PUBLIC SECTOR OPERATORS NOT TO BE FRANCHISEES

HC Deb 02 November 1993 vol 231 cc211-56

Lords amendment: No. 31, in page 24, line 37, at end insert— ("(1A) Nothing in subsection (1) above shall prevent—

1. (a) the British Railways Board (in this Act referred to as "the Board"); or
2. (b) a wholly owned subsidiary of the Board,

from being a franchisee.")

7 pm

The Secretary of State for Transport (Mr. John MacGregor)

I beg to move, That this House doth disagree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

With this we may consider the following Government amendments in lieu of Lords amendment No. 31: (a), in page 24, line 40, at end insert—

1. '(3) Subject to the following provisions of this section, subsection (1) above shall not prevent—
   1. (a) the British Railways Board (in this Act referred to as "the Board"), or
   2. (b) a wholly owned subsidiary of the Board,
   from being a franchisee.
2. (4) Subject to the following provisions of this section, whenever the Franchising Director proposes to issue invitations to tender under section 23 below in respect of any particular services for the carriage of passengers by railway, he may, after consultation with the Board and the Regulator, determine that neither the Board nor any wholly owned subsidiary of the Board shall be eligible for inclusion among the persons to whom the invitations are to be issued or who may be selected as the franchisee.
3. (5) The Franchising Director shall not make a determination under subsection (4) above unless he considers that it is desirable to do so—
   1. (a) for the purpose of promoting competition for franchises;
   2. (b) for the purpose of promoting the award of franchise agreements to companies in which qualifying railway employees have a substantial interest;
   3. (c) for the purpose of encouraging new entry to the passenger railway industry; or
   4. (d) for the purpose of preventing or reducing the dominance of any person or persons in the market for the provision in Great Britain, or in a part of Great Britain, of services for the carriage of passengers by railway.
4. (6) The Franchising Director shall—
   1. (a) give notice of any determination under subsection (4) above to the Board; and
   2. (b) publish notice of the determination in such manner as he thinks fit.
5. (7) Nothing in subsection (5) above shall be taken to affect the matters which the Franchising Director may take into account in determining the other persons whom he invites to tender for franchise agreements or whom he selects as franchisees.
6. (8) No objectives, instructions or guidance shall be given under section 5 above by the Secretary of State to the Franchising Director with respect to the exercise of his functions under this section.
7. (9) In this section— "competition for franchises" means competition to become franchisees under franchise agreements; 212 "encouraging new entry to the passenger railway industry" means encouraging private sector operators who do not currently provide services for the carriage of passengers by railway to commence doing so; "qualifying railway employees", in the case of any franchise agreement, means persons who are or have been employed in an undertaking which provides or provided the services to which the franchise agreement relates at a time before those services begin to be provided under that franchise agreement.'.

(b), in page 54, line 36, after '20' insert '21, 23'.

(c), in page 72, line 2, at end insert— '( ) every notice of a determination under section 22(4) above;'.

Mr. MacGregor

As the House knows, we discussed similar issues on Report on 25 May when a Labour amendment along the lines of amendment No. 31 was tabled. The Labour amendment was rejected by a majority of 19 after a lengthy debate. After the Lords amendment tabled by Lord Peyton was passed, I made it clear that the House of Lords was asking us to re-examine the arguments, and that I would wait until the Bill had passed through the other place before I made our position known.

Since the passage of the Lords amendment, we have had detailed discussions with many people, including a number of my hon. Friends, about the issues, and what I am proposing in our amendment is the result. Therefore, I urge that we disagree with the Lords in their amendment and pass our amendment instead.

The House will be aware of our concerns about allowing British Rail to bid for franchises. They are not simply our concerns. They were spelt out many times during the debate on 25 May when I set out our objections, with which the House agreed at that time. The most important concern is that British Rail starts out as the monopoly operator—indeed, the sole operator. Its privileged position, backed by the taxpayer, will discourage other potential franchisees from bidding and make it more difficult for management and employee teams to prepare and support bids for franchises.

With the best will in the world, senior British Rail management are bound to favour their corporate bids at the expense of management-employee buy-outs. Those who want to mount management-employee buy-outs would be hesitant, to put it mildly, about going against senior management in that way.

We already know—my hon. Friend the Minister for Public Transport has talked about this already in our two-day debate—that many managers in British Rail are keen to submit management-employee buy-out bids. However, they have made it known that, if British Rail bids against them, they will have severe difficulties. We need to address that issue. I think that Tory Members and, I hope, the whole House are in favour of encouraging management-employee buy-outs. After the vote yesterday, it is clear that Labour Members are not in favour of encouraging management-employee buy-outs but certainly all Tory Members are.

The second problem is the chaos and confusion that would result—I know that many people in British Rail are concerned about this—if the Lords amendment went through unchanged. Chaos and confusion would arise because, in many cases, the managers who will be asked to submit the British Rail bid will be keen to submit their own bids. Clearly, that is a recipe for complete confusion. To deal with that specific point, a British Rail source is reported in The Daily Telegraph yesterday as asking what would happen if the British Rail Board asks the same people—there is not a limitless supply of experienced managers—to prepare bids on its behalf for the same franchises. It is an impossible conflict of loyalty and will put many managers off altogether. It is not clear at what point the franchise director will step in to rule that a board bid is acceptable or otherwise. Obviously, that comment was made before the Government's amendment had been seen, because our amendment makes clear the point at which the franchising director will step in. He will step in at an early stage to avoid unnecesary and fruitless bids and to clear up the uncertainties to which the source refers.

My third point is that it would be much more difficult to develop a healthy, competitive market in passenger railway services if British Rail were given unfettered discretion to bid for and operate franchises. We need to secure competition between franchisees which means avoiding market dominance by any one operator. That has been the clear purpose of our reforms, and one of the main benefits will come through that competition.

There are problems about transparency in bidding—problems of possibly unfair playing fields, cross subsidies and so on. The point is—I think that many people still misunderstand this with regard to our reforms—that there is no single big bang, no private flotation and no "Sid". Inevitably, the franchises will be granted over a period because the franchise director will be preparing different ones. We have indicated seven franchises that we regard as his priority.

In setting up the franchises, a track record of the separate business operating as a shadow franchise will have to be established so that bidders will be in a reasonable position to prepare bids. Inevitably, that means that not all bids will be happening at once—they will come through gradually. If British Rail is able to compete on each franchise at a different stage, that will increase the risk of unfair competition for bidding. Certainly, everyone who is preparing to bid will think that that is the case.

Mr. Nick Harvey (North Devon)

The Secretary of State says that a track record will have to be established on the service that is franchised. Can he clarify whether the managers who are running the shadow franchise and establishing the track record—the same team of managers—will be allowed to bid for the franchise? If so, is there not some incentive for them to ensure that the track record that they develop is as modest as possible so that they have the lowest possible figure for which to bid?

Mr. MacGregor

I do not think that that will be the case. If the hon. Gentleman is suggesting that managers will set out deliberately to run a poor service in order to show that they can improve the service, in that case they will prepare their bids, there will be other bids and they will be compared with the British Rail situation. If all the bids are better than the track record, clearly, the bid that is accepted will improve the situation.

In any case, everyone who is bidding—whether it is a management-employee buy-out or someone else—will do so on the basis of the same known details of the track record. There will be no favourable position in that respect in terms of information for management-employee buy-outs as compared with any other bidder. Therefore, in that sense, it does not matter because everyone will have the same basis of comparison on the track record.

Mr. Harvey

I am grateful to the Secretary of State for that. Is he telling us that the track record is the bid? Surely, at the point at which the bid is submitted, the track record is historic and the bid that is being made by the team is some sort of projection of the future. It may be that, having achieved a perfectly modest record in the period running up to the bid's being made, the team will none the less have a much more imaginative and adventurous business plan to submit. The projection of the future would be compared with bids from the private sector, and the figure that they submit would be based on that. However, the track record could be perfectly modest.

Mr. MacGregor

I thought that the hon. Gentleman would know this, because it has already been debated at great length. The track record of the shadow franchise will not be the bid—it will be the basis on which bids are prepared. Obviously, that will be important for every bidder. The bids will be considered by the franchising director—he will compare the different bids. If the bids are an improvement on the track record, clearly, that will be a factor that he will take into account. That is also something which we will welcome, because, in the competition for franchises, we will be looking for an improvement on the historic record.

I believe that the real issue is the other way round. I understand from discussions that we have had that a number of management-employee buy-outs are aware of the potential for increasing revenue, making savings and improving efficiency. They will submit a bid that will be a good deal better than the track record for different reasons, not the reasons given by the hon. Member for North Devon (Mr. Harvey).

The Government have always said that if the franchising director is not satisfied with any of the bids, for whatever reason, and he feels that British Rail's track record while operating a shadow franchise gives better value for money, he will not grant any of the bids and British Rail will continue to operate as it has done. I hope that that makes the position clear.

Mr. Bob Cryer (Bradford, South)

It does not.

Mr. MacGregor

I know that the hon. Gentleman does not understand, but he has not been following it.

All the indications that we have had since the Lords amendment was incorporated in the Bill suggest that our concerns were and are justified. Potential bidders, including bidders for management-employee buy-outs, have made it clear that they would be deterred from bidding if BR were given complete freedom to bid for franchises. I know that my hon. Friends agree with those concerns.

The Government amendment in lieu of Lords amendment No. 31 resolves those difficulties. I pay particular tribute to my hon. Friend the Member for Ashford (Sir K. Speed). He has taken a close interest in these matters throughout and approached them in a constructive spirit, as have other of my hon. Friends. We have achieved a satisfactory outcome, which meets his concerns and those that the Government have always expressed. I regret that my hon. Friend cannot be here today owing to illness, but I hope that we will see him back shortly.

The Government amendment preserves the wording of amendment No. 31, and the Government accept that BR should be eligible to be a franchisee. We are, of course, asking the House to reject amendment No. 31 and to replace it with the Government amendment. That is a technicality—it is a way of achieving the passage of the Government amendment—but the whole of the original measure from the House of Lords is preserved in the Government amendment.

The Government amendment puts certain confinements on BR's eligibility, and addresses the concerns that I have listed. It gives the franchising director a power to determine that BR should not be invited to bid for a particular franchise in certain circumstances. The franchising director may exclude BR from bidding, but only when he considers it desirable to do so in the interests of promoting management and employee bids or competitions for franchises, encouraging new entry into the industry or preventing or reducing market dominance in the provision of passenger railway services.

The question whether to invite BR to bid will be left to the discretion of the franchising director. He will have responsibiliy for the entire franchising process, an important part of which involves having effective competition at the franchising stage wherever possible. It is right that he should be the person to decide whether to invite BR to bid for particular franchises.

Mr. Cryer

Why? It is crackers.

Mr. MacGregor

He will do so at the pre-qualification stage, before notices to tender go out and before people have to prepare bids. That is important in order to give the certainty that was asked for by the BR source, and to prevent unnecessary expenditure on the preparation of bids on a false basis.

Subsection (9) in amendment (a) makes it clear that the Secretary of State will not be able to give objectives, guidance and instructions to the franchising director in the exercise of his powers to determine that BR should not be invited to bid. I know that some people regard that as an important part of the amendment, because it guarantees the franchising director's independence.

The amendment does not affect BR's role in operating passenger services until they are franchised. Should the franchising director decide not to accept any of the bids in response to his invitations to tender, BR will continue to operate that particular service.

On Report on 25 May, I argued that the amendment from the other place was unnecessary because there was a fundamental basis on which other bids could be assessed—BR's operating track record. If none of the other bids was regarded as satisfactory because they did not give better value for money, BR would continue to operate that particular service.

Ms Glenda Jackson (Hampstead and Highgate)

In that instance, would the BR bid receive the same subsidy that a private franchisee would receive, or would BR still have to operate its services with its present subsidy?

Mr. MacGregor

That would be a matter for the franchising director. He would have to look at what subsidies were being bid for by the franchisees. The intention is that it would continue as before, but the issue of subsidy at that point would be a matter for the franchising director.

Mr. Brian Wilson (Cunninghame, North)

The Secretary of State seemed to say that if British Rail became a franchisee, it would have the same length of franchise as any other franchisee, and the appearance of another interest in a particular service would not overtake the allocation of BR's franchise for the whole of the franchise period. Is that correct?

7.15 pm

Mr. MacGregor

That is more or less correct. It is a point which I will come on to later.

I am talking about a situation in which the franchising director decides that there are no viable bids, or no bids that give value for money. In such a situation, he would reject all the bids, and British Rail would continue to operate the service.

There is concern about the uncertainty that this might create for BR managers and staff, who will need to know where they stand in order to plan the operation of their services. For that reason, and having regard to BR's need to motivate its staff and to deliver services, I intend to include in the objectives, instructions and guidance that I will give to the franchising director a requirement that he should allow a reasonable period of time to elapse before initiating a new competition. It will be for the franchising director to decide how long that period should be. That point is covered in the second draft of the guidance to the franchising director, which is available in the Library. It is still a draft, and no doubt it will be subject to changes.

I will also incorporate in the guidance to the franchising director guidance on the assessment of bids from BR in cases in which he decides that BR should be allowed to bid. That is also contained in the draft guidance in the Library. The franchising director will have to ensure that BR's bids are assessed fairly, taking into account BR's position as the only public-sector body allowed to be a franchisee and the incumbent operator of the services to be franchised.

I will expect the franchising director to attach great weight to BR's record in providing the services in question, and to take account of the value of transferring risk from the public to the private sector. That will achieve the level playing field and the transparency.

The amendment giving the franchising director power to exclude BR from bidding will ensure that the interests of competition are properly safeguarded in the process of deciding who should be invited to bid for franchises. The guidance that I will give the franchising director will ensure that when BR does bid, its bids are properly and fairly assessed. That should reassure potential private-sector bidders that, despite BR's dominant position, there will be a level playing field.

As I have said, the amendment gives the franchising director a discretionary power to prevent BR from bidding when he considers that desirable for well-defined reasons. I cannot say how he will exercise that discretion, because the amendment also prevents me from giving him any guidance or exercising any power over his use of that discretion. In the terms of this amendment, there will be cases where BR will be given the opportunity to bid, although it will be for BR to decide whether to do so.

The Lords amendment makes a material change, even with the amendments that I propose. It will mean that a BR franchise will run for the period of the franchise, as distinct from the BR franchisee's being the residuary operator where there is no successful bidder. I hope that answers the hon. Gentleman's question. We intend to respond to the marketplace and the depth of the bids, and therefore the length of the franchises will differ.

