§ Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Arbuthnot.]
12.50 am§ Mr. Hugh Bayley (York)At Question Time today, I raised the subject of the 532 recently announced redundancies at Asea Boveri Brown Transportation's York carriage works and a further 364 redundancies at the company's other works in Crewe and Derby.
The redundancies are clearly a disaster for the individual workers and their families and are also a severe blow to York's economy and to the British balance of payments. They are, however, the reflection of a problem rather than the problem itself. Put simply, the problem is that the Government do not have, or at least do not appear to have, a strategy for rolling stock replacement and renewal or, indeed, a strategy for the railway manufacturing industry in general. If they do have a strategy, they are too shy to tell the public what it is or give it the necessary urgency to safeguard the needs of the travelling public and of the train builders—the companies and their work force.
The reason a real strategy for rolling stock renewal is needed becomes clear when one considers the nature of the British Rail fleet of passenger vehicles. British Rail has 11,000 passenger vehicles, which typically have a life of 30 to 40 years. An annual replacement programme of some 300 to 400 new vehicles would be needed to retain the existing fleet with the existing age profile. It would require an investment of £250 million to £300 million per year. If, on top of that, one were to predict a modest increase of 1 per cent. a year in traffic on the railways as a result of the country pulling itself out of recession, we should need an extra 120 vehicles a year—an investment of some £90 million.
If one believes what the Government say—I hope that it is true—about a shift of traffic from road to rail, and if one were to build in a further modest 1 per cent. increase in rail traffic each year, we should need another 120 vehicles, making a total annual investment in new passenger railway carriages of about £500 million. That compares with the Government's figure announced in the autumn statement for investment in new passenger carriages of £150 million. There is a large gap between the two figures.
The kind of projection that I am suggesting is not pie in the sky. In the late 1980s, Network SouthEast estimated that it needed 400 new carriages to be built each year. It negotiated with ABB. On the strength of Network SouthEast's projection of its future needs, ABB invested £15 million in its York carriage works to meet the demand that Network SouthEast suggested that it would need to contract for in the years to the turn of the century.
In terms of carriage building, ABB has created a rolling stock factory in York which is a centre of excellence not just in British or European terms, but on a worldwide basis. People from Europe who visit the factory say that they have nothing like that in Germany, Italy or France. The York factory is a world-class facility.
The factory has the capacity to build 400 carriages a year. Until recently, it was operating at half-capacity. As a result of the redundancies announced two or three weeks ago, it is now operating at one-third capacity. It could soon be operating at zero capacity, because, if further 800 orders do not come through, the works will close. Despite all the investment, that factory will no longer produce carriages.
What a shocking betrayal of British engineering that would be. What a dreadful waste of the £15 million invested by ABB. What kind of message would that send to other foreign companies considering investing in our country if a company takes the plunge, negotiates with customer, invests £15 million and then finds that the orders do not flow? What a damning indictment of Government policy that would be. The works would have closed, simply because the Government did too little too late to save them.
The Government did too little because they came up with 150 million rather than the £500 million necessary for an adequate replacement programme for the existing British Rail fleet. The Government are too late because they dithered. They announced £150 million in November, but the following summer we have still no clear indication when or if an order will be placed.
§ Mr. Mark Wolfson (Sevenoaks)As the hon. Gentleman is aware, I have a common interest in the issue, across the country and across the Floor of the House, particularly with regard to the speed or lack of it of the Government's announcing their decision to go ahead. I appreciate that it is for British Rail to make the decision, but I support the hon. Gentleman's argument that modern new rolling stock is long overdue for Kent commuters, for whom standards are still pretty appalling.
The Budget contained a very positive announcement to opt for leasing. In my Budget speech, I clearly supported that leasing plan and I welcomed the fact that my right hon. Friend the Prime Minister had said that the Government were going to give a high priority to the future of manufacturing industry. On the issue of the works in York and the order that Network South East so badly needs, a number of points come together.
Let us implement the Government's good decision in the Budget. The essential needs of Kent commuters should be met. The operational needs of Network SouthEast, with the coming of channel tunnel trains, should be raised to much higher standards than at present, and the hon. Gentleman's constituency should be assured of a better future.
§ Mr. BayleyI welcome that intervention by the hon. Member for Sevenoaks (Mr. Wolfson) and I absolutely concur with him. It is not just a Labour Member like me from a northern manufacturing constituency who believes that the order for Network SouthEast trains needs to be placed, and placed now. That view is shared by Conservative Members who represent constituencies in Kent and other counties served by Network SouthEast. It is also the view of the Railway Industry Association, and of my hon. Friends the Members for Kingston upon Hull, East (Mr. Prescott) and for Livingston (Mr. Cook). My hon. Friend the Member for Livingston wrote to his opposite number in the Department of Trade and Industry today to press the point. It is also the view of the Transport Select Committee and of the Engineering Employers Federation.
I am not asking the Minister to back a lame duck. The class 465 vehicle which is built in York is the train to reshape the railways. It is the universal Networker. It will run equally on an old southern region third rail 801 electrification or north of the Thames on a pantograph. The Government say that they want a leasing market in secondhand trains, which implies an interchangeability of rolling stock between lines, and the class 465 developed by ABB will provide precisely that. It would bring London's cummuter services into the 21st century.
The York-designed and York-built body shell of a 465 is the only body shell in Europe that has the European Community's full crash safety certification—none of its competitors has that. For the first time, this country has a train with major export potential to other countries in Europe.
That is not a pipe dream. The York works has already won a European order. It is building the Strasbourg supertram, which it won in competition with many French rail manufacturers. Price and quality at the York works now have an international reputation which will be put at risk if the York works do not get what any other exporting industry in any other country would need—that is, a base load of home production to keep it secure and on which it can build for export success.
British Rail and the Government are juggling with two orders—one for the west coast main line and one for Network SouthEast. I have called on the Government before to increase the amount of investment from the £150 million of leasing finance authorised in the autumn statement to £300 million. I repeat that bid now. If the Government want, as they say, to increase rail investment as they move towards privatisation, that increase in investment should happen. I do not want an either-or choice. Both the west coast main line and London commuters deserve a better service.
If a choice has to be made, I urge the Minister and British Rail to opt for Network SouthEast, for four reasons. First, if the contract goes to ABB, Network SouthEast trains would be wholly built in the United Kingdom. Competitors would not build a UK train—they would buy half of it, the body shell, from abroad. Secondly, the York carriage works is a centre of excellence and will close if it does not receive an order. It is as simple as that. We cannot beat about the bush; that would happen. We would lose the last base in Britain at which whole suburban trains with modern aluminium carriages are built. That cannot be allowed to happen.
Thirdly, Network SouthEast's London commuter services are clearly a public service railway. They cannot operate without Government support. The west coast main line is a commercial railway. Chris Green, the managing director of InterCity, says that it is completely commercially viable to invest in InterCity trains running from London to Manchester and further up the west coast main line. If that is the case, and if the Government are committed to private sector involvement in a privatised railway, they should give him the green light and say, "Go ahead, you have a commercial opportunity which yields a substantial return; go into partnership with the private sector, do that on your own account, and leave the Treasury-authorised £150 million for a public service, high-need railway for London commuters."
Fourthly—the hon. Member for Sevenoaks identified this point—Networkers, if used on the Kent lines, would increase the capacity of those lines by about 50 per cent. because the trains are bigger and take more passengers and 802 also because they accelerate more quickly than existing trains, so one can fit more train movements on a single line within an hour. That extra capacity is essential because, when the channel tunnel opens, the train paths will be needed on existing lines between the tunnel and London for several years to come. That capacity must be freed up, and the Networkers at York could do that.
In his statement on 3 June, the Minister announced that the Government were creating three passenger rolling stock companies. He said that the Government had two measures to encourage continued investment in rolling stock after privatisation: first, the £150 million which I have already mentioned and, secondly, a new clause in the Railways Bill to enable the franchising director to offer some sort of "comfort" to rail investors. I am not sure what "comfort" means. It is neither immediate nor specific. In terms of saving the York works and Britain's ability to build modern trains, an immediate and specific response is needed.
I have two sets of questions that I want to ask the Minister. The first are short-term questions relating to ABB and the York works. What will the Government do to keep the York carriage works in business so that rail travellers in Britain and the British economy will continue to benefit from British-built trains? When specifically will British Rail and the Government decide how the £150 million will be spent? When will British Rail be able to sign a contract, and when will the contractor who wins the work be able to start construction?
The second set of questions is equally important and relates to the longer term. Does the Minister agree that the country needs a strategy for rail investment and a clear programme for rolling stock renewal? Can he see a time when the railway industry in Britain will be able to plan ahead and we shall get the rolling stock necessary to meet the needs of the public, or will the Government allow the railway manufacturing industry to continue to lurch from crisis to crisis and have Members of Parliament like myself asking the House for emergency action to keep what could be a highly successful foreign exchange earning industry above water?
We have the potential for a major British engineering manufacturing success, which could be put in jeopardy. We should not be lurching from crisis to crisis. For heaven's sake, let us not let the British train manufacturing industry go the same way as the British bus manufacturing industry went after deregulation. I have nothing against Mercedes or Volvo buses—they are fine vehicles—but, they do nothing for employment in Britain or for our balance of payments. It would be a tragedy if the rail manufacturing industry were allowed to go the same way as the bus industry.
§ 1.7 am
§ The Minister for Public Transport (Mr. Roger Freeman)I welcome the opportunity to answer the points made by the hon. Member for York (Mr. Bayley). He stoutly defended the interests of his constituents who work in the ABB factory. I pay tribute to ABB for its investment in modernising that facility. My hon. Friend the Member for Sevenoaks (Mr. Wolfson) stoutly defended the interests of his constituents, who are passengers. I have only 11 minutes in which to answer the key points, so I will concentrate on the main issues raised by the hon. Member for York (Mr. Bayley).
803 I regret the loss of the 532 jobs at the ABB works in York. Those redundancies cannot be blamed on the Government's proposals for the reform of the railway industry. They have a lot to do with the recession in the United Kingdom and the consequences for British Rail—British Rail is not immune from the pressures of recession and with the understandable, but optimistic, expansion plans of the industry, including ABB, over the past few years.
To answer one of the hon. Gentleman's points, I believe that Britain should have a domestic rolling stock manufacturing industry. The hon. Gentleman is right to say that we need that. We do not want, in five or 10 years' time, to have to rely on French or German manufacturers.
The hon. Gentleman asked what the strategy was. The strategy is perfectly clear. We want to move increasingly to the private sector assuming responsibility for design, for the placing of orders and for the financing of rolling stock for the railway industry. That is a very clear objective. It will take a number of years, because British Rail has a number of obligations that it must continue to discharge. I do not rule out British Rail or the public sector placing further orders.
It is important to step back and look at the present state of the industry. We undeniably have quite significant over-capacity, as the hon. Gentleman has been frank enough to admit in the past. The Railway Industry Association, in its publication "Beyond Future Railway", estimates that the present annual capacity of the industry is about 2,200 vehicles per annum.
Over the past five years, between 1988 and 1992, the industry has delivered to British Rail about 500 vehicles per annum. That is one quarter of the present capacity, and includes a peak year of delivery in 1990. The association's most optimistic forecast of likely orders up to the year 2000 runs at about 1,100 vehicles per annum–50 per cent. of present capacity.
I put it to the hon. Gentleman that that combination of circumstances has resulted in a position that does not present appealing options. As Minister for Public Transport, I accept responsibility, in working with the industry, to ensure as good a use of that capacity as possible. However, the industry will have to rely on orders coming from beyond British Rail, a point with which I shall deal in a minute.
The hon. Gentleman asked me about the £150 million of special lease finance. I do not accept that as the sum total of orders that I should like to see placed in this financial year. The £150 million is not the ceiling for this year. It is not an annual figure, and it is not in British Rail's external financing limit. Undoubtedly, because it is the first major lease of its kind for rolling stock, special considerations will have to apply to the terms and conditions of the lease.
It is up to British Rail to make a decision; it is not up to Ministers to decide between the two options. There had to be two options because, at the urging of both ABB and GEC, British Rail decided to hold a competition for value for money between two run-on orders. If British Rail had decided to use the facility for a brand new design of rolling stock, it would have taken a considerable time to draft a specification and to allow industry to prepare the necessary tools and jigs for manufacture. That is not the case here.
I do not accept that there has been delay. British Rail decided on the two options to compare before Easter, as it 804 said it would. I cannot give the hon. Gentleman a week when a conclusion will be reached; that is not within my gift. I cannot specify precisely when a conclusion will be reached. British Rail will decide on the best offer, and then, I hope, manufacture will start shortly. Once the decision has been taken—it is an invidious decision between Networkers and 225 stock—I shall immediately start work with British Rail on helping it to prepare with industry a true operating lease that meets the Treasury's criteria of a lease that does not count against public expenditure. That is a commitment that I have made.
I do not regard it as a choice for all time between the Networkers or the 225 HSTs mark 4 stock for the west coast main line.
I should like to see both manufactured in due course, but the condition is that if British Rail decides to pursue an order for the class not initially chosen, it must meet the Treasury's criteria, which, as the hon. Gentleman will know, were laid out at the end of May.
I have been asked what steps the. Government are taking to facilitate the development of this leasing market, which is most important. In its latter stages, the Railways Bill was amended to allow the franchising director to designate certain new rolling stock as what are called franchise assets. The Bill now enables the franchising director to require that successive franchisees use that rolling stock. The purpose, of course, is to extend the guaranteed lease life of the asset. That is most important, because it reduces the residual value risk to the lessor.
We have taken those steps, but industry and, in particular, the private capital markets will have to accept some residual value risk. That is minimised if there is a standard design or one that does not require very much change from order to order or between the uses of rolling stock on different routes. It will be helpful if the manufacturer offers to maintain the rolling stock to a high standard and to carry out technological improvements throughout its life. I have offered to meet the Railway Industry Association, representing ABB, GEC and others, in July to discuss its views about how best to develop the leasing market for rolling stock.
I turn now to the foreign market. As I explained earlier, even if British Rail and franchisees, through the leasing market, were to meet the most optimistic forecasts of the Railway Industry Association, only about 50 per cent. of this country's current capacity would be used. Thus, foreign orders are essential to the well-being of the industry.
Within the European Community, of course, orders have to meet the requirement laid down in the utilities directive. In other words, British Rail, when it is placing orders for rolling stock of a new design, must advertise and must accept qualifying tenders from other manufacturers in the Community. That applies also to the nationalised railway undertakings in the EC. This will take time, as there are long lead periods in the placing of orders.
As for the situation outside the Community, I have to say that the market is very competitive. I congratulate the British industry on winning some excellent orders abroad in the last few years. The pressure must continue. The Government and the Department of Transport will do everything they can to help ABB and the other manufacturers.
I believe very strongly that we must introduce more long-term planning into rolling stock procurement. Assuming that the Railways Bill will be enacted, I can tell 805 the House that the rolling stock companies, initially under public ownership, will be set up by 1 April 1994. We want those companies to pass into private sector ownership in due course.
British Rail will very shortly appoint advisers on the reorganisation of the ownership of rolling stock and on the move from public sector ownership to private sector ownership. But RailTrack has been asked to prepare a 10-year indicative budget for infrastructure investment.
806 There is a good case for the franchising director and industry to work together and to look forward by up to 10 years in making provision for new rolling stock.
I look forward to the meeting that is to take place on, I believe, 6 July, when the wider issues of the railway industry will be discussed, as it relates to York, with the hon. Gentleman and with my hon. Friend the Member for Ryedale (Mr. Greenway). We need the co-operation of industry, British Rail, the franchising director and the Government in planning for the future prosperity of the rolling stock manufacturing industry.
§ Question put and agreed to.
§ Adjourned accordingly at eighteen minutes past One o'clock.