain a service if those who are involved locally can see the true situation. Section 20 grants could be extended to cover services passing through several local authorities or PTAs and some services could well be improved by the new financing regime.
    Essential to the success of those plans is the establishment of a true and fair assessment of the cost of using the permanent way. In that respect, I welcome again the Government's change of mind in relation to splitting British Rail into two parts—the maintenance of the infrastructure, track and signalling, and the operational side.
    In the 1970s, when there was a Labour Government, the transport policy group advocated the split-up of the operation of rail services from the maintenance of the track. Here again, perhaps belatedly, the Government have come round to the view that some of us have expressed for many years. Perhaps even more surprising, the Department of Transport has come round to that view. On several occasions some of us tested that idea on officials from the Department of Transport, who said that it was completely impractical. Therefore, I congratulate the Government on their belated conversion in another area.
    I have mentioned two areas where the Department of Transport has accepted points of view and policies that some of us have been putting forward for many years. May I suggest one more? I have already said that the local authorities and the PTAs can play a good role in the new system that will be established. There is one exceedingly important area of the country where it is difficult to put that idea into practice, and that is the south-east.
    My hon. Friend should look at the first report ever published by the Select Committee on Transport on London's future transport policy. There is a need for an overall transport authority for the Greater London area and the counties that adjoin it. The kind of planning that is needed to provide the right co-ordination will be even more necessary under the new rail regime that the Government are putting forward. Having been converted on two points, I hope that conversion on the third is possible before too long.
    I do not underestimate the problems that the Government will have in putting their ideas and policies into effect. One of the most important things is that they must get them right. It is no good the early franchises proving to be a failure because that will discredit the policy and undermine confidence in the future. The Government must go fairly slowly in order to ensure that the franchises will be a success. Therefore, I was pleased to hear what the Secretary of State had to say this afternoon about going slowly. That is the most sensible approach and should be generally welcomed.
    Because there are many problems, I am not surprised that it will take up to 12 years for the Government to
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    achieve the full potential of the policies before us. But those who criticise the Government must ask themselves whether they are satisfied with the present situation. The present level of British Rail services is not universally bad. In many areas it is good. But British Rail's history has been dogged by financial problems such as those that I listed earlier. They have been compounded by British Rail's position within the public sector.
    The House should give understanding and sympathetic support to the Government's attempt to evolve a new system to enable our rail services to get away from the constant crises of increasing fares, having to take off trains and having problems with their borrowing requirement. Therefore, instead of being negative, we should give the Government support and accept that they will not rush ahead wildly in the hope that eventually we will solve the complex problems that British Rail has given to successive Governments ever since its nationalisation.
    7.34 pm
    Mr. Bill Etherington: This has been an interesting debate and, apart from the first hour and a half of speeches from the Front Benches, quite a gentle one.
    The privatisation or part-privatisation of the rail network is based on the false premise that privatisation, competition or free market forces must be better, but there is no proof of that.
    Looking at the history of the railway system from the day the railways were constructed, it is apparent that they have always been subsidised in one form or another. In the early days they were subsidised because many of the people who bought shares in them ended up bankrupt and the concern which had been built or partly built was gobbled up by a larger company at a cut price and operated on that basis.
    In 1921, more than 120 private companies had to be amalgamated into four companies because they were not providing the kind of service the Government thought that the country should have. The problem was all too obvious. In those days there was too much competition. It was not uncommon for two, three or four railways to serve the same district. When the railways were finally nationalised in 1948, there were many rationalisations and closures as a result of that excess in services.
    Ever since the time of Sir Brian Robertson and the modernisation carried out in 1955, no matter what Government have held office, the House has never valued Britain's railways in the way it should have done. They were the cradle of the industrial revolution, providing tremendous wealth. In the 1930s they came into competition with roads in a fairly primitive form. As time went on, things became difficult. By the 1950s, there was great concern at the amount of money that was being lost and the word "subsidy" began to be bandied about as though it were a dirty word.
    It is as well that the public should be aware what subsidy means in the context of the railways. It means the amount of money needed to provide a service that the Government think is required by the nation. It should not be a dirty word or something of which we should be ashamed. If we are getting the sort of service that is required, the cost—provided that it is within reason—should be accepted. If, instead of some of the doctrinaire statements that we have heard over the years about

    831
    nationalisation being a bad thing, people had been prepared to accept that the service had to be paid for—all services have to be paid for in one form or another—we might not have had the hostility from the public against nationalised industries that we have had on many occasions.
    Whether the railways are nationalised or privatised, the problems will be the same. Part-privatised, nationalised, or totally privatised, the service will still have to be paid for. I accept what has been said by one or two hon. Members in different forms in the debate. It does not matter whether the railways are nationalised or privatised—what matters is the quality of management, the amount of investment in the industry, and the industrial relations and employment practices within the industry. I hope that both sides of the House will accept that, all things being equal, a nationalised industry with good management and good relations is better than a private industry with bad management—and vice versa.
    It is interesting that all the pundits of the great advantages of privatisation never refer to the fact that when most of the great public utilities were nationalised in the years after the war the same management was often kept on. That happened in the coal and electricity industries. That was the case almost everywhere. Those people did not suddenly become good or bad depending on whether their industry was privately or publicly owned. They were what they were and they did not change. I certainly do not accept that the partial denationalisation of the railway system will improve it.
    Following the putting out to tender of local government services, the public have complained on a massive scale about the deterioration of standards of cleanliness in schools and hospitals, and about refuse collection. Aiming for the so-called goal of privatisation has not improved the service to the public. It was supposed to solve all the problems, but it has solved nothing. The hon. Member for Southport (Mr. Banks) had the effrontery to cite the success of the denationalisation that has taken place so far. I have observed no improvement in British Telecom, the water service or the electricity service and neither has anyone else—nor have those services become any cheaper.
    Mr. Matthew Banks rose—
    Mr. Etherington: I refuse to give way—not out of churlishness or for any personal reason, but because I intend to speak for no longer than 10 minutes or so. Many hon. Members have taken 20 or 25 minutes, largely due to interruptions.
    There is no proof that privatisation works any better than nationalisation; in fact, the opposite seems to be the case. After 30 or 40 years of nationalisation, it is difficult to argue with the claim that privatisation might be an improvement. I am too young to remember what the great utilities were like when they were privately owned, although I have heard a good deal about it. It has even been claimed that private health insurance worked satisfactorily before the establishment of the national health service, though not many people have accepted that in my hearing.
    The Government are proposing to return to a concept which failed. Between 1921 and 1948, only one of the four big railway companies ever made a return to its
    832
    shareholders. When the Government had to take over the railway system during the war, they put a good deal of money into it, but they used the people who had been managing it before. By degrees, we are returning to that arrangement.
    I am no expert on the railways. I cannot hold a candle to the hon. Member for Christchurch (Mr. Adley), for instance. I have read much of his work over the years, and it is obvious that an understanding of railways is in his soul. My hon. Friend the Member for West Bromwich, East (Mr. Snape) has worked on the railways and knows a lot about them. Nevertheless, I know that over the years many people have not valued the railways properly, and I believe that hon. Members do not value them properly. That feeds into the public perception. I also know that if the south-eastern service, which serves London so well, had to run on the basis that it would be closed if it did not pay, the country would grind to a halt. Far too much has been spent on the road network. It is clear that we shall not get the full benefit of the channel tunnel, which will mean unloading goods from trains on to wagons in the south-east and then sending them to places such as Inverness. What we need is an integrated transport system, rather than experimenting in the way proposed by the Government.
    I issue a challenge to the Government: if franchising —which really means sub-contracting—is such a good idea, why has it never been considered before? I know the answer. When it was the responsibility of the railways to carry traffic in privately owned wagons, it was a disaster. The principle is exactly the same in this case. Hon. Members have mentioned safety. In industries which sub-contract—for instance, the building and coal industries—the accident rate is always higher. That is not a matter of opinion—it is a matter of fact, based on statistics, and there can be no argument about it. Naturally, the public have a great fear of accidents. The record of the railways before they were nationalised in 1948 left a good deal to be desired; it has improved greatly since then.
    If you believe in equity and in real competition, as you claim, why do you not give the nationalised railways the same right as the private investor to put in for the franchise?
    Madam Deputy Speaker (Dame Janet Fookes): Order. I remind the hon. Gentleman that he is addressing me.
    Mr. Etherington: I am sorry, Madam Deputy Speaker. It was force of habit: I am more used to addressing open meetings.
    If the Government really believe in equity and free competition, why do they not give British Rail the same opportunity as the private entrepreneur to put in for the franchise, and then let the public decide who offers the best service?
    7.45 pm
    Mr. Alan Haselhurst: The challenge issued by the hon. Member for Sunderland, North (Mr. Etherington) tempts me to launch a wide-ranging defence of privatisation, but I shall content myself with saying that I do not agree with him about its effect on organisations such as British Telecom. I think that it has brought about a remarkable improvement. Before privatisation, I would have had to wait until the year 2010 for my local exchange

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    to be modernised; this week, I was informed that the work would be done during 1993. That shows the benefits of the increased investment that has followed privatisation.
    Let me remind the House of the interest that I declared in the Register of Members' Interests, although I do not intend to talk about freight.
    I am disappointed that the Opposition managed only a one-line motion rejecting BR's privatisation; there is some scope for argument about whether the Government's proposals merit that description. I should have thought that the Opposition would take the opportunity to add a few more lines about how they would approach the matter. We are left with the impression that all is for the best—or almost for the best—in this best of all possible worlds, except what £10 billion or £20 billion would improve. The Opposition have advanced no constructive suggestions in the debate; they have simply attempted to knack the Government's proposals.
    It appears that most Opposition Members—and, possibly, my hon. Friend the Member for Christchurch (Mr. Adley)—do not understand the current state of those proposals. The style of the opening remarks of the hon. Member for Sunderland, North suggested that he does not understand them; he did not even take on board what my hon. Friend the Member for Wellingborough (Mr. Fry) had said only a few minutes earlier, although that came much nearer to describing them.
    My right hon. Friend the Secretary of State and my hon. Friend the Minister for Public Transport must recognise, as the rest of us do, that there is no gratitude in politics. A cut-and-dried plan for the sale of the railways would have represented a clear policy, but anyone advancing such a plan would have been accused of being dogmatic, peremptory and over-eager. Because the Government have been prepared to pace it rather more slowly, to consult, listen to ideas and adjust their proposals accordingly, they are being criticised for an apparent lack of clarity and purpose. Their approach has been well considered and they have listened to the arguments.
    I am becoming impatient about the amount of misinformation on the subject. The Opposition have selected the wrong target. We have heard talk of breaking up the network, but, as the White Paper made clear, the Government do not propose to break up the system. The knockabout performance of the hon. Member for West Bromwich, East (Mr. Snape) showed that the Opposition are attacking targets that are no longer there and that the policies of the Government have matured.
    The debate is all about the method that will be used to try to improve our rail system. The Government have decided that it is better to separate the maintenance of track and signalling from the operations of the railway. Responsibility for track and signalling will be vested in Railtrack. I am in two minds about Railtrack. Much concern has been expressed by people in the industry about whether a railway can be operated effectively without control over track and signalling. However, it seems possible to meet that concern.
    If people are interested in running the rail system on a franchise basis, it rather gives the lie to the suggestion that there is apparently no interest. I sense that quite a number of people are interested, many of whom are employed by British Rail and want to take advantage of the opportunity of a management buy-out. If track and signalling is vested in Railtrack, there is no reason why care and maintenance cannot be delegated to a franchisee, just as a highways
    834
    authority delegates care and maintenance to district councils. Under such an arrangement, it would be possible for franchisees to have the vertical franchise for which many of them have argued. It is possible to maintain this separation I can see the reasons for the separation—and meet some of the concerns that might hold back the enthusiasm of people who would like to become franchisees.
    We must ensure that Railtrack has the necessary investment. Hon. Members have expressed concern about the need to ensure that our railway improves. The Government have plainly stated in the White Paper their commitment to ensuring that improvement. My hon. Friend the Member for Eltham (Mr. Bottomley), in an intervention in the speech of my hon. Friend the Member for Wellingborough, said that it did not appear in the first line of the document. That is so. But in paragraph 43 the Government state that they want to see more investment and that capital grants will be made to Railtrack. The more the Government can underline that point, the more reassuring it will be to people who are concerned for the future of our railway system.
    Dr. John Marek: The hon. Gentleman is advocating that the Government should make grants to ensure that track is maintained in good condition, but why do not the Government do that now? We desperately need such money on the west coast main line. If the Government did so, they could then sell other parts of the network more easily.
    Mr. Haselhurst: The Government do not propose to sell the railway. They are talking about keeping Railtrack in the public sector for the foreseeable future and about franchising operations, neither of which amounts to selling the railway. Under the system that the Government envisage, there will be liberalisation of the terms on which money can be obtained for investment in the rail system. I welcome and pin some hope on that. We all want more money to be allocated to improving our rail system.
    There is scope for questioning whether there should be few or many franchising arrangements under the new system. The number of franchises that one might ideally seek will depend to some extent on what view is finally taken about the relationship between the franchise operators and Railtrack. As the Government are emphasising—this should be welcomed in many quarters —that they will proceed cautiously and carefully over a period of years and that there may be only six, seven or eight pilot franchises, perhaps we should stick to the number of business centres that emerged from the Organising for Quality campaign. It might reinforce the confidence of many British Rail employees who are considering becoming franchise operators if they can stay within the pattern that has become familiar to them as a result of the reorganisation that has taken place in British Rail.
    That would ease the transition from the public sector to the new private regime and would not preclude the possibility of certain business areas being merged if that seemed the better way forward. For example, it would be possible to franchise the west Anglia and great northern division separately from the great eastern division, but equally one could take the view that all services out of Liverpool Street station should be a single franchise. I do

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    not think that that needs to be determined at this stage. I would prefer to stick with the existing business centres as the basis for the franchise.
    A quality threshold should be built into the franchise contract when it is devised so that we can try to ensure a commitment to the leasing or purchase of new rolling stock. Passengers will be reassured if they can see that there is a clear and more likely route to obtaining better quality rolling stock.
    I hope that my right hon. Friend the Secretary of State will consider the concept of a rolling franchise. Franchisees will have the confidence to lease new equipment if they know that, by showing that they are performing satisfactorily, their term will be extended. That may overcome the difficulty of an operator being unwilling to invest in new track because the franchise term is too short.
    If the structure of the new system outlined in the White Paper can be simplified, it will encourage more people to believe that they can play their part in the new system. If, for example, there is scope for merging the franchise authority and the regulator, it would not be such a bad thing. Anything that makes matters simpler will lead to greater confidence in the system.
    We are faced with a choice. Those of us who have taken an interest in the railways over the years believe either that things can be improved by staying with the present system or that they can be improved by finding another system. Of course, there are difficulties in changing what has become familiar, but one can exaggerate those difficulties to the point of arguing that there is no way to improve the system and that everything is as good as it could be. However, if one pinches oneself, one realises that that is wrong; something must be done.
    The Government are right. In the foreword to the White Paper, my right hon. Friend said that the purpose was
    "to improve the quality of railway services by creating many new opportunities for private sector involvement."
    That is not a dogmatic but a constructive and sensible approach which should be welcomed. If we face a choice between doing something and doing nothing, I infinitely favour doing something along the lines of my right hon. Friend's proposals.
    8.1 pm
    Mr. Elfyn Llwyd: The hon. Member for Southport (Mr. Banks) said that the water quality on the beaches in his constituency had improved, but I do not know whether he realises that the cost involved has been passed to the consumer. In the Welsh context, I know of the vast increases in water rates. The excuse is that environmental work is being carried out, but the truth is that underinvestment over many years must now be redressed.
    The Government's aim, as stated in the White Paper, is apparently to reduce bureaucracy, to improve efficiency and to lower unit costs. My respectful view is that privatisation is definitely not the answer whether it be creeping, running, rolling or any other form of privatisation. Surely the answer must be immediate investment by the proper authorities.
    The White Paper was delayed and did not appear before the election. It is understood that the Cabinet was deeply divided over the issue and I trust that the divisions
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    will in turn create an atmosphere in which coherent and constructive debate can take place because that is extremely important in this context. The hon. Member for Southport and others have today strongly protested their loyalty over this matter, which leads one to think that there is and will be a definite division between both parties.
    It is supposed that the intended franchising authority will monitor the performance of franchisees, will be charged with collecting premiums from franchisees on popular franchises and will have a duty to subsidise others which are not so well off. That will be within the budgetary restraints set by the Secretary of State. The Government state that they are committed to the establishment of a general right of access to the railway network for companies which wish to provide new railway services and which can meet the necessary operational and safety standards. That means that independent train operators may also run services in addition to, and sometimes in competition with, franchised services.
    The Government's proposals are extremely complex and involve various bodies frequently in competition with one another. To make the proposed system work, it will be necessary for the Secretary of State, the regulator, the franchising authority, Railtrack, the franchisees, British Rail, independent passenger operators, freight operators, passenger transport authorities, local authorities and the Health and Safety Executive, among others, to work together cohesively and constructively. That is a massively tall order.
    Some of those bodies will have different objectives which will frequently bring them into conflict. In short, it is a bureaucratic nightmare of perhaps horrendous proportions. It is undoubtedly the exact opposite of the Government's stated aim of reducing bureaucracy and improving efficiency. Nothing could be further from the truth. I am not a prophet of doom, but I cannot envisage such a mass of interests working together cohesively.
    The people of Wales felt the effect of Dr. Beeching's axe to a greater extent than other parts of the United Kingdom. We have very few lines currently operating, but we rely heavily on them. As we have a relatively sparse population, I foresee a rapid downgrading of the skeleton sevice now offered, so much so that it will no longer be a viable option for passengers.
    My hon. Friends the Members for Caernarfon (Mr. Wigley) and for Ynys Mon (Mr. Jones) have long campaigned for the north Wales line to be electrified. It is an important gateway to Ireland and the rest of the European Community. The three of us asked the European Community to investigate the possibility of cohesion funds being made available for that purpose. To my great regret, the only recent change in the north Wales service was a cut in the number of InterCity services from Holyhead to London. I am very concerned that north Wales will languish in a backwater with such negative treatment. I am desperately worried that if the Government's proposals, which are complex and seemingly unworkable, come to fruition there will be little hope for north and mid-Wales as the lines there will appear unattractive to operators.
    The Government should reconsider the schemes as it clearly behoves them to ensure that adequate investment is made now so that the infrastucture is brought up to date and that environmentally beneficial services are upgraded. Failure to do so would be but another exercise in the short-termism so frequently shown by the Government.

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    This is one sell-off which must be prevented because it is so fraught with problems as to be unworkable. The bureaucracy involved would soon ensure that the railways ground to an ignominious and economically disastrous halt.
    The White Paper is badly lacking in any commitment or assurances for the future. For example, is the same amount of track to be retained? What will be the scale and level of passenger services? The hon. Member for Christchurch (Mr. Adley) mentioned the view of the Freight Transport Association with which I agree; it is, of course, very important to ensure that the infrastructure is brought up to date. That is a major factor in the success or otherwise of the scheme outlined. I believe that the scheme is definitely unworkable, but I heard what the hon. Gentleman said and I understand his argument.
    Rail freight is facing an uncertain future. Despite being environmentally sensible, there is no commitment to the maintenance of rail freight capability or to a specified percentage level of freight to travel by rail. The upshot will be more congestion on the roads and more environmental pollution, all as a direct result of the demise of rail freight.
    We have only to consider the fate of Charterail to realise that the Government are truly uninterested in the freight sector. That is a damning statement in this day and age when everyone must and surely can recognise the environmental benefits of freight transport. The managing director of Charterail stated that the regime offered to his company by BR was simply uneconomic. We all know that the company has since gone into liquidation.
    The Government have said that they would continue to pay subsidy for "socially necessary services". My grave concern is that there will be no socially necessary services in Wales and that, in the short term, we shall see a downgrading of services leading to cuts which will further hamper Wales's efforts to rejuvenate its economy.
    It does not take a genius to work out that train operators will not queue up for the privilege of running rural services in Wales. They will aim for the more lucrative areas to the detriment of rural services. That has already been mentioned by several Opposition Members. The rural services will in the short term rely on a subsidy, but after a short time they will definitely face the axe.
    There are no specific references to Wales in the White Paper. In addition, neither the White Paper nor the franchising document specifies the operating lines to be incorporated into a franchise. There are two possible outcomes. First, there may be complete freedom and flexibility for companies to come up with viable schemes, both operationally and financially and with or without grants. Secondly, there will be a situation bordering on chaos in which there will be different propositions, overlapping networks, gaps in routing and variations in ticket prices. That will result in comparisons being almost impossible.
    I am absolutely opposed to franchising. If it is to take place, even in the time scale referred to, the recommendation of the Select Committee on Welsh Affairs may prove useful. The Committee suggested, first, that the operation in Wales should be administered by the Welsh Office and the regulator jointly. They would have a joint responsibility to the Secretaries of State for Wales and for Transport. Thus Wales's priorities in the provision of rural railways and in urban transit policy, in Cardiff for example, would be paramount.
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    Secondly, under the Committee's proposals, finance for subsidy and investment assistance would be provided by the Welsh Office. Thirdly, as the hon. Member for Saffron Walden (Mr. Haselhurst) said, local authority finance would continue if we have local authorities in Wales in the near future. Fourthly, the rural nature of most of the Welsh network would be fully considered.
    Initiatives were taken by the Government through a joint environment and transport study which examined planning regulations and policies governing land use to see whether they could be co-ordinated with transport and with infrastructure development to reduce the need for travel and to encourage modes that are less polluting than the lorry and the car. That study is to be welcomed and the approach implies that the proposals for change in the organisation, structure and control of the national railway system must be set out within the strategic approach to overall transport demands.
    The Government must make a commitment to supplying adequate financial resources to allow the rail network to achieve greater use even though that may mean some continuing subsidy and funding of infrastructure and modernisation. Major infrastructure investment is needed on projects such as the Great Western line and the north Wales main line as track improvements and electrification will mean expenditure that is too substantial to be capable of being funded by new private sector investors alone.
    As we know, the Government propose that the track infrastructure and the day-to-day control through signalling will remain the state's responsibility under the new body called Railtrack. The Government intend to introduce private sector passenger services through financing agreements over a period. The agreements with Railtrack will continue to provide passenger services through arm's-length operating companies. The White Paper says:
    "The private sector would then compete to take over these companies for the life of the franchise."
    A franchising authority would be established to supervise the programme for passenger services. Subsidies for certain passenger services in Wales would continue, but at an unspecified level. Subsidies would be made available to franchise.
    The Government will establish a regulator to oversee arrangements for track access and charging, to promote competition, to prevent monopoly abuse and to promote consumer interests. Assurances have been made about the need for a national rail network with through tickets, cross-validity and a national timetable.
    However, there is concern about the practical realities which are as yet undefined. The number of franchises is undefined and there will be different contract periods. There will be inherent disadvantages in terms of the fragmentation of the system across the network. The area most prone to disruption will be ticketing and timetabling, which are at the heart of passenger requirements. How do the Government intend to ensure adequate planning arid implementation of railway ticketing and timetabling arrangements to ensure that mechanisms exist for the optimum network arrangements for passengers?
    This morning, I received a fax message from Mencap which is obviously and rightly concerned about the proposals. I do not know whether other hon. Members received that communication. Mencap is concerned about

    839
    the adequacy of support for the publishing of information and national timetables. It has a specialised and valid interest which must be addressed in due course.
    Numerous questions must be answered and I want to ask the Government one or two. I am greatly interested in what steps will be taken to ensure that Railtrack is stimulated to be efficient and responsive to customer demands, which will now come from the franchisees and from the freight companies. How will Railtrack adjudicate between competing demands from different operators?
    Will the franchising authority itself introduce proposals for the new passenger services? What criteria will it use in determining the level of need for the publicly supported network? The new private passenger service operator will have to meet the requirements of the passengers charter. As lack of punctuality and unreliability are the most serious interruptions to service, who will now take responsibility? If signalling is faulty, will Railtrack pay compensation? If a breakdown by a franchisee causes all services to be delayed, will that franchisee be responsible for compensation and/or reimbursement of losses to other operators? It is obvious that an individual franchisee could not accept the responsibilities outlined in paragraph 29 of the White Paper.
    Will the Government specify the standards that must be met in the Railtrack contract with operators and in the operators' ticketing terms with the passenger? Will child fares at 50 per cent. be guaranteed for those between five and 16? Will an ABTA-type bonding arrangement be necessary so that compensation claims are met from a central pool? What other mechanisms are there to make such compensation payments?
    How will Railtrack determine access priority where paths are scarce or where various train operators share the use of infrastructure? Will it be on the basis of auctioning paths, bearing in mind the constraints of the EC directive 91/440 on open access, or will other policy considerations be applied, such as social priorities? If so, by whom? How realistic is it to expect that private operators will be prepared and able to pay from their revenue Railtrack's charges for maintenance, including safety costs and modernisation of the network? Would such a requirement lead to substantial increases in fares and a converse reduction in passenger miles?
    What role will the European regional development fund and other EC structural funds—particularly important in Wales—play in continuing to support infrastructure renewal and modernisation? Will the transfer of some assets and most operations to the private sector lead to a reduction in ERDF grant both in terms of percentage and in terms of eligibility? Has the EC already started to re-examine existing ERDF grant eligibility in the light of the scheme now proposed by the Government. That question is vital to us in Wales and I am sure has a bearing throughout the United Kingdom.
    Those are some of the questions which I would like answered. We shall shortly be entering the consultation period. I sincerely hope that those questions will be answered fully and positively so we at least know where we stand. I dare say that that will not change my view or that of my party on this creeping privatisation but at least we shall be able to see exactly what is on offer and what the country faces in the medium term.
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    Many fundamental questions remain unanswered. In my respectful submission, the privatisation of rail services simply will not work. I trust that good sense will prevail to prevent the introduction of yet another disastrous scheme driven by unthinking Tory dogma. I agree with the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) and I urge all hon. Members to consider their constituents first. After all, we are talking about our constituents and about a vital rail network. It will be no use our looking at each other in 10 years' time, when the network has been decimated. We in Wales continue to suffer because of Dr. Beeching's axe and I am sure of one thing at least: we do not intend to suffer further and will therefore resist the proposals at all costs.
    Any hon. Member whose constituency contains a rural area or areas must beware of the challenges to their rail network. If hon. Members are to represent their constituents properly, they must stand up and be counted and not just pledge blind loyalty to dogma as Conservative Members have done so far.
    8.22 pm
    Mr. Bob Dunn: I apologise for not having been present during some of the earlier speeches. I serve on a Select Committee which met from 5 pm until 7.15 pm and I returned as soon as I could.
    The hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) seemed to criticise the Government's proposals on the ground that they were too complex. They are, indeed, complex proposals which touch on huge undertakings and embrace reforms that Conservative Members believe are necessary. The fact that they are complex does not weaken the case to be made for them. The hon. Gentleman invited us to consider our constituents. That is the one thought that motivates me to speak tonight. Any hon. Member who represents a commuter constituency like mine cannot fail to understand the huge range of problems that the travelling public have had to face in the past 20 years or more getting to and from their home and place of work.
    I was interested in the terms of the motion tabled by the Opposition, which urges:
    "That this House opposes the privatisation of the railways."
    The motion tells us little. It simply states an objective that the Labour party has pursued for many years. There is no surprise in that. It is rather like a bishop being against sin —although these days perhaps that is rather more surprising as so many bishops are not. The Labour party has simply stated its bald objection to the privatisation of the railways. It has not said what it would like to do instead—except to ask for more money, and more money, and perhaps a bit more money yet from the ever-suffering taxpayer. At least the hon. Member for Meirionnydd Nant Conwy attempted to paint a picture of life in his constituency as he sees it. In other Opposition Members' speeches, however, I have failed to see any picture, any clarity of vision or any policy except a reliance on the traditional determination to make the thing work, which is something that we have not yet seen in this country.
    I listened with interest to the speech of the hon. Member for Kingston upon Hull, East (Mr. Prescott), who is a flamboyant and strong speaker. His speech seemed largely to echo the "Panorama" programme that I saw a little while ago. I am therefore moved to ask whether the hon. Gentleman is writing for "Panorama" or whether

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    "Panorama" is writing for him. The hon. Gentleman simply restated the argument that he advanced in our debate on 29 October last.
    Mr. Wilson: Will the hon. Gentleman give way?
    Mr. Dunn: I have not finished my annoying attack yet. I shall give way later.
    Many of the arguments advanced in that debate have simply been rehashed today. I am moved to ask what the Labour party believes in. I know that it is going through a period of Clintonisation. Everything must now be kept quiet and under wraps until a commission has reported, upon whose findings the current Leader of the Opposition can adjudicate. When the Labour party's bright young things come back from America we may find that one of the items of advice that they have received from Mr. Clinton on how to win an election is that they must endorse the freeing up of the railway system—because that is one way to get votes, especially in the south-east of England.
    We are talking today about a great philosophical divide. The Labour party and, I am afraid, some of my hon. Friends believe that British Rail is like a white Mini —one has only to paint it black and one can pretend that it is a Rolls-Royce. That is simply not the case. It will not work. In his excellent speech, my hon. Friend the Member for Saffron Walden (Mr. Haselhurst) said, "If faced with a choice of doing something or doing nothing, I would rather be doing something." That is a school of philosophy to which I belong. The Opposition have stated their views. At one time, they believed in something. They used to believe in helping people and putting people first, but now they are hidebound by advice from American politicians.
    My right hon. Friend the Secretary of State made matters quite plain. There were a number of items in his speech that the Opposition had not heard. Rail services are to be franchised—not sold—and ultimately, if standards are not met, the franchise can be withdrawn. My right hon. Friend also said that track and signalling would remain in public ownership—until such time as they may be privatised. Railtrack will still have public interest responsibilities which it will be required to meet. My right hon. Friend also said that this was not a speedy privatisation. I do not regard an evolving gradual process of privatisation over a period of 12 years as fast. Finally, my right hon. Friend said—the hon. Member for Sunderland, North (Mr. Etherington) did not seem to hear him—that subsidies would continue under the arrangements that we are discussing and pass into legislation when the period of consultation is over.
    I am glad that the hon. Member for Meirionnydd Nant Conwy reminded us to put our constituents first. We are talking about a service to our people and the service has not been in accordance with the fare, price and tariff that they have had to pay. The railway service is a national service, but it is often delivered locally. My constituents who travel from Dartford to London and back will be delighted at the notion of privatisation: first, because it provides a degree of accountability that we have not had before; secondly, because it will free up the proper application of private sector rigour to be applied to the railway service. We have heard that a number of management groups within British Rail may wish to buy out or into a form of service. The management would transfer from one area to another, but at least it would be
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    able to do it for itself. That essential freedom, which I believe British Rail needs, will be there for all our constituents to enjoy.
    I wholeheartedly welcome the Government's proposals. The Labour party has not demonstrated its belief in the motion that it has tabled—a sad, pathetic motion doing no more than to oppose privatisation of the railways. I wish to give some advice not only to the Opposition but to my right hon. Friends Lords Ridley, Whitelaw and Young. They are pretty free with their advice. I do not blame the hon. Member for Kingston upon Hull, East for using whatever evidence comes his way; I would do the same. I should like to issue a challenge to Lord Whitelaw, Lord Ridley, and Lord Young. For a period of 28 days they should travel from Dartford station at 7.30 in the morning and return in the rush hour at 6 o'clock at night. If they did that, I wonder whether they would express the same views as they expressed recently about the privatisation of British Rail. I make that challenge most carefully because I admire those great men who have had a past.
    Mr. Prescott: They certainly have.
    Mr. Dunn: I want to talk about that later. It is essential for the noble Lords to see life in the raw—the life of my constituents who have no option but to use British Rail.
    Mr. Bowen Wells: Will my hon. Friend add to the challenge that he has made to the noble Lords and ask them to travel from Hertford, East to Liverpool Street daily? Perhaps they could divide their attention between the line to Dartford and the line to Hertford, East, and possibly even to Southend. If the noble Lords did that, they might possibly experience greater inconvenience than they have ever experienced before.
    Mr. Dunn: Perhaps my hon. Friend could write to the noble Lords and make that suggestion in his own inimitable way.
    In conclusion, I welcome the proposals. They are balanced, essential, and right. Because the proposals are gradual, they can be seen to be working and assimilated properly. I thank the House for listening to me so warmly.
    8.33 pm
    Ms. Glenda Jackson: Like the hon. Member for Dartford (Mr. Dunn), I, as a Member who is sponsored by the rail union ASLEF, have the honour to represent a London constituency. I do not welcome the Government's proposals to privatise, or, rather, commercialise, British Railways. Anyone who has ever used the railways on the commuter network surrounding London and the south-east will have a horror story that concentrates on the old, cold, often dirty and invariably overcrowded railway carriage in a train that arrives all too often late and, on occasions, refuses to arrive at all.
    In some cases people have had their job applications turned down simply because their journey to work would involve travelling on some of the most notoriously inefficient lines. Therefore, I am sure that most hon. Members would agree that the question to be answered is not whether our railways are in urgent need of modernisation, but how best that modernisation can he achieved and how standards can be maintained in subsequent years.

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    Initially, I had written the word privatisation. However, after hearing the Minister's remarks this afternoon, I have opted for semi-privatisation. According to Ministers, semi-privatisation is the only sensible option. They have argued that semi-privatisation will introduce competition and vital new managerial expertise from the private sector. As the hon. Member for Christchurch (Mr. Adley) so saliently said this afternoon, the only people on these islands who have any experience in managing a railway are those who manage British Rail at present. The Government argue that privatisation is the option that is being chosen by our European partners and our major competitors such as Sweden, Germany and Japan.
    The Minister referred to British Rail as a public monopoly. He argued that the monopoly is causing British Rail's problems and implied that what was needed was a short, sharp shock of competition. However, that simply is not the case. For example, InterCity is in direct competition with private cars, company cars, buses and even airlines. It has a market share of 8 per cent. Rail Freight Distribution has only 7 per cent. of the market share. Despite the Minister's reference to the monopoly that British Rail exercises over commuter traffic, Network SouthEast carries less than half of such traffic into inner London.
    British Rail already operates in a highly competitive market. It will be to the benefit of no one if rail is forced to compete against itself in addition to its other competitors. It is a grave mistake for the Government to view British Rail in terms of nothing other than profit and loss. British Rail is not merely a business; it is vital in social, environmental and broad economic terms which go well beyond whether the Chingford to Liverpool Street line is showing a positive return.
    The energy consumption of cars is six times greater than that of rail. Cars emit 200 times more nitrogen than trains and 500 times more carbon monoxide. I well remember with some chagrin my first visit to the United States when I stood and gazed in arrogant disbelief at weather forecasts which regularly carried something called breatheability air levels. In my arrogance I believed that such a situation could never arise in these islands. However, our weather reports regularly contain reports on the breatheability of our air.
    What value will private enterprise place on a clean, breatheable environment? Will business men who are fighting against tight profit margins be content to see a greener Britain as an adequate return on their investment? What about the social dimension? Many regional railways already run services as infrequently as four times a day. Such lines are not attractive to investors, but they are vital to those who use them. If privatisation or commercialisation becomes a reality, the only incentive to maintain such services will be a guarantee of Government subsidy. Since 1983, the Government have cut British Rail's subsidy by half.
    There is a broader economic picture. Our railways are vital to the economy of the nation as a whole. The Confederation of British Industry has estimated that road congestion costs our nation £15 billion per year. Sir John Banham has predicted that Britain will
    "enter the 21st century with the worst transport infrastructure in Western Europe".
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    It is imperative that Britain has a co-ordinated and integrated transport network. It is not feasible that such a network can evolve in an environment in which myriad individual companies struggle to capture lines, passengers and subsidies from each other.
    If a train breaks down mid-route, in the present network a replacement can be dispatched from the nearest depot. In a privatised network, how willing will a company be to send one of its highly prized investments to the aid of one of its competitors?
    I have said before that Ministers use the example of rail networks in Sweden and Japan, and the proposed privatisation of the German rail network, as justification for their scheme. I wonder how closely Ministers have examined the schemes which they praise so highly. The privatisation of Swedish railways resulted in the loss of 15,000 jobs, although it was done in co-ordination with the Swedish bus network. In Britain, the buses are being deregulated. Of the 25 networks that were opened up to competition, private contractors won contracts to operate only two.
    In Germany, privatisation will be accompanied by a car tax, which is an environmental initiative to cut transport pollution by 30 per cent., and investment of DM108 billion in the railway infrastructure. The Japanese Government set up a headquarters to deal with the retraining and redeployment of 93,000 former railway employees and introduced legislation which gave it authority to recruit private enterprises to re-employ surplus personnel. In Japan, a corporation was set up to manage the debts of the former companies and shoulder the burden of pension payments. I have no doubt that the Minister's statements today about pension payments to British Rail employees will be welcomed. I hope that the Government's pension proposals were not simply a matter of take it or leave it.
    How many of the proposals that I have set out will be found in the Government's privatisation plans? Will the Government introduce a car tax? Will it promise investment of £43 billion? Will it give guarantees on jobs and retraining?
    There are reasons why British Rail is a nationalised industry. As I said, it is not a business which could or should be judged solely in terms of the profit that it provides for its investors. It is not sheltered from competition or devoid of incentive. As the nation's industry, it is driven by an incentive to do the things that it is not possible for a company in the private sector to do. As the nation's industry, it is able to provide services to those parts of the nation that are isolated and unattractive to the private investor.
    What value can there be in leaving the infrastructure and the service which are so vital to our nation's future to the hurly burly and often less than honourable competition of the private sector? British Rail, as the nation's industry, can implement safety improvements in an integrated way throughout the entire network in a way that would be impossible for a small company with limited capital and a limited length of franchise. As the nation's industry, it has an incentive to provide a service that benefits the nation as a whole and fulfils long-term aims rather than the aims of a company which is obliged to show a quick return and to maximise its profits.
    If the privatisation proposals are implemented, that commitment to the nation's service will be lost. That will be of absolutely no benefit to anyone.
    8.40 pm
    Mr. Stephen Milligan: The Opposition and the railways have one thing in common: they both run on fixed tracks. We have heard a succession of speeches the gist of which is that the only way to improve the quality of our railway services is to spend more money and give greater subsidies.
    Today, as always, there are limitations on the amount of public money that is available. I believe that there are also new ways to improve the quality of our railway services. I represent a railway constituency in which more than 2,000 people work on the railways. My constituents have a strong interest in the greater use of the railways and in transferring traffic from road to rail.
    However, it is not enough to say, as do some people—including the Leader of the Opposition—that more people should travel by railways. Indeed, I understand that the Leader of the Opposition constantly travels to and from his constituency by plane. It is very easy to say that other people should travel by railway. If we are to encourage more people to use the railways, we must improve the quality of the service.
    Many hon. Members have said, quite correctly, that BR has become much more efficient over the past 10 years. I pay tribute to the improvements that have been made on the railways through more efficient management. The hon. Member for Kingston upon Hull, East (Mr. Prescott) said that it is possible to have more efficient public sector management. British Rail has achieved that.
    Mr. Prescott: British Rail did that 10 years ago.
    Mr. Milligan: It has improved over the last 10 years. British Rail now carries 49 per cent. more traffic per employee than the west European average at one sixth of the subsidy. That is a considerable achievement. However, we have exhausted the limits of improvement simply as a result of better public sector management. We must consider other methods to encourage improvement.
    I believe that two aspects are important. The firsi is to try to give better service to the customer. Nationalised industries, which tend to be oriented towards output, are not so well geared to look after customers. The second point is to encourage innovation. Again nationalised industries do not have a good record on innovation. They tend to continue to produce what they have already produced.
    It is not possible to privatise the entire railway network for reasons that are already well known. However, there are signs that experiments with privatisation on limited services have been a success. The hon. Member for Kingston upon Hull, East referred to Charterail, which went bust, and to Tiger Rail. However, he did not refer to Foster Yeoman, a west country quarrying company, which has a great interest in cheap transport costs.
    Mr. Prescott: It is in the public sector.
    Mr. Milligan: Foster Yeoman is not in the public sector. It is a private company.
    Foster Yeoman wanted to use British Rail to transport aggregates for building work in the south-east. Transport costs were critical to that company if the aggregates were to be transported by rail rather than by road. Its experience was that BR could not do the job at the price the company wanted.
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    Foster Yeoman offered to provide a privatised service by buying its own locomotives with bigger trains and less maintenance. As a result, it runs a very efficient service with BR personnel. Goods have been taken off the roads and now are moved by rail. There is a similar experience, although in a minor way, in respect of private tourist services such as the Orient Express and the Royal Scot which have found niche markets which BR did not find.
    Many hon. Members have referred to the foreign experience. That experience is the most significant factor. The hon. Member for Kingston upon Hull, East referred to Japan. I hope that he will forgive me when I say that I believe that he is slightly muddled about what is happening in Japan. He said that it was a question, not of privatisation in Japan, but of some kind of nationalised industry.
    Roughly half the railways in Japan are already privatised. They have been in private hands for a very long time. Incidentally, they have as good a safety record as the railways in the public sector. Japanese railways in the public sector have been divided into six separate companies which operate independently and which, in time, will be floated on the stock market. They have not been floated yet because, as hon. Members may have noticed, the Japanese stock market has been in a pretty bad way. However, they will be floated and they have already gained considerable benefits by being independent of the national railways.
    Mr. Enomoto, a managing director of the East Japan Railway, has said
    "The railways in Japan are now in excellent condition."
    With regard to the new arrangement, he stressed the improvement in employee morale. Such an improvement could be significant in this country. Using rather quaint Japanese terms in English translation, he said that one of the notable things now about the staff on Japanese railways is that they give "polite greetings" and "kind directions" to people who use the railways. We would very much appreciate that approach in this country.
    We should also consider what has happened in Sweden. It has been said that only 1 per cent. of Swedish railways has been privatised. However, the part of the Swedish railways which has been put out to private tender has achieved enormous improvements. Fares have been halved and passenger usage has been greatly increased, by about 40 per cent. My hon. Friend the Member for Christchurch (Mr. Adley) mentioned the improvements across the Swedish railways where costs have been cut by about 30 per cent. That has occurred partly as a result of imitation of the improvements achieved by private companies.
    It is interesting that the Swedish Government are considering extending tendering, which until now has been confined to branch lines, to all main lines. Privatisation and franchising in Sweden have reduced costs and encouraged the use of the railways. Hon. Members on both sides of the House would like to see that.
    Although the hon. Member for Kingston upon Hull, East railed against privatisation at one point, he said that he did not think that ownership was critical. I hope that he will accept that it is possible to have a mixed system of ownership on the railways and that a degree of competition and of private enterprise can bring great improvements to the quality of the service.
    We are entering new territory and it is right that the franchises should be experimental in the first phase. That

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    is why I believe that it is right not to sell off the track and the assets. After five or six years it may be clear that the experience has not been good.
    Our message to the people of this country should be, "You are fed up with the quality of the railway services in this country so we are now going to give private companies the chance to improve the quality of the service through innovation and new methods." That message would be widely welcomed.
    The Opposition's negative approach is characteristic of them. They are not interested in new ideas to improve the railways or in privatisation. Since 1979 the Opposition have opposed every privatisation—privatisation that has been emulated around the world. We should not be surprised by the Opposition's motion and I hope that the House will reject it tonight.
    8.50 pm
    Mr. Hugh Bayley: First, I should remind the House that I am sponsored by the rail union RMT.
    I wish to focus on something that the Secretary of State has stressed throughout the debate on rail privatisation, ever since the publication of the White Paper some months ago—his view that safety is paramount. If safety is his paramount consideration, a good test of whether privatisation will be a success should be whether it will make Britain's railways safer or less safe. Will it mean that we shall have more rail accidents, followed by Clapham and Cannon Street type inquiries, or will there be fewer of them?
    Like other hon. Members, only earlier this afternoon did I receive the Department of Transport's latest report, "Ensuring safety on Britain's Railways", so I cannot claim to have read it in detail, but I have read the section headed "Preventing Fatigue—Controlling Hours of Work and Rest", and I am concerned by what I see there. The report says:
    "It is likely that there will be considerable public and Parliamentary pressure to apply limits to hours of work and rest periods for train drivers at least."
    That is an understatement. It is not only likely that there will be such disquiet and such protests; it is absolutely certain. And why should the concern apply only to drivers? We should not forget that the Clapham crash, in which 35 people died, was caused, according to the Hidden inquiry, by a signal wiring fault, which was blamed on excessive overtime being worked by the person who did that bit of wiring.
    The Department of Transport report which came out earlier today makes comparisons of the maximum permitted working hours of rail employees in Britain and in other European countries. All the countries in the report have an almost wholly, and in most cases a wholly, public sector railway system. One has to go a long way to find a private system.
    In the autumn I went to the United States and met managers of Amtrak, who stressed to me the absolute importance in a mixed private-public rail system of having statutory regulation of railway employees' hours. I have been sent a copy of the American Hours of Service Act 1982, which stipulates in federal American law a general provision that no rail employee should work more than 14 hours, and more stringent conditions for some other types of staff. For operators and train despatchers—in English,
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    signal men and women—the maximum is a nine-hour shift. For signals installation staff, like the man involved in the Clapham wiring, the maximum period of duty is 12 hours. There is no statutory limit in Britain, but since the Hidden report British Rail has operated a non-statutory 12–hour maximum in a 24–hour period.
    Will the Minister, in replying, undertake to examine the United States Act and to consider bringing in similar statutory protection for rail workers and the travelling public here in Britain?
    8.52 pm
    Mr. Nick Hawkins: My concern in analysing the Government's proposals for privatisation is to ensure a better service for passengers. Part of that, in my view, is to ensure that there is greater opportunity for the disciplines of the private sector, because it is a facet of corporate monopolies in the public sector that they encourage the worst traditions of bureaucratic indolence and sloppy standards. Despite the substantial progress that has been made in British Rail in recent years, which I recognise and welcome, and despite the very large and ever increasing amounts, well ahead of inflation, which the Government have put into rail investment over the past few years—there has been well over £1 billion of investment this year alone, an increase in real terms of more than 50 per cent. since 1980—there are still very substantial difficulties.
    Mr. Wilson rose—
    Mr. Hawkins: Time is short and I am afraid that I cannot accept interventions.
    The problems that passengers in my constituency of Blackpool, South and throughout the country face as a result of inadequate standards have to be addressed. The negative nature of the Opposition motion and the air of unreality that has pervaded pretty well all the speeches from the Opposition Benches are quite staggering. To hear Opposition Members talk, one would think that none of them ever heard complaints about rail services in their surgeries and constituency correspondence.
    Only this morning I received a six-page letter, including a copy of a complaint form to British Rail, from a pensioner constituent of mine, and it is fairly typical. She and her husband were making a journey recently from my constituency to London and back. They had pre-booked their seats, as British Rail asks customers to do. Their train to London was over two hours late; their train coming back from London was over two hours late. The state of the toilets in the stations and on the trains was unspeakably disgusting, and the overcrowding was appalling. This, I am afraid, is the experience of far too many people.
    There are many dedicated British Rail staff who do their best to minimise the difficulties, and there has been a massive improvement in British Rail services. They are vastly better today than they were in the bad old days of the 1960s and 1970s, when Labour Governments consistently underfunded British Rail, when there was no imaginative management, when there were none of the improvements that the Government have introduced in recent years. But there is so much more that can be done, and only by involving private sector capital can we ensure that we have a rail system to be proud of.

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    The benefits of rail privatisation are that passengers will get a better deal from a service in which management and employees will have a stronger incentive then ever before to provide high-quality service which responds to the customer's needs. Competition will provide a further incentive to improve and expand services. Safety will remain at the top of the Government's priorities, as it always has to and as the Health and Safety Commission has confirmed in today's report. Rail management will be able to concentrate on running services free from the constraints of the public sector spending round and without Government involvement in day-to-day matters.
    There will be many opportunities to improve efficiency and quality as local management takes on greater responsibilities and works more and more closely with the public that it serves. The franchising authority will set clear standards which will be written into franchisees' contracts. Only when those standards are introduced and the disciplines of the private sector are seen to operate will the morale of the staff really be improved and will there be opportunities to have the kind of rail system of which the public can be justly proud.
    I very much hope and expect that the House will rightly reject the Opposition motion, which is so negative and has nothing constructive to offer, and will support the Government's proposals wholeheartedly, as I do.
    8.56 pm
    Mr. Andrew Mackinlay: I will endeavour to be brief—indeed, I am under instructions to be brief, so I will deal with the substantive point in a moment.
    I cannot think of a more sloppy and disgraceful way of dealing with this matter than the Government's method of publishing relevant documents on a gradual basis whilst at the same time promising us a major Bill in the next few weeks. The minimum that we should expect is that the Minister should use his good offices with the Leader of the House to see if we can have two days for the Second Reading debate. There is much that needs to be scrutinised and we are incapable of doing that because we have not yet had the necessary documentation.
    What we are about to embark upon as the legislation goes through the House can only be described as a political mortal sin. The criteria for a mortal sin are full knowledge, full consent and grave matter. The Government have full knowledge of, and fully consent to embarking on, something that will subsequently prove to be extremely reckless. They have had counsel from the media, from the industry, from the hon. Member for Christchurch (Mr. Adley), from Members of the other place who used to be until recently on the Treasury Bench; all have told the Government that it will not work. There are even prospective commercialisers who have made it abundantly clear that the franchising basis on which the Government are embarking will not work. I refer, in particular, to Sir James Sherwood, who gave evidence to the Select Committee on Transport. Unfortunately, the media were more preoccupied with Richard Branson's pullover on that day and failed to give sufficient attention to the valuable evidence of Sir James Sherwood, who indicated that he was not interested in the idea of the Railtrack authority and did not believe that it would work.
    There has been reference to Foster Yeoman. We received considerable evidence from freight industry witnesses—and I think that Foster Yeoman was included
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    in this particular point—who made it abundantly clear that, if the pricing regime of the track were to be based on what they understood the Government's proposals to be, they would have to look to moving their traffic from rail to road; it simply was "not on" to continue to run freight on the basis of that which we understand to be the Government's proposition. I use the phrase "we understand" because we do not know. This sloppy Government have not produced, at this critical stage, a document setting out the pricing regime for the use of the track. It is an absurd situation and one that they need to remedy before we have the Bill, in the interests of both the House itself and also of their parliamentary colleagues who, once they have seen what is proposed, will, I think, change their attitude to the Bill dramatically. They will have much less enthusiasm for it than has been demonstrated tonight.
    I want to make one comment about the hon. Member for Christchurch. I have not been a Member of the House long, but I doubt whether there has been in recent times a more devasting speech by a Government Back-Bencher on a proposal of the Government than that which we heard from the hon. Gentleman. I commend his courage. I also commend his precision and his knowledge of how railways can and should work. His motive in speaking was not only to be a diligent Member but also, I suspect, to save the Government he supports from a disaster such as they experienced with the poll tax. The hon. Member has referred to the proposals as a poll tax on wheels.
    As someone who represents a commuting constituency, I am concerned that my constituents will have no benefit from this very costly and lengthy legislation upon which we are about to embark. Others have spoken about the parlous state of British Rail at present, including the hon. Member for Dartford (Mr. Dunn) and the hon. Member for Blackpool, South (Mr. Hawkins), who referred to the complaints that he had received in his constituency mail. Of course, we all receive complaints. They are an indication of how our important rail network has been run down by the Conservative Government over the past 14 years.
    The remedy is not this franchising proposal. My great anxiety is that we are about to rush into changes which will lead eventually to a closure of lines, peak-hour only facilities in many areas, high costs to commuters and rail travellers and a continuing haemorrhage of freight from rail with no appreciable improvement of the service for people who live in and around London and those who wish to commute from other parts of the country.
    There are many other of the Government's rail proposals that one would like to probe. There is no time tonight, but I hope that, at the very least, the Government will take on board the rights of hon. Members on both sides of the House so that when the legislation is introduced they will ensure, not only in Committee but on Second Reading, that we have an opportunity to develop our thoughts and our questions to a much greater extent than we are able to do today, both because of time constraints and because we have had insufficient detailed documentation on the intentions and effects of the Government's proposals.
    9.2 pm
    Mr. Brian Wilson: Nothing has been more pathetic or revealing in this debate today than to hear Tory Members, particularly in the last few speeches, denigrating and berating British Rail services as they affect their constituents without acknowledging one iota of responsibility for this state of affairs and for under-investment in British Rail. They have had 14 years of power, but still lack the guts to accept any of the responsibility for what has resulted from it as regards either the railways or anything else. I would refer them, in particular, to a quotation from an article in The Independent by Christian Wolmar from the day on which the representatives of the French, Swedish and German railways gave evidence to the Select Committee on Transport. Mr. Wolmar summed things up like this:
    "Their answers will send a shiver down the spines of all rail users as they both said"—
    the French and Swedish representatives—that, as a result of what the Government were proposing to do,
    "there would be line closures, a transfer of freight and passengers to rail and competition on some well used lines. But even these services might become more unreliable because of under-investment in the infrastructure."
    The core problem they identified was the years of under-investment in the United Kingdom network. As Mr. Lundberg, the director of corporate planning with Swedish railways, said:
    "You must first invest, then you can privatise."
    So even according to their own standards and by their own lights the Government are hoist on the petard of their own folly—of their failure to invest in the railways over the past 13 years. They have rendered the railways incapable of responding to the political ideology which they now wish to impose upon them.
    Let us be in no doubt about what the indictment is tonight and will be in the weeks ahead as the debate develops. Rail privatisation would mean more bureaucracy, fewer services, more freight on the roads, substantial job losses and greater safety risks. The British public will agree that there is not a great deal in that offer for them. There is nothing in rail privatisation—nothing positive, nothing worth while, nothing creative, nothing to improve the environment or the economy for the passenger or the taxpayer. There will be more bureaucracy, fewer services, more freight on the roads, substantial job losses and greater safety risks: a poor agenda to offer the travelling public and the taxpayer alike.
    I shall deal first with safety because that should always be dealt with first in these matters. The Health and Safety Commission report was the dog that was not meant to bark today. We had expected a statement on it. The statement disappeared. I believe that the reason why the statement disappeared and the whole thing became a bit of a mishmash in the course of the Secretary of State's speech was that the Government had been denied the opportunity to news-manage this document because the true thrust of the report was revealed in advance. However, what it did say cannot be avoided. I will not allow Tory Members to avoid the realities of what that report actually says as opposed to the gloss that the Secretary of State tried to put on it. I ask each hon. Member to note this because one day they will be held to account for this by their constituents. The report says under "Privatisation":
    "Companies with little or no previous experience of operating on the railway and managers with limited experience of railway safety issues will enter the railway industry as the BR
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    is broken. Many changes in traditional working arrangements may be proposed. Control of railway operations will be divided between many different organisations and this will generate a need to define the extent of the responsibilities of each party and to ensure effective management of safety …
    Unless considerable care is taken to set up systems to ensure that new operators are properly equipped and organised there can be no confidence that risk will be effectively controlled right from the start and that important matters do not fall between the safety arrangements of the various parties."
    I ask Tory Members, including the most glib and most sycophantic in supporting these proposals, to note the following words:
    "The consequences of failing to achieve adequate systems of control will be seen in increased risk on the railway system and the likelihood of an increase in the numbers, and possibly also the severity, of accidents."
    That is what the report says and the warning that it gives. Of course it goes on to set out a long list of measures to counter the threat and of course the Government accept those recommendations. It would be extremely odd if they did not, given that they are the political masters of the situation and they are the ones who are driving it. The Health and Safety Commission is telling the Government that they are putting in place a more dangerous system and unless they control it very carefully there will be more accidents and more serious accidents. That is what the Health and Safety Commission is saying.
    I ask every Tory Back Bencher, where is the demand coming from to put in place that more dangerous system? That document is crucial and the message is, of course, that if you throw money and bureaucracy at them, every one of the risks can be countered in a more and more convoluted way. But who wants to create the danger just so that it must be met through such convoluted systems? That applies to only the few, the handful on the Government Benches, who have been dragooned into speaking in the debate. They have more loyalty to their party than to their constituents.
    That might apply to those few here, but every witness before the Select Committee said, in effect, "We see no sense or advantage in it. We want a decent railway system, and this is not the way to achieve it." But because the Conservatives are driven by ideological and dogmatic insistence, they will press on with their proposals and the first price to be paid will be the certainty that the public are travelling on the safest possible railway system.
    The hon. Member for Christchurch (Mr. Adley) probably has copyright on the phrase "poll tax on wheels." It started as something of a slogan, but the comparison continues to build to the point at which it becomes compelling. In recent years the Conservatives have introduced many measures which we have found unattractive and have opposed. However, the true analogy between the poll tax and rail privatisation lies not in its malevolence, but, first, in its intellectual absurdity and, secondly, in its unworkability. It lies in the contrived complexity of the mechanisms which must be devised to meet the objections. It lies in the increasing unease of those who are asked to support the policy, matched only by the increasing obsessiveness of those promoting the policy.
    There was a compelling analogy with the poll tax last week when the Secretary of State for Transport, broadcasting to the nation, said that the whole problem was due not to the legislation and what was proposed but to the fact that people did not properly understand it. Lord

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    Ridley, Lord Young, Lord Whitelaw and the leader writer of The Daily Telegraph did not understand it. The whole world, including the hon. Member for Christchurch, did not understand it. If only they understood it, they would support it, the right hon. Gentleman claimed. It was as though he was retreating into the asylum shouting, "I'm not mad. It's just that the whole world doesn't understand."
    I shall go through the objections one by one, the first being the future of passenger services. I regret that there are not many more Members in the House tonight. The situation is analogous with the poll tax; it takes a long time for matters such as this to build up, but build up this issue will as the Committee stage proceeds, as the debates continue and as the articles appear. Warnings will continue to come from consumer groups. Objections from local authorities of all complexions will be put forward. We shall have one debate after another on this subject in the coming two or three years and then the Benches will be fuller as Members begin to realise what the message is from their constituents.
    I shall be proven correct in saying that Tory Back Benchers will have to get used to the idea that privatisation will mean the closure of railway lines, stations and services. Loss-making, and particularly rural services, need the protection of cross-subsidy within an integrated system. There is no escaping the fact that if we disintegrate the system, we threaten the weaker lines. Anybody wanting proof of that need only have seen the reaction of the Secretary of State this afternoon to my question about the future of the 11,000–mile network. "Shifty" would be too modest a description.
    The hon. Member for Southport (Mr. Banks), in what I thought was a notably naive and sycophantic speech, called in aid Mr. James Sherwood as a witness who had gone to the Select Committee to greet the proposals as good news. I do not think anybody else would have put that interpretation on Mr. Sherwood's evidence. The hon. Gentleman and Mr. Sherwood should go along the south coast of England to each of the stations that will lose the services that Mr. Sherwood said he would close as part of his interest in privatisation. While Mr. Sherwood's evidence might have been good news in Southport, it was not good for the coastal lines, which he has already said he will close if he ever gets his hands on them.
    The figure is 11,000 miles, and the Secretary of State says that the great majority of them will survive. He must know that 7,000 miles is a great majority of 11,000. So is 8,000. Can he put a figure on it? We can, because there has been a figure on it for the last 20 years under Governments of both complexions. The figure is 11,000 miles. But today, in his evasions, the right hon. Gentleman confirmed that the expectation and reality must be the substantial closure of railway lines throughout the country and in particular rural lines which exist for a social as well as a communications purpose.
    Nobody need be in any doubt about this. One has only to read the submissions from the would-be operators, such as the proposals of Sherwood. Already Sherwood knows what he is going to close. One has only to read about what the Badger Line wants to do about the Newquay branch in Cornwall, where it is already talking about bus substitution. One has only to read about what Grampian Transport wants to do. It wants to concrete over the rails and create busways. The same thing applies in the Isle of Wight, where the Invecta bus company operates.
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    About half the external expressions of interest in rail privatisation and franchising has come from bus companies. Can the Secretary of State for Transport seriously tell us that bus companies will compete against themselves? Can he tell us that when, in a year or two, they say that it would be more economic to take the trains off and put the passengers on their buses, he will say, "No, that is not cricket. You cannot do that. You will have to run the train services and bus services side by side". I hope very much that the Office of Fair Trading, which has expressed an interest in the creation of these local monopolies, with bus companies bidding for the franchises, will pursue the matter to the limit and say that it will not tolerate such a situation.
    Every hon. Member knows in his heart of hearts that loss-making rural services will not stand the privatisation process.
    Mr. Matthew Banks rose—
    Mr. Wilson: The hon. Member for Southport declined to extend to me the courtesy of giving way. However, I shall give way to him.
    Mr. Banks: The fact that the hon. Gentleman has made not one but successive comments about this matter indicates either that he has not listened at all since 3.30 this afternoon or that he is deliberately misrepresenting what the Government are trying to do.
    Mr. Wilson: That is a sweeping statement, but the hon. Gentleman will have more success in sweeping Southport than in sweeping the House with it. I am dealing in specifics; he is dealing in pious hopes. Since I, too, have a majority of just 3,000 I, too, would hope that my rail services would not be taken away.
    Of course, rural and loss making services will be more exposed. There is an argument for specifying how much each service loses. I understand that argument and it could be applied to any other system. However, with regard to this regime, if one were to start with the view that losses on specific local services should be set out, within months—certainly within years—the case that it would be reasonable to withdraw such routes would be built up. The case would be made that it is absurd to have only 10 people using a service that costs £X per person per user in subsidy. How ridiculous, it would be said. This is what is protected under the cross-subsidy system when it is run by people who believe in the railways as a national network. However, it does not take a soothsayer to predict that once the per capita cost of operating these services is known the Government will withdraw the subsidy and accept the overtures of the private operators for withdrawal, particularly if, in the meantime, they have managed to get rid of everyone else who uses the lines—the freight operators, who at present share the costs.
    Mr. Snape: Is my hon. Friend aware that the identification of individual lines in terms of profit and loss is an idea that has been tried before? Indeed, it is one beloved of the Treasury, which has always believed that somewhere in there is the core of a profitable railway system. Is my hon. Friend aware that such a system was dropped as a result of the Railways Act 1974 because it was felt that, in order to bring British Rail's accounting into line with that in the rest of the European Community,

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    we needed to get away from such an approach? So far as the Government are concerned, it is another case of back to the future.
    Mr. Wilson: I am grateful for the fact that, in respect of these matters, my hon. Friend goes back much further than I do. What he says is entirely right. If we believe in a national railway we must resist the philosophy of the core railway. But the core railway is the logical progression of the privatised system, especially when operated by a Government who, at heart, as we have heard many times tonight, do not believe in the principle of subsidy on social or any other grounds.
    What about passenger transport authorities and the services that they provide? The hon. Member for Blackpool, South (Mr. Hawkins), a cheerful proponent of breaking up the railways although that process has led to the loss of the InterCity service to Blackpool, spoke about the bags of mail that hon. Members receive about the inadequacy of local rail services. I do not receive such mail: my local rail services are extremely good because of the intelligent co-operation between Strathclyde regional council and British Rail through Strathclyde passenger transport executive. That is why the west of Scotland has excellent electrified services and why £100 million has been invested in passenger transport services in the west midlands.
    My hon. Friend the Member for Morley and Leeds, South (Mr. Gunnell) spoke about the experience in west Yorkshire. Innovations are prevented by restrictions imposed by the Department of Transport. Throughout the country, passenger transport authorities do an excellent job and strive to do a better one within the limits of the resources that are available to them. They are to be boxed out of this altogether. Local taxpayers' money will go into systems over which there is no democratic accountability through local authority representatives on the PTAs. How can that be justified? Their sole job, according to the Government, will be to administer on behalf of the private operators.
    Is it seriously suggested that that is how local taxpayers' money should be used, or will the whole system simply collapse along with so much else? A creative public transport commitment is needed to carry out the work that the PTAs are doing and the Government are prepared to throw that work away to pursue the daft dogma of rail privatisation.
    The certainty of rail privatisation is that it will drive more freight on to the roads. That is important to people outside even if it is not important to some hon. Members. There is no need to look into the crystal ball to see that because it is already happening on a large scale.
    It would be unfair to Tory Members to say that they do not care. I have sat through debates in which many of them appeared to care. They care about their constituencies, about the roads of Kent, for instance, but they care in a localised, short-sighted, myopic way. They wonder whether in their areas something could be done to get more freight on to the railways. They fail to understand that while the Government pursue policies that are specifically directed towards the other trend, that will not happen. In order to reduce rail freight to a core business British Rail
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    is working under conditions and towards objectives that nobody could reach and still maintain freight on the railways.
    Mr. Hawkins: Will the hon. Gentleman give way?
    Mr. Wilson: No.
    Why is British Rail still operating under financial objectives that were laid down by Cecil Parkinson in December 1989 when he was Secretary of State for Transport? Those objectives were a profit of £50 million and an 8 per cent. return on investment. Can the Minister name one road haulage firm in the country that aims for an 8 per cent. return on investment in the present economic climate? Why was a letter sent from the Department of Transport last July to British Rail saying that there was to be no new investment in rail freight except for that directed towards the channel tunnel? Why was that done? If there is any desire to get freight on to the railways, why is not BR allowed to work to realistic objectives?
    Mr. David Harris: In his capacity as the Opposition Front-Bench spokesman, will the hon. Gentleman say what sum his party would cite as a reasonable objective? To what extent would he subsidise freight transport and the business of trying to transfer freight from the roads? The hon. Gentleman is speaking in abstract terms, but perhaps he would put a figure on the subsidy that his party would provide for freight transport.
    Mr. Wilson: I welcome the hon. Gentleman to the debate. I hope that he was here to listen to what I said about the prospect for services in Cornwall. Subsidy is another term for "nothing else to lose". If freight can be carried on the railways without additional cost to the infrastructure, any sensible society would opt for that because it has social and economic advantages.
    Mr. Harris: Without subsidy?
    Mr. Wilson: That seems to be roughly equivalent to zero. If goods can be carried without cost to the infrastructure, it makes sense to do so. In contrast, British Rail is forced to work under those objectives and that is why contracts are being thrown away.
    Mr. Harris: The hon. Gentleman is dodging.
    Mr. Wilson: I am not dodging anything. All the contracts that are being thrown away because of those objectives as part of the pre-privatisation aim of getting Railfreight down to a rump operation are exactly those that any sensible person would say should be carried on the railways—cement, oil, bitumens, chemicals and forestry products. Every time a 100,000-tonne contract is lost by British Rail it means another 4,000 lorries on our roads.
    Let Tory Back Benchers who support rail privatisation go to their constituents with the slogan "More freight on the roads". One cement contract lost, not because it was unprofitable but because it was not profitable enough, will put another 200,000 tonnes of freight on to the roads. That is the reality of what is happening as a result of the run-up to privatisation. Conservative Members should not tell their constituents that they want more freight on the railways because everything that they and Ministers are doing in order to slim down the freight operation is having precisely the opposite effect.

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    Many people work on building trains, rolling stock and everything else that is needed for the railways. It is an important industry with a good tradition and many skills. But what does that matter to people who have destroyed so many other industries with great traditions and skills?
    The Railway Industry Association warned the Select Committee on Transport. and thereby the House, that 30,000 jobs are at risk in the railway industries already because of the blight which the threat of privatisation has placed on investment in the railways. For the first time ever, InterCity plans no new investment in rolling stock. No one will invest in rolling stock or rail equipment when it is not known who will be running the trains in a few years' time. If Conservative Members check with railway suppliers in their constituencies they will find that their order books are empty.
    The Railway Industry Association, which I suspect is not a great ideological friend of the Opposition, has warned that 30,000 jobs are at stake. On the railways the attrition is already on to slim down, with 5,000 redundancies scattered around the country, and that is only the start.
    The bureaucracies that will be created in order to pursue the worthy aims of dividing up fares among half a dozen different companies and reviving the clearing house at Euston will result in the creation of white collar jobs while the people on whom the safety and efficiency of the railways depends are being got rid of. To take an example from my area, in the west of Scotland 131 track maintenance posts are to be done away with. The managers responsible for the crews which will be reduced in that way say:
    "It is our view that … we have already reached the bottom line as far as manpower cuts are concerned and that any further reductions in staff will cause a sharp decline in track quality and compromise the safe running of trains."
    That is what the managers in that region wrote to the British Rail management.
    As similar job cuts are made throughout the country in order to complete the slimming down operation, that is the sort of message that will go to every region of British Rail and that, too, will filter back to Tory Members of Parliament.
    The key to all the proposals is the separation of Railtrack from the operators of the trains; to say that not only will Railtrack be unsubsidised, but that it too has to give an 8 per cent. return on investment.
    We have heard some nonsense today about comparisons with other systems. The Swedish system has been called in aid on various occasions. One hon. Member was particularly proud of the fact that the 1 per cent. of Swedish railways that is privately operated seems to be doing a terrific job. I wish it well, but the idea that there is any comparison is absurd.
    The fundamental difference is that in Sweden the rail track operators are subsidised. That is where the subsidy goes in order to allow them to provide the railway infrastructure that we all want and on which other operators could potentially work, although, as we know now, 99 per cent. is still in the public sector.
    It is, however, entirely different to suggest that the Railtrack authority will be unsubsidised and must therefore obtain all its revenue from the users. That is the catch 22. If the authority sets its charges at a realistic level —which I very much hope that it would—to take account of safety requirements and all the infrastructure over and
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    above the track for which it will be responsible, the charges to operators will be so high that the operators will be bleating from day one, or will not operate the services at all.
    The unthinkable alternative is to bring in some hard men from private enterprise to run the Railtrack authority, with the primary motive of getting the costs down, thus lowering the operators' charges. I fear that such a division of responsibility, with the operators constantly pressing the authority for lower charges, is a recipe for not a safer but a more dangerous railway, and for job losses in the short rather than the long term. Such a formula will ensure that traffic, both passenger and freight, will be driven off the railways.
    Mr. Milligan: The hon. Gentleman suggests that it would be much better to subsidise the infrastructure company. The Government have already made it clear that, where it is necessary to continue to pay a subsidy for a service to exist, it will subsidise the running company. Why is it better to pay the owner of the track rather than the company that runs the service on the track?
    Mr. Wilson: I do not have time to answer that question, but if the hon. Gentleman seriously wishes to answer it for himself, I am prepared to assist him; he will then begin to understand the fundamental flaws in the Government's proposals.
    Dame Elaine Kellett-Bowman: The 1 per cent. is very effective.
    Mr. Wilson: The hon. Gentleman might just be able to understand the flaws; but I am afraid that there is no hope for the hon. Member for Lancaster (Dame E. Kellett-Bowman).
    I know that The Daily Telegraph is now regarded in Tory circles as a dangerously radical rag, so there is no point in quoting from it. I also know that the various peers who have made their views felt are now persona non grata. I was not sure where to turn for a source that was sufficiently establishment to highlight the concerns felt by 99 per cent. of the population, but I felt that "Jane's World Railways" might prove adequate.
    Mr. Snape: Who's she?
    Mr. Wilson: A sister of "Jane's Fighting Ships".
    Tories like talking about enterprise. How does this sound?
    "In Britain, it seems, entrepreneurs innocent of debt arising from the past cost of developing a high-speed Inter-City system, will be able to lease modern BR rolling stock to cream off very profitably the premium peak business on key routes. Until the rest of the Inter-City operation can be sold off, piecemeal or as an entity, this must then struggle to make ends meet on its residual less lucrative and consequently contracting services."
    That is really enterprising, is it not?
    On the question of whether other European countries might follow us, "Jane's World Railways" says:
    "It will be astonishing … if any Continental European government, let alone its railway, views this as better than a dogma-driven exercise, utterly irrelevant to national need of a well-balanced multi-modal transport system, and a damper of any further technological exploration of rail transport's potential."
    That is what the Tories want: another great industry to be run down, flogged off and denigrated in advance. That is what they are doing to the railways, but they will not get

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    away with it. Many analogies can be made with the poll tax. The more that people know about the Government's proposals, the more they will resist them and defeat them.
    9.34 pm
    The Minister for Public Transport (Mr. Roger Freeman): Throughout this long debate, Conservative Members have given solid and consistent support to our proposals. Eight Conservative Members spoke. With the exception of my hon. Friend the Member for Christchurch (Mr. Adley), the seven others—my hon. Friends the Members for Wellingborough (Mr. Fry), for Hampshire North-West (Sir D. Mitchell), for Southport (Mr. Banks), for Saffron Walden (Mr. Haselhurst), for Dartford (Mr. Dunn), for Eastleigh (Mr. Milligan) and for Blackpool, South (Mr. Hawkins)—supported the Government's proposals. That clearly showed the support of Conservative Members for our proposals.
    The hon. Member for Cunninghame, North (Mr. Wilson) was a prophet of gloom in the last general election campaign. He forecast that if a Tory Government were returned there would be a series of closures of stations, lines and services. He was wrong then, and he is wrong now. Let me deal with his point about Jim Sherwood. The Government do not accept what Mr. Sherwood proposes. When we franchise services there will be a competition and the company that wins will be obliged to run those services. No private sector company will close any railway service, so let us not be taken in by media comments or by comments from one individual.
    The hon. Member for Cunninghame, North said that my right hon. Friend the Secretary of State had said that there could be closures on a significant scale. That is untrue. The franchising authority will start with the existing timetable and will impose on franchise companies a requirement to run a specific service for the length of the franchise. There will be clear closure procedures. In exchanges with the hon. Member for Kingston upon Hull, East (Mr. Prescott) at the beginning of the debate, my right hon. Friend the Secretary of State made it plain that to draw the inference that privatisation or the reforms that we propose will lead to closures was quite wrong.
    The hon. Member for Cunninghame, North criticised the disaggregation of subsidy—the allocation of subsidy to individual railway lines. I think that he will find that he is in a minority. The transport users consultative committees are broadly in favour of the allocation of subsidy to particular lines and groups of services because they believe, and I believe that they are right—[Interruption.] No, the hon. Member for Cunninghame, North was not in favour of that. He talked erroneously about cross-subsidy. We are talking about taking the £1,000 million of subsidy to Regional Railways and Network SouthEast and, over time, allocating it to particular services. The Government believe that that will lead to a more informed debate about what is sensible and what is needed for rail services. The hon. Gentleman is out of step with his colleagues.
    The hon. Gentleman asked a number of questions about freight, as did the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), who informed my right hon. Friend and me that she would not be here for the wind-up. The mail freight target set by Lord Parkinson, the then Secretary of State for Transport, was a profit of £50
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    million for the fiscal year 1992–93. Rail freight will lose £50 million this year, which is wide of the mark, and British Rail is rightly taking relatively modest steps to price up certain traffic. I think that it is sensible for British Rail to seek to increase prices where the business is not even covering its avoidable costs, making no contribution whatever to the infrastructure.
    Mr. Rhodri Morgan: Will the Minister give way?
    Mr. Freeman: No. I am sure that the hon. Gentleman will forgive me, but I have to answer 15 speeches and I intend to do so briefly in the time available. That is a courtesy to the House.
    The 8 per cent. rate of return for new investment is modest compared with road haulage, shipping or aviation in the private sector.
    My hon. Friend the Member for Hampshire, North-West, in a powerful speech, asked a number of pertinent questions. He asked about contracting-out services by Railtrack, the infrastructure body. I give him a categoric assurance that when Railtrack, a nationalised industry, has been established—we hope that the infrastructure body will be established by April 1994—the Government will require it to contract out as many of its services as possible. That will be a powerful incentive to get the best value for money from national resources going into infrastructure.
    Secondly, my hon. Friend referred to leasing and rolling stock procurement. My right hon. Friend the Secretary of State hopes next week to publish a consultation document on rolling stock procurement. We shall spell out carefully our plans for the development of a leasing industry so that the private sector can commence at an early stage—this year, we hope—the ordering of rolling stock and, ultimately, its leasing to private sector operators.
    Mr. Morgan: Old or new?
    Mr. Freeman: New rolling stock.
    My hon. Friend the Member for Hampshire, North-West asked about the ability of the private sector to commence the haulage of freight now. The first step is for us to publish yet another consultation document on the charging regime for not only freight but passenger services on the railway. My right hon. Friend hopes to publish that document in the next few weeks. It will enable the private sector to judge the viability and profitability of hauling freight, with private sector ownership of locos and wagons and private sector employment where profitable opportunities lie. I hope that in 1993, prior to privatisation, British Rail will take the opportunity of working with the private sector.
    I see sitting on the Front Bench the previous Secretary of State for Transport, my right hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Rificind). My right hon. and learned Friend asked British Rail to encourage the private sector to haul freight now and not to wait until we have reformed the legislation. I confirm that we shall discuss with British Rail opportunities for the private sector in the immediate future.
    Sir David Mitchell: Does that mean that there will be open access for the private sector freight operator to use British Rail track this year?
    Mr. Freeman: There cannot be open access until Royal Assent has been given to legislation. Prior to Royal Assent, we need the co-operation of British Rail because it has a statutory right to provide the drivers of trains. I hope that British Rail will co-operate voluntarily in any passenger and freight opportunities prior to Royal Assent.
    The hon. Member for North Devon (Mr. Harvey) asked what were the benefits to passengers. During the debate, I noted 10 possible practical benefits to passengers, perhaps to commuters on Network SouthEast. It is not an exhaustive list, but I will quickly read out some examples of how a private sector franchised operator could improve the quality of passenger services.
    The first is the interconnection of InterCity services and other rail services using buses or even aeroplanes. It would be a positive advantage for rail users, although, of course, one must be careful about monopoly legislation. The second example is an improvement not only in car parking facilities for users of commuter services but in the security of cars in the car parks.
    Thirdly, there could be better passenger information systems. This is not merely a question of money but of attitude. It involves paying attention to passengers' interests. Fourthly, there could be the improvement of retailing opportunities at stations. Fifthly, there could be early provision of new equipment and the design of new rolling stock. Instead of engineers being responsible for designing what they think that the public needs—
    Mr. Prescott: Who will do it?
    Mr. Freeman: I shall tell the hon. Gentleman who will do it. The private sector owners of the rolling stock will be much more interested in designing stock to suit the passengers' needs.
    Sixthly, there could be better marketing. There must be new opportunities for changes in the price structure—especially for off-peak travel—to encourage more traffic. Seventhly, there could be better on-board services and, eighthly, development at stations. There must be property development opportunities which will improve some of the provincial railway stations in particular.
    Ninthly, there would be better staff incentives, giving rail staff the opportunity to own a share of the company, and there could be better performance pay arrangements. Finally—
    Mr. Bayley: Will the Minister give way?
    Mr. Freeman: No. On station services, more could be done at our major rail stations if the staff were interested in the passengers who use the rail stations rather than in the running of the trains.
    Mr. Harris: Will my hon. Friend give way?
    Mr. Freeman: No. I hope that my hon. Friend will forgive me. I have only 14 minutes left.
    The hon. Member for North Devon referred briefly to Tony Speller and to the Transport Act 1962 (Amendment) Act 1981, which he promoted. It is right that we should record the progress made in introducing experimental new rail services as a result of his initiative several years ago. I confirm that we shall preserve the Speller process, which brings great benefit to the rail services.
    It is strange to see the hon. Member for West Bromwich, East (Mr. Snape) sitting right at the back. I hope that the hon. Gentleman is not resiling from the
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    challenge of being a member of the Standing Committee. We look forward to his energetic and constant attendance in Committee—and to his sense of humour, which somewhat defeated him when he talked about rail investment. He implied that rail investment was being neglected. I looked at the record under the previous Labour Government. Between 1974 and 1979, at current prices—
    Mr. Snape indicated dissent.
    Mr. Freeman: The hon. Gentleman shakes his head. I shall give him the figures. From 1974 to 1979, in 1992–93 current prices, the average annual investment made by British Rail, with Government support, was £600 million. As my right hon. Friend the Secretary of State mentioned to the Select Committee only yesterday, next year—a difficult year—British Rail will invest £1 billion a year—
    Mr. Wilson: Including the channel tunnel?
    Mr. Freeman: Investment by British Rail in rolling stock and in improving the railway, whether it is in the channel tunnel or in commuter services, is rail investment.
    Mr. Wilson: Will the Minister give way?
    Mr. Freeman: I shall come on to the other points raised by the hon. Gentleman. I will not give way.
    I am grateful for the support of my hon. Friend the Member for Southport. He supported the concept of pilot franchises. My right hon. Friend the Secretary of State for Transport hopes to announce the first tranche of franchises soon. During the course of 1993, that will enable negotiations with those who are interested in running the services. The first franchises cannot be let until there is Royal Assent to the Bill and until Railtrack is established. I am grateful for my hon. Friend's support.
    The hon. Member for Morley and Leeds, South (Mr. Gunnell), who is in his place, referred specifically to rolling stock for the West Yorkshire passenger transport authority. I share his concern about that. I have arranged to meet the PTA at an early date to discuss whether the new leasing initiative announced by the Chancellor of the Exchequer, with £150 million of leasing for rolling stock, will apply to the Leeds-Bradford railway. I understand that there are substantive negotiations on rolling stock and it may be appropriate to consider that stock under that facility.
    On investment, order books for the past 44 years have reflected the fact that British Rail, being a nationalised industry, can look forward only a relatively short period. One of the great advantages of bringing in the private sector is that the time horizons for investment planning can be greater. That will be a great advantage.
    My hon. Friend the Member for Wellingborough asked a number of questions. He is a neighbouring Member of Parliament with long experience in transport. He asked about private management bids. I can confirm that British Rail will encourage and finance management buy-out bids. That is right. A price preference will be available when it comes to purchases of freight operations. We want the management of British Rail to play an active part.
    My hon. Friend the Member for Wellingborough also asked about closure procedures. His argument is exactly right. The public sector will get better value for money for

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    the £1 billion subsidy currently spent if the private sector operates existing railway services more efficiently. That must be right.
    I should make it plain that the 12–year time horizon referred to during the debate applies to privatisation on the German model, which marches closely with the British Government's proposals. During this Parliament, we hope to make progress with transferring freight into the private sector and also to make significant progress with franchising. The 12–year time horizon is for the complete privatisation of the railway, as proposed by the Germans.
    The hon. Member for Sunderland, North (Mr. Etherington) talked about channel tunnel freight. I share his view that such freight, which should be running in about 12 months' time, should travel all the way by rail to the north-east and the north-west. I draw the hon. Gentleman's attention to the terminal at Wilton and to the Government's belief that we must look forward into the 21st century for alternative routes around London for the transport of freight beyond London.
    Mr. Morgan: Will the Minister give way?
    Mr. Freeman: I am sure that the hon. Gentleman will forgive me; I have nine minutes left and have yet to deal with some of the points raised by Members on the Opposition Front Bench.
    My hon. Friend the Member for Saffron Walden made a number of helpful points. I agree that the Opposition's approach has been extremely negative. We have heard nothing positive from the Opposition Front Bench. Labour Members argue that there is nothing wrong with British railways that a lot more money will not solve. That is the sum total of their argument. I am grateful to my hon. Friend for his support of the concept of Railtrack. He was right in talking about the Government's new initiative in providing capital grants for investment in infrastructure —the new department announced in the White Paper last summer. Moreover, the Chancellor's autumn statement provides the opportunity for the private sector to play a role in the financing of infrastructure as well as rolling stock.
    On the subject of the franchising process, I confirm that we do not rule out the possibility of what we call vertical franchising. In certain cases, it may make a lot of sense for franchisees to control the signalling and the infrastructure —subject, or course, to the freeholding interest of Railtrack. If that makes sense, we are prepared to consider it.
    In his short speech, the hon. Member for Meironnydd Nant Conwy (Mr. Llwyd) asked me 15 questions. I shall read the record and reply to all of them. The hon. Gentleman was kind enough to say that, whatever answer I gave, he would not change his mind, but some of his constituents may. The hon. Gentleman asked how the franchising authority would go about subsidising—what the criteria would be. I can confirm that when it comes to the letting of franchises and the holding of competitions, the franchising authority will start with the service provided by British Rail. It will know the cost of the subsidy provided to that line and will be looking for better value for money. If that cannot be obtained, the service
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    will continue to be provided by British Rail. As my right hon. Friend the Secretary of State said, the revenue subsidy regime will continue.
    My hon. Friend the Member for Dartford would go with three peers a-commuting. I look forward to hearing of my hon. Friend's experience with Lords Young, Ridley and Whitelaw on the 8 am from Dartford. Perhaps he will report back to us on that. The Government agree with my hon. Friend's view that private sector franchising will improve accountability. We shall have a leaner management, with shorter lines of reporting and a better service provided.
    The hon. Member for Hampstead and Highgate (Ms. Jackson) is not in her place, so I will write to her.
    I am grateful to my hon. Friend the Member for Eastleigh for his support. In his powerful speech, he drew upon the experience in Sweden, Japan and Germany, all of which helps support our proposals. My hon. Friend is right to talk about the successes of Foster Yeomen and the Royal Scot because those services currently provided by the private sector will expand under our provisions of open access.
    In answer to the hon. Member for York (Mr. Bayley), I shall explain that the safety document published today by my right hon. Friend the Secretary of State recommends consultation on the desirability of imposing controls of drivers' hours. We are prepared to listen to representations not only from the hon. Gentleman but from other people.
    My hon. Friend the Member for Christchurch raised a number of matters which deserve comment. The Government will publish eight consultation documents. I am sure that the hon. Member for Kingston upon Hull, East and the whole House will welcome the consultation process. It is not a dogmatic imposition of policy; it is a dialogue that the Government will conduct with the industry and those who are interested in running services.
    We have published four documents—on franchising, the British Transport police, safety and consumer representation—and we shall publish four other documents: on pensions, rolling stock procurement, access and charging, and the structure of the freight industry that will be transferred to the private sector. I hope that my hon. Friend the Member for Christchurch will appreciate, as I know that many of my other hon. and right hon. Friends will appreciate, the open way in which the consultation process will be conducted.
    My hon. Friend the Member for Christchurch referred to the role of British Rail in bidding for services. I can confirm that when the franchising authority lets franchises for passenger services it will pay special attention to bids from management and staff. If a bid does not present good value for money, British Rail will continue to provide the service. I hope that that will provide some protection, certainly for the Exchequer, to ensure that the service provided is efficient.
    My hon. Friend the Member for Christchurch also referred to leasing and the public sector borrowing requirement. The £150 million is not counted in British Rail's public financing limit and, therefore, represents additional resources provided by the Government to British Rail.
    In conclusion, I shall draw on three matters raised by the hon. Member for Kingston upon Hull, East. I have tried to answer questions raised, rather than resort to cheap exchanges, as typified to a certain extent in the hon. Gentleman's speech. The hon. Gentleman cannot quite

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    reconcile two different statements that he made. First, he said that private sector operators are not as good as the state.
    Mr. Prescott: I did not say that.
    Mr. Freeman: The hon. Gentleman did say that—I wrote it down very carefully. The hon. Gentleman can read the record in the morning. Later in his speech, he said that he was happy for private sector operators to provide public transport services.
    The difference between the Labour party and the Conservative party is that we see the private sector working in partnership with the public sector to improve the quality of the rail services. We see the infrastructure being provided initially by the state, Railtrack, and financed by the state with an improvement in the mechanism for financing it. We also see the transfer of freight services to the private sector. All other modes of freight movement in the United Kingdom, whether by ship, air or road, are in the private sector and are not subsidised. There is no reason why rail freight should not be in the same position.
    The privatisation of passenger services has the strong support of Conservative Members. To bring in the private sector to run certain passenger services will be a gradual process. The Government will continue to provide a substantial level of subsidy. The hon. Member for Kingston upon Hull, East is dogmatic, although he charged the Government with being dogmatic. He is not prepared to see any private sector operation of a passenger train. By opposing the Government's proposals, he is against the concept of the private sector operating passenger services. He is also against the transfer of freight to the private sector.
    The Government are determined to introduce legislation shortly which will command the overwhelming support of Conservative Members. The reforms in such legislation will provide a service which improves the quality and quantity of passenger services provided by British Rail at present. I commend the Government amendment to my colleagues on the Conservative Benches. I invite the House to throw out the Opposition motion and go, to use the words of my hon. Friend the Member for Christchurch, "full steam ahead."
    Question put, That the original words stand part of the Question:—
    The House divided: Ayes 270, Noes 309.

    Division No. 109]

    [9.59 pm

    AYES

    Abbott, Ms Diane

    Bell, Stuart

    Adams, Mrs Irene

    Benn, Rt Hon Tony

    Ainger, Nick

    Benton, Joe

    Ainsworth, Robert (Cov'try NE)

    Bermingham, Gerald

    Allen, Graham

    Berry, Dr. Roger

    Alton, David

    Betts, Clive

    Anderson, Donald (Swansea E)

    Blair, Tony

    Anderson, Ms Janet (Ros'dale)

    Blunkett, David

    Armstrong, Hilary

    Boateng, Paul

    Ashdown, Rt Hon Paddy

    Boyce, Jimmy

    Ashton, Joe

    Bradley, Keith

    Austin-Walker, John

    Bray, Dr Jeremy

    Banks, Tony (Newham NW)

    Brown, Gordon (Dunfermline E)

    Barnes, Harry

    Brown, N. (N'c'tle upon Tyne E)

    Battle, John

    Bruce, Malcolm (Gordon)

    Bayley, Hugh

    Burden, Richard

    Beckett, Margaret

    Byers, Stephen

    Beggs, Roy

    Caborn, Richard

    Beith, Rt Hon A. J.

    Callaghan, Jim

    866

    Campbell, Mrs Anne (C'bridge)

    Harvey, Nick

    Campbell, Ronnie (Blyth V)

    Hattersley, Rt Hon Roy

    Campbell-Savours, D. N.

    Henderson, Doug

    Canavan, Dennis

    Heppell, John

    Carlile, Alexander (Montgomry)

    Hill, Keith (Streatham)

    Chisholm, Malcolm

    Hinchliffe, David

    Clapham, Michael

    Home Robertson, John

    Clark, Dr David (South Shields)

    Hood, Jimmy

    Clarke, Eric (Midlothian)

    Hoon, Geoffrey

    Clelland, David

    Howarth, George (Knowsley N)

    Clwyd, Mrs Ann

    Howells, Dr. Kim (Pontypridd)

    Coffey, Ann

    Hoyle, Doug

    Cohen, Harry

    Hughes, Kevin (Doncaster N)

    Connarty, Michael

    Hughes, Robert (Aberdeen N)

    Cook, Frank (Stockton N)

    Hughes, Roy (Newport E)

    Cook, Robin (Livingston)

    Hughes, Simon (Southwark)

    Corbett, Robin

    Hutton, John

    Corbyn, Jeremy

    Ingram, Adam

    Corston, Ms Jean

    Jackson, Glenda (H'stead)

    Cousins, Jim

    Jackson, Helen (Shef'ld, H)

    Cox, Tom

    Jamieson, David

    Cryer, Bob

    Janner, Greville

    Cummings, John

    Jones, Barry (Alyn and D'side)

    Cunliffe, Lawrence

    Jones, Lynne (B'ham S O)

    Cunningham, Jim (Covy SE)

    Jones, Martyn (Clwyd, SW)

    Cunningham, Dr John (C'p'l'nd)

    Jowell, Tessa

    Dafis, Cynog

    Kaufman, Rt Hon Gerald

    Dalyell, Tarn

    Keen, Alan

    Darling, Alistair

    Kennedy, Charles (Ross,C&S)

    Davidson, Ian

    Kennedy, Jane (Lpool Brdgn)

    Davies, Bryan (Oldham C'tral)

    Khabra, Piara S.

    Davies, Rt Hon Denzil (Llanelli)

    Kilfoyle, Peter

    Davies, Ron (Caerphilly)

    Kirkwood, Archy

    Davis, Terry (B'ham, H'dge H'I)

    Leighton, Ron

    Denham, John

    Lestor, Joan (Eccles)

    Dewar, Donald

    Lewis, Terry

    Dixon, Don

    Litherland, Robert

    Dobson, Frank

    Livingstone, Ken

    Donohoe, Brian H.

    Lloyd, Tony (Stretford)

    Dowd, Jim

    Llwyd, Elfyn

    Dunnachie, Jimmy

    Lynne, Ms Liz

    Dunwoody, Mrs Gwyneth

    McAllion, John

    Eagle, Ms Angela

    McAvoy, Thomas

    Eastham, Ken

    McCartney, Ian

    Enright, Derek

    Macdonald, Calum

    Etherington, Bill

    McFall, John

    Evans, John (St Helens N)

    McKelvey, William

    Ewing, Mrs Margaret

    Mackinlay, Andrew

    Fatchett, Derek

    McLeish, Henry

    Faulds, Andrew

    Maclennan, Robert

    Field, Frank (Birkenhead)

    McMaster, Gordon

    Fisher, Mark

    McNamara, Kevin

    Flynn, Paul

    McWilliam, John

    Forsythe, Clifford (Antrim S)

    Madden, Max

    Foster, Derek (B'p Auckland)

    Mahon, Alice

    Foster, Don (Bath)

    Mandelson, Peter

    Foulkes, George

    Marek, Dr John

    Fraser, John

    Marshall, Jim (Leicester, S)

    Fyfe, Maria

    Martin, Michael J. (Springburn)

    Galbraith, Sam

    Martlew, Eric

    Galloway, George

    Maxton, John

    Gapes, Mike

    Meacher, Michael

    Garrett, John

    Meale, Alan

    George, Bruce

    Michael, Alun

    Gerrard, Neil

    Michie, Bill (Sheffield Heeley)

    Godman, Dr Norman A.

    Milburn, Alan

    Godsiff, Roger

    Miller, Andrew

    Golding, Mrs Llin

    Mitchell, Austin (Gt Grimsby)

    Gordon, Mildred

    Moonie, Dr Lewis

    Graham, Thomas

    Morgan, Rhodri

    Grant, Bernie (Tottenham)

    Morley, Elliot

    Griffiths, Nigel (Edinburgh S)

    Morris, Estelle (B'ham Yardley)

    Griffiths, Win (Bridgend)

    Morris, Rt Hon J. (Aberavon)

    Grocott, Bruce

    Mowlam, Marjorie

    Gunnell, John

    Mudie, George

    Hain, Peter

    Mullin, Chris

    Hall, Mike

    Murphy, Paul

    Hanson, David

    Oakes, Rt Hon Gordon

    Hardy, Peter

    O'Brien, Michael (N W'kshire)

    Harman, Ms Harriet

    O'Brien, William (Normanton)

    867

    O'Hara, Edward

    Smith, Llew (Blaenau Gwent)

    Olner, William

    Snape, Peter

    O'Neill, Martin

    Soley, Clive

    Orme, Rt Hon Stanley

    Spearing, Nigel

    Pendry, Tom

    Spellar, John

    Pickthall, Colin

    Squire, Rachel (Dunfermline W)

    Pike, Peter L.

    Steinberg, Gerry

    Pope, Greg

    Stevenson, George

    Powell, Ray (Ogmore)

    Stott, Roger

    Prentice, Ms Bridget (Lew'm E)

    Strang, Dr. Gavin

    Prentice, Gordon (Pendle)

    Straw, Jack

    Prescott, John

    Taylor, Mrs Ann (Dewsbury)

    Primarolo, Dawn

    Taylor, Matthew (Truro)

    Purchase, Ken

    Thompson, Jack (Wansbeck)

    Quin, Ms Joyce

    Tipping, Paddy

    Radice, Giles

    Turner, Dennis

    Randall, Stuart

    Tyler, Paul

    Redmond, Martin

    Vaz, Keith

    Reid, Dr John

    Walker, Rt Hon Sir Harold

    Robertson, George (Hamilton)

    Wallace, James

    Robinson, Geoffrey (Co'try NW)

    Walley, Joan

    Roche, Mrs. Barbara

    Wardell, Gareth (Gower)

    Rogers, Allan

    Wareing, Robert N

    Rooker, Jeff

    Watson, Mike

    Rooney, Terry

    Wicks, Malcolm

    Ross, Ernie (Dundee W)

    Wigley, Dafydd

    Rowlands, Ted

    Williams, Rt Hon Alan (Sw'n W)

    Ruddock, Joan

    Williams, Alan W (Carmarthen)

    Sedgemore, Brian

    Wilson, Brian

    Sheerman, Barry

    Winnick, David

    Sheldon, Rt Hon Robert

    Worthington, Tony

    Shore, Rt Hon Peter

    Wray, Jimmy

    Short, Clare

    Wright, Dr Tony

    Simpson, Alan

    Young, David (Bolton SE)

    Skinner, Dennis

    Smith, Andrew (Oxford E)

    Tellers for the Ayes:

    Smith, C. (Isl'ton S & F'sbury)

    Mr. Eric Illsley and

    Smith, Rt Hon John (M'kl'ds E)

    Mr. Jon Owen Jones.

    NOES

    Ainsworth, Peter (East Surrey)

    Burns, Simon

    Aitken, Jonathan

    Burt, Alistair

    Alexander, Richard

    Butcher, John

    Alison, Rt Hon Michael (Selby)

    Butler, Peter

    Allason, Rupert (Torbay)

    Butterfill, John

    Amess, David

    Carlisle, John (Luton North)

    Ancram, Michael

    Carlisle, Kenneth (Lincoln)

    Arbuthnot, James

    Carrington, Matthew

    Arnold, Jacques (Gravesham)

    Carttiss, Michael

    Ashby, David

    Cash, William

    Aspinwall, Jack

    Channon, Rt Hon Paul

    Atkinson, Peter (Hexham)

    Chaplin, Mrs Judith

    Baker, Rt Hon K. (Mole Valley)

    Churchill, Mr

    Baker, Nicholas (Dorset North)

    Clappison, James

    Baldry, Tony

    Clark, Dr Michael (Rochford)

    Banks, Matthew (Southport)

    Clarke, Rt Hon Kenneth (Ruclif)

    Banks, Robert (Harrogate)

    Clifton-Brown, Geoffrey

    Bates, Michael

    Coe, Sebastian

    Batiste, Spencer

    Colvin, Michael

    Bellingham, Henry

    Congdon, David

    Bendall, Vivian

    Conway, Derek

    Beresford, Sir Paul

    Coombs, Anthony (Wyre For'st)

    Biffen, Rt Hon John

    Coombs, Simon (Swindon)

    Blackburn, Dr John G.

    Cope, Rt Hon Sir John

    Body, Sir Richard

    Cormack, Patrick

    Bonsor, Sir Nicholas

    Couchman, James

    Booth, Hartley

    Cran, James

    Boswell, Tim

    Currie, Mrs Edwina (S D'by'ire)

    Bottomley, Peter (Eltham)

    Curry, David (Skipton & Ripon)

    Bottomley, Rt Hon Virginia

    Davies, Quentin (Stamford)

    Bowden, Andrew

    Davis, David (Boothferry)

    Bowis, John

    Day, Stephen

    Boyson, Rt Hon Sir Rhodes

    Deva, Nirj Joseph

    Brandreth, Gyles

    Devlin, Tim

    Brazier, Julian

    Dickens, Geoffrey

    Bright, Graham

    Dorrell, Stephen

    Brooke, Rt Hon Peter

    Douglas-Hamilton, Lord James

    Brown, M. (Brigg & Cl'thorpes)

    Dover, Den

    Browning, Mrs. Angela

    Duncan, Alan

    Bruce, Ian (S Dorset)

    Duncan-Smith, Iain

    868

    Dunn, Bob

    King, Rt Hon Tom

    Durant, Sir Anthony

    Kirkhope, Timothy

    Dykes, Hugh

    Knapman, Roger

    Eggar, Tim

    Knight, Mrs Angela (Erewash)

    Elletson, Harold

    Knight, Greg (Derby N)

    Emery, Rt Hon Sir Peter

    Knight, Dame Jill (Bir'm E'st'n)

    Evans, David (Welwyn Hatfield)

    Knox, David

    Evans, Jonathan (Brecon)

    Kynoch, George (Kincardine)

    Evans, Nigel (Ribble Valley)

    Lait, Mrs Jacqui

    Evans, Roger (Monmouth)

    Lamont, Rt Hon Norman

    Evennett, David

    Lang, Rt Hon Ian

    Faber, David

    Lawrence, Sir Ivan

    Fabricant, Michael

    Legg, Barry

    Fairbairn, Sir Nicholas

    Leigh, Edward

    Fenner, Dame Peggy

    Lester, Jim (Broxtowe)

    Fishburn, Dudley

    Lidington, David

    Forman, Nigel

    Lilley, Rt Hon Peter

    Forsyth, Michael (Stirling)

    Lloyd, Peter (Fareham)

    Forth, Eric

    Lord, Michael

    Fowler, Rt Hon Sir Norman

    Luff, Peter

    Fox, Dr Liam (Woodspring)

    Lyell, Rt Hon Sir Nicholas

    Fox, Sir Marcus (Shipley)

    MacGregor, Rt Hon John

    Freeman, Roger

    MacKay, Andrew

    French, Douglas

    Maclean, David

    Fry, Peter

    McLoughlin, Patrick

    Gale, Roger

    McNair-Wilson, Sir Patrick

    Gallie, Phil

    Madel, David

    Gardiner, Sir George

    Maitland, Lady Olga

    Garel-Jones, Rt Hon Tristan

    Malone, Gerald

    Garnier, Edward

    Mans, Keith

    Gill, Christopher

    Marland, Paul

    Gillan, Cheryl

    Marlow, Tony

    Goodson-Wickes, Dr Charles

    Marshall, John (Hendon S)

    Gorman, Mrs Teresa

    Marshall, Sir Michael (Arundel)

    Gorst, John

    Martin, David (Portsmouth S)

    Grant, Sir Anthony (Cambs SW)

    Mawhinney, Dr Brian

    Greenway, Harry (Ealing N)

    Mellor, Rt Hon David

    Greenway, John (Ryedale)

    Merchant, Piers

    Griffiths, Peter (Portsmouth, N)

    Milligan, Stephen

    Grylls, Sir Michael

    Mills, Iain

    Gummer, Rt Hon John Selwyn

    Mitchell, Andrew (Gedling)

    Hague, William

    Mitchell, Sir David (Hants NW)

    Hamilton, Rt Hon Archie (Epsom)

    Moate, Sir Roger

    Hamilton, Neil (Tatton)

    Monro, Sir Hector

    Hampson, Dr Keith

    Montgomery, Sir Fergus

    Hannam, Sir John

    Moss, Malcolm

    Hargreaves, Andrew

    Needham, Richard

    Harris, David

    Nelson, Anthony

    Haselhurst, Alan

    Neubert, Sir Michael

    Hawkins, Nick

    Newton, Rt Hon Tony

    Hawksley, Warren

    Nicholls, Patrick

    Hayes, Jerry

    Nicholson, David (Taunton)

    Heald, Oliver

    Nicholson, Emma (Devon West)

    Heath, Rt Hon Sir Edward

    Norris, Steve

    Heathcoat-Amory, David

    Onslow, Rt Hon Sir Cranley

    Hendry, Charles

    Oppenheim, Phillip

    Heseltine, Rt Hon Michael

    Ottaway, Richard

    Hicks, Robert

    Page, Richard

    Higgins, Rt Hon Sir Terence L.

    Paice, James

    Hill, James (Southampton Test)

    Patnick, Irvine

    Hogg, Rt Hon Douglas (G'tham)

    Patten, Rt Hon John

    Horam, John

    Pattie, Rt Hon Sir Geoffrey

    Hordern, Rt Hon Sir Peter

    Pawsey, James

    Howard, Rt Hon Michael

    Peacock, Mrs Elizabeth

    Howarth, Alan (Strat'rd-on-A)

    Pickles, Eric

    Howell, Ralph (North Norfolk)

    Porter, Barry (Wirral S)

    Hughes Robert G. (Harrow W)

    Porter, David (Waveney)

    Hunt, Rt Hon David (Wirral W)

    Portillo, Rt Hon Michael

    Hunt, Sir John (Ravensbourne)

    Powell, William (Corby)

    Hunter, Andrew

    Rathbone, Tim

    Hurd, Rt Hon Douglas

    Redwood, John

    Jack, Michael

    Renton, Rt Hon Tim

    Jackson, Robert (Wantage)

    Richards, Rod

    Jenkin, Bernard

    Riddick, Graham

    Jessel, Toby

    Rifkind, Rt Hon. Malcolm

    Johnson Smith, Sir Geoffrey

    Robathan, Andrew

    Jones, Gwilym (Cardiff N)

    Roberts, Rt Hon Sir Wyn

    Jopling, Rt Hon Michael

    Robertson, Raymond (Ab'd'n S)

    Kellett-Bowman, Dame Elaine

    Robinson, Mark (Somerton)

    Kilfedder, Sir James

    Roe, Mrs Marion (Broxbourne)

    869

    Rowe, Andrew (Mid Kent)

    Temple-Morris, Peter

    Rumbold, Rt Hon Darne Angela

    Thompson, Sir Donald (C'er V)

    Ryder, Rt Hon Richard

    Thompson, Patrick (Norwich N)

    Sackville, Tom

    Thornton, Sir Malcolm

    Sainsbury, Rt Hon Tim

    Thurnham, Peter

    Scott, Rt Hon Nicholas

    Townend, John (Bridlington)

    Shaw, David (Dover)

    Townsend, Cyril D. (Bexl'yh'th)

    Shaw, Sir Giles (Pudsey)

    Tracey, Richard

    Shephard, Rt Hon Gillian

    Tredinnick, David

    Shepherd, Colin (Hereford)

    Trend, Michael

    Shepherd, Richard (Aldridge)

    Trotter, Neville

    Shersby, Michael

    Twinn, Dr Ian

    Skeet, Sir Trevor

    Vaughan, Sir Gerard

    Smith, Tim (Beaconsfield)

    Viggers, Peter

    Soames, Nicholas

    Waldegrave, Rt Hon William

    Speed, Sir Keith

    Walker, Bill (N Tayside)

    Spencer, Sir Derek

    Waller, Gary

    Spicer, Sir James (W Dorset)

    Wardle, Charles (Bexhill)

    Spicer, Michael (S Worcs)

    Waterson, Nigel

    Spink, Dr Robert

    Watts, John

    Spring, Richard

    Wells, Bowen

    Sproat, Iain

    Wheeler, Rt Hon Sir John

    Squire, Robin (Hornchurch)

    Whitney, Ray

    Stanley, Rt Hon Sir John

    Whittingdale, John

    Steen, Anthony

    Wiggin, Sir Jerry

    Stephen, Michael

    Wilkinson, John

    Stern, Michael

    Willetts, David

    Stewart, Allan

    Winterton, Mrs Ann (Congleton)

    Streeter, Gary

    Wolfson, Mark

    Sumberg, David

    Wood, Timothy

    Sweeney, Walter

    Yeo, Tim

    Sykes, John

    Young, Sir George (Acton)

    Tapsell, Sir Peter

    Taylor, Ian (Esher)

    Tellers for the Noes:

    Taylor, John M. (Solihull)

    Mr. Sidney Chapman and

    Taylor, Sir Teddy (Southend, E)

    Mr. David Lightbown.

    Question accordingly negatived.
    Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments) and agreed to.
    MADAM SPEAKER forthwith declared the main Question, as amended, to be agreed to.
    Resolved,
    That this House recognises that progress has recently been made in improving British Rail's services; believes that further necessary improvements for rail users can best be achieved by creating the opportunity for introducing into the railways private sector ownership, management skills and capital; and therefore supports the Government's proposals as set out in the White Paper, "New Opportunities for the Railways".

Insurance Companies
10.14 pm
The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Neil Hamilton): I beg to move,
That the draft Insurance Companies (Amendment No. 2) Regulations 1992, which were laid before this House on 30th November, be approved.
The regulations which I have laid before the House are intended to fulfil our obligation to implement the second Council directive on life insurance, directive 90/619/EEC, of 8 November 1990.
The main purpose of the directive is to allow life insurance companies which have head offices in one member state to operate in another without having to set up a branch or agency in that state. This concept of selling insurance across member states' borders is known as the freedom-to-provide services. This freedom has existed for most non-life insurance for two years and was extended in November last year to companies providing cover for motor insurance risks. The regulations now before the House extend this freedom to life insurance, although not, for the time being at least, to long-term business falling within class VII, that is, pension fund management.
This freedom is, however, of limited effect. Only insurers of large non-life risks and life contracts which are taken out by the policyholder on his own initiative enjoy full freedom to provide services under the second directive. The directives allow the member state where the services are provided to continue to authorise the provision of other insurance into that member state. The Government did not take up this option in respect of non-life insurance provided into the United Kingdom, and do not propose doing so for life insurance. Thus we will continue to allow freedom to provide services into the United Kingdom.
The directive represents a midway stage between the first life directive, which in 1979 allowed life insurers for the first time to establish branches in other member states, and the third directives which were adopted last year and which complete the single market for insurance by introducing the single passport concept for all direct insurance. This single passport will mean that an insurer will be able to offer insurance anywhere in the European Community on the basis of a single authorisation which it receives in the state where its head office is situated. These third directives are due to be implemented by July 1994. I shall be laying measures later this year to implement the third directives. Tonight, however, we have to consider the implementation of the midway stage of the second life directive.
The directive is in two main parts. First, it amends and extends the first life directive by introducing provisions in four areas: first, rules governing the law applicable to direct life insurance contracts; secondly, procedures for the transfer of life insurance contracts from one insurer to another; thirdly, an extension of the supervisory authority's powers to take action against an insurer which infringes the laws of another member state; and, fourthly, the establishment of reserve powers to enable member states to act together to obtain effective access to non-EC markets.
Dr. Norman A. Godman: Can the Minister give an assurance that he is satisfied as to the measures of protection for individual policyholders contained in the regulations?
Mr. Hamilton: As regards contracts which are written in the United Kingdom, there is no change in the protection that applies to policyholders. As regards United Kingdom residents who wish to take advantage of the opportunity to purchase contracts of insurance from other member states in the Community, they will be protected by such arrangements as are in force for those member states.
I reiterate that this is a halfway stage between the first and third directives. We are not going to be in a situation where there is complete freedom to provide services throughout the Community which we shall eventually enjoy, and to that extent the need to be authorised as an insurer in other member states will, to some extent, I suppose, provide the kind of protection which the hon. Gentleman might be envisaging.
Secondly, the directive introduces freedom for life insurers to provide services. The provisions include a requirement on the insurer to notify the supervisory authorities in the member state where his head office is situated of his intention to provide services in another state, to notify the authorities in the state where the services are to be provided, and, where the insurance is to be provided from a branch established in another member state, to notify the authorities of that state also.
The option to which I referred for member states to choose to make the provision of services in their territory conditional on the grant of an official authorisation from their authorities except where the policyholder takes the initiative to conclude a contract on a cross-border services basis includes also a power for the competent authorities in the member state where the services are provided to take action against companies which fail to comply with the laws applicable to them in that state, and if the authorities in the member state where that establishment is situated fail to do so it also provides for cooling-off rights for all individual life assurance policyholders contracting on a cross-border services basis, and the exchange of statistics on premium income receivable from services contracts.
I have placed in the Library and in the Vote Office detailed notes on the regulations. I hope that hon. Members will find those helpful to their understanding of their effect. I shall explain briefly how each regulation implements those principles, but I shall be happy to explain any point should hon. Members find that helpful.
Regulations 2 and 4 extend to long-term insurance business existing provisions in the Insurance Companies Act 1982 which were introduced by earlier regulations in respect of general insurance business. Regulation 2 extends the Secretary of State's powers of intervention, powers to withdraw a company's authorisation and powers to petition for the winding up of a company where that company has failed to comply with the laws of another member state if those laws implement the first or second life directives.
Regulation 4 extends the provisions relating to the provision of life insurance into the United Kingdom from another member state and thus fulfils one of the key purposes of the directive. Regulation 6 provides interpretation for certain phrases used in the Insurance Companies Act 1982, as amended by these regulations.
Regulation 3 implements article 6 of the directive, which lays down detailed arrangments for consultation with the authorities in other member states before approval can be given to a transfer of long-term insurance business from one authorised insurer to another. It also requires the authorities in the member state where the head
872
office of the transferee company is situated to certify that the transferee will have the necessary margin of solvency after taking the transfer into account.
Regulations 5 and 9 implement the provisions of the directive which determine the law applicable to direct life insurance contracts. Regulation 5 amends the Insurance Companies Act by introducing the rules of article 4 of the directive and the Rome convention. Regulation 9 clarifies the relationship between article 4 and the Rome convention on the law applicable to contractual obligations.
Regulation 7 limits the notification requirements on EC insurers providing insurance into the United Kingdom, if that insurance is investment business within the definition in the Financial Services Act 1986. The FSA requires such insurers to notify the Securities and Investments Board of its intention to provide such services into the United Kingdom. However, all EC insurers providing any sort of life insurance services into the United Kingdom are required by the Insurance Companies Act to notify the Secretary of State. That regulation allows such insurers to be deemed to have complied with the FSA by submitting a single notification to the Secretary of State, who will in turn forward such notification to the SIB.
Regulation 8 completes the implementation of article 9 of the directive and article 4 of the motor services directive, which is directive 90/618/EEC, which for the most part were implemented by the Insurance Companies (Amendment) Regulations 1992, in the consideration of which I had the advantage of the presence of the hon. Member for Middlesbrough (Mr. Bell) on 19 November last year.
That regulation ensures that the Secretary of State's or the Treasury's powers to take action under section 183 of the Financial Services Act against an insurer which is connected with a non-EEC country cannot be exercised in situations where the Council or Commission may issue a direction under the directives. In the view of the Government, the powers of the Council and Commission are exclusive. A similar provision in respect of banking was made last month in the Banking Co-ordination (Second Council Directive) Regulations 1992.
Regulations 10 and 11 introduce a statistical requirement on life insurers to provide details of premium income receivable from their services business broken down into each class of business in each member state in which the services have been provided. Regulation 11 limits the provision of statistics to cover only that business provided from the time the regulations come into force —that is, after 20 May this year—thus ensuring that the requirement is not retrospective.
The schedule to the regulations provides the form in which this information should be supplied.
These regulations do not implement the cooling-off provisions of article 15, to which I referred earlier. This article was amended by article 30 of the third life directive, which was adopted on 10 November last year. I intend, in due course—shortly, I hope—to lay separate regulations to implement the cancellation provisions of both directives. These regulations would come into force on the same day—20 May—as the regulations we are discussing now.
Mr. A. J. Beith: This means that we shall end up with two different cooling-off periods

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—one, of 10 days, for policies within the Community, and another, of 14 days, for those involving countries outside. Does the Minister agree that this will be rather confusing?
Mr. Hamilton: I admit that it is less than satisfactory. As the Church of England might say, it falls short of the ideal. The difficulty is caused by the problem of vires under European Community legislation, inasmuch as we can implement by order the provisions of the directive only insofar as it is required to fulfil the purposes of the directive with regard to the provision of services entirely within the European Community. As regards third countries, it is not possible for us to include provisions to harmonise the legislation by order. We should have to introduce primary legislation to do that.
In view of the fact that the regime under these directives will subsist for only a relatively short period—12 months or so—it does not seem to us to pose too great a risk, although I have to admit that if we had had a completely free hand in the matter we might have acted differently. However, I see no prospect of our being able to implement a common regime by means of primary legislation in the meantime. As the right hon. Member for Berwick-upon-Tweed (Mr. Beith) knows, we have much pressing business to do in the remainder of this Session.
The Government attach high priority to the completion of the single market in insurance. The second direclive and the regulations that we are discussing tonight represent a small but useful step. I therefore look forward to bringing before the House later this year regulations to implement the third directives, which, as I have said, will grant the single passport to European Community insurers and make the single market a reality.
On that basis, I commend the regulations to the House.
10.27 pm
Mr. Stuart Bell: I am grateful to the Minister for taking us through the regulations and explaining the great entanglements involved in dealing with European Communities legislation. We can see that our signing the Single European Act, with the single market coming into force on 1 January, permeates all the legislation that goes through this House and produces entanglements such as the Minister has described. We have here a clear example. The regulations with which we are dealing impinge upon and modify the Insurance Companies Act 1982, the Financial Services Act 1986, the Insurance Companies (Amendment) Regulations 1992—not to mention the Contracts (Applicable Law) Act 1990.
Today I have noticed a curious paradox. On one hand, the Prime Minister called for more deregulation, whereas later in the day we are debating more, rather than less, regulation. While the Government consistently call for more deregulation, anyone in the business of protecting the consumer—it is the duty of the Department of Trade and Industry to supervise the insurance industry—must look for regulations such as we are debating tonight.
Regulation or not, it can hardly be said that the Government have been particularly successful in maintaining the pre-eminence of our insurance industry as an international leader at the heart of the European Communities. In 1990 the insurance sector's net foreign earnings were £2.2 billion—below its 1983 level, and well short of the peak of £4.9 billion attained in 1986. An analysis of London's actual share of international insurance business suggests a decline from 50 per cent. in
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1976 to 25 per cent. now. Specialist insurance, a field in which London was formerly an international leader, has also registered a decline. In total, funds such as pension and life assurance under portfolio management in the United Kingdom fell some way short of the equivalent totals managed in Tokyo and New York.
The insurance industry has not provided a reassuring face for the British public. Throughout the country there is genuine concern about increased premiums and the sheer inability to get insurance cover. I—and, I am sure, many hon. Members—have constituents who cannot get insurance cover for items such as rented flats, youth clubs and community centres or even for businesses whose leases are running out and will not be renewed because of the absence of insurance cover.
Sir Nicholas Bonsor: The hon. Gentleman is aware of my interest as a member of Lloyd's. One of the reasons for British insurance not being so successful as it should is that the tax regimes of successive Governments have made it impossible for British insurance companies and, indeed, Lloyd's to build up adequate reserves in the way that all our overseas insurance competitors have done. Will the Opposition support tax measures which will make such reserves possible?
Mr. Bell: I am aware of the hon. Gentleman's interest in Lloyd's and in insurance in general. One of the side issues of the directive will be taxation and whether there should be support for the view that policyholders' funds relating to services business written by United Kingdom insurers should not be taxed as they build up, so that United Kingdom insurers can compete on an equal footing with insurers in other countries. The debate has consequences for taxation. I shall deal with the matter of Lloyd's later in my speech.
The uncertainty and insecurity that the Governments of the noble Lady Thatcher liked to strew around the country as her own particular stardust have now affected the insurance industry—those who are insured and those who do the insuring. Equally important is the effect on those who invest their lives in their work for insurance companies. Local authorities encountered difficulties following the sudden withdrawal from the insurance market of MMI. Those difficulties have been lessened by its acquisition by the Zurich Insurance Company and by the hiving off of other assets of MMI. Those difficulties arose because MMI diversified into property, finance and computing and moved from its traditional base of insuring local authorities.
Local authorities throughout the country must have adequate insurance cover at reasonable premiums to avoid additional charges upon their council tax payers—especially at this time of Government-induced stringency. With the threat of council tax capping hanging over them, reasonable premiums are even more important. I am grateful to the Minister for his courtesy to me and my hon. Friends when we met him to discuss the future of MMI and the uncertainties faced by its staff. We are hopeful that the Zurich Insurance Company will understand that its future success will be founded on the kind of co-operation between management and workers that existed at MMI.
Insurance companies throughout Europe which will be covered by the directive employ nearly 790,000 people. Life assurance accounts for about 44 per cent. of premiums. We should all encourage that industry.

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In this country, the Confederation of Insurance Trade Unions alone represents more than 100,000 insurance staff.
It is ironic that the Government use the cloak of European Council directives to amend our internal legislation, notably the Lloyd's Act 1982 and the Insurance Companies Act 1982. That means that the Secretary of State, in accordance with regulation 2 of the order to which the Minister referred, now has powers of intervention over Lloyd's underwriters when they fail to satisfy obligations laid down in Community legislation.
It is a significant turn of events whereby the House is called upon to modify domestic legislation through the instigation of a European directive rather than a Bill through the House, especially on such an important matter as Lloyd's underwriters. The Minister was honest enough to say that the kind of primary legislation that we would need to put the various Community directives into order is not likely to happen, due to pressure on time. Therefore, we welcome this short debate tonight which allows us to air some of the matters that we have wanted to debate which otherwise would be excluded.
We have seen the untoward publicity that Lloyd's of London has received of late, the allegations of widespread insider dealing, financial mismanagement, the steps that Lloyd's has taken to put its house in order, the appointment of a new chief executive and chairman—both of whom I wish well in their work—the actions of the so-called burnt names and the difficulties with certain syndicates. We are looking closely at the question of self-regulation and statutory regulation. We are even considering in the long term whether the Lloyd's Act should be repealed.
On the complex question of taxation that the hon. Member for Upminster (Sir N. Bonsor) raised, while the Opposition closely scrutinise the regulation of Lloyd's, we are anxious to ensure that the Lloyd's market is successful not only in the City of London but within the framework of the EC and on the global stage.
The regulations touch on solvency margins. Will the Secretary of State tell the House what the solvency margins referred to in the directive and the regulations are? What is the excess of assets over liabilities within the EC? Is the minimum margin permitted approximately 17 per cent. of premiums, but is the benchmark throughout Europe the 30 per cent. margin that the Department of Trade and Industry thinks is the more appropriate margin?
We can also see from the regulations that there has to be full reciprocity throughout the Community in that regulation 8 precludes the issue of a notice in relation to a subsidiary insurance company where the only ground for the issue is the failure of a third country to allow insurance companies in the United Kingdom to carry on direct insurance business on an equal basis.
Regulation 8 also highlights the intertwining of insurance business throughout the European Community, which the Minister mentioned when he referred to the variety of regulations that we shall have to debate and discuss. We can also see the application of private international law in the regulations—that is to say, a court in this country looking into another's jurisdiction and satisfying itself that specified conditions in that member state are met.
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We see, too, that under Community legislation not only must the Secretary of State satisfy himself as to the obligations of an insurance company under our own United Kingdom law, but he may also act to satisfy an obligation under the law of another member state. The Chinese walls between member states become ever thinner in what is clearly a drive to harmonisation and, it is hoped, consumer protection.
We see under regulation 10 how the Department of Trade and Industry maintains its supervisory status—its watchdog status—by requiring establishments to prepare additional information to be submitted to the Secretary of State in respect of operations, namely, in the case of gross premiums.
My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) and the right hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to the cooling-off period. As I understand it, the regulations introduce a mandatory cooling-off period of between 14 and 30 days for all cross-border business, and that is extended to establishment business by the life framework directive. As the Minister has said, it is proposed to implement those provisions at the same time by insurance companies' cancellation regulations and he issued a consultation document last year. There may be some anomalies and paradoxes, but the 14 to 30–day cooling off period will be of assistance to those who wish to take out insurance in another country in accordance with the framework of the directive.
The Minister referred to a Committee sitting which took place on 19 November. Over a period, the Committee has observed the way in which EC financial directives are affecting the City's relation to Europe—and the insurance industry is at the centre of the City. Opposition Members believe that, while the City may be a leading player in the world financial markets, it is no longer the sole leading player.
We consider the City to be a leading financial centre, which will be working within the Single European Act—under a variety of directives, such as the one that we are debating tonight—to ensure that the single market includes a basic harmonisation of the rules and operations of financial intermediaries and markets. Our party will look carefully at the way in which we handle regulation in the City. We shall consider whether that regulation should be self-induced or independently induced; and whether there should be statutory regulation, along the lines of the Securities and Exchange Commission, or whether there is another form of regulation in harmony with the European legislation and directives that we can enact. We shall also consider the fact that we have two life investor protection statutes and two prudential supervisors for the life assurance industry.
The strategy that we shall work out will be one which links the City to Europe through directives such as this, and which links the City to industry. It will ensure that insurance industries are able to satisfy the home market with appropriate premiums at reasonable rates, which are within the reach of those who wish to insure, while at the same time playing a full part in that sector of the globalised economy which is Europe.
The insurance industry is a massive employer: some 490,000 people are employed in it throughout Europe. It is a creator of work, which we should encourage as we will encourage the City of London as a whole, but we should do that within a framework which not only protects the

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consumer and those who work in the industry, but gives the City a reputation for health, wealth and encouraging people throughout the country.
10.41 pm
Mr. John Butterfill: People in the insurance industry have told me how much they appreciate the co-operation that has been shown by the Department of Trade and Industry—not only in regard to the specific issues in the regulations, but in regard to their representations to the Treasury about taxation. Although this is only an interim measure, it will assist greatly in the completion of the single market, which is so important to the UK insurance industry.
One or two matters, however, present problems. One, which was mentioned by the right hon. Member for Berwick-upon-Tweed (Mr. Beith), is the difference in the cooling-off period. As I understand it, the difference will arise in respect of policies provided by UK insurers for non-EC policyholders and the UK branches of non-EC insurers for UK policyholders. Those are the policies for which primary legislation would be required and which at present involve the anomaly of a 10–day cooling-off period rather than the 14–day period that is proposed.
In his reply to the right hon. Member for Berwick-upon-Tweed, my hon. Friend the Minister suggested that the anomaly would disappear in a year's time—presumably when the life framework directive comes into force in July 1994. It would be helpful if he could confirm that that is so and tell us under what mechanism UK statute law will be changed through implementation of that directive.
Another matter that is still giving rise to concern is a new one concerning taxation. There has been no problem with the overseas branches of UK insurers being able to conduct business on the same footing as companies in the countries concerned. The problem is that the directive will permit United Kingdom life offices to sell direct to people who are resident in other EC countries. As I understand our present tax system, those policies would be subject to the principle of United Kingdom taxation, whereby the policyholder's funds are taxed as they build up. United Kingdom insurers selling across border would therefore be at a competitive disadvantage with other EC insurers who may be selling domestically or across borders. I am sure that that is not what the Government intend. Has my hon. Friend the Minister made representations to the Treasury on that matter and can we look forward to the Government addressing the problem?
I repeat my welcome for this measure and for the constructive approach of the Department to the problems.
10.45 pm
Mr. A. J. Beith: Although the regulation is, as the Minister said, a temporary measure, it is nevertheless important for the workings of an important industry that is a major employer, especially outside London. One thinks of cities such as Norwich, Bristol and Edinburgh, where the insurance industry is a major employer. The Minister has the headquarters of Refuge, which is an important employer around the country, on the edge of his constituency. It is doubly important, therefore, that we ensure that the regulations are as accurate and satisfactory as possible.
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I mentioned the cooling-off period, about which questions were well put by the hon. Member for Bournemouth, West (Mr. Butterfill), so I shall not add to what I said.
Mention has been made of the tax implications of the regulations and the belief of British insurance companies that they will be at a competitive disadvantage in trying to attract business from customers in the face of competition from businesses based elsewhere in Europe whose taxation system does not operate in the same way as ours but treats earnings on a basis that allows the expenses of getting the business to be reckoned against income at the beginning and which pays more regard to the way in which income arises and the investment that follows insurance business. The Government contend that other aspects of company taxation in Britain may help to compensate for that, but the significant difference in the way in which insurance operations are taxed will have to be taken into account.
Another factor that will loom large if we ever have a single currency will be divergence and fluctuation in the United Kingdom exchange rate in relation to other European countries. This is an uncomfortable matter for the Minister, who, when he pointed to the existence of legislation that is filling our parliamentary timetable, could not mention his own traditional hostility to much of that legislation now that he has to vote for it. People taking out insurance policies in the future will have to have regard to exchange rate fluctuations and will have to make calculations about what they think will happen to their stream of income from, for example, a policy in retirement if they do not know what the relative strength of the currencies will be and if those currencies are not pegged together. Most parts of business and industry are well aware of the importance of a single currency to a single market, not least in financial services.
There is another area where the implementation of this regulation will present new problems for the insurance industry that are not so much of the Government's making but more of the industry's making. British companies will have to compete in a market that is not so dominated by tying as has latterly become the practice in the British insurance industry. It has suited large parts of the British industry and most of the large financial institutions to develop tying arrangements under which the decision to take out a mortgage commits the subsequent decision about which company will be used for endowment insurance policies or other insurance policies. That is not the pattern throughout Europe, where insurance brokers play a large role in a number of countries. The British insurance industry may have to look once again to its traditional ways of seeking business when it cannot rely on such tying arrangements.
The hon. Member for Middlesbrough (Mr. Bell) mentioned some of the problems faced by customers who find gaps in insurance provision which may lead them to look to overseas companies. I constantly come across such problems, but the other day I heard of a new one. Someone in my constituency was seeking to let his home, but found that his existing building society and insurer would not accept his current insurance for any tenant whose rent was paid by the Department of Social Security. He applied to other insurance companies and found that they too would not accept insurance for property if the tenant's rent was paid by the DSS. That is another restraint on the provision of rented housing for those who need it, but in this case one arising from the insurance industry.
Mr. Jeremy Corbyn: I am surprised by what the right hon. Gentleman said about insurance, tenants and the DSS. Is he convinced that it is legal to prevent DSS tenants from renting a house in such circumstances?
Mr. Beith: I do not think that it could possibly be illegal. An insurance company is merely placing conditions on the letting of a property on which there is a mortgage. Many different conditions can be imposed, including the approval of a tenancy. If it becomes a blanket condition that no one whose rent is paid by the DSS can be a tenant, it will be extremely damaging although not illegal. It would be a severe restraint and something would have to be done about it.
The example that I gave is another reason why there should be more competition in the insurance market. British consumers should have the opportunity to compare British products with those of other countries and I want our insurance companies to operate successfully and obtain business in the rest of Europe, thereby bringing employment to this country.
10.52 pm
Mr. Quentin Davies: I suspect that this is an issue on which there is much agreement across the House. I also welcome the regulations in principle, but I have two concerns one of which has been mentioned by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill). One is a minor concern and the other major, and I should be grateful if the Minister could reassure me on both of them.
My minor concern is that the Minister explained that under the directive member states will be granted the option of insisting that all life contracts which are not sold as a result of the initiative of the assured remain subject to authorisation and that we had decided not to take advantage of that option although it existed. The assumption is that others will take advantage of it. Clearly there is a lack of reciprocity inherent in such a situation. At first sight, it seems to go against the purpose of a single market. I should be grateful for the Minister's assurance that, in practice, it is not a basis on which the export channel from this country will be constricted whereas the import channel will not.
My major concern involves tax but is not the point mentioned by my hon. Friend the Member for Upminster (Sir N. Bonsor). He spoke about the different tax treatment of insurance provisioning here and in other Community countries. It is a very important point, with which I agree. My major concern, however, is the one mentioned by my hon. Friend the Member for Bournemouth, West.
In this country, the tradition has always been that life insurance funds are subject to tax as they accumulate and not subject to tax in the hands of the beneficiary when payment is finally made to him. On the continent, the reverse generally applies. The funds roll up free of tax—they are, in effect, gross funds, like pension funds in this country—and the beneficiary is taxed when he receives payment. It follows that if in this country a fund is subject to tax as it builds up, and if the beneficiary is the resident of another Community state, he will be charged by his own tax authorities in the country in which he is resident tax on the amounts accruing from the policy when he receives it, and he gets the worst of all possible worlds.
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It seems at first sight—and, I fear, probably at second and third sight as well—that, if that is the case, the tax handicap carried by life insurance policies written in this country will be such that no sane man or woman on the continent will purchase one. It must be blindingly obvious to the whole House that all the tremendous bureaucratic and ministerial effort—I am sure that it was very gallant and talented effort—that went into the negotiation and drafting of the directive will have been completely wasted in terms of the interests of this country or of our insurance industry if such a tax handicap is carried by any policies written in this country as we enter the single market in life insurance.
I know that it will be possible for life insurance companies based in this country to sell policies through their subsidiaries in other Community countries and that they will thereby be able to escape from that tax charge. However, the whole purpose of the directive was supposedly to make progress on the regime we have had since 1979 under which it has been possible for British life insurance companies to set up subsidiaries in the Community and to sell life insurance policies from there. My point is fundamental to the utility for this country in practice of the new arrangements that are represented by the directive. I look forward with great interest to what the Minister will say. I am sure that my hon. Friend will say that any remedy to the problem that—
Mr. Corbyn: He is not listening.
Mr. Davies: He probably knows the answer already and we shall get it in due time.
Mr. Corbyn: He is not listening.
Mr. Davies: So that the hon. Gentleman—
Madam Deputy Speaker (Dame Janet Fookes): Order. We cannot have a sub-conversation going on.
Mr. Davies: So that the hon. Member for Islington, North (Mr. Corbyn) can fully appreciate the weightiness of the ministerial answer when he hears it, it may be a good idea for me to establish the essential question with which my hon. Friend will deal.
Mr. Corbyn: I was only trying to assist, Madam Deputy Speaker, and to ensure that the Minister understood the question. I had the distinct impression that the Minister was not giving the slightest attention to the hon. Member for Stamford and Spalding (Mr. Davies).
Mr. Davies: The Minister has no doubt grasped my point, and I am sure that we shall hear an answer. I hope that it will be a reassuring answer because much of the industrial interest in the directive turns on the question of tax.
I also share the concerns of the right hon. Member for Berwick-upon-Tweed (Mr. Beith) about the prospects of a single currency emerging in the European Community in terms of our ability to exploit the single market in financial services. We could argue all night—we may do so tomorrow—about the merits of a single currency or about the prospects of such a phenomenon arising. If it does come about by the end of the century or in any other timetable that a large part of the continent adopts a single currency, that will create a major problem for any British

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insurance company that seeks to sell life insurance products or other financial services, such as unit trusts, on the continent.
A life insurance policy is something that people will always want to buy denominated in their own currencies. It is a fundamental asset for any individual who holds it. No one would seriously wish to incur a foreign exchange risk for such a fundamental asset. It follows that if one wants to sell a life insurance policy in France or in Germany and those countries have at the time a single currency, one will have to offer a live insurance policy denominated in that currency. To be able to do that, one will have to invest the premiums in assets largely denominated in that currency.
That means that people will not be able to cross-sell the products that they have in this country in the single market. There will have to be different products managed, packaged and marketed in different ways. They will be very different products. Therefore, in the single market, British life insurance companies will not be able to benefit from their very good management record by citing the returns that they have been able to make for their clients and beneficiaries over the years. They will not be able to point to what a particular policy has done over the past 20 or 25 years. Rationally or not, life insurance products have to be sold on historic record and our companies will not be able to use that record because it will relate to a sterling product.
One of the fundamental premises on the basis of which we entered the single market was that there are some sectors in which we in Britain have an inherent competitive advantage, and many of us for a long time believed that financial services, insurance products and life insurance were among those sectors. That will not be the case, however, if a single currency emerges in the single market and we are not part of it.
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Mr. John Greenway: I have no wish to detain the House at this late hour, but there are so few opportunities for us to speak on the insurance industry that I felt it appropriate to make one or two comments. Essentially, my comments are directed at the Minister, because I want to give him some encouragement. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) is absolutely right and, like him, I want to place on record the fact that the Minister's efforts on behalf of the United Kingdom insurance industry are much appreciated.
Although, as the Minister said, the directive is an important, if small, step on the road towards the single market, we should not delude ourselves into thinking that the single market—particularly in the life assurance sector —will mushroom overnight. A great deal of effort will be required on the part of United Kingdom life assurers and life insurance companies if they are to exploit that market and I suspect that it will be five to 10 years before we see much development of it.
There are clear cultural and structural differences between the insurance industry in the United Kingdom and that on the continent, although I often speak on behalf of the all-party group—which, as the Minister knows, is blossoming at the moment—and I hear encouraging noises to the effect that the markets in Spain and Italy look particularly attractive.
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Will the Minister please give our life assurers every possible encouragement to be innovative, flexible and entrepreneurial? The market creates an opportunity for us to expand into the European dimension in a sector in which Britain has great traditions, great expertise and a great deal to offer. I sense, however, that those who work in the industry sometimes need a little encouragement to put their entrepreneurial hat on and be as innovative as their forebears were 100 or 200 years ago, when the United Kingdom life assurance industry and the great mutual funds—I shall not advertise by mentioning any of them, but I think that the House will know those to which I refer—were born. The industry has provided a great service to United Kingdom policyholders and can provide a similar service to policyholders on the continent.
When the Minister is persuaded to try to argue with the Treasury that we want a level playing field as regards tax —I entirely endorse and agree with what has been said —he should remind the life assurers that, on premium rates, we have an enormous competitive advantage which makes some of the tax problems shrink into insignificance.
That brings me to my third point. One of the reasons why the United Kingdom has such a competitive industry is that we have a strong independent intermediary sector. It is that sector that has provided the competitive market in life assurance in the United Kingdom which will provide the springboard for a competitive market in Europe and every prospect for United Kingdom life assurers to take advantage of the single market.
There is one caveat, however. We must ensure that in the next year or 18 months we get right the United Kingdom regulatory framework for insurance intermediaries, whether in the financial services sector or in the general insurance sector. I am sure that hon. Members will not need much imagination to recognise that there would have been considerable difficulty in and damage to the United Kingdom insurance industry if the Financial Services Act 1986—often much maligned—which brought to the surface a number of scandals and the fraudulent behaviour of disreputable firms, had involved European policyholders and not just those in the United Kingdom. I want us to look to the longer term, the next five, seven or 10 years, and recognise that we will be able to launch ourselves confidently in Europe and secure a much bigger market for the United Kingdom insurance industry if we get our regulatory framework right and ensure that those who work in the industry are properly regulated and are, above all, fit and proper to be in the industry.
11.6 pm
Mr. Neil Hamilton: I am grateful to all hon. Members, on both sides of the House, for their helpful speeches on the regulations. As I said earlier, the second life directive represents a small but useful step towards completion of a single market in insurance. The directive is a small step for the United Kingdom because we already have a more open market than that provided by it. Of course, the directive represents a bigger step for other member states.
The directive is useful because it established the principle of single-country supervision for certain insurance contracts—those entered into by the policy holder on his own initiative. The principle of single-country supervision became the foundation stone for the much more significant third directive which was agreed last year.

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I have no difficulty whatever in agreeing with the right hon. Member for Berwick-upon-Tweed (Mr. Beith) and my hon. Friends the Members for Ryedale (Mr. Greenway), for Bournemouth, West (Mr. Butterfill) and for Stamford and Spalding (Mr. Davies) and others who lauded the achievements of the British insurance industry. As a result of the flexibility which we have traditionally exhibited, the British insurance industry stands to gain considerably from the increased freedom which will come from the implementation of the third directive next year.
Mr. Corbyn: Will the Minister give way?
Mr. Hamilton: I am sorry if I omitted the hon. Gentleman from my litany of financial experts.
Mr. Corbyn: Will the Minister comment on the matter raised by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) about insurance companies refusing to allow Department of Social Security claimants to become tenants in houses in which they have an insurance interest? Is the Minister aware that the hon. Members for Stamford and Spalding (Mr. Davies) and for Ryedale (Mr. Greenway) have declared interests, one in the insurance industry and the other as a merchant banker? Clearly they were speaking on behalf of those interests in the general sense of the industry.
Mr. Hamilton: I know that the hon. Gentleman thinks that it is a considerable disadvantage to know what one is talking about when one speaks in a debate. However, we could not accuse him of that when he speaks on such complex matters, so I acquit him of any knowledge or understanding as a result of experience. I hope that he is pleased by the accolade which I have just given him.
Mr. Corbyn: Will the Minister give way?
Mr. Hamilton: I have made one mistake, and that should probably be sufficient. I will respond to the matter raised by the right hon. Member for Berwick-upon-Tweed, as I will attempt to deal with all of the matters raised by hon. Members in the debate.
The hon. Member for Middlesbrough (Mr. Bell) brings great expertise to our debates. I welcome him to the Opposition Front Bench because it is worth listening to him. He raised a number of matters which were referred to by my hon. Friend the Member for Upminster (Sir N. Bonsor) and others, and I hope to respond to them.
I shall start with the matter of taxation. I know that representations have been made by the industry and others about the different approach to taxation which has been adopted in respect of the insurance industry in the United Kingdom. It is always possible to pick out the tax advantages and disadvantages in the various member states of the Community. To believe that we will ever harmonise the tax regimes of the different Community member states so that there is no difference between the tax systems is fantasy. However, the Government have said that they will consider action if clear evidence shows that United Kingdom insurers are worse off, overall, than their EC counterparts. In particular, we must consider the lower tax rates in the United Kingdom.
I do not know how many of my hon. Friends or how many Opposition Members noticed my right hon. Friend the Chancellor of the Exchequer lurking behind the Chair
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at the beginning of the debate. He is enjoying a period of purdah in the Chamber. I am therefore limited in what I can say as I cannot anticipate his Budget. However, the competitive position of United Kingdom insurers as opposed to those in the rest of the European Community is currently being examined.
Hon. Members may have no doubt that the Department of Trade and Industry sees it as its role to be the advocate for British industry and commerce and, if arguments are put to us that are relevant to the policies of other Departments, we will ensure that they receive a fair hearing.
Mr. Bell: In response to a point raised by the right hon. Member for Berwick-upon-Tweed (Mr. Beith), the Minister referred to the number of directives that are required. One of the difficulties of the Minister and of the House is the division of responsibility between the Treasury and the Department of Trade and Industry. However, as the DTI has a supervisory role over insurance, we would welcome confirmation from the Minister that there will be the closest co-operation between the two Departments.
Mr. Hamilton: As the hon. Gentleman will know, the Government are indivisible. We are indistinguishable from one another in all respects and wholly united on all policies at any one time. I confirm that the position is as the hon. Member for Middlesbrough would hope it to be. I guarantee that the representations that he and other hon. Members have made in respect of complex taxation issues will certainly be considered very carefully.
Mr. Bell: I am grateful to the Minister for responding to me, but I now have a longer intervention to make on two points. The first point relates to the comments made by the right hon. Member for Berwick-upon-Tweed after my reflections and the second to the point raised by my hon. Friend the Member for Islington, North (Mr. Corbyn) about those who rent premises or apartments for which the Department of Social Security is paying board and lodging.
In respect of the second point, insurance companies are now refusing to insure landlords in respect of such properties. As a result, landlords are reluctant to rent property to those individuals. It is not a question of it being illegal to rent the property. However, landlords will be worried if there is no proper insurance on such flats. That is a cause for concern on the Opposition Benches, and that point must be examined.
Will the Minister also note the intervention of the hon. Member for Ryedale (Mr. Greenway), who made a significant contribution in respect of regulation? We have certain views about regulation. In respect of the City and the industry, it is a matter of "physician heal thyself." The industry must note the comments made in this place and elsewhere about the need for clear regulation which works in relation to those who insure with insurance companies and which gives confidence to the outside world. I should like the Minister to address those specific points.
Mr. Hamilton: On the latter point, as the deregulation Minister I am well aware of the costs that can be imposed by laws that we pass which are not clear or effective in achieving the objectives that we set when we draft legislation. I assure the hon. Member for Middlesbrough that we attach considerable importance to that matter.

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With regard to the alleged lack of insurance cover for properties in multiple occupation, it is not simply a question of DSS claimants. As my correspondence with hon. Members shows, the problem can also be found in other areas.
This is first and foremost a commercial matter for the companies. My principal responsibility as the insurance regulator is to protect the interests of policyholders. I have to ensure that insurance companies manage their business in such a way as to satisfy the prudential requirements of the insurance companies legislation. It would be quite wrong for us to seek to lean upon companies in the carrying out of their day-to-day commercial business to try to slant things in favour of one class of policyholder rather than another, particularly if the consequence of that were to be to expose them to an excessive risk, which would be paid for by other policyholders. I am not in a position to second-guess insurance companies in this respect.
The hon. Member for Middlesbrough and others will know from their correspondence with me on this and similar topics that it is not the case that no cover whatever can be obtained in the market, although I admit that fewer and fewer companies are prepared to take the risk which they believe to be associated with that kind of occupation. It is not a question of discriminating against people because they happen to be social security claimants; it is just that a multiple occupation property presents higher risks for insurance companies. There is an increased risk of fire and various other characteristics which make it a less acceptable risk for the companies. Consequently, if insurance can be obtained, inevitably the premiums will reflect that risk.
It would be wrong for the Government, in my view, to seek to intervene in the commercial contracts of insurance companies in that way. If we do it for one class of insurer, we have to do it for all classes, and in that way madness lies.
Mr. Beith: I remind the Minister that this problem is not confined to multi-occupation. In the case that I mentioned to him, it was a straightforward letting of a single house to a single family, and it seems a little odd to the outside world that those people whose rents the Government are paying can be regarded by the industry as a bad risk.
Mr. Hamilton: It is a mistake for the hon. Gentleman to say that the industry regards it as a bad risk, because the industry does not speak with a common voice. There is competition in the insurance market; insurance is a highly competitive business. I believe that if, through the intermediaries about which my hon. Friend the Member for Ryedale (Mr. Greenway) spoke so eloquently, as he always does—he knows what he is talking about, as I am sure the hon. Gentleman appreciates—the cover can be obtained.
The hon. Member for Middlesbrough asked me some technical questions. I shall have to crave his indulgence, if he will excuse me for using such an elitist and gentlemanly term in respect of him, and carry on to deal with some more serious points which he and others have raised in the debate.
The hon. Member for Middlesbrough raised some questions, to which the answers are complex, about solvency margins. I know that this is an issue which has excited some interest and comment in recent months. I
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have seen criticism of both the slimness of the minimum margin for general business and the inability of the factors included in the margin calculation to reflect all the risks to which an insurance company is exposed. Supervisors generally expect companies to maintain a margin of at least double the minimum and to examine a wide range of other parameters—for example, type of business, profitability, the level of reserving, quality of management and systems—in forming their view on the financial strength of companies. So, important as the solvency margin is, it is not the whole story.
The answer to the specific questions which the hon. Gentleman asked me is contained in the first life directive, in articles 18 to 20. It would probably confuse the House as much as I am confused myself if I were to go into too much detail on that, but he will find all the details on the questions which he asked in those articles. If he still has some specific doubts or questions that he wishes me to answer, I will of course be more than willing to put on record, by means of a written reply, the facts that he requires. I answered a question from his hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase), which said precisely what I have just said about the statutory minimum solvency margin insofar as there are Community obligations stemming from the first insurance directives in respect of non-life insurance, 1973, and of life insurance, 1979.
The Commissioners have undertaken to review and report on the need for further harmonisation of the solvency margin by July 1997 at the latest, so these are matters which will be under active consideration and the hon. Gentleman will be able to contribute to the debate on that. I would welcome his active co-operation. We will certainly bear in mind the implications of the questions that the hon. Gentleman raised.
The hon. Gentleman also mentioned the situation as regards Municipal Mutual Insurance. I was grateful for the opportunity to meet him, his hon. Friend the Member for Warrington, North (Mr. Hoyle), representatives of MSF and others who were concerend about the employment implications of the unfortunate events surrounding MMI. I share with him the joy at what appears to be in prospect, the rescue of MMI by Zurich Insurance, and, although contracts have not yet been signed, we very much hope that all the loose ends will shortly be tied up. I bore in mind very much the arguments that the hon. Member raised with me in the Department, and although, as I indicated then and earlier in the course of this speech, my principal concern must be the interests of policyholders, as I am a prudential supervisor in respect of them, I do not depreciate the importance of the employment-related issues that he has raised, and I will certainly draw attention once more to the points that he has made in this debate to the Zurich Insurance Company.
I am sure that the hon. Gentleman appreciates the difficulty that the DTI always encounters in circumstances such as those surrounding MMI, whether to use our powers to cease to authorise business or to put it into run-off, effectively to reduce the value of the assets of the company; and there are circumstances in which immediate action is required in the interests of policyholders. In other circumstances, if one can preserve the company in being as a going concern, the assets that can be realised in the interests of the policyholders can be augmented and therefore the interests of policyholders can be advanced. Happily, this is one of the cases in which there appears to

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be such a consequence, and that is to be applauded. I hope that as a result the solvency of MMI, in effect, will be restored.
We have had a wide-ranging debate which in some respects has gone beyond the details of the regulations, but that is no bad thing. As my hon. Friend the Member for Ryedale pointed out, there are few opportunities for us to exhibit a serious interest in debating insurance matters, and I am glad to have had this opportunity of doing so. The Government attach considerable importance to a successful insurance industry in this country. I pay tribute to the ability of our insurance industry to compete successfully in the world and, in particular, in the single market in insurance which will shortly be upon us. I am sure that the flexibility which the relatively free market that we in this country have traditionally enjoyed will be rewarded by an increasing share of European business.
I take, in particular, the point made by my hon. Friend the Member for Stamford and Spalding about reciprocity in the authorisation of business within the Community. He asked me whether it was not an unlevel playing field, that we did not propose to authorise or require authorisation for business sold into this country from other member States of the Community, and whether it would be reciprocated elsewhere.
So far as I am aware, only the Netherlands intends, like us, not to require the authorisation of business sold into its own country. We do not yet know for certain what is to happen with other member states, and the hon. Gentleman will know that the second directive is a temporary state of affairs. It will not be in force for very long before the third directive supervenes and takes over, after which there will be no need for authorisation for the inward sale of business. So I suppose it is true to some extent that in all probability we shall have a more liberal regime than some of our Community partners, but I do not think that we should regard that as a weakness. Ultimately, as the experience of the years shows, a protectionist attitude weakens one's industry, makes it less able to respond flexibly to the requirements of the market and therefore, when the restrictions are reduced or removed, the consequence is that one is not as strong as those who have had to compete in rather more rigorous selling conditions.
I have every confidence in the British insurance industry
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being able to compete successfully in the regime which will shortly be inaugurated to give us a single market in insurance in the Community. We attach considerable importance to the completion of the single market in insurance, and I know that the directives which we are debating tonight and which we shall debate in due course have the support of the insurance industry and consumer organisations.
I welcome the opportunity to put these points on record and welcome the contributions which have been made by my hon. Friends and Opposition Members. I therefore commend—
Mr. Butterfill: May I press my hon. Friend on the point of harmonisation of the cooling-off period? He indicated earlier that there was some mechanism whereby that would be achieved by 1994. Would he deal with that?
Mr. Hamilton: I apologise to my hon. Friend for forgetting to deal with that point. In response to the earlier intervention of the right hon. Member for Berwick-upon-Tweed, I pointed out that we cannot remove the difference in treatment by means of orders because the European Communities Act does not allow us to do that. Section 2(2) of the Act gives us the vires to implement our obligations by secondary legislation only in respect of insurance business within the Community. Outside the Community we require primary legislation to achieve that effect. I hope that it will be possible at the time we implement the third directive to complement that by means of primary legislation in order to remove this anomaly.
That depends, of course, upon the good will of my hon. Friends the business managers, by whom I am surrounded, and who are glaring at me and looking at the clock. I cannot guarantee to my hon. Friend that we shall be able to align them in terms of time because that will take place in a different Session, but I am well aware that this is an unsatisfactory situation and we shall seek to correct it at the earliest opportunity. I hope that I have been able to satisfy my hon. Friend.
I commend the regulations to the House.
Question put and agreed to.
Resolved,
That the draft Insurance Companies (Amendment No. 2) Regulations 1992, which were laid before this House on 30 November, be approved.

PETITION

  Asylum Seekers
  11.29 pm
  Mr. Jeremy Corbyn: I have the pleasure of presenting a petition to the House which has been circulated widely throughout the country concerning the passage of the Asylum and Immigration Appeals Bill which completed its Third Reading in the House yesterday and is now on its way through the House of Lords. I will read the petition:
  To the Honourabl0e the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled. The humble petition of the people of the United Kingdom sheweth:
  That we wish to register strong protest at the Government's proposals to restrict the rights of asylum-seekers;
  That the fast-track systems for the determination of claims will deny natural justice to asylum-seekers, giving only 48 hours in which to give notice of appeals against refusal;
  That some of the proposed changes in the Immigration Rules will make it more difficult for asylum-seekers to establish their claim and are against the letter and spirit of the 1951 UN Convention on Refugees;
  That the increased powers to fine airlines will further erode the spirit of the 1951 United Nations convention on refugees, as will proposals to send British officials to scrutinise passports at foreign airports;
  That fingerprinting asylum-seekers is discriminatory and will criminalise innocent people;
  That the housing restrictions proposed are discriminatory;
  And that the secret intergovernmental discussions currently taking place in the ad-hoc group on immigration are apparently proposing even more restrictive asylum policies.
  Wherefore your Petitioners pray that your honourable House will not proceed with those unjust proposals, and your Petitioners, as in duty bound, will ever pray.
  I am told that the petition is supported by 6,962 signatories, in addition to the three on the face of the petition. I fully endorse and support it.
  To lie upon the Table.

Pension Funds (Transport Industries)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]
11.31 pm
Dr. John Marek: I speak on this subject as a sponsored Member of the National Union of Rail, Maritime and Transport Workers. I speak on a day when the Secretary of State for Transport has announced an industry-wide effort to reorganise the British Rail pension scheme. I had intended to use this occasion to urge the Government to take that step, so I welcome his announcement and hope that the Minister, in replying to this debate, will give more details of his right hon. Friend's proposals.
My hon. Friend the Member for Streatham (Mr. Hill) hopes also to comment on the important matters that I am raising, which are important to many tens of thousands of workers. I hope that the Minister will explain whether his right hon. Friend the Secretary of State intends to issue a White Paper, will give details of the scope of that document and will say what class of employees will be included in any provisions.
There is a wider remit to this debate. It is about pension funds in the privatised transport industries, so we are dealing with workers in British Rail and in the bus and coach industry and with seafarers. Before dealing with my main points of concern, I remind the House that the transport sector is low paid. While not all employees in the sector are low paid, the sections of the industry which have been privatised contain, by and large, many low-paid employees. I hope that the Minister and hon. Members in all parts of the House agree that we do not want those employees, due to a deteriorating pension situation, to be thrown on to income support and become supplicants to the Department of Social Security. We want them to be in a position to make pension contributions and later to live on those pensions in their own right without recourse to DSS funding.
That being our desire, there must be something wrong with what is happening to pensions in Britain. We are familiar with the Maxwell fraud, but it goes further than that. There are frauds and near-frauds, but there are also perfectly legitimate ways by which companies can take money out of pension funds to the detriment of the pensioners-to-be. For example, the National Freight Corporation, Sealink, British Rail Engineering Limited and Travellers Fare have all been privatised, and the sales required that the pension benefits should be of equal, or better, value after privatisation. In fact, all those pension schemes now offer inferior benefits—and that is in spite of what the Government said at the time. Companies enjoyed pension holidays, and they introduced new schemes which gave them greater control. Transfer values tend to work against the transferee. That is one of the ways in which, I believe, companies cheat.
I will give some examples of bad cases. CityLink wound up its mirror image pension scheme and now offers personal pensions which exclude any employer contribution. That is not what employees were led to believe would happen, but it is what they now have to put up with. I hope that the Minister agrees with me that it is wrong. British Transport Hotels, when they were privatised, were all required to establish their own pension schemes, providing the same or better benefits. Some of those hotels have

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changed hands several times, and many of the schemes have been wound up or closed to new entrants. Again, that is quite wrong and is against what was intended when the privatisation took place.
A worse case is that of Nightingale Coaches. For two years employees paid their contributions, but instead of putting the money into the pension scheme, the company pocketed it and used it for cash flow purposes. Then it ceased trading. Action is proceeding at the moment. Whether those employees will ever receive full pension benefit is a moot point. I do not think that they will. Clearly, that is wrong, and it has resulted directly from the Government's policy and action on privatisation. Here, I am not seeking to engage in a debate about whether the privatisation was right or wrong; I am simply drawing attention to what happened as a result of Government policy and action. The effects on many people's pensions have been unfortunate.
Recently the Devon General Bus Company decided that from 6 September it could no longer afford the benefits provided under its hourly and monthly pay schemes. The schemes will be closed to new entrants, who will be able to join another scheme providing only minimal benefits. The Southern National Bus Company is now enjoying its second pension holiday. The fact that such a holiday is available to the company but not to the employees is a matter that we could debate. Opposition Members regard it as something that is not right.
Then there is the recent example of the National Welsh Bus Company. It may be that more than £1 million is missing from the pension fund of the former National Bus Company subsidiary, National Welsh. Having gone into receivership at the beginning of last year, it has deducted employees' pension contributions from pay but has not put them into the pension fund. In south Wales, about 800 former employees have been told that the fund is unable to meet its liabilities. Again that is quite wrong but it is a direct consequence of the bus privatisation policies of the present Government and of the previous Conservative Administration. It is true that the pension fund of the former National Bus Company is safe, but that does not apply to recent contributions.
I contend that pensions are deferred pay. They are part of the contract between employees and employers—employees agreeing to contribute part of their pay, and employers agreeing to contribute an additional amount. It is quite wrong that companies should be able to cheat, either through fraud or through changes in pension schemes. It is wrong that employees should not get what they expect. Employees have a right to have their pension funds managed properly. They have a right to know that their weekly or monthly contributions go into the fund. They have a right to know that, on retirement, they will receive benefits that have not been eroded. Funds should be managed in the interests of the employees—not in the interests of the company. Unfortunately, money has been stolen from former employees of National Welsh and of Nightingale Coaches. Money has also been stolen from employees of companies which have changed the rules or taken contribution holidays.
I am pleased at the announcement by the Secretary of State for Transport of an industry-wide scheme for British Rail employees when, or rather if, the railways are
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privatised or franchised. I say "if" because there is no general acceptance of the Government's proposals. Will that scheme be open to new entrants after franchising or privatisation? Will it be open to outside employees? The Government intend to franchise London's buses, but how that will be done is another issue. Will there be franchises for different routes, such as Nos. 88, 12 or 53 which pass the House? If after three years the franchisee decides that he cannot make a profit and gives up the route and his employees are engaged by another franchise operator, the only sensible course would be to have a nation-wide scheme or extend the BR scheme to allow people who are not BR employees, perhaps bus workers, to join.
The Goode committee was set up as a result of the Maxwell scandal and will produce a considered report addressing some of my other concerns. Will the Government act quickly on that report to ensure that there is statutory provision for the setting up of pension funds, that contributions go to the fund and that it is managed properly in the interests of fund holders so that they receive what they expect when they retire? They should not have to put up with lame excuses that the money is not there but has been used for other purposes or fraudulently spirited away. The Government have a duty in these matters. Tens of thousands of people want to know what the Government intend to do. They should act as quickly as possible.
11.41 pm
Mr. Keith Hill: I am grateful to my hon. Friend the Member for Wrexham (Dr. Marek) for his generosity in permitting me to participate in this debate on these important matters. I welcome the statement on pensions today by the Secretary of State for Transport. In some respects, it seems to meet the requirements of British Rail pension fund members and their representatives and has ended the powerful sense of uncertainty and anxiety which has built up on the subject in the past few months. It will be necessary, however, to study the Secretary of State's precise words in print and to examine in detail the consultation document on pensions promised within the next two weeks.
I especially welcome the commitment to an industry-wide railway pension fund. That proposal, which is the preferred option of the railway trade unions, was first mentioned by me in a speech in Standing Committee on the British Coal and British Rail (Transfer Proposals) Bill in June. The Government Whip nods. I am glad that he remembers my contribution in Committee. At that time, the Minister for Public Transport said that he would give careful attention to the proposal. I am grateful to him for his response and I am happy to have played a modest part in what seems to be a successful outcome to the representations.
The model for the industry-wide scheme is the Electricity Act 1989, which provided protection for past service so long as members remained in their respective schemes during and after transition from the nationalised electricity undertaking to the new privatised electricity companies. We shall have to confirm that that is the model that the Government will use for the railways. If it is, and provided there are long-term guarantees for the integrity and maintenance of the value of benefit, that commitment

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will be an important reassurance to railway workers in a period of understandable anxiety as the railways are privatised.
Regrettably, however, the Government still seem intent on excluding future recruits to the proposed new franchising companies from the industry-wide scheme. I very much hope that the Government will display a further degree of open-mindedness on the issue.
If, as will presumably be the case, the franchisee will be required to sustain, at the same level as British Rail formerly did, the employer's contribution to the industry-wide scheme, it seems quite unfair that new employees, working side by side with longer serving railway employees, should not enjoy the same level of benefits. Equity surely demands that employees doing similar work, in identical conditions, making the same contribution to the success of the company, should be entitled to equal pension benefits. That arrangement operates in the shipping industry; it should apply in the railway industry as well.
I assume, of course, that existing scheme members will retain total freedom to remain in the industry-wide scheme for as long as they so choose. If, however, as may be the case, they choose to enter an alterntive scheme arranged by the new franchisee, it is essential that copper-bottomed guarantees should be enshrined in law to ensure the long-term viability of the alternative scheme. In particular, there must be an appropriate mechanism to ensure that the liabilty continues to any subsequent franchisee.
As my hon. Friend the Member for Wrexham has demonstrated, it has been the all-too-frequent and painful experience of employees in privatised transport industries that attractive new schemes, initiated at the moment of privatisation, have collapsed after the second transfer of ownership. In other words, the transfer value of the scheme must be organised on an actuarial basis with the assurance of adequate funding to sustain the scheme, and there must be similar guarantees to protect the pension rights of employees in the event of failure of the franchisee.
The Secretary of State's statement also embraced the position of current pensioners under the British Rail scheme. I especially welcome the Government's rejection of the possibility that present pensioners should become the responsibility of the franchising companies. That would have been to place at intolerable risk the moral and legal rights of a large number of pensioners who, in many cases, have given a lifetime of service to the railway industry and now derive a modest reward for that service.
The Secretary of State seemed to outline two alternative arrangements for the future of the pension fund, and we shall need to look at that proposal with great care. What is paramount, however, is that the assets of the fund should be ring-fenced to protect the individuals concerned: we want no corporate raids from the Treasury.
While I am speaking of the Treasury, I add a special plea that there should be no undermining of the small, historic pension schemes inherited from the original railway companies. Those funds benefit from a topping up from the Treasury under the terms of the Transport Act 1980. They still have a large number of beneficiaries. It is essential that the protection of the 1980 Act should be maintained for them.
I hope that the Minister will be able to offer reassurance on that subject and on the ring-fencing of the larger British Rail pension fund. I hope that she will also undertake, on
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behalf of the Government, to extend the proposed industry-wide scheme to new recruits to the privatised railway undertakings.
With those specific qualifications, I repeat my welcome for the announcement that we have heard today.
11.48 pm
The Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe): I congratulate the hon. Member for Wrexham (Dr. Marek) on securing this Adjournment debate and the hon. Member for Streatham (Mr. Hill) on his interesting intervention.
There are two difficulties in replying to the debate. The first is that much of the material quite properly raised by hon. Members concerns the responsibilities of my right hon. Friend the Secretary of State for Transport. I hope that hon. Members will be patient with me when I say that I cannot enter into detailed discussions on what he may or may not have in mind as a result of his announcement this afternoon. However, I undertake to draw specifically to my right hon. Friend's attention the particular points that hon. Members have raised, and I am sure that he, or one of his Ministers on his behalf, will respond to them in so far as it is possible at this stage.
My second difficulty is that the parts of the debate that concern my responsibilities—namely, the protection of occupational pension rights—are also subject to an independent review by Professor Goode, as the hon. Member for Streatham pointed out. It would be quite improper for me to pre-empt what Professor Goode might decide to do. However, I will undertake to ensure that the remarks made specifically about protection for scheme members on transfer of schemes are drawn to his attention.
Mr. Tam Dalyell: When is Professor Goode likely to report?
Miss Widdecombe: I shall come to that. I was asked a pertinent question about how quickly we would react.
My third difficulty is this. Such is the availability of NHS dentistry that I have had three dental operations in as many weeks, and for that reason I may sound a bit peculiar.
We expect Professor Goode to report in the summer. We have given two undertakings. The first is that if at any time in his deliberations—before he produces his report —he should by any chance conclude that a particular measure could be taken that is so urgent that it should be taken out of context with the rest of his report, the Government will consider implementing it ahead of any general Bill that we might introduce to meet the professor's general recommendations. So far we have had no indication that that is likely to happen, but the undertaking was given very clearly by the Secretary of State and would be honoured if the situation arose.
Mr. Nick Hawkins: If my hon. Friend makes contact with Professor Goode and with colleagues in other Departments—the Secretary of State for Transport and, perhaps, the Secretary of State for the Environment, who deals with local government matters —will she mention the points raised with me by the managing director of Blackpool Transport Services Ltd., in my constituency? They are not dissimilar to the points raised tonight by the hon. Members for Wrexham (Dr. Marek) and for Streatham (Mr. Hill). Will she follow up

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the helpful reply that I received from my hon. Friend the Parliamentary Under-Secretary of State for the Environment in December? Perhaps if I write to her about the company's concerns—which were raised again in a letter that I received today, the managing director having heard about the debate—she will consider his anxieties about employees who were members of the local government superannuation scheme—
Madam Deputy Speaker (Dame Janet Fookes): Order. This is a very long intervention in a short debate.
Mr. Hawkins: I am coming to my last sentence, Madam Deputy Speaker.
Madam Deputy Speaker: I am afraid that the hon. Gentleman has already come to it.
Miss Widdecombe: I think that I can anticipate that last sentence. I assure my hon. Friend the Member for Blackpool, South (Mr. Hawkins) that I will relay his remarks to the relevant quarters, and ensure that he receives answers to them if necessary.
Let me now deal with some of the specific points that have been raised. First, there is the question of contribution holidays. The purpose of a contribution holiday is not to undermine the rights of employees so much as to undermine revenue received by the Inland Revenue. Once a scheme has reached 105 per cent., it can attract tax liabilities. As a result, many employers choose to take a contributions holiday rather than meet that liability. Professor Goode will consider contributions holidays. I am sure that he will also consider the ownership of funds and the protection that is available to members who transfer schemes from one employer to another.
Under trust law, trustees are obliged to act in accordance with what is of the greatest benefit to the fund rather than to the employer or to existing employees. The duties of the trustees are to secure the best for the fund and always to act in its interests. I am sure that Professor Goode will consider whether that duty can be tightened in law to ensure that it is better discharged in some cases. In doing so, he will wish to consider the composition of trustees and the law that lays down their duties and obligations.
It would be wrong to leave the House with the impression that we examine occupational pensions law only when something goes wrong. It was nothing to do
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with the Maxwell scandal that the Social Security Act 1990 provided for the restriction of self-investment by schemes and for a deficit on the winding up of a scheme to become a debt on the employer. That Act introduced the pensions ombudsman. Last year, we extended and strengthened the requirement on schemes to disclose information to members.
An Opposition Member—I am ashamed to say that I have forgotten who it was—raised the issue of information. It is important not only that individuals have rights of access to information about their scheme but that they are encouraged, as individuals or through their trade unions or representative bodies, to make such inquiries. People should understand that once they have joined a pension scheme they should treat it in exactly the same way as they would treat savings on deposit in a bank or some other account. We have an extremely successful pensions tracing registry in Newcastle, which is often asked to trace schemes going back 20 or 21 years with which members have lost contact. I urge anybody with an occupational pension to treat it as preciously as they would something under a mattress that they would check from time to time.
We all regret what was done by Maxwell. The only good that has come out of Maxwell is that it has drawn the attention of individuals to the importance of occupational pensions, whereas in the past there has been a tendency to take such schemes for granted.
I have every faith in Professor Goode and we shall react as soon as practicable to his recommendations. When he reports, we shall want to examine his proposals and to consult on particular aspects of them. There will be no undue delay in implementing anything that seems to us to be wise, reasonable, practical and in the interests of pensioners.
The vast majority of pension funds in this country are properly, securely and responsibly operated—only a few, which are known to the Occupational Pensions Board, are not.
I will ensure that hon. Members receive specific answers to the transport issues that they raised, which are not within my remit. I am satisfied that occupational pensions are, in general, very safe, a very good investment, are greatly to be encouraged and have added significantly, particularly in the past 10 years, to the retirement income of many people who otherwise would not have had that additional income above their state provision.
Question put and agreed to.
Adjourned accordingly at one minute to Twelve o'clock.