Clause 106 provides that it shall be the principal objective of the Secretary of State, in exercising his powers in clauses 77 to 90 of the Bill, to secure as soon as … is reasonably practicable the result that the function of providing railway services in Great Britain is performed by private sector operators. That objective, as has been clear from the outset, applies to all railway services, including Railtrack, BR Railfreight, BR franchises and other BR-owned activities, including infrastructure companies, but the objective applies only as soon as is reasonably practicable and it is qualified by a wide range of other factors in subsection (2) to which the Secretary of State is required to have regard. Those include maintaining efficiency, economy and safety of operation in the provision of railway services and securing that any disposal takes place on favourable financial terms.

I could have said more about things that were said yesterday, but, to ensure that we get on with debating the amendment, which I know is of great interest to the House, I shall forbear from doing so. I shall simply conclude by saying that Lord Peyton's original amendment would have created chaos and confusion in BR and among management buy-outs and would have discouraged competition for franchises, which will secure better deals for passengers, taxpayers and employees.

Our amendment strikes a proper balance between allowing BR to be a franchisee where that is appropriate, and ensuring that BR's dominant position does not prevent the development of private sector interest in franchised passenger services. It is workable in a way in which the House of Lords amendment in its present form would not be, and I commend the Government amendment to the House.

Mr. Wilson

It is a supreme irony for the Secretary of State for chaos and confusion, the architect of this massive, unwanted disruption of our railway network, to accuse Lord Peyton, that benign figure at the other end of the corridor, of seeking to cause chaos and confusion in British Rail with his amendment. It is an exact minor image of the truth; the Government are responsible for the chaos and the confusion that will be caused by the Bill.

This is a key series of amendments. The Lords amendment would give British Rail the right to bid. It started its life as the Adley amendment and it would be remiss not to recognise the late Member for Christchurch's view of it. Robert Adley said: It is a bit odd to say that the only people who will not. be allowed to bid to run the trains is the only organisation in Britain that actually has any experience of running trains—namely, British Rail. That was true when Robert Adley said it, and it is true now. The absurdity that he highlighted was gross then, it is gross now, and nothing that the Secretary of State has said tonight erodes that fundamental absurdity. What has been stitched up as a deal with Conservative Back Benchers is the Government's internal affair, but the rest of the House and the country know that it is not a compromise but a buy-off, and that it is a buy-off for an extremely low price.

Until last week, there seemed to be reasonably widespread agreement throughout the Chamber on the principle that Robert Adley enunciated, and which had carried on life as the Peyton-Marsh amendment. That agreement has now collapsed due to the so-called Tory rebels' undignified retreat, which was as predictable as it is risible.

We are left with a contradiction. Yes, British Rail will be allowed to bid, but only if the franchise director can find no one else to bid against it. If he can, British Rail will be sent off into undignified retreat as the operator of last resort.

That is not fair competition; it is a rigged perversion of competition. It is deeply contemptuous of British Rail, its managers and its work force. British Rail will be left as the provider of last resort when no one else wants to run a service. The Minister, when it suits him, admits that, for a long time to come, a large part of the British rail network will remain in the hands of British Rail, but it will be in the hands of British Rail under the conditions which the amendment to the amendment seeks to impose, in which British Rail has been categorised as the provider of last resort, in the full knowledge that the opinion of the Government is that, if it can be got rid of, it will be got rid of.

I recognise a small advance in that. I have no doubt that, when the Government set out on this course, they intended to abolish British Rail altogether and to leave it running no trains at all. They have been on a collision course with reality because of the modicum of private sector interest that exists and also the massive cost in subsidy, which we now know a little more about, that will be needed if private operators are to be interested. They recognise now that British Rail will not go away and that it will still have a usefulness, but in a role which no other party and no other Government would dream of according the state railway company. We should be investing in and developing British Rail so that it gives us a railway to be proud of, integrated within the public sector, as exists in other continental countries.

What the Secretary of State is doing in this amendment is deeply contemptuous not only of British Rail but also of the British taxpayer. The Secretary of State is saying that, even if British Rail is the most effective potential bidder—in fact, especially if British Rail is the most effective potential bidder against a private interest—it will be excluded from competing in order to clear the way for that private bidder. There will be no competition.

Mr. MacGregor

indicated dissent.

Mr. Wilson

The Secretary of State shakes his head, but it is my understanding that, where that is likely to exist, British Rail will be disqualified from bidding. Irrespective of how little subsidy British Rail seeks to operate a particular franchise, if a private operator who might be asking for a great deal more subsidy is available, British Rail will be excluded and the money will go to the private operator. That is why we begin to realise that a huge increase in subsidy will be required to hold the network together.

The figures that we discussed the other day did not take account of train operators' profit. They envisaged the daft circular movement of everyone paying everyone else profit—the economic charges, plus 8 per cent. return. The figures did not take account of the train operators' profits. It is at that point, when the private operators are brought into that circle, if they ever exist, that the cost of subsidy, if the existing network is to be maintained, will go through the roof, even beyond the £2 billion a year which is being discussed now.

If British Rail were allowed to bid for every franchise, and came in as the lowest tenderer in every franchise, the country would ask why British Rail should not operate every franchise, because in aggregate the cost to the taxpayer would be massively less than the alternative, which is to fragment the railway, to cosset the private sector and, in each of those franchises where there is an interest, to pay the operators more in order to operate the services.

The Secretary of State, in defence of that point, argues against the concept of cross-subsidy. Cross-subsidy is a good idea; we owe an awful lot of our public services to it. In arguing against cross-subsidy in order to disqualify British Rail from bidding, the Secretary of State gives the show away. If British Rail were allowed to compete for every one of those 25 train operating companies, and if it were able to win every one of those franchises, obviously it would not be on the basis of cross-subsidy because British Rail would have had to make the appropriate bid in each and every case. Cross-subsidy enters the argument only when one is dealing with two or three of those franchises, not when one is dealing with all of them.

If there were any logic in what the Secretary of State is doing, and if there were any interest in giving the taxpayer the best deal, it would be put to the test: British Rail would be allowed to bid for every one of those franchises. The Secretary of State understands and fears above all that British Rail would probably win all, or nearly all, the franchises, which would be the best deal for the British taxpayer.

Mr. MacGregor

The hon. Gentleman totally ignores two points: first, as I made clear, the franchises will not all go out at one and the same time, but will be staggered substantially; and secondly that the franchising director will know the operating track record of British Rail during the period beforehand as a separate business—the shadow franchise, in other words. He will therefore have a benchmark, a comparison, with which to compare the bids, and if he does not think that he is getting value for money for the bids, he will not grant them.

Mr. Wilson

The point about staggering is irrelevant; in fact, it supports my case, because, if the Government's policy is pursued, ultimately all the lines would go out to franchise. Eventually, cross-subsidising would catch up with British Rail, because it would not be able to bid effectively for the later franchises. It is not true—British Rail would win the franchises not by cross-subsidising but because, as Robert Adley said, it is the only organisation in Britain with any experience of running the railways.

I am sorry, but what was the Secretary of State's second point?

7.30 pm

Mr. MacGregor

The franchising director will always know British Rail's track record of operating as the shadow franchise. He will be able to make that comparison, and, if he does not think that the bidders offer value for money, he will not award them the contract, so the shadow franchise will be converted into British Rail operating the franchise.

Incidentally, the hon. Gentleman is quite wrong about the £2 billion, and therefore about subsidies. He has completely misunderstood the basis for that figure. It comes from a report which is only a working document and which I have never seen. There are many models, and it is ridiculous to place such weight on that one. His argument about subsidy and value for money is undermined by the very process that the franchising director will go through.

Mr. Wilson

I certainly understood, from his reaction on television, that the Secretary of State had never seen the document in question. It was produced at the highest level by his officials and spells out the cost of subsidy during the next year. I have no doubt that, now that the document has come out, some formula will be found for disguising the figures, but essentially it spells out in great detail that more taxpayers' money will be needed in the system to make the thing work. That is the lesson to be learned from the document, and it is also common sense if anyone looks at this legislation.

Mr. MacGregor

Let me make it quite clear that I did not know about the report when I was confronted with it on television on Sunday, because there are a large number of documents from working groups at various levels. Naturally, one asks for different models of the way in which one can achieve a more commercial basis for the system. I think that that report was the 79th document from that working group. The hon. Gentleman is creating a great myth on the basis of very little, as he so often does.

Mr. Wilson

Frankly, if I were the Secretary of State I would think that some questions needed to be asked when my Department produced a document that concluded that "the central Government grant requirement would total about £2 billion in 1994–95, assuming an 8 per cent. return for Railtrack", if the officials had got it wrong to the nearest billion, irrespective of the level at which the report was prepared. If he likes, he can tell us the level of the document and whether that statement is wrong. It is not my statement, however—it comes from his Department, which says that it will cost £2 billion next year to make this show operate, without running a single extra train or carrying a single extra passenger.

Mr. MacGregor

Will the hon. Gentleman give way?

Mr. Wilson

Yes, we will bow to experience.

Mr. MacGregor

The hon. Gentleman has completely misunderstood. If I remember correctly, I think that the report says, "by way of illustration". It is a model. The fact is that we are studying various models. That document was illustrating one way in which certain factors, which have all yet to be decided, could be worked through in the system. It is wrong to make any deductions from it about the level of subsidy next year.

The hon. Gentleman, among others, has made all sorts of suggestions on previous occasions about Network SouthEast fare increases. I have always said that we should wait until the announcement. I suggest that the hon. Gentleman would be well advised to do so, rather than building his position on a working document when many other such documents are being worked through.

Mr. Wilson

We need not prolong this argument. As the Secretary of State says, it will all come out in the wash. I am surprised, however, that he should build his case on fare increases. What sort of Government do laps of honour when fare increases are restricted to four or five times the rate of inflation, after Government intervention to hold them down? I am talking about Network SouthEast and the 8 or 9 per cent. increase in the travelcard. I do not regard that as a great triumph, and that increase was after intervention. Suppressing such increases would have to be paid for one way or another. British Rail has been left with that problem.

We have wandered off the point slightly. Let me return to the subject of ghost bids, to which I think the Secretary of State referred. We are invited to believe that the franchise director will consider British Rail's operations, once the vast superstructure for privatisation has been set up, and will work out what it costs British Rail to run each franchise area. He will then say that, if the private sector cannot do it for less, there will not even be a competition and British Rail will carry on. Is that probable? Is some guy appointed by the Secretary of State going to study BR's costs and call the whole thing off because, having looked at it objectively, he has decided that there is no way that the private sector could do it more cheaply? I do not believe it. The Secretary of State does not believe it. It is a total fiction to parade to the House.

The Secretary of State's political direction to the franchise director will be that he should get some franchises going this side of the next general election, but only the safe ones—the ones at which money can be thrown and which will cause the Government no political embarrassment. I do not think that they exist; we are beginning to see that from the Gatwick express, which is supposed to be the easiest of them all.

Political direction will occur at every stage. The franchise director will be told what to franchise, to cut out British Rail and to skew subsidy in the early years towards private operation, to give the Secretary of State the sort of political cover that he obviously so much requires.

I know that many of my hon. Friends want to speak and I think that Conservative Members have some explaining to do, so I do not want to take too long on the subject, but the myth of management buy-out must be challenged whenever it occurs. The Secretary of State may be a magician but he is not entitled to set himself up as a ventriloquist, to speak for people who are not allowed to speak for themselves, and to misrepresent them. That is a disgrace.

I do not know what precise proportion of BR's management are interested in buy-outs, but I know that, according to the only survey of opinion undertaken, 92 per cent. of senior railway managers are opposed to rail privatisation. It may be a little more, or a little less, but there is not one shred of evidence from which the Secretary of State can adduce, or even try to adduce, that a majority or even a substantial body of railway managers are positively in favour of rail privatisation and want to be involved in buy-outs.

Ninety-two per cent. of rail managers replying to the survey were opposed to privatisation; 77 per cent. were in favour of British Rail retaining the ability to bid for franchises. Seventy-seven per cent. of managers are still in favour of the very amendment that we are discussing. Tory Back Benchers—to whom the railway managers appealed—will betray them on that amendment.

Let it not be said that the amendment has been tabled in the name of railway managers, because it is not true. The Government are looking for a minority of railway managers who, from zeal or fears for their jobs and prospects, will become involved in the buy-outs. It is a disgrace to misrepresent railway managers by suggesting that they are behind the proposal. It astonishes me. No, it does not astonish me, as nothing that this lot does can astonish me. In the light of the figures, the Secretary of State glibly pretends that Government proposals are intended to support railway managers.

Railway managers may be the front men—we discussed last night how they might be used by private sector interests as a way in. A handful of managers may be involved, but how long will they remain involved? I know that the Secretary of State and the Minister attend conferences on rail privatisation, as I do—a great new industry has been created. I am sure that they are as familiar as I am with the advice given by financial interests to potential management buy-outs. I am sure that they are also as familiar with the term "exiting", which is used at such conferences, when railway managers are told, "Yes, get in there, make your money and then exit within three to five years. Sell on to the full private sector." That is the strategy urged on railway managers by the financial backers and the interested parties who will eventually take over those companies.

The idea that there is widespread enthusiasm among railway managers to make it their life's work to run private railways is false. The Minister knows what happened in other industries. Let us consider what happened to the bus industry where buy-outs occurred—within a few years, financial pressures and the anxiety to make a fast buck led to companies being sold on. I make no distinction between management buy-outs and full privatisation, because they are ultimately exactly the same. The only substantial difference in most cases is that a small number of pockets are well lined. That provides a heavy incentive for managers to become involved initially.

The extraordinary tribute to managers' commitment to the public railway can be seen in the figures. In spite of the bribe, 91 per cent. of railway managers are opposed to the suggestion. The Secretary of State said that there was not a limitless supply of experienced managers". He has got something right. Of course there is not a limitless supply; in fact, there is a distinctly limited supply.

What will happen while the wonderful management buy-outs bids are being prepared? We understand that managers involved in the bids will have to separate themselves from British Rail while the bids are put together for a period of six months, or perhaps even 12 months—[Interruption.] The Minister can correct me if I am wrong.

Mr. Freeman

Later.

Mr. Wilson

Who will run the railway from the moment that the bids are put together? If the bids do not succeed—there is no guarantee that they will—what will happen to the railway managers who have separated themselves from British Rail in order to put their bids together? Will they return to Dust the people who have run the public railway while they have been away putting together their bids? The scheme is a recipe for conflict and division, and will sap morale. Some people will be seen to be trying to feather their own nests, while others will be left with the job of running the public railway. That is what the Government are doing to the railways, and it is already having a huge effect on the morale of those who work in that industry.

The Secretary of State is right to say that there is not a limitless supply of experienced managers. Where will those private interested parties, who are supposed to be waiting in the wings, find the supply of railway managers to run the industry? When bus companies and other interests enter the market, they may want to recruit from the existing pool of railway managers, but at that stage not even the Secretary of State will be able to dragoon railway managers to work for them. At present, there is a large haemorrhage of experienced railway managers because they despise what is being done to their industry. That haemorrhage will increase.

The Secretary of State must bear in mind the fact that there will not be a limitless supply of experienced managers. He will leave us with a railway from which many of the most experienced people have gone. The inevitable corollary of that is that the running of the railway will be left in the hands of inexperienced people, which will have serious implications.

I am curious about the line that market dominance will exclude British Rail from bids. The Government are in the process of setting up private monopolies throughout the country. No matter which company wins the franchise, it will have a monopoly—whether it be British Rail or any other company. If only one operator runs a franchise—which will be the reality for a long time, even under the Government's scheme—that operator has market dominance. To say that British Rail cannot bid because to do so would give it market dominance is nonsense. If the Government have an explanation, I will be interested to hear it.

7.45 pm

I question whether fixing the scheme against British Rail and talking up management buy-outs is legal under European law. That issue was authoritatively raised in the House of Lords by Lord Clinton-Davis. In our contacts with the European Commission, we have been advised that it would certainly want to consider that issue. The notion that competition can be twisted to push one potential operator and discount another is ridiculous. Perhaps that could be done in the good old days of market rigging, but there is now European law to be taken into account. The words of Lord Clinton-Davis in the House of Lords will be actively pursued by the Labour party, which wants answers to various questions.

The subject should be of interest to my friends and colleagues from Ulster, who were present earlier. The Government may try to tell them that the Bill contains nothing relevant to Northern Ireland. We know that emissaries were sent to try to buy their votes a few weeks ago. There is a consultants' report on the future of Northern Ireland Railways. Despite several parliamentary questions, the Government have refused to publish that report. If they go ahead with the Bill, there is every reason to believe that Northern Ireland Railways would be next in line, as well as any other bits and pieces of railways around the country. The precedent of not allowing the operator to bid would presumably apply in each of those cases. The implications for Northern Ireland do not have to be spelled out.

The scheme is not a compromise; it is not an effort to satisfy the reasonable demand to give British Rail the right to bid. It is a fix against British Rail and cossets the private sector, which may turn out not to exist. There are minimal signs of genuine private sector interest. British Rail will continue to operate the great majority of services in this country. After a change of Government, British Rail will once again operate all the services in this country. In the meantime, what damage will be done to the morale and fabric of British Rail? The Government's performance over the issue, particularly the amendment, has been tawdry. They may have bought off the Tory rebels, but not opinion in the country.

Mr. Tim Rathbone (Lewes)

If the speech of the hon. Member for Cunninghame, North (Mr. Wilson) was meant to be a short speech that left lots of time for colleagues on both sides of the House to make their own contributions, I am glad that we were not blessed with a long speech from the hon. Member.

I am extremely glad to have caught your eye, Mr. Deputy Speaker, as it gives me the opportunity to put my oar into the debate not just only on my behalf, but on behalf of my hon. Friend the Member for Ashford (Sir K. Speed) who, as my right hon. Friend the Secretary of State said earlier, is unfortunately extremely unwell and unable to be with us today.

My hon. Friend the Member for Ashford and I are grateful to my right hon. Friend for seeking to address the concerns that a number of us have expressed. Our worries relate to ensuring the fundamental direction of the Bill and what it is meant to do. The Bill is intended to improve the service offered to customers by railways and to offer value for money both to passengers and to taxpayers.

There has been much press and public comment on the subject of Lords amendment No. 31, the so-called Peyton amendment, to allow the British Railways Board or a wholly owned subsidiary of the board to become a franchisee. Since the amendment of Lord Peyton—no shrinking violet—was accepted in another place, a number of colleagues and I have argued in favour of the amendment to improve the denationalisation Bill.

I am delighted and grateful that my right hon. Friends the Secretary of State and the Minister for Public Transport have accepted that principle and tabled a Government amendment on the issue, in the same positive way as they have reacted to other suggestions that we have made over recent weeks and months.

As my right hon. Friend the Secretary of State said earlier, it is essential to have a level playing field for all potential franchisees, be they from the private sector, management-employee buy-outs or the British Railways Board. British Rail managers with whom I and my hon. Friends have spoken, including those employees who wish to mount management-employee buy-outs, have stressed that they want only a level playing field, not a built-in advantage. They merely want to be able to compete for the franchise equally and fairly. They did not want the Peyton amendment overturned.

I understand the managers' concern. I believe that anyone with any business experience would understand their concern, because railway franchises will inevitably be a risky business. The companies will employ staff and have contracts perhaps for only five or seven years, although I was pleased to hear my right hon. Friend state on television last weekend that the contracts could go up to 15 years or even more.

The companies will not own many assets. The trains will be leased and the track, signalling and stations will be owned by Railtrack or by franchisees for those stations. They will avoid much capital debt, but will lack also the financial security that those assets would otherwise bring. Their business will be largely specified by the franchising director, heavily regulated and yet subject to the fierce competition of car, coach and air, which British Rail faces now, and which any rail operator will face in the future. As demand for rail travel rises or falls in line with the economy, even when business is bad the operator will still have to meet the obligations given to the franchising director when the original bid was made, so of course new operators need the sort of encouragement that my right hon. Friend proposes in his amendment.

I know that my right hon. and hon. Friends will welcome the view of potential management-employee buy-outs that they merely want a level playing field. It demonstrates that they are already embracing the free market principles of fair and equal competition. That was referred to at length during our debate on the guillotine motion this afternoon. They understand that in that way the railway will change for the better and will offer a better service and, crucially, better value for money.

My right hon. Friend the Secretary of State has assured me that those are his objectives, too; and I believe him when he says that those are the objectives behind the amendment that stands in his name. I welcome those assurances and the stands that he has taken.

I much regret the comments made by Opposition Members and their supporters outside the House who are seeking to undermine and rubbish the Government's proposals with rumours and innuendo worthy of a Machiavelli, which are thereby causing a lot of quite unnecessary worry among present rail users and present rail pensioners. That was the context in which I made some comments earlier this afternoon.

The Bill is complex. I want to try to help Opposition Members and perhaps my right hon. Friend the Secretary of State by inviting him to take this opportunity to give the House once again the assurances that he has given me and my hon. Friends. The first concerns a small point that was raised by the hon. Member for York (Mr. Bayley) towards the end of the debate on the guillotine motion. It is to do with the future right of British Rail's museums to the artefacts, free and clear of any cost in the future, as it has been given that right in the past. That matter has been raised before in the Chamber.

I had the opportunity of raising the matter in the last few words of the last speech before my right hon. Friend summed up on Third Reading. It has been touched on in the House of Lords and I believe that reassurances can be given—I hope that reassurances can be given—even though it has not been written into the Bill. Whether it becomes the responsibility of the franchising director in a similar way to that in which he becomes responsible for stations that are franchised individually, or some other responsibility, I believe that we should have some reassurance as to the present rights of that magnificent British Rail museum.

Returning specifically to the amendments, which I know that you, Mr. Deputy Speaker, will want me to do, paragraph (4) of Government amendment (a) permits—I emphasise the word "permits"—the franchising director in certain circumstances to determine that neither the British Railways Board, nor a wholly owned subsidiary, shall be allowed to bid for a franchise.

There is no requirement on the franchising director to do that. He can act only under the specific circumstances set out in the amendment. As my right hon. Friend has told us, those circumstances are designed to ensure a level playing field. He said that in his opening words and I believe that he should say it again when he sums up. He should go on to say that provision of quality of service and value for money are indeed the overwhelming reasons why a particular franchise will be granted.

I understand it to be the Government's intention that the franchising director would exercise those powers to that end and to no other. Were that not to be the case, I am sure that the Public Accounts Committee would soon be examining the activities of the franchising director. I hope that my right hon. Friend will therefore confirm to the House that that will be the case and that the franchising director as accounting officer will be required to come before the Public Accounts Committee to justify his actions in terms of seeking the maximum value for the public money for which he is accountable.

Mr. David Nicholson (Taunton)

As a member of the Public Accounts Committee, I am encouraged by what my hon. Friend has said in that regard. Does he agree that decisions by the franchising director, which might be controversial, might be open to judicial review?

Mr. Rathbone

I agree with that and I will come to that point in just a few moments.

I particularly welcome the requirement on the franchising director to promote competition for franchises. I hope that my right hon. Friend will confirm to the House that, in most cases, that will require the inclusion of British Rail in the bidding process to promote competition and to provide the benchmark against which new entrants to the Rail industry will and can be judged.

I must tell the House, however, that I was concerned about the reference in the amendment to preventing or reducing the dominance of any person or persons". That is a highly judgmental factor and one which, if abused, could give the franchising director carte blanche to buy bids by the British Railways board willy-nilly. [Interruption.] If hon. Members on the Opposition Benches would stay comfortably quiet, I should be most grateful.

It seems to me that, in the absence of open access competition, every franchise operator will be a monopoly provider of rail services within his area and therefore dominant, except in a limit number of cases such as Gatwick Express. In my constituency of Lewes, the local franchisee is certainly likely to be the only operator.

I have the assurance of my right hon. Friend that it is not his intention to use that provision universally to bar British Rail from bidding. It is difficult to understand how paragraph (5)(d) of his amendment will operate. I hope that he will be able to give the House an indication of what is meant by the word "dominance".

I was considerably reassured by a letter that I have received from Sir Bob Reid in answer to questions that I put to him. He indicates a proper approach to that sensitive issue. It is clear that British Rail will be prepared to submit to proper scrutiny of any of its bids; that it will do so in co-operation with the Government; and that it accepts as a minimum requirement a robust accountancy system to prevent subsidy leakage. That is being built into the restructuring which is already in hand.

A crucial part of the Government's amendments is the requirement for the franchising director to publish his decisions. That will allow them—here I come to the point raised by my hon. Friend—to be tested in court if necessary by way of application for judicial review. As my right hon. Friend has told me, that is a vital safeguard if the franchising director is to be given the power to bar British Rail from bidding.

I am advised, however, that it would be difficult for aggrieved bidders successfully to petition for leave for judicial review if the franchising director has not given the reasons for his decision. I hope, therefore, that my right hon. Friend will be able to give the House some comfort on that point. He may be unwilling to include such a requirement on the face of the Bill, but I hope that he will be able to give the House an assurance that the franchising director will give reasons for his decisions when he takes them, and not just in his annual report.

I have one further concern relating to those cases where, despite the franchising director seeking bids, he is unable to appoint a suitable franchisee and British Rail remains the operator. In those cases, it is my view, and the view of many of my right hon. and hon. Friends, that such an arrangement should be in force for the franchise period.

8 pm

In his draft objectives for the franchising director my right hon. Friend the Secretary of State has recognised the importance of the effect on morale and the need for a period of stability. But those draft objectives refer only to a reasonable period of time before seeking potential franchisees again and, if I heard him correctly, my right hon. Friend used exactly the same phraseology in his opening speech today.

My concern is that those continuing the running of difficult services or taking over unpopular franchises should be rewarded with a degree of stability. As a result of the changes that my right hon. Friend has agreed to the Bill, British Rail will be long-term operators and not just caretakers. I hope that my right hon. Friend will be able to reassure me and the House that the final version of his objectives for the franchising director will be more specific on that point and establish that such continuing British Rail operations will be at least for the length of the franchise period on offer.

Perhaps the most important feature of my right hon. Friend's amendment, on which I particularly congratulate him, is subsection (8) where he removes any question of his being able to direct the franchising director in these matters. If, therefore, the franchising director is to bar British Rail from bidding, the decision will be his and his alone after consultation with the regulator and the British Railways Board.

However, I have heard it said that that subsection prevents the Secretary of State from directing the franchise director only in that specific context, a point which I believe my right hon. Friend also made in his opening speech today. It has been alleged by others that the Secretary of State could use other powers of direction within the Bill effectively to ensure that British Rail would not be awarded a franchise if any other bids were made.

The argument runs that the Secretary of State could direct that another bid be awarded the franchise. It has been argued that the amendment to clause 4, which was successfully moved in another place by my noble Friend the Earl of Caithness, the Minister for Aviation and Shipping, would place a duty on the Secretary of State to direct the franchising director to accept MEBO bids above all others.

I have my right hon. Friend's assurance that that is not his intention, but, if he will excuse me, Secretaries of State tend to come and go, and nowhere more frequently than in the Department of Transport. I am sure, therefore, that the House would welcome some reassurance that the powers contained in the Bill should not be interpreted in that way.

In that context also, I remain concerned that the franchising director must submit to the Secretary of State for approval any proposal to offer vertically integrated franchises wherever those seem appropriate even though any such proposal can be made only with Railtrack's agreement. Therefore, I hope that the final objectives will delete that requirement as well as clarifying the previous requirement to which I have referred.

I return briefly to the crucial issue with which I started—that the Bill and my right hon. Friend's amendment have the sole intention of achieving value for money and quality of service through fair and equal competition between all those who bid for franchises, so that the best future operator wins each of the franchises, so that in turn much needed increased investment is made to improve services, particularly in such areas as the Kent coast line serving the constituents of my hon. Friend the Member for Ashford, the south coast central franchise area and the Sussex coast services which serve my constituents.

I know that my right hon. Friend the Secretary of State will be able to confirm that and give the assurances that I invited him to state, and I am confident that those assurances from my right hon. Friend will enable my right hon. Friends to join me in supporting the Government amendment.

Mr. Keith Hill (Streatham)

The hon. Member for Lewes (Mr. Rathbone) did the House a service, about which the Government will not be unduly perturbed, when he highlighted a central contradiction in the Government's amendment in his reference to subsection (5)(d). This will not be an open access railway. In granting franchises, the franchising director will inevitably be conferring not merely dominance in a particular railway but a monopoly in the railway. When proposals were put forward for the deregulation of the buses, it was precisely because the Government were worried about the potential abuse by franchisees that they rejected the concept of franchises in connection with buses.

On many occasions in the Select Committee on Transport and the Standing Committee which considered the Bill, we have drawn attention to documentation published in the mid-1980s which demonstrated the anxieties of departmental officials that the franchisee would capture the franchiser. The argument is that, in due course, railway passengers will pay the penalty for the situation that the Government are establishing.

However, that is not the main burden of my remarks this evening. Initially at least, I wish to pursue a line of questioning raised by my hon. Friend the Member for Cunninghame, North (Mr. Wilson) about the compatibility of the Government's amendments in relation to our obligations under the treaty of Rome.

The Secretary of State, who has just left his place, will doubtless be aware that those matters were raised by my noble Friend Lord Clinton-Davies, himself a former Commissioner, which adds authority to the reservations that he expressed in another place on this matter. Even the most sympathetic perusal of the record reveals that the Minister for Aviation and Shipping in the other place was unable to supply anything approaching an adequate response to the issues raised by my noble Friend Lord Clinton-Davis.

There is no doubt that the Government's amendments confer a privileged position to management-employee bids for franchises. There can he no other interpretation of the words: for the purpose of promoting the award of franchise agreements to companies in which qualifying railway employees have a substantial interest". Those words confer rather more than a level playing field to the advantage of MEBOs in these approaching bids.

However, there are potential objections to the Government's proposals under three heads of European Community legislation. Article 7 of the treaty states: Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. It is at least arguable that the present provisions put forward by the Government implicitly discriminate in favour of nationality. It is certainly an argument that merits a response.

Article 85 of the treaty defines as having the effect of prevention, restriction or distortion or competition within the Common Market, and therefore in contravention of the treaty, agreements, decisions and concerted practices which apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage". It is certainly arguable that another potential franchisee could take exception to the preference offered to a MEBO and it is hardly satisfactory for the Government to reply, as did the noble Earl of Caithness, that the Government would seek an exemption under article 85, paragraph 3. That power might be sought by the Government, but do they have any grounds to believe that it is likely to be granted? In other words, are there grounds to believe that the provision is compatible with the treaty?

I draw the Minister's attention to article 90 of the treaty, which states: In the case of public undertakings and undertakings to which Member States grant special or exclusive rights Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty. That relates in particular to the rules provided for in article 7, which I have quoted, and in articles 85 to 94 to which I have referred.

The Government amendments place MEBOs in a privileged position and that privilege will be enshrined in statute. There is no doubt that the statutory provision could be used in evidence against the interests of the MEBO. These matters should have been subject to serious consideration before the Government drew up their amendments. I wonder whether they seriously investigated the implications of the proposals in light of our treaty obligations. Did they consult the Commission? Are the Government sure that their proposals meet our treaty obligations? If they did not consult the Commission, and if they are not entirely sure that they have met the treaty obligations, is it not improper to ask the House to approve the amendments? Should not the amendments be withdrawn?

If the Government press the amendments to a vote—I suspect that they intend to do so—Conservative Members should be aware that the next Session may bring amending legislation to the Bill.

I shall turn briefly to the main thrust of the Government's proposals in the amendments. Conservative Members have expressed disquiet about the Government's earlier resistance to the amendments from Lord Peyton on British Rail's right to bid. If those hon. Members are willing to fall for the proposals, I fear that they are liable to fall for anything. It appears that Conservative Members wanted to secure a reasonable opportunity for BR to enter competitive bids to provide services. We have heard a good deal about the level playing field. The truth is that the Government are denying BR that level playing field and are saying effectively that it may compete only, if no private operator is interested in running the service.

By any standards BR is an efficient railway undertaking. There are Conservative Members who do not believe that. Why, I wonder, are those hon. Members so enthusiastic about the enlisting of the support of BR managers through the proposed MEBOs? In any comparative terms—capital investment, railway undertakings, the proportion of GDP expended upon railways—BR is an outstandingly efficient and productive railway system. Why should BR be effectively and extensively denied the right to compete for the franchises?

There is an inconsistency here with earlier Government legislation which provided for competitive tendering in local government and in the health service. The Government have always permitted the public sector to bid. After all, BR knows something about running a railway, unlike virtually every other potential franchisee in sight. Is it not true that the Government are fearful that BR would win most of the franchises? In the public sector and in local government, the public sector won three out of every four contracts and, I might add, Swedish railways have won most of their work.

8.15 pm

Is it not true that the Government are aware that there is virtually no interest in the franchises? Are not the Government seeking to exclude BR to make it easier for the pathetically few private bidders—however expensive and however inefficient they are likely to be—to enter the scene? It is beyond my comprehension that the Conservative Members who apparently were willing at an earlier stage to go out on a limb to secure a reasonable opportunity for BR to provide these services are to be bought off easily. I hope very much that those hon. Members will listen carefully to the strength of the arguments made by my hon. Friend the Member for Cunninghame, North and by other Opposition Members and that they will join us in the Lobby tonight.

Sir David Mitchell (Hampshire, North-West)

In the original Bill, my right hon. Friend the Secretary of State provided, I believe wisely, that British Rail could not bid for franchises, but that the franchise director need not accept a franchise bid and could leave BR as the operator. The Lords have amended that to permit BR to bid for franchises and my right hon. Friend has tabled an amendment which goes part of the way to meet the Lords amendment.

I regret the Lords amendment, which I believe was short-sighted and misdirected. If BR bids, the private sector will be frightened off. There have been continual references during the debate to the need for a level playing field. I do not think that there is any way in which a level playing field can be achieved with BR as a bidder. I shall explain why I think that is the case.

BR has enormous financial clout and there will be fear by those who are invited to bid for franchises that BR will cross-subsidise. I regret to say that I disagree with my hon. Friend the Member for Lewes (Mr. Rathbone), and that is unusual. To bid for a franchise, any bidder needs to know the cost and overheads and how to apportion and predict the movement of those overheads. Does the House, my right hon. Friend or anyone who knows BR intimately believe that there is any way in which BR knows what its costs are and can predict them? It is not organised to do that.

I do not believe, nor does anyone who knows the industry, that BR would be capable of putting forward a clean bid on a level playing field. I know that, many hon. Members know that and—more important—anyone thinking of putting forward a MEBO knows that only too well. If BR is to bid, there will be cross-subsidisation, which I as a taxpayer have every right to be fearful of. BR would be using taxpayers' money and that would be cheap and nasty; cheap for BR and nasty for the taxpayer. That would inevitably frighten off bidders from the private sector.

There are important points which my hon. Friend the Minister should not overlook when he winds up the debate. The benefit of private sector culture will be lost if BR continues to hold a franchise. One can take a photograph of the situation at any particular moment, but the situation is moving. Looking forward over the period of the franchise, there will be opportunities for innovation and for change. It is that innovation and change at which BR is so bad and at which the private sector is inevitably better. The real difficulty is that, if BR is to be compared with a private sector bid, the facts will be concealed. BR will rumble on as it has for so many years, whereas the innovative private sector bidder could bring new ideas and new ways of capturing the market and of pleasing the customer.

Mr. Keith Hill

During the hon. Gentleman's earlier incarnation as a Transport Minister, he leaped around the counties of Hereford and Worcester in pursuit of buses to pave the way for bus deregulation.

I suppose that the hon. Member would argue that we have seen the benefits of innovative creativity from bus deregulation and privatisation, which has led to a total loss of 13 million bus passenger journeys each year since its introduction.

Sir David Mitchell

The hon. Gentleman will know that bus deregulation has been a considerable success in Worcester. In many parts of the country, innovative ideas have been introduced, such as the minibus, which virtually did not exist before the Transport Act 1985 was passed. If the hon. Gentleman wants to know what happened, one result of bus deregulation was the introduction of a whole series of new ways of providing services which were of substantial benefit to the consumer.

Yes, there is a long-term downward trend in the number of passenger miles. That is simply a result of growth of the use of the private car, with all the convenience that it can offer. That trend has not altered. I shall come back to the hon. Gentleman's point about buses in a moment; I do not want to detain the House for too long.

We must bear in mind the serious point that if British Rail can bid, the level playing field that Members on both sides of the House believe should exist will not be provided. Management buy-outs will be stifled. No manager will bid against his employer knowing that if he loses the franchise, he will continue to be beholden to that employer for his employment. Indeed, managers will think two or three times about whether they dare to put their future employment prospects on the line, mortgage their houses and do the other things that might go with a buy-out. There is serious anxiety about whether managers and employees will dare to bid against a British Rail franchise offer.

The last reason why there will not be a level playing field is that managers will have to put up their own money, mortgage their houses and take real risk while British Rail will bid with the bottomless purse of the taxpayer. The Government amendment says that nothing should prevent British Rail or its subsidiaries from being franchisees, subject to the right of the franchise director to forbid it, if desirable, for the purpose of promoting competition for franchises, encouraging management and employee buy-outs, encouraging new entrants to railway operations in the United Kingdom and preventing market dominance by one operator. I find it difficult to live with that. I am prepared to do so and to put confidence in my right hon. and hon. Friends this evening, but the original Bill was much more sound in ensuring that genuine innovative new bids were brought into the working of railways.

The hon. Member for Cunninghame, North (Mr. Wilson) feared that large increases in subsidy would be required when franchises came in. The hon. Member for Streatham (Mr. Hill) spoke about buses. There is one lesson to be learned from bus deregulation. I refer to it in the narrow aspect. When socially necessary bus services were put out to tender, service after service which previously needed a substantial subsidy needed much less and, in many cases, no subsidy. That was to the astonishment of the county and metropolitan councils which had been paying the subsidy thinking that they were obtaining value for money.

Mr. Bayley

Will the hon. Gentleman give way?

Sir David Mitchell

Certainly.

Mr. Deputy Speaker (Mr. Michael Morris)

Order. We cannot go into a long discussion about the pros and cons of buses.

Sir David Mitchell

In that case, I will not give way. I conclude by saying that some £40 million was saved by county and metropolitan councils throughout the country when they discovered to their astonishment that, by putting bus services out to competitive tender, they saved substantial amounts of subsidy. I believe that there will be considerable astonishment when it is found that the same thing applies to the railways.

I bow to your wisdom, Mr. Deputy Speaker, in not pursuing the argument about buses any further. I shall support my hon. Friend the Minister in the Lobby, but we would have done better to reject the Lords amendment and stuck to the original Bill.

Mr. Harvey

One would find it easier to believe that the Government had had a significant change of heart and were making a concession on this point if their change of heart was not so late in the day. As others have said, it came after the Government's defeat in the Lords. Their response has been cobbled together on the back of an envelope and as the hon. Member for Streatham (Mr. Hill) said, there is considerable doubt about its legal validity.

The argument about allowing British Rail to bid has been with us for a long time. When the White Paper was issued, long before the Bill was published, I asked from this Bench whether British Rail would be allowed to bid. The point was raised again on Second Reading, throughout the Committee proceedings, on Report and Third Reading and in the Lords, where the Government were defeated. Only after that defeat, when the Government faced the prospect of the same thing happening in the House of Commons, did the Secretary of State wave his magic wand and come up with the strange formula that we have before us.

We were told earlier that the leaked document from the Department of Transport which said that the privatisation process would double the level of public expenditure was just a model. But surely the model of allowing BR to bid with some handicap was considered earlier. If it was ruled out as invalid then, why has the option been whipped out at this late stage as the basis of the legislation which is shortly to go on to the statute book?

Allowing BR to bid is simply a device to allow Conservative Members who have threatened to rebel to walk away without loss of face. It has nothing to do with the running of the railway service or choice for passengers. Nor does it do anything to guarantee the position of the taxpayer, who has poured money into the nation's rail network for decade upon decade. The prospect of allowing British Rail to bid was the only guarantee that the service would not be taken away and dismembered by spivs who would come in briefly to run a railway service, find that they could not, bale out and leave the mess behind them.

The suggestion that risk is being transferred from the public to the private sector and that some value should be put on that gives the game away. I wonder whether it is true. If the risk that will be taken by the private sector will not be bailed out by the taxpayer when the crunch comes, the fears that have been voiced by Members of Parliament and people elsewhere that services will close will be realised. If there is a risk transfer, who will pick up that risk?

At this point we should be discussing the Government's rail policy for the future. A proper policy would seek to avoid the doubling of road use by 2025. A sensible policy might reasonably seek to double use of the railways by the end of the decade. People want to use the railways more. They are put off by the ridiculously. high fares that they have to pay. The Bill will make that worse. We shall see a net transfer of not only freight but passenger traffic away from rail back on to the roads.

Ministers are fond of saying that, if the amount of freight carried on the rail doubled, it would reduce road traffic by only 5 per cent. That is false, because it ignores the distance of the journeys involved. If the railway doubled its share of the 200 km-plus market, it would reduce long-distance lorry freight by 50 per cent. That would be a popular move. It would be a great deal more popular than building a motorway from Felixstowe to south Wales and the south-west—a proposal that is coming on to the agenda.

The Bill is not about safeguarding the taxpayer or improving choice for the passenger. It is not about facing up to the real crisis of under-investment in the railways or exploring new ways of doing something about it. The game has been given away during the debate. We have heard that the Bill is about cutting public subsidy. I believe that it is about continuing to pursue the Thatcherite dogma of the 1980s and convincing the right of the party that the candle burns on, the policy still exists and the Government are true to the faith.

The Government amendment is ridiculous. It says that BR can bid, but that in any circumstance that any sane man can think of, the bid is to be disregarded. There are four reasons why it can be disregarded. One is to feather-bed management buy-outs, which will be the only real prospective bidders. The second is to feather-bed private sector buyers. There is no sign of any of them. The third is competition, although by the time competition has been skewed twice, one has to query whether it is worthy of the name competition.

The fourth reason why the bid can be disregarded is to prevent anyone from having a dominant position in the market. British Rail has 100 per cent. of market at the moment. That means that, at any given point, on any franchise that is considered, British Rail can be disregarded because it is a dominant supplier. The catch-all enables the franchising director to disregard BR's bid on any occasion for any reason that enters his mind. We need British Rail to be a strong, vibrant bidder, an on-going committed public transport provider that is going to guarantee quality to the public and to guarantee value for money to the taxpayer. We do not want BR to be an impotent bidder of last resort.

8.30 pm

The consequences of the amendment are no different to those that would have occurred before the amendment was tabled. The Government were initially saying that, if the private sector management buy-outs did not produce a worthwhile bid, BR would be left as the operator as the last resort. What sort of service is it to operate as the provider of the last resort? What sort of service will the passenger get on lines run by the operator of the last resort?

Under those circumstances, BR should be given the franchise. BR should be given a guarantee that, for a period of seven, 10, or 15 years, it will be running that service and it should have the same incentives and objectives as any other bidder or anybody else operating any part of the rail network. Damage has already been caused to morale and unity among BR employees by the work that has gone on in putting together the shadow franchises.

I wonder why, even at this late stage, the Government did not take the opportunity to save themselves from the ridiculous ideology of trying to prevent BR from bidding. Even the Evening Standard—hardly a renowned bastion of left-wing thinking—asked in an editorial in the summer, what on earth all this is for? Who is going to benefit? Will it end up with fares going up, services being reduced and a new level of bureaucracy being created just to split BR into franchises? It said that the game is not worth the candle. The late Robert Adley summed up the Bill as the poll tax on wheels. That description and what he meant by it it will come home to roost.

I deplore the Bill for the passengers and I deplore it for the taxpayers. The only thing that prevents the Conservatives from plunging on to their own sword is the hope that the franchising director will save them from themselves and allow BR to bid.

Mr. Peter Luff (Worcester)

Opposition tactics over the Bill, especially in the past two days, have consisted of little more than delay, scaremongering and, most appallingly, threats. When the hon. Member for Kingston upon Hull, East (Mr. Prescott) described yesterday what would happen, in the unfortunate event of a future Labour Government seeking to renationalise the railway, to those managers who dared to try to provide a better service to the customer, we saw the Opposition's real enthusiasm for involving management and employees in running a better business. I was deeply disappointed with what he said.

The words of the hon. Member for Kingston upon Hull, East were not surprising. We know that the Opposition want to kill the Bill. They are not, and never have been, interested in the consumer. Their interest is in the producer, the provider of services. I was disappointed to hear the hon. Member for North Devon (Mr. Harvey) sharing that same prejudice. I shall tell the House what the Bill is about. It is about providing new ideas, new investment and new involvement in the railway from the management and employees of the railway. That is why I was so anxious to speak on this group of amendments.

I expect significant private sector interest in the franchises to be offered by the franchising director. I think that that interest will often be expressed in partnership with management and employee teams, and very often I expect management and employee teams to take the lead in bidding for the franchises in their own right—and I welcome that. We must ensure that no potential new participants are frightened from bidding for the franchises by anything in the Bill.

I sincerely hope that the concessions that have been made by the Government in this group of amendments in an attempt to get the Bill on the statute book before the end of the Session will not have that frightening effect. I fear that there is already some evidence that managers are becoming less enthusiastic as a result of their concern at this concession. I shall ask my hon. Friend the Minister to assure me on a number of specific points.

The British Railways Board fought a clever campaign to try to frustrate the Bill. One senior BR representative said recently: The board will not stand by and preside over its own suicide Frankly, that is no concern of the House. Our concern must be for the quality of service, not the preservation of the British Railways Board. It is essential that we look carefully at the Government's new amendments to see whether they go too far, whether they will frustrate management and employee buy-outs and whether they will betray the confidence of those managers who are currently preparing bids and who believe that they can run a better railway. Contrary to the view of the hon. Member for Cunninghame, North (Mr. Wilson), there are many more than three managers currently preparing bids who were named in The Daily Telegraph yesterday.

Over recent months, I have spoken to a number of managers who are interested in preparing bids and they have warned of the consequences of accepting the amendment as it stands. The concerns that I shall express are not mine, but those of railway managers who want to bid. First—

Mr. Nick Raynsford (Greenwich)

Out of self-interest.

Mr. Luff

Their interest is not self-interest, not exclusively self-interest. Yes, they will make some money, but they will provide a better service to the passenger. That is the important point. The British Railways Board has access to money at different rates from managers or outsiders bidding for franchises. There is a real danger of unequal competition as a result of that consideration.

Secondly, the board would always have been the operator of the last resort if the franchising director declined to accept any other bid. I still worry whether that process needs even the limited double chance that it is being given by the amendments.

Thirdly, in many areas, many managers feel that the board has failed to reduce central administration adequately under the Organising for Quality initiative, landing individual managers with excessive central costs. Managers must be allowed a chance to show what they can do when they choose how much central administration to buy.

Fourthly, many outside bids could be non-compliant. They may seek greater vertical integration than the Government seem prepared to accept. A large central compliant bid from the British Railways Board would automatically rule out outside bids, thus inhibiting the evolution and development of the railway. I hope that, under the Government's new proposals for the objectives of the franchising director, that danger will be carefully monitored.

Fifthly, managers of British Rail know that they have an unsaleable brand, with 45 years of adverse associations. During that period, the railways share of the passenger transport market has declined slowly, but consistently. Under the new regime, the managers to whom I have spoken are looking for a new start for new products that can succeed. I hope that the Minister will assure me that there is nothing to stop bidders grouping together to sustain the one British Railways brand that has real value in the marketplace: the InterCity brand.

Sixthly, the Government will continue to provide the British Railways Board with money through public service obligation grants to run those parts of the railway with which it is entrusted. If the BRB is allowed to bid for franchises, there is a real danger that it will direct funds to franchise bids. That could worsen the service elsewhere on the passenger railway.

Seventhly—a point that has been made by many hon. Members and commentators—there will be a conflict of interest if managers are forced to choose between whether to work on a British Rail bid or on their own. I must welcome what the Government have done to clear the way for those bids.

It is now too late to fine-tune the plans. I hope that the amendments meet the seven specific concerns of the managers that I have expressed. I will be carefully scrutinising the activities of the franchising director to ensure that he uses his powers well to address those seven concerns. How well he does so will determine the success of the Bill, which provides an opportunity for the liberating winds of choice, competition and concentration on the customer—something so often lacking in so many parts of the British Railways Board's activities over the years—to blow through the railway. I wish the franchising director well in that onerous task.

Mr John Gunnell (Morley and Leeds, South)

I was watching television on Sunday afternoon and saw the Secretary of State receive the news about the extra £2 billion expenditure. I have heard him say tonight that it was only the 79th paper from the working group and therefore that he is discounting figures that gave him such a shock on that programme. Will the Minister tell us whether there are to be increased costs?

Sir David Mitchell

Is the hon. Gentleman aware that, in the past, British Rail has had to show an 8 per cent. return on new investment? The paper to which he referrred dealt with the consequence of the wholly new concept of having to apply an 8 per cent. return to all the old investment. That is not likely to become a practical reality, and if somebody has worked it out as one of the options in the Department, the hon. Gentleman should not put too much weight on it.

Mr. Gunnell

I am not about to put any weight on it. The Minister for Public Transport, in his discussions with passenger transport authorities, has agreed that, next year, their public service obligation grant—the money that they get through the section 20 agreement—will need to be increased by 50 per cent. to cover the extra costs of the changes that will be taking place. Therefore, he has accepted that the extra money is a result of the Bill. Sadly, because of the guillotine, we shall not be able to debate the necessary arrangements to reschedule the section 20 grants.

It will come as no surprise to the Minister or to any hon. Member to hear that PTAs wish BR to bid for every franchise in which they have an interest. They fear that, if BR becomes only a residual operator, management motivation will be lost and efficiency will drop. Over a number of years, PTAs and their executives have exerted considerable pressure on BR to improve financial and operational performance. When I was leader of a metropolitan authority, I had a number of such meetings, in which we demanded increased efficiency from British Rail. The Government have acknowledged the success of PTAs and written into the Bill provisions to continue, and perhaps strengthen, the role of PTAs and their executives.

By keeping the maximum pressure on British Rail to maintain efficient management practices and seek innovative solutions, the PTAs will be able to continue to improve local services. If they cannot continue to do so, they fear a return to escalating costs and declining standards. If there is a mixture of organisations, with a residual operation by British Rail—if that is what it becomes—it will have no long-term goals except its own extinction.

I accept that there may be bidders for franchises from management buy-outs. Another possibility is bus companies, and some major bus companies have been looking seriously at bidding, but have already decided that, as the franchises are too large for them, they will not bid. No one has yet mentioned possible bids from foreign railway operators. Will the Government be prepared to sanction bidding from such companies, which may then charge a higher price than BR to run the service? There might also be bids from non-transport companies—we do not know of any yet—that might seek partnerships with BR teams of managers. All those possibilities do not look likely to become realities.

We have to ask the Government to consider several questions. First, why will there be no genuine competitive tendering in this privatisation? My hon. Friend the Member for Streatham (Mr. Hill) said that the Government have permitted other in-house groups within the public sector to set up and compete against the private sector. I would go further: I would say that the Government have encouraged that. We have seen many examples of groups that have offered services first within the public sector and then, as a result of their experience there, have put in bids and transferred to the private sector.

The Government would have benefited if they had allowed British Rail to compete. The hon. Member for Hampshire, North-West (Sir D. Mitchell) said that he did not think that BR managers were all that good at some of the aspects of business that are necessary in a management buy-out. He said that they were not good at giving the sort of financial information that would be necessary in a bid. In that case, it would be better to allow BR to develop such expertise than simply to cut its managers free now.

We have to ask about the transfer of risk, a point that I mentioned last night. The Minister said that he did not regard the whole of the private sector bid as being covered by the transfer of risk. If BR is providing a service at £10 million a year and a private sector bidder offers to provide the service at £15 million a year, will the transfer of risk be more than the £5 million a year to make that private sector bid more economical?

8.45 pm

We have to be suspicious of the Government's amendment, because it contains no referrence to costs, as the hon. Member for Lewes (Mr. Rathbone) said. Given that the amendments are designed to transfer services to the private sector, why is there no clause to ensure that the transfer does not incur significant additional costs? Why is that not a limiting factor and why have the Government not put economy at the forefront of their amendments? In every other respect, it has been clear that the franchising director has to take maximum account of cost and the economy; but not in this instance. That is why the Minister, in dealing with PTAs—he has been willing to talk to them throughout the passage of the Bill—has said that the section 20 grants will have to rise by 50 per cent. to cover the increased costs of services. Those increased costs are brought about by the change in the Bill. The Minister cannot avoid answering that point.

Mr. Gary Waller (Keighley)

Any lingering doubts that I might have had about the Government's amendments would have been blown away by the lack of vision shown by Opposition Members. Time and again, they have ignored the key point, which was emphasised by my right hon. Friend the Secretary of State, that even where BR does not have an opportunity to make a formal bid, the franchise director will be precluded from awarding a franchise to an operator whose potential does not match the track record of BR.

The draft objectives for the franchising director state clearly, on the first page, that he must seek to protect the interests of passengers. It would be nonsense in those terms to award a franchise to an operator whose potential service would be worse. We have heard the misleading claim that BR is a provider of last resort. The suggestion is that BR will be left with services only if no other bids are submitted for them. That is a misunderstanding of the purposes of the Bill. Sadly, that misunderstanding is spread throughout the country. We have to explain the measure better. Unreal fears have been promoted in recent months on the basis of misleading information deliberately provided from certain sources.

It seems to me that rail users have a good two-way bet. The BR shadow franchises will inevitably have to respond to commercial pressures and, whether BR or a management and employee buy-out eventually runs the service, it will be a better service—at least it will be no worse— because the franchise director will not award a franchise to someone who will provide a worse service.

Another myth is that BR will be left running a rump railway after a bout of cherry picking. Anyone who believes that clearly has not read the Bill or the "Draft objectives for the franchising director", the first page of which includes as a principal objective through payment of support to the British Railways Board and its wholly owned subsidiaries and to franchisees, to secure an improved overall service for passengers. I am convinced that, for a long time, services will continue to require taxpayers' support. That cannot be denied. Indeed, it is bound to be the case, as it is in all countries with railway services.

I hope that the franchising process will bring the greatest improvement to those services that need it. For various reasons, the service currently provided by BR is patchy throughout the country. We all know that certain lines desperately need improvement and the franchising process is the best way to ensure that it is directed to those services.

I welcome the fact that the Government have gone not for a big bang but a gradualist approach. As time goes by, the Bill's benefits will become clearer and clearer.

Ms Glenda Jackson

Yesterday, my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) referred to another amendment in the Bill as "Alice in Wonderland". Surely this amendment brings us to the Mad Hatter's tea party. I clearly recall my hon. Friend the Member for Wrexham (Dr. Marek) tabling an amendment in Committee urging the Government to allow BR to bid for franchises. The Government's response then was a categorical no. For a variety of reasons, BR was not to be allowed to bid for franchises in the bright new world of privatised railways.

What has happened in such a comparatively short time to change the Government's attitude to the idea of British Rail bidding for franchises? Could it conceivably be that the private sector has shown no interest whatever in taking on the British Rail network? That is probably a stronger reason than the much-vaunted Conservative Back-Bench revolt. Even someone as comparatively new to the House as I am knows that Conservative Back Benchers tend to talk a good fight, but inevitably fail to deliver the knock-out punch.

The argument of the hon. Member for Hampshire, North-West (Sir D. Mitchell), that BR should not be allowed to bid because it was over-qualified, was absurd. I should not like to travel on a rail network run by amateurs, which is, in essence, what we are talking about. He argued that it is unfair because BR has a bottomless pit of public money with which to provide an improved service. We have seen in the past few weeks that that is patently untrue. The Government have savagely reduced public service obligation and BR subsidies.

I asked the Secretary of State this afternoon whether the subsidy earmarked for private operators when they bid for franchises would be given to the BR service if a private franchiser failed to win a franchise. BR will be expected, come hell or high water, to keep the trains running on our national network. As usual, the Secretary of State neglected to answer.

How can the Government seriously expect to improve the use of the rail network, attracting more passengers on to it and keeping freight off the roads? As one of my hon. Friends said yesterday, when will the Government give up their love affair with the juggernaut?

How can the proposed basis for introducing this ridiculous Bill be achieved if those now running the rail network, who will be expected to get out of trouble privatised franchise operators who significantly fail to deliver the service? How are we to expand the use of our networks and attract more people onto them when the Government consistently say that BR is a fail-safe device, is not good enough to bid for new franchises, and lacks the imagination to produce better services?

I spent an entire day with the management and work force of the part of BR that runs through my constituency—the north London line. A more dedicated group of people it would be extremely hard to find. They have weathered and worn the Government's chopping and changing and their inability to define what they mean by a public network service, short or long-term franchises, or plans for British Rail. Yet the members of that management and work force are still dedicated to the idea of a public network system. They are desperate to improve their stations and only too anxious to improve their services. They have a welter of imaginative ideas which they and I believe would attract more people back to that stretch of the railway. They have wonderful ideas for integrating that piece of railway into the much wider network.

Those who significantly failed to link this country by means of the channel tunnel link should listen to those members of the BR management. But they are not interested in the idea of breaking up the existing network in which public money will do little more than line the pockets of private investors who, as we have heard time and again in the House, lack any experience in running a rail network.

Only one group of people knows how to run a network. It could run it infinitely better if only the Government would acknowledge that a railway is a national resource and infrastructure that should be funded by public and private combinations, not split up in this absurd way.

Mr. Wilson

May I ask the Minister a specific point on ghost bids? I understand that there has been a change in Government thinking and that track and rolling stock costs will not now be distributed by the franchise director to specific franchises but, instead, the franchise director will pay a lump sum to Railtrack and the leasing companies.

Will the Minister confirm whether that is correct? If so, it represents a fundamental change in the Bill, virtually abolishing the concept of transparency and the attribution of costs to particular routes within the franchise. It also makes it impossible to make meaningful comparisons between BR's current performance and the bids being made. Has that major change in Government thinking, as yet unannounced, taken place?

We have had a full debate for the past two hours. I am pleased to see that, until the closing speeches, the allocation of speeches has gone back and forth across the Chamber.

Despite that widespread participation, the Government have truncated the debate on the spurious ground that there was procrastination in yesterday's debate. The debate would have been even better if it could have continued last night and we had been allowed more time. The Government's assertion that Opposition Members were speaking to no purpose has been discredited in the past couple of hours.

The Government's arguments on the amendments have been similarly discredited. Conservative arguments were summed up by my hon. Friend the Member for Hampstead and Highgate (Ms Jackson), who said that they asserted that British Rail was to be disqualified from bidding because it over-qualified. People who use the railways want a safe and efficient system that will cost the taxpayer as little as possible. They would prefer over-qualified people to those who are under-qualified, who are brought into the network not to improve it but to practise the dogma and prejudice that underlies the legislation.

As the hon. Member for North Devon (Mr. Harvey) said, the grounds on which the franchising director, who will be a creature of Government, will be able to rule out British Rail are part of a catch-all clause. BR will be left as a last resort provider. We shall oppose that at every stage, and shall draw attention to what is being done, to the discrimination against British Rail and to the disadvantage that will be imposed on the taxpayer. We shall continue to oppose the amendments.

9 pm

Mr. Freeman

I shall try to be as succinct as possible, but I am sure that the House would want me to answer all points properly. I can tell the hon. Member for Cunninghame, North (Mr. Wilson) that, for the first round of franchises, we expect that the franchising director will reach agreement with Rail track on the costs of track access for all franchises.

After that, the franchising director will ask for bids for subsidy for those lines that he proposes to franchise. Therefore, the bids will reflect not only the cost of train operation but the cost of access to the track. Of course, open access operators and the freight industry will bid directly to Railtrack. As I have said, we expect Railtrack as from yesterday to negotiate terms for access to the track. Rolling stock is a matter for the rolling stock companies.

The hon. Member for Streatham (Mr. Hill) asked about the treaty of Rome. Obviously, the franchising director must exercise his discretion under the amendmentin line with our obligations under that treaty. The amendment does not require the franchising director to take any action in breach of those obligations.

The hon. Members for North Devon (Mr. Harvey) and for Morley and Leeds, South (Mr. Gunnell) spoke about the £2 billion. My right hon. Friend and I have explained that, but I shall try to do so again. This is a model. It does not imply any additional funds for the railway system—that is to say, Railtrack, British Rail and the franchising director. It is simply one attempt of many to estimate the external financing limit of one part of the railway system, the franchising director. That is all in the public sector. I am sure that my right hon. Friend will look at many more possible solutions as to how a given sum of public money can be split between the external financing limits of those three public sector bodies.

It is not true that I have spoken about 50 per cent. The figure represents the increase in track costs to the passenger transport authorities, and I have no idea what the final increase will be. We shall provide a specific grant to the PTAs to cover the increase in costs in 1994–95. We have no desire to interfere with the level of service, and there is no reason to do so.

The Secretary of State and I are grateful to my hon. Friends the Members for Hampshire, North-West (Sir D. Mitchell) and for Worcester (Mr. Luff). I appreciate their support. They also want to improve the private sector's contribution to the railway, and that can be done by permitting additional investment and greater innovation. That is not a criticism of BR managers or employees. Because of the nature of a public sector monopoly, those two benefits are not properly reaped. The issue is how that is to be done.

The hon. Member for Cunninghame, North asked whether British Rail would bid. I confirm that our expectation, intention and belief is that it will bid competitively in certain circumstances. That is the purpose of my right hon. Friend's amendments. However, it will not be invited to bid in specific cases. The franchising director will decide. That is where the issue of promoting an interest in buy-outs by management-employees arises. That will encourage competition and prevent dominance. I shall try to define precisely the last of those.

There is evidence that British Rail management are seeking to prepare bids. We welcome that. I have visited many BR managers and I know that they are interested in the 25 franchises in the offing. Some of that interest will manifest itself next year and some in years to come.

The hon. Member for Morley and Leeds, South asked about value for money. The franchising director's budget is cash-limited, and he must use the money efficiently and economically. Therefore, when he compares private sector bids with BR's historic costs and makes his decision, taking account of risk transfer to accept a higher subsidy bid in the early years, he must initially justify that decision to the Public Accounts Committee. Of course, his judgments are subject to judicial review. The figures cited by the hon. Gentleman are way over the top. There may well be some differences, but they will have to be justified.

My hon. Friend the Member for Lewes (Mr. Rathbone) asked seven questions, and I shall seek to answer them as succinctly as I can. I am sorry that my hon. Friend the Member for Ashford (Sir K. Speed) is not here. Some of the questions that my hon. Friend the Member for Keighley (Mr. Waller) asked overlapped with the seven from my hon. Friend the Member for Lewes, and I hope that I have them correctly.

First, we did not manage to table the amendments to deal with the ability of the railway museum to acquire artefacts from the private sector. I will reply to the director of the railway museum. I give an assurance that I will have a meeting with him. It may be that we will be able to achieve the same objectives, but not via the statute. [Laughter.] There seems to be some mirth about that. It is not an evasion at all; we intend that the museum should obtain artefacts from both the private and public sector. I do not understand what the mirth is about.

Secondly, my hon. Friend asked whether the franchising director would operate on a level playing field. It is important that the franchising director obtains value for money. As I have already explained to the House, his judgments will have to be explained in due course to the Public Accounts Committee. There is certainly no requirement upon him to exercise that discretion in any particular fashion. He will enable BR to bid in certain cases, and he must explain any actions he takes in relation to the private sector.

Thirdly, my hon. Friend asked what was meant by dominance. It does not mean an absolute bar on BR bids from the beginning. My right hon. Friend and I certainly do not interpret dominance to mean that no BR bid should be allowed until it is down to 25 per cent. of all rail services in Great Britain: that is clearly absurd. Judgment will have to be used regionally and nationally, because we want to encourage private sector participation.

Fourthly, my hon. Friend asked about the publication of decisions. My hon. Friend will know that clause 67 of the print of the Bill dated 27 May states that the franchising director must publish and annual report which must be laid before the House by my right hon. Friend. We believe that is the right way to explain the decisions that have been taken.

Mr. Rathbone

It is absolutely essential that those decisions are explained in the annual report. In order to enable a judicial challenge to be made, it is unreasonable to expect a potential challenger to postpone making that challenge until the annual report becomes available, so it is important that the franchising director publishes his reasons before the annual report.

Mr. Freeman

I understand that. I am sure that the franchising director will be making announcements. I will reflect on what my hon. Friend has said, but I can give him no assurance at this stage that the franchising director will go beyond giving a account of this activities in the annual report. I understand what my hon. Friend is arguing; perhaps it is sensible to review what statement is made by the franchising director as and when he makes each decision. It is a perfectly reasonable point, and my right hon. Friend and I will reflect on it.

I was asked what was a reasonable period for BR to operate as a matter of last resort and continue to run services if it does not participate in the franchise award. We have deliberately not tried to define that, because it is not possible to do so. My right hon. Friend and I will reconsider the draft objectives which have been tabled for consideration by the House and reflect on how the language can be improved, but I do not hold out any hope that that period should specifically match the franchise period that the franchise director had in mind to offer if BR was not bidding.

I entirely accept my hon. Friend's point that we must ensure that the morale of BR does not deteriorate, and that management should be given some certaintly in continuing to run services.

Sixthly, my hon. Friend asked whether there were other means by which my right hon. Friend the Secretary of State can direct the franchising director in terms of accepting or rejecting British Rail as a bidder.

The answer is no, my right hon. Friend cannot use clause 5 to instruct the franchising director to use his powers to exclude BR from the bidding.

Finally, my hon. Friend asked me about vertical integration. That is not part of the Government's policy, which is why the franchising director has to refer these matters to my right hon. Friend. I am sure that that must be right, and we have set out our reasons for that.

I very much welcome the speeches by my hon. Friend the Member for Lewes and other hon. Friends. I hope that the assurances that I have given on these important issues will make them feel able to vote with the Government. I commend to the House both the motion moved by my right hon. Friend the Secretary of State to disagree with the Lords amendment No. 31 and the Government amendments in lieu.

Question put, That this House doth disagree with the Lords in the said amendment:—

The House divided: Ayes 316, Noes 282.

Division No. 381]	[9.10 pm
AYES
Ainsworth, Peter (East Surrey)	Carrington, Matthew
Aitken, Jonathan	Carttiss, Michael
Alexander, Richard	Cash, William
Alison, Rt Hon Michael (Selby)	Channon, Rt Hon Paul
Allason, Rupert (Torbay)	Churchill, Mr
Amess, David	Clappison, James
Ancram, Michael	Clifton-Brown, Geoffrey
Arnold, Jacques (Gravesham)	Coe, Sebastian
Arnold, Sir Thomas (Hazel Grv)	Colvin, Michael
Ashby, David	Congdon, David
Aspinwall, Jack	Conway, Derek
Atkins, Robert	Coombs, Anthony (Wyre For'st)
Atkinson, David (Bour'mouth E)	Coombs, Simon (Swindon)
Atkinson, Peter (Hexham)	Cope, Rt Hon Sir John
Baker, Nicholas (Dorset North)	Cormack, Patrick
Baldry, Tony	Couchman, James
Banks, Matthew (Southport)	Cran, James
Banks, Robert (Harrogate)	Currie, Mrs Edwina (S D'by'ire)
Bates, Michael	Curry, David (Skipton & Ripon)
Batiste, Spencer	Davies, Quentin (Stamford)
Beggs, Roy	Davis, David (Boothferry)
Bellingham, Henry	Day, Stephen
Bendall, Vivian	Deva, Nirj Joseph
Beresford, Sir Paul	Devlin, Tim
Biffen, Rt Hon John	Dicks, Terry
Blackburn, Dr John G.	Dorrell, Stephen
Body, Sir Richard	Douglas-Hamilton, Lord James
Bonsor, Sir Nicholas	Dover, Den
Booth, Hartley	Duncan, Alan
Boswell, Tim	Duncan-Smith, Iain
Bottomley, Peter (Eltham)	Dunn, Bob
Bottomley, Rt Hon Virginia	Durant, Sir Anthony
Bowden, Andrew	Elletson, Harold
Bowis, John	Evans, David (Welwyn Hatfield)
Boyson, Rt Hon Sir Rhodes	Evans, Jonathan (Brecon)
Brandreth, Gyles	Evans, Nigel (Ribble Valley)
Brazier, Julian	Evans, Roger (Monmouth)
Bright, Graham	Evennett, David
Brooke, Rt Hon Peter	Faber, David
Brown, M. (Brigg & Cl'thorpes)	Fabricant, Michael
Browning, Mrs. Angela	Fairbairn, Sir Nicholas
Bruce, Ian (S Dorset)	Fenner, Dame Peggy
Budgen, Nicholas	Field, Barry (Isle of Wight)
Burns, Simon	Fishburn, Dudley
Burt, Alistair	Forman, Nigel
Butcher, John	Forsyth, Michael (Stirling)
Butler, Peter	Forsythe, Clifford (Antrim S)
Carlisle, John (Luton North)	Forth, Eric
Carlisle, Kenneth (Lincoln)	Fowler, Rt Hon Sir Norman

Fox, Dr Liam (Woodspring)	Lord, Michael
Fox, Sir Marcus (Shipley)	Luff, Peter
Freeman, Rt Hon Roger	Lyell, Rt Hon Sir Nicholas
French, Douglas	MacGregor, Rt Hon John
Fry, Peter	MacKay, Andrew
Gale, Roger	Maclean, David
Gallie, Phil	McLoughlin, Patrick
Gardiner, Sir George	McNair-Wilson, Sir Patrick
Garel-Jones, Rt Hon Tristan	Madel, David
Garnier, Edward	Maitland, Lady Olga
Gill, Christopher	Major, Rt Hon John
Gillan, Cheryl	Malone, Gerald
Goodlad, Rt Hon Alastair	Mans, Keith
Goodson-Wickes, Dr Charles	Marland, Paul
Gorman, Mrs Teresa	Marlow, Tony
Gorst, John	Marshall, John (Hendon S)
Grant, Sir A. (Cambs SW)	Marshall, Sir Michael (Arundel)
Greenway, Harry (Ealing N)	Martin, David (Portsmouth S)
Greenway, John (Ryedale)	Mates, Michael
Griffiths, Peter (Portsmouth, N)	Mawhinney, Dr Brian
Grylls, Sir Michael	Mayhew, Rt Hon Sir Patrick
Gummer, Rt Hon John Selwyn	Mellor, Rt Hon David
Hague, William	Merchant, Piers
Hamilton, Rt Hon Archie (Epsom)	Milligan, Stephen
Hamilton, Neil (Tatton)	Mills, Iain
Hanley, Jeremy	Mitchell, Andrew (Gedling)
Hannam, Sir John	Mitchell, Sir David (Hants NW)
Hargreaves, Andrew	Moate, Sir Roger
Harris, David	Molyneaux, Rt Hon James
Haselhurst, Alan	Monro, Sir Hector
Hawkins, Nick	Montgomery, Sir Fergus
Hawksley, Warren	Moss, Malcolm
Hayes, Jerry	Needham, Richard
Heald, Oliver	Nelson, Anthony
Hendry, Charles	Neubert, Sir Michael
Heseltine, Rt Hon Michael	Newton, Rt Hon Tony
Higgins, Rt Hon Sir Terence L.	Nicholls, Patrick
Hill, James (Southampton Test)	Nicholson, David (Taunton)
Hogg, Rt Hon Douglas (G'tham)	Nicholson, Emma (Devon West)
Horam, John	Norris, Steve
Hordern, Rt Hon Sir Peter	Onslow, Rt Hon Sir Cranley
Howard, Rt Hon Michael	Oppenheim, Phillip
Howarth, Alan (Strat'rd-on-A)	Ottaway, Richard
Howell, Rt Hon David (G'dford)	Page, Richard
Howell, Sir Ralph (N Norfolk)	Paice, James
Hughes Robert G. (Harrow W)	Patnick, Irvine
Hunt, Rt Hon David (Wirral W)	Patten, Rt Hon John
Hunt, Sir John (Ravensbourne)	Pattie, Rt Hon Sir Geoffrey
Hunter, Andrew	Pawsey, James
Jack, Michael	Peacock, Mrs Elizabeth
Jackson, Robert (Wantage)	Pickles, Eric
Jenkin, Bernard	Porter, David (Waveney)
Jessel, Toby	Portillo, Rt Hon Michael
Johnson Smith, Sir Geoffrey	Powell, William (Corby)
Jones, Gwilym (Cardiff N)	Rathbone, Tim
Jones, Robert B. (W Hertfdshr)	Redwood, Rt Hon John
Jopling, Rt Hon Michael	Renton, Rt Hon Tim
Kellett-Bowman, Dame Elaine	Richards, Rod
Key, Robert	Riddick, Graham
Kilfedder, Sir James	Rifkind, Rt Hon. Malcolm
King, Rt Hon Tom	Robathan, Andrew
Kirkhope, Timothy	Roberts, Rt Hon Sir Wyn
Knapman, Roger	Robertson, Raymond (Ab'd'n S)
Knight, Mrs Angela (Erewash)	Robinson, Mark (Somerton)
Knight, Greg (Derby N)	Roe, Mrs Marion (Broxbourne)
Knight, Dame Jill (Bir'm E'st'n)	Ross, William (E Londonderry)
Knox, Sir David	Rowe, Andrew (Mid Kent)
Kynoch, George (Kincardine)	Rumbold, Rt Hon Dame Angela
Lait, Mrs Jacqui	Ryder, Rt Hon Richard
Lamont, Rt Hon Norman	Sackville, Tom
Lang, Rt Hon Ian	Sainsbury, Rt Hon Tim
Lawrence, Sir Ivan	Scott, Rt Hon Nicholas
Legg, Barry	Shaw, David (Dover)
Leigh, Edward	Shaw, Sir Giles (Pudsey)
Lennox-Boyd, Mark	Shephard, Rt Hon Gillian
Lester, Jim (Broxtowe)	Shepherd, Colin (Hereford)
Lidington, David	Shersby, Michael
Lightbown, David	Sims, Roger
Lilley, Rt Hon Peter	Skeet, Sir Trevor
Lloyd, Peter (Fareham)	Smith, Sir Dudley (Warwick)

Smith, Tim (Beaconsfield)	Tredinnick, David
Soames, Nicholas	Trend, Michael
Spencer, Sir Derek	Trimble, David
Spicer, Sir James (W Dorset)	Trotter, Neville
Spicer, Michael (S Worcs)	Twinn, Dr Ian
Spink, Dr Robert	Vaughan, Sir Gerard
Spring, Richard	Viggers, Peter
Sproat, Iain	Waldegrave, Rt Hon William
Squire, Robin (Hornchurch)	Walker, A. Cecil (Belfast N)
Stanley, Rt Hon Sir John	Walker, Bill (N Tayside)
Steen, Anthony	Waller, Gary
Stephen, Michael	Ward, John
Stern, Michael	Wardle, Charles (Bexhill)
Stewart, Allan	Waterson, Nigel
Streeter, Gary	Watts, John
Sumberg, David	Wells, Bowen
Sweeney, Walter	Whitney, Ray
Sykes, John	Whittingdale, John
Tapsell, Sir Peter	Widdecombe, Ann
Taylor, Ian (Esher)	Wiggin, Sir Jerry
Taylor, John M. (Solihull)	Wilkinson, John
Taylor, Sir Teddy (Southend, E)	Willetts, David
Temple-Morris, Peter	Wilshire, David
Thomason, Roy	Wolfson, Mark
Thompson, Sir Donald (C'er V)	Wood, Timothy
Thompson, Patrick (Norwich N)	Yeo, Tim
Thornton, Sir Malcolm	Young, Rt Hon Sir George
Thurnham, Peter
Townend, John (Bridlington)	Tellers for the Ayes:
Townsend, Cyril D. (Bexl'yh'th)	Mr. Sydney Chapman and
Tracey, Richard	Mr. James Arbuthnot.
NOES
Abbott, Ms Diane	Clarke, Tom (Monklands W)
Adams, Mrs Irene	Clelland, David
Ainger, Nick	Clwyd, Mrs Ann
Ainsworth, Robert (Cov'try NE)	Coffey, Ann
Alton, David	Cohen, Harry
Anderson, Donald (Swansea E)	Connarty, Michael
Anderson, Ms Janet (Ros'dale)	Cook, Frank (Stockton N)
Armstrong, Hilary	Cook, Robin (Livingston)
Ashdown, Rt Hon Paddy	Corbett, Robin
Ashton, Joe	Corbyn, Jeremy
Austin-Walker, John	Corston, Ms Jean
Baldly, Tony	Cousins, Jim
Barnes, Harry	Cox, Tom
Barron, Kevin	Cryer, Bob
Battle, John	Cummings, John
Bayley, Hugh	Cunliffe, Lawrence
Beckett, Rt Hon Margaret	Cunningham, Jim (Covy SE)
Beith, Rt Hon A. J.	Cunningham, Rt Hon Dr John
Bell, Stuart	Darling, Alistair
Benn, Rt Hon Tony	Davidson, Ian
Bennett, Andrew F.	Davies, Rt Hon Denzil (Llanelli)
Benton, Joe	Davies, Ron (Caerphilly)
Bermingham, Gerald	Davis, Terry (B'ham, H'dge H'I)
Berry, Dr. Roger	Denham, John
Betts, Clive	Dewar, Donald
Blair, Tony	Dixon, Don
Blunkett, David	Dobson, Frank
Boateng, Paul	Donohoe, Brian H.
Boyce, Jimmy	Dowd, Jim
Boyes, Roland	Dunnachie, Jimmy
Bradley, Keith	Dunwoody, Mrs Gwyneth
Bray, Dr Jeremy	Eagle, Ms Angela
Brown, Gordon (Dunfermline E)	Eastham, Ken
Brown, N. (N'c'tle upon Tyne E)	Enright, Derek
Burden, Richard	Etherington, Bill
Byers, Stephen	Evans, John (St Helens N)
Callaghan, Jim	Ewing, Mrs Margaret
Campbell, Mrs Anne (C'bridge)	Fatchett, Derek
Campbell, Menzies (Fife NE)	Faulds, Andrew
Campbell, Ronnie (Blyth V)	Field, Frank (Birkenhead)
Campbell-Savours, D. N.	Fisher, Mark
Canavan, Dennis	Flynn, Paul
Cann, Jamie	Foster, Rt Hon Derek
Carlile, Alexander (Montgomry)	Foster, Don (Bath)
Chisholm, Malcolm	Foulkes, George
Clark, Dr David (South Shields)	Fraser, John
Clarke, Eric (Midlothian)	Fyfe, Maria

Galloway, George	Maddock, Mrs Diana
Gapes, Mike	Mahon, Alice
Garrett, John	Mandelson, Peter
George, Bruce	Marek, Dr John
Gerrard, Neil	Marshall, David (Shettleston)
Gilbert, Rt Hon Dr John	Marshall, Jim (Leicester, S)
Godman, Dr Norman A.	Martin, Michael J. (Springburn)
Godsiff, Roger	Martlew, Eric
Golding, Mrs Llin	Maxton, John
Gordon, Mildred	Meacher, Michael
Gould, Bryan	Meale, Alan
Graham, Thomas	Michael, Alun
Grant, Bernie (Tottenham)	Michie, Bill (Sheffield Heeley)
Griffiths, Nigel (Edinburgh S)	Michie, Mrs Ray (Argyll Bute)
Griffiths, Win (Bridgend)	Milburn, Alan
Grocott, Bruce	Miller, Andrew
Gunnell, John	Mitchell, Austin (Gt Grimsby)
Hain, Peter	Moonie, Dr Lewis
Hall, Mike	Morgan, Rhodri
Hanson, David	Morley, Elliot
Hardy, Peter	Morris, Rt Hon A. (Wy'nshawe)
Harman, Ms Harriet	Morris, Estelle (B'ham Yardley)
Harvey, Nick	Morris, Rt Hon J. (Aberavon)
Hattersley, Rt Hon Roy	Mowlam, Marjorie
Henderson, Doug	Mudie, George
Heppell, John	Mullin, Chris
Hill, Keith (Streatham)	Murphy, Paul
Hinchliffe, David	Oakes, Rt Hon Gordon
Hoey, Kate	O'Brien, Michael (N W'kshire)
Hogg, Norman (Cumbernauld)	O'Brien, William (Normanton)
Home Robertson, John	O'Hara, Edward
Hood, Jimmy	Olner, William
Hoon, Geoffrey	O'Neill, Martin
Howarth, George (Knowsley N)	Orme, Rt Hon Stanley
Howells, Dr. Kim (Pontypridd)	Parry, Robert
Hoyle, Doug	Patchett, Terry
Hughes, Kevin (Doncaster N)	Pendry, Tom
Hughes, Robert (Aberdeen N)	Pickthall, Colin
Hughes, Roy (Newport E)	Pike, Peter L.
Hughes, Simon (Southwark)	Pope, Greg
Hutton, John	Powell, Ray (Ogmore)
Jackson, Glenda (H'stead)	Prentice, Ms Bridget (Lew'm E)
Jackson, Helen (Shef'ld, H)	Prentice, Gordon (Pendle)
Jamieson, David	Prescott, John
Johnston, Sir Russell	Primarolo, Dawn
Jones, Barry (Alyn and D'side)	Purchase, Ken
Jones, leuan Wyn (Ynys Môn)	Quin, Ms Joyce
Jones, Lynne (B'ham S O)	Radice, Giles
Jones, Martyn (Clwyd, SW)	Randall, Stuart
Jones, Nigel (Cheltenham)	Raynsford, Nick
Jowell, Tessa	Redmond, Martin
Kaufman, Rt Hon Gerald	Reid, Dr John
Keen, Alan	Rendel, David
Kennedy, Charles (Ross,C&S)	Robertson, George (Hamilton)
Kennedy, Jane (Lpool Brdgn)	Robinson, Geoffrey (Co'try NW)
Khabra, Piara S.	Roche, Mrs. Barbara
Kilfoyle, Peter	Rogers, Allan
Kinnock, Rt Hon Neil (Islwyn)	Rooker, Jeff
Kirkwood, Archy	Rooney, Terry
Leighton, Ron	Ross, Ernie (Dundee W)
Lestor, Joan (Eccles)	Rowlands, Ted
Lewis, Terry	Ruddock, Joan
Livingstone, Ken	Salmond, Alex
Lloyd, Tony (Stretford)	Sedgemore, Brian
Llwyd, Elfyn	Shearman, Barry
Loyden, Eddie	Sheldon, Rt Hon Robert
Lynne, Ms Liz	Shore, Rt Hon Peter
McAllion, John	Short, Clare
McAvoy, Thomas	Simpson, Alan
McCartney, Ian	Skinner, Dennis
Macdonald, Calum	Smith, Andrew (Oxford E)
McFall, John	Smith, C. (Isl'ton S & F'sbury)
McKelvey, William	Smith, Rt Hon John (M'kl'ds E)
Mackinlay, Andrew	Smith, Llew (Blaenau Gwent)
McLeish, Henry	Snape, Peter
Maclennan, Robert	Soley, Clive
McMaster, Gordon	Spearing, Nigel
McNamara, Kevin	Spellar, John
McWilliam, John	Squire, Rachel (Dunfermline W)
Madden, Max	Steinberg, Gerry

Stevenson, George	Welsh, Andrew
Stott, Roger	Wicks, Malcolm
Strang, Dr. Gavin	Wigley, Dafydd
Straw, Jack	Williams, Rt Hon Alan (Sw'n W)
Taylor, Mrs Ann (Dewsbury)	Williams, Alan W (Carmarthen)
Taylor, Matthew (Truro)	Wilson, Brian
Thompson, Jack (Wansbeck)	Winnick, David
Tipping, Paddy	Wise, Audrey
Turner, Dennis	Worthington, Tony
Tyler, Paul	Wray, Jimmy
Walker, Rt Hon Sir Harold	Wright, Dr Tony
Wallace, James	Young, David (Bolton SE)
Walley, Joan
Wardell, Gareth (Gower)	Tellers for the Noes:
Wareing, Robert N	Mr. Eric Illsley and
Watson, Mike	Mr. J. O. Jones.

Question accordingly agreed to.

Amendment in lieu of the Lords amendment proposed:

(a) in page 24, line 40, at end insert—

1. '(3) Subject to the following provisions of this section, subsection (1) above shall not prevent—
   1. (a) the British Railways Board (in this Act referred to as "the Board"), or
   2. (b) a wholly owned subsidiary of the Board,
   from being a franchisee.
2. (4) Subject to the following provisions of this section, whenever the Franchising Director proposes to issue invitations to tender under section 23 below in respect of any particular services for the carriage of passengers by railway, he may, after consultation with the Board and the Regulator, determine that neither the Board nor any wholly owned subsidiary of the Board shall be eligible for inclusion among the persons to whom the invitations are to be issued or who may be selected as the franchisee.
3. (5) The Franchising Director shall not make a determination under subsection (4) above unless he considers that it is desirable to do so—
   1. (a) for the purpose of promoting competition for franchises;
   2. (b) for the purpose of promoting the award of franchise agreements to companies in which qualifying railway employees have a substantial interest;
   3. (c) for the purpose of encouraging new entry to the passenger railway industry; or
   4. (d) for the purpose of preventing or reducing the dominance of any person or persons in the market for the provision in Great Britain, or in a part of Great Britain, of services for the carriage of passengers by railway.
4. (6) The Franchising Director shall—
   1. (a) give notice of any determination under subsection (4) above to the Board; and
   2. (b) publish notice of the determination in such manner as he thinks fit.
5. (7) Nothing in subsection (5) above shall be taken to affect the matters which the Franchising Director may take into account in determining the other persons whom he invites to tender for franchise agreements or whom he selects as franchisees.
6. (8) No objectives, instructions or guidance shall be given under section 5 above by the Secretary of State to the Franchising Director with respect to the exercise of his functions under this section.
7. (9) In this section— "competition for franchises" means competition to become franchisees under franchise agreements; "encouraging new entry to the passenger railway industry" means encouraging private sector operators who do not currently provide services for the carriage of passengers by railway to commence doing so; "qualifying railway employees", in the case of any franchise agreement, means persons who are or have been employed in an undertaking which provides or provided the services to which the franchise agreement 249 relates at a time before those services begin to be provided under that franchise agreement.'.—[Mr. MacGregor.]

Question put, That the amendment be made:—

The House divided: Ayes 313, Noes 283.

Division No. 382]	[9.27 pm
AYES
Ainsworth, Peter (East Surrey)	Deva, Nirj Joseph
Aitken, Jonathan	Devlin, Tim
Alexander, Richard	Dicks, Terry
Alison, Rt Hon Michael (Selby)	Dorrell, Stephen
Allason, Rupert (Torbay)	Douglas-Hamilton, Lord James
Ancram, Michael	Dover, Den
Arbuthnot, James	Duncan, Alan
Arnold, Jacques (Gravesham)	Duncan-Smith, Iain
Arnold, Sir Thomas (Hazel Grv)	Dunn, Bob
Ashby, David	Durant, Sir Anthony
Aspinwall, Jack	Elletson, Harold
Atkins, Robert	Evans, David (Welwyn Hatfield)
Atkinson, David (Bour'mouth E)	Evans, Jonathan (Brecon)
Atkinson, Peter (Hexham)	Evans, Nigel (Ribble Valley)
Baker, Nicholas (Dorset North)	Evans, Roger (Monmouth)
Baldry, Tony	Evennett, David
Banks, Matthew (Southport)	Faber, David
Banks, Robert (Harrogate)	Fabricant, Michael
Bates, Michael	Fairbairn, Sir Nicholas
Batiste, Spencer	Fenner, Dame Peggy
Beggs, Roy	Field, Barry (Isle of Wight)
Bellingham, Henry	Fishburn, Dudley
Bendall, Vivian	Forman, Nigel
Beresford, Sir Paul	Forsyth, Michael (Stirling)
Biffen, Rt Hon John	Forsythe, Clifford (Antrim S)
Blackburn, Dr John G.	Forth, Eric
Body, Sir Richard	Fowler, Rt Hon Sir Norman
Bonsor, Sir Nicholas	Fox, Dr Liam (Woodspring)
Boswell, Tim	Fox, Sir Marcus (Shipley)
Bottomley, Peter (Eltham)	Freeman, Rt Hon Roger
Bottomley, Rt Hon Virginia	French, Douglas
Bowden, Andrew	Fry, Peter
Bowis, John	Gallie, Phil
Boyson, Rt Hon Sir Rhodes	Gardiner, Sir George
Brandreth, Gyles	Garel-Jones, Rt Hon Tristan
Brazier, Julian	Garnier, Edward
Bright, Graham	Gill, Christopher
Brooke, Rt Hon Peter	Gillan, Cheryl
Brown, M. (Brigg & Cl'thorpes)	Goodlad, Rt Hon Alastair
Browning, Mrs. Angela	Goodson-Wickes, Dr Charles
Bruce, Ian (S Dorset)	Gorman, Mrs Teresa
Budgen, Nicholas	Gorst, John
Burns, Simon	Grant, Sir A. (Cambs SW)
Burt, Alistair	Greenway, Harry (Ealing N)
Butcher, John	Greenway, John (Ryedale)
Butler, Peter	Griffiths, Peter (Portsmouth, N)
Carlisle, John (Luton North)	Grylls, Sir Michael
Carlisle, Kenneth (Lincoln)	Gummer, Rt Hon John Selwyn
Carrington, Matthew	Hague, William
Carttiss, Michael	Hamilton, Rt Hon Archie (Epsom)
Cash, William	Hamilton, Neil (Tatton)
Channon, Rt Hon Paul	Hanley, Jeremy
Chapman, Sydney	Hannam, Sir John
Churchill, Mr	Hargreaves, Andrew
Clappison, James	Harris, David
Clifton-Brown, Geoffrey	Haselhurst, Alan
Coe, Sebastian	Hawkins, Nick
Colvin, Michael	Hawksley, Warren
Congdon, David	Hayes, Jerry
Conway, Derek	Heald, Oliver
Coombs, Anthony (Wyre For'st)	Hendry, Charles
Coombs, Simon (Swindon)	Heseltine, Rt Hon Michael
Cope, Rt Hon Sir John	Higgins, Rt Hon Sir Terence L.
Cormack, Patrick	Hill, James (Southampton Test)
Couchman, James	Hogg, Rt Hon Douglas (G'tham)
Cran, James	Horam, John
Currie, Mrs Edwina (S D'by'lre)	Hordern, Rt Hon Sir Peter
Curry, David (Skipton & Ripon)	Howard, Rt Hon Michael
Davies, Quentin (Stamford)	Howarth, Alan (Strat'rd-on-A)
Davis, David (Boothferry)	Howell, Rt Hon David (G'dford)
Day, Stephen	Howell, Sir Ralph (N Norfolk)

Hughes Robert G. (Harrow W)	Pattie, Rt Hon Sir Geoffrey
Hunt, Rt Hon David (Wirral W)	Pawsey, James
Hunt, Sir John (Ravensbourne)	Peacock, Mrs Elizabeth
Hunter, Andrew	Pickles, Eric
Hurd, Rt Hon Douglas	Porter, David (Waveney)
Jack, Michael	Portillo, Rt Hon Michael
Jackson, Robert (Wantage)	Powell, William (Corby)
Jenkin, Bernard	Rathbone, Tim
Jessel, Toby	Redwood, Rt Hon John
Johnson Smith, Sir Geoffrey	Renton, Rt Hon Tim
Jones, Gwilym (Cardiff N)	Richards, Rod
Jones, Robert B. (W Hertfdshr)	Riddick, Graham
Jopling, Rt Hon Michael	Rifkind, Rt Hon. Malcolm
Kellett-Bowman, Dame Elaine	Robathan, Andrew
Key, Robert	Roberts, Rt Hon Sir Wyn
Kilfedder, Sir James	Robertson, Raymond (Ab'd'n S)
King, Rt Hon Tom	Robinson, Mark (Somerton)
Knapman, Roger	Roe, Mrs Marion (Broxbourne)
Knight, Mrs Angela (Erewash)	Ross, William (E Londonderry)
Knight, Greg (Derby N)	Rowe, Andrew (Mid Kent)
Knight, Dame Jill (Bifm E'st'n)	Rumbold, Rt Hon Dame Angela
Knox, Sir David	Ryder, Rt Hon Richard
Kynoch, George (Kincardine)	Sackville, Tom
Lait, Mrs Jacqui	Sainsbury, Rt Hon Tim
Lamont, Rt Hon Norman	Scott, Rt Hon Nicholas
Lang, Rt Hon Ian	Shaw, David (Dover)
Lawrence, Sir Ivan	Shaw, Sir Giles (Pudsey)
Legg, Barry	Shephard, Rt Hon Gillian
Leigh, Edward	Shepherd, Colin (Hereford)
Lennox-Boyd, Mark	Shersby, Michael
Lester, Jim (Broxtowe)	Sims, Roger
Lidington, David	Skeet, Sir Trevor
Lightbown, David	Smith, Sir Dudley (Warwick)
Lilley, Rt Hon Peter	Smith, Tim (Beaconsfield)
Lloyd, Peter (Fareham)	Soames, Nicholas
Lord, Michael	Spencer, Sir Derek
Luff, Peter	Spicer, Sir James (W Dorset)
Lyell, Rt Hon Sir Nicholas	Spicer, Michael (S Worcs)
MacGregor, Rt Hon John	Spink, Dr Robert
MacKay, Andrew	Spring, Richard
Maclean, David	Sproat, Iain
McLoughlin, Patrick	Squire, Robin (Hornchurch)
McNair-Wilson, Sir Patrick	Stanley, Rt Hon Sir John
Madel, David	Steen, Anthony
Maitland, Lady Olga	Stephen, Michael
Major, Rt Hon John	Stern, Michael
Malone, Gerald	Stewart, Allan
Mans, Keith	Streeter, Gary
Marland, Paul	Sumberg, David
Marlow, Tony	Sweeney, Walter
Marshall, Sir Michael (Arundel)	Sykes, John
Martin, David (Portsmouth S)	Tapsell, Sir Peter
Mates, Michael	Taylor, Ian (Esher)
Mawhinney, Dr Brian	Taylor, John M. (Solihull)
Mayhew, Rt Hon Sir Patrick	Taylor, Sir Teddy (Southend, E)
Mellor, Rt Hon David	Temple-Morris, Peter
Merchant, Piers	Thomason, Roy
Milligan, Stephen	Thompson, Sir Donald (C'er V)
Mills, Iain	Thompson, Patrick (Norwich N)
Mitchell, Andrew (Gedling)	Thornton, Sir Malcolm
Mitchell, Sir David (Hants NW)	Thurnham, Peter
Moate, Sir Roger	Townend, John (Bridlington)
Molyneaux, Rt Hon James	Townsend, Cyril D. (Bexl'yh'th)
Monro, Sir Hector	Tracey, Richard
Montgomery, Sir Fergus	Tredinnick, David
Moss, Malcolm	Trend, Michael
Needham, Richard	Trimble, David
Nelson, Anthony	Trotter, Neville
Neubert, Sir Michael	Twinn, Dr Ian
Newton, Rt Hon Tony	Vaughan, Sir Gerard
Nicholls, Patrick	Viggers, Peter
Nicholson, David (Taunton)	Waldegrave, Rt Hon William
Nicholson, Emma (Devon West)	Walker, A. Cecil (Belfast N)
Norris, Steve	Walker, Bill (N Tayside)
Onslow, Rt Hon Sir Cranley	Waller, Gary
Oppenheim, Phillip	Ward, John
Ottaway, Richard	Wardle, Charles (Bexhill)
Page, Richard	Waterson, Nigel
Paice, James	Watts, John
Patten, Rt Hon John	Wells, Bowen

Whitney, Ray	Wood, Timothy
Whittingdale, John	Yeo, Tim
Widdecombe, Ann	Young, Rt Hon Sir George
Wiggin, Sir Jerry
Wilkinson, John	Tellers for the Ayes:
Willetts, David	Mr. Irvine Patrick and
Wilshire, David	Mr. Timothy Kirkhope.
Wolfson, Mark
NOES
Abbott, Ms Diane	Denham, John
Adams, Mrs Irene	Dewar, Donald
Ainger, Nick	Dixon, Don
Ainsworth, Robert (Cov'try NE)	Dobson, Frank
Alton, David	Donohoe, Brian H.
Anderson, Donald (Swansea E)	Dowd, Jim
Anderson, Ms Janet (Ros'dale)	Dunnachie, Jimmy
Armstrong, Hilary	Dunwoody, Mrs Gwyneth
Ashdown, Rt Hon Paddy	Eagle, Ms Angela
Ashton, Joe	Eastham, Ken
Austin-Walker, John	Enright, Derek
Banks, Tony (Newham NW)	Etherington, Bill
Barnes, Harry	Evans, John (St Helens N)
Barron, Kevin	Ewing, Mrs Margaret
Battle, John	Fatchett, Derek
Bayley, Hugh	Faulds, Andrew
Beckett, Rt Hon Margaret	Field, Frank (Birkenhead)
Beith, Rt Hon A. J.	Fisher, Mark
Bell, Stuart	Flynn, Paul
Benn, Rt Hon Tony	Foster, Rt Hon Derek
Bennett, Andrew F.	Foster, Don (Bath)
Benton, Joe	Foulkes, George
Bermingham, Gerald	Fraser, John
Berry, Dr. Roger	Fyfe, Maria
Betts, Clive	Galloway, George
Blair, Tony	Gapes, Mike
Blunkett, David	Garrett, John
Boateng, Paul	George, Bruce
Boyce, Jimmy	Gerrard, Neil
Boyes, Roland	Gilbert, Rt Hon Dr John
Bradley, Keith	Godman, Dr Norman A.
Bray, Dr Jeremy	Godsiff, Roger
Brown, Gordon (Dunfermline E)	Golding, Mrs Llin
Brown, N. (N'c'tle upon Tyne E)	Gordon, Mildred
Burden, Richard	Gould, Bryan
Byers, Stephen	Graham, Thomas
Callaghan, Jim	Grant, Bemie (Tottenham)
Campbell, Mrs Anne (C'bridge)	Griffiths, Nigel (Edinburgh S)
Campbell, Menzies (Fife NE)	Griffiths, Win (Bridgend)
Campbell, Ronnie (Blyth V)	Grocott, Bruce
Campbell-Savours, D. N.	Gunnell, John
Canavan, Dennis	Hain, Peter
Cann, Jamie	Hall, Mike
Cartile, Alexander (Montgomry)	Hanson, David
Chisholm, Malcolm	Hardy, Peter
Clark, Dr David (South Shields)	Harman, Ms Harriet
Clarke, Eric (Midlothian)	Harvey, Nick
Clarke, Tom (Monklands W)	Hattersley, Rt Hon Roy
Clelland, David	Henderson, Doug
Clwyd, Mrs Ann	Heppell, John
Coffey, Ann	Hill, Keith (Streatham)
Cohen, Harry	Hinchliffe, David
Connarty, Michael	Hoey, Kate
Cook, Frank (Stockton N)	Hogg, Norman (Cumbernauld)
Cook, Robin (Livingston)	Home Robertson, John
Corbett, Robin	Hood, Jimmy
Corbyn, Jeremy	Hoon, Geoffrey
Corston, Ms Jean	Howarth, George (Knowsley N)
Cousins, Jim	Howells, Dr. Kim (Pontypridd)
Cox, Tom	Hoyle, Doug
Cryer, Bob	Hughes, Kevin (Doncaster N)
Cummings, John	Hughes, Robert (Aberdeen N)
Cunliffe, Lawrence	Hughes, Roy (Newport E)
Cunningham, Jim (Covy SE)	Hughes, Simon (Southwark)
Cunningham, Rt Hon Dr John	Hutton, John
Darling, