HC Deb 02 March 1993 vol 220 cc274-82

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Andrew Mitchell.]

12.1 am

Mr. Stephen Milligan (Eastleigh)

I am extremely grateful for this opportunity to raise an issue of fundamental concern to my constituency. I thank my hon. Friend the Minister for agreeing to reply to the debate, because I know that he has spent a very arduous day in the Committee considering the Railways Bill.

I ask my hon. Friend the Minister to pass on to my hon. Friend the Minister for Public Transport my thanks for the visit that he paid to the railway maintenance yard at Eastleigh last September. I know that he is very aware of the problems that the works faces, and I am appreciative of the help that my hon. Friend has already given.

John Arlott, the well-known cricket commentator and Hampshire personality, was asked 30 years ago to comment on Eastleigh. His reply was a bit double-edged, but I will repeat it: Anyone who admires Eastleigh seems to me like the character evoked by a modern poet— 'As fond as a plain woman's lovers Of charms that the world does not see.' But Eastleigh has a heart, a huge fiery, steam-pulsed, hammer-beating heart. The heart of Eastleigh is its railway maintenance works, which is the subject of this debate.

Since 1891, when the London and South-Western railway—an efficient and wisely managed private company —decided to bring its wagon and carriage works from south London to Eastleigh, the works has been the heart of the town. That is particularly so since 1909, when the company decided to move the locomotive building works there also.

Today, 1,400 of my constituents are employed at the Eastleigh works, and hundreds more elsewhere on the railways. The works is still the biggest employer in the town. Hundreds more—employees' families, shopkeepers and businesses—depend on the works for their livelihood or welfare. It is vital to my constituency that British Rail Maintenance Ltd. continues as a prosperous and successful employer.

BRML is not some antiquated nationalised industry but a well-run and efficient nationalised industry. It has a first-class record. Every year for the past five years the works has been able, because of its efficiency, to reduce its charges to the railway by 2.5 per cent. It is flexible, and because its work force has a wide range of skills, the works can adapt in times of crisis. Perhaps the most striking example of that happened two years ago, when thousands of passengers were delayed by the famous wrong type of snow. That situation was dealt with: they got the right kind of maintenance at Eastleigh. The work force worked 24 hours a day, seven days a week, and managed to repair all the electric motors that had been damaged; very soon, trains were back in service. Had it not been for the large, flexible and skilled work force at Eastleigh, that might not have been possible. The work is done with increasing rapidity. Work on the light-maintenance trains can be turned around within three days.

Eastleigh is also remarkable for the good relations between management and work force. I am glad to say that representatives of both are here tonight to listen to the debate.

Despite that record of achievement, jobs—alas—are at risk in the rail maintenance yards. There are two reasons for that. First, the recession has meant a reduction in the use of trains on the network, and therefore a reduced need for maintenance; secondly—rather ironically—the Government's investment programme means that new rolling stock is coming on stream which requires less maintenance. For example, the new trains with sliding doors need much less maintenance than the old slam-door trains. There is a serious risk that many BRML workers will lose their jobs in the years ahead, whatever happens as a result of privatisation.

I sought the opportunity to speak tonight, before the Government have made any decisions about privatisation as it affects the maintenance sector, to ensure that they are aware of the concern that is felt. It is precisely because jobs are at risk and the welfare of my constituency is threatened that I hope the Government will consider very seriously, before making any decisions on privatisation, the effect on the work force and my constituents.

The company recently announced that it had asked the management consultants McKinsey and Co. to establish the best solutions and the best way forward. I welcome that decision: McKinsey is a first-rate company, and I think that its advice could be most helpful. I note from its remit, however, that it has been asked to consider not only the best form of maintenance and what is best for the railways, but what is best for the employees. I hope that the Minister will be able to tell us tonight that McKinsey will consider the employees' concerns, and will be prepared to meet the trade unions before making its recommendations.

I am principally concerned about the possible effects of the general privatisation of the network on railway maintenance. If the new franchisees are simply given terms of five, six or seven years to run the railways, they will naturally be tempted to cut corners—not to carry out proper maintenance, and to allow longer periods to elapse between maintenance sessions. That would not only be bad for the railways and for passengers; clearly, it would be extremely disadvantageous for my constituents who work for BRML.

I was very encouraged by a letter that my hon. Friend the Minister of State wrote to me last week in which he said that one option being considered by the Government was a special relationship between BRML and the new company set up to own the rolling stock—a company that would obviously have an interest in maintaining the quality of rolling stock, and would not be tempted to cut corners. I hope that the Government will explore that option further, with the aim of ensuring that corners are not cut in maintenance, and that the interests of BRML's employees in Eastleigh are taken fully into account.

I want to raise a number of points that are concerning my constituents and those who work at BRML; I hope that my hon. Friend the Minister can answer them. The first relates to the time scale. For three or four years, those who work at BRML have been in suspense: they have not known what their future is. They have been worried about job losses; they do not know whether BRML will remain a separate company, or whether it will be privatised. Can my hon. Friend give us some idea when a decision will be made so that those workers will know their future?

Secondly, will my hon. Friend confirm that BRML in Eastleigh will probably continue to be the main centre for the long-term maintenance of Southern region trains, whoever owns or runs them?

Thirdly, will he deal with an issue that troubles many of my constituents—the future of their pensions? That concerns both those who work on the railways now and the thousands who have retired. Last Saturday, I held a meeting in my constituency to discuss the issue: it was attended by 300 or 400 pensioners, who were extremely concerned about some of the misleading newspaper reports that they had read, implying that the Government might do a Maxwell and filch the pension fund. I should like an assurance not only that the value of pensions will be maintained but that pensioners, especially BRML pensioners, will in no way be disadvantaged by privatisation. They have paid their contributions and are entitled to the full pensions which they have earned during their working lives.

If the Government decide to privatise BRML, I should like to put a number of points on the record. Will the Government make it their objective to ensure that there is a level playing field? There has been considerable concern in recent months because some of the electric traction motors which are overhauled at Eastleigh have been put out to tender without BRML having a chance to put in a bid. There should be a level playing field, but there is concern that some work might go to other depots. My constituents accept that the railway demands the best price, service and conditions, but they want to be reassured that they will have the benefit of competing on equal terms with other companies and depots which may want to do the work.

If privatisation occurs, will the Minister make every effort to ensure that any new company is well managed and that some of the lessons of what went wrong at British Rail Engineering Ltd. are learnt before new arrangements are made for BRML?

Privatisation will clearly bring benefits to the railway —as my hon. Friend the Minister knows, I support privatization—but there will also be costs. I am concerned to ensure that those costs do not fall disproportionately on my constituents. In that respect, I should like those who work at BRML to gain some clear benefits if it is privatised. Would it be possible to have a shareholding scheme so that if the company prospers those who work there reap the benefit instead of it going to an outside organisation which merely bought it?

I have in mind the favourable experience of another company in my constituency, the shipbuilders Vosper Thornycroft, which was successfully privatised 10 years ago. It has doubled its productivity and has the largest order book in its history. It is one of the few defence firms in the south of England which is recruiting workers. It has been able to offer its employees shares in the company— about half have accepted—so they have drawn a direct benefit from the company's success. With the same thought in mind, would it be possible to expand the work for which BRML can bid? At the moment it is limited to trains on the Southern region. Could it hid for work elsewhere on the railway network or possibly for work in other sectors? The Minister may know that during the war the Eastleigh works produced bomb trolleys and worked on assault craft and a variety of other wartime needs. It is flexible and could do work for other industries.

Will the Minister offer some words of encouragement and assurance to my constituents? They are extremely worried about what will happen to their jobs. Unemployment in Eastleigh has traditionally been very low, but it has almost tripled in the past two years. The town of Eastleigh is very dependent on the railways. There is an air of uncertainty. We should be most grateful if the Minister could offer assurances that will enable my constituents and those who work at BRML to believe that they have a sound future.

I support the Government's privatisation programme because I believe that it will lead to greater use of the railways, which is what my constituents want. If any change to BRML can be managed in such a way that it benefits not only the railways but the employees, it will help the constituents of the railway town that I am proud to represent.

12.12 am
Mr. John Denham (Southampton, Itchen)

I am grateful to the hon. Member for Eastleigh (Mr. Milligan) and to the Minister for allowing me to make a brief contribution to this important debate. Many of my constituents work at British Rail Maintenance Ltd. and will also be listening carefully to the answers that the Minister will give. I shall be brief because I am as keen as anyone to hear the answers to the specific questions that have been asked.

I emphasise two points of particular importance. First, BRML is a public asset. Whether the Government intend to keep it in the public sector or move it to the private sector, it is in the public interest to ensure that it has a sound future. It is therefore in the public interest to ensure that no short-term actions are taken, or are allowed to be taken, which undermine BRML's ability to meet the heavy engineering needs of the railway network in the south-east and nationally.

How British Rail is privatised, if the Government persist in their intention to privatise it, and the links between the way it is privatised and the maintenance operations are critical to BRML's future.

I am one of those who believe that BRML's future will not be bright if it is left as an isolated unit, not integrated into the rest of the rail network, and I hope that the Minister will be able to give an assurance that BRML will not be left on its own to sink but will be linked in a positive way to the franchise operators—and ideally to those who will be operating services in the south-east—or to Railtrack, or to the leasing company that was referred to earlier.

I also hope that the Minister can give an assurance that BRML's core long-term viability will not be undermined by allowing light maintenance depots to asset-strip work which may be short term and profitable but which could end up by putting BRML out of business and denying the railway network the skills and expertise that exist at that important depot.

12.15 am
The Parliamentary Under-Secretary of State for Transport (Mr. Steve Norris)

I start by congratulating my hon. Friend the Member for Eastleigh (Mr. Milligan) on securing the debate. I am grateful to him for conveying his good wishes to my hon. Friend the Minister for Public Transport, who, sadly, cannot be with us. I know that one of the things that my hon. Friend the Minister would have wanted to say is that we and our colleagues in the Department have been impressed by the consistent way in which my hon. Friend the Member for Eastleigh has maintained his interest in the railworks in Eastleigh and has assiduously and constantly pressed us for the sort of assurance that he hopes to obtain from me this evening. The evidence for that is his consistent efforts to secure this Adjournment debate.

I am happy to join my hon. Friend's name with that of the hon. Member for Southampton, Itchen (Mr. Denham), who asked to intervene on behalf of his constituents. I see that my hon. Friend the Member for City of Chester (Mr. Brandreth), who I know is also keenly interested in the future of the railways in Great Britain, and the hon. Member for Cunninghame, North (Mr. Wilson), who leads for the Opposition on these matters, are also here.

As my hon. Friend the Member for Eastleigh said, Eastleigh has a proud railway tradition. The locomotive works there was opened on the present site, as my hon. Friend doubtless knows, in 1910, for construction and repair of London and South-Western Railway locomotives. Today the works handles repairs and modifications to BR's fleet of multiple units and locomotives, especially the Network SouthEast stock. The aim of BRML is to achieve rapid turn-round times and get vehicles back into service quickly.

When my hon. Friend the Member for Public Transport visited Eastleigh with my hon. Friend the Member for Eastleigh last September, he was impressed by the skills and adaptability of the BRML work force and, as my hon. Friend noted, the willingness of the work force to work constructively with management in producing a first-class product.

Eastleigh works has recently gained its British Standard quality certificate of which it can be justifiably proud. Over the years the Eastleigh work force has proved that it is capable of tackling any task that comes its way, displaying craftsmanship and achieving customer satisfaction of a very high order. I am sure that its good record will serve it well in the future. My hon. Friend is entirely right to want to clarify the future of all four of the BRML works as soon as possible.

My hon. Friend will know that, following the sale of BREL, the Eastleigh, Glasgow, Doncaster and Wolverton works became part of a new BR subsidiary—which is known as British Rail Maintenance Limited, and is responsible for heavy maintenance work for British Rail. That followed the board's decision that the design and supply of new traction and rolling stock should be competitively sourced from private manufacturers, with maintenance being undertaken in BR workshops on the basis of a component exchange system. That maintenance work is not, at present, put out to competitive tender, although components removed in BR workshops are overhauled externally following competitive tendering.

The Government's policy is that BR should widen private sector involvement in maintenance. We are still considering the options for BRML depots, but have made it clear that we see benefits in involving the private sector in the heavy repair work currently carried out by BRML. Private contractors do, of course, already carry out some heavier repair and refurbishment work for BR.

A number of options for the future of BRML are under consideration. One option would be to sell off BRML, either as a whole or by major individual depots, through trade sales or through management-led employee buy-outs. BR and other rail operators would then contract for heavy maintenance. Although the outright sale of BRML has attractions, it might pose serious competition problems. Where major overhauls and repairs are concerned, the monopoly power of an individual depot would be less, provided that the individual works were distributed among different owners so that an effective monopoly was not established. But even if the elements were sold separately, it might be difficult or too expensive for a railway operator to use other than the nearest depot, particularly in the case of the electric third rail network.

A second option might be to transfer individual depots to that part of the railway which is their major customer. That might make sense in the case of the BRML Glasgow works and the ScotRail franchisee. But it might be less appropriate in the case of Eastleigh, given its wide role in servicing Network SouthEast stock south of the Thames, and the fact that more than one franchisee would be involved.

Many franchisees may, of course, want to lease their rolling stock. My hon. Friend made that point, and I shall return to it in a moment. Some may wish to do so through a simple finance lease so that the franchisee does his own maintenance. Others may wish to concentrate their efforts purely on marketing. For them, rolling stock lessors might offer rolling stock on a fully maintained basis, recovering their costs through rolling stock leasing charges. The lessor in turn could either contract out maintenance or supply it from in-house resources. Either route could make use of the valuable expertise and experience which currently resides in BRML. Some combination of those three options may prove appropriate, depending on the circumstances. Above all, we must retain flexibility to meet the emerging requirements of future operators.

My hon. Friend is right to identify the sort of relationship that might exist in future between BRML and a publicly owned company established for the purpose of leasing railway stock. Certainly that would avoid the risk, if their were to be a risk, of short cutting by any individual franchisee on long-term maintenance, the effect of which might be beyond the immediate terms of the initial franchise.

As my hon. Friend says, British Rail has appointed McKinsey as consultants to advise on the future of BRML and the Level 5 group of depots. I understand that the trades unions have been advised by BR of the terms of reference for the work. The remit is to consider what options exist in the light of the Government's emerging plans for BR privatisation and to report to BR in the spring. I confirm to my hon. Friend that the terms of reference for the McKinsey study specifically require the study to have regard to the interests of employees of BRML and of the Level 5 group of depots. We look forward to receiving the board's proposals for the future of its heavy maintenance depots. In that context, I must add that it would be inconceivable, to my mind, if in the course of its investigation and the preparation of the report McKinsey were not formally to meet the trade unions as part of that process.

I recognise that uncertainty about the future is causing anxiety among BRML workers. We will make an announcement as quickly as we can. Meanwhile, we are giving further consideration to the relationship between rolling stock, franchising and access to maintenance facilities. The need to secure adequate maintenance facilities will be an important factor for franchisees, and could be a barrier to entry for new operators.

My hon. Friend the Member for Eastleigh and the hon. Member for Southampton, Itchen asked several other specific questions which I shall attempt to answer in the time available. My hon. Friend asked that if privatisation took place there should be clear benefits for employees —such as, employee shareholding schemes and the opportunity to bid for a wider range of work. We shall certainly encourage employees to take a direct stake in the future of a franchised or privatised business in which they work. My hon. Friend will know that the BREL sale, for example, included an employee shareholding scheme. I am also pleased to confirm that a privatised BRML would have the opportunity to bid for a wider range of work. It would compete in the private sector on a level playing field.

BREL's experience demonstrates the greater repair opportunities that will be available following privatisation. For example, although British Rail and London Underground Ltd. remain the major customers, BREL —which is now ABB Transportation—has won significant contracts from various industrial sectors, including defence, utilities, the construction industry and transport operators. That sort of widening of the customer base must be beneficial to a company and its employees.

I should like to say a few words about the level playing field to which my hon. Friend the Member for Eastleigh referred. I understand that the BREL sale agreement contains legal limitations on what BR repairers can bid for. Certainly, that is an issue which would need to be addressed by BR before any sale of BRML. If Eastleigh were transferred to the private sector, the intention would be that it would compete fairly on a level playing field with other companies in the private sector. It will be important to ensure that franchisees and any rolling stock leasing companies have access to the full range of maintenance facilities.

My hon. Friend wanted an assurance that a privatised BRML would have top-quality management in order to take it forward. I am sure that he will agree with me that one of the benefits of privatisation is that railway management will be more free to get on with what it considers are priorities.

Obviously, the terms and conditions of the sale will be a matter for British Rail. The Secretary of State's role in that context is to give formal consent to the sale. The terms on which the sale will be offered make it clear that there would certainly be top-quality management available to BRML in a privatised form.

I shall spend a moment on the important matter of pensions which my hon. Friend raised. I regret that an emotive issue of such crucial importance has affected many thousands of people who are getting on in years and who are, understandably, worried, especially in the wake of the absolutely scandalous treatment of the employees belonging to pension funds in the control of the late Mr. Maxwell. It is quite reprehensible that pensioners in that circumstance should be worried by the sort of stories which have been going around suggesting that the Government might employ the technique ascribed to the late Mr. Maxwell when dealing with pensioners.

Let me make one thing clear. We accepted the rail unions' suggestion that a joint industry pension scheme should succeed the present BR schemes after privatisation. We made it clear that the joint industry scheme will offer pension benefits which are "no less favourable" than the BR scheme for the staff transferring. We made it clear that successor employers who choose to leave the joint industry scheme will be required to make alternative arrangements which are "no less favourable" to meet that criterion.

Far from there being any intention to plunder the assets of the BR scheme, we have given two clear options to the trustees of the scheme as to how they want to see the future management of pensions for present and future BR pensioners. I give my hon. Friend an assurance which I am sure he accepts. The Government are not the slightest bit interested in making political capital out of this at the expense of some of the most vulnerable in society—the elderly who have genuine concerns about such issues and who are, understandably, concerned when they read some of the irresponsible reporting in the newspapers.

Mr. Brian Wilson (Cunninghame, North)

Will the Minister give way?

Mr. Norris

I have only three minutes, but, as I have dealt with all except one of the points that my hon. Friend the Member for Eastleigh raised, I shall be delighted to allow the hon. Gentleman to intervene if he will be quick.

Mr. Wilson

I shall be extremely quick. We could solve a lot of people's worries if the Minister would give us an assurance that £4.25 billion will not be transferred from the British Rail pension fund to the Treasury under any circumstances.

Mr. Norris

This is my hon. Friend's debate. I know that the hon. Gentleman is aware of the traditions of the House. He knows that I cannot digress into the issue that he raises except to say that he is aware that the Government made two clear options available to the trustees of the BR pension scheme. One involves the Government guaranteeing the payment of pensions, and thus taking over the assets of the scheme. The other involves the trustees determining a private arrangement which may well result in the pension scheme performing as well or perhaps even better. It has performed extremely well in the past.

I give the hon. Gentleman an unequivocal assurance that if the BR pension scheme trustees choose the latter course, the Government will respect that course and, indeed, urge it on the pensioners. It is important that the pensioners should listen to independent financial advice and take only the best quality advice available to them on the subject. I know that it is just as important to pensioners at Eastleigh as to pensioners everywhere else in the railway system.

Perhaps the most important point is that we are confident that, following BR privatisation, Eastleigh will be required to continue to use the well-established and extremely well-respected facilities at Eastleigh. That will make eminently good economic sense for operators in southern England—both franchisees and the residual BR. To train new staff to carry out maintenance functions is likely to be neither practicable nor economical in the required time scale. I am sure that the simple logic of that is the reassurance that the work force at BRML at Eastleigh seek. I am certain that successor companies and contractors will look for and require the considerable skills of the present work force.

I hope that in the time available I have managed to cover all the points that my hon. Friend raised. I assure him that if there are any other points on which he seeks further clarification I or my hon. Friend the Minister for Public Transport will be happy to write to him.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to One o'clock.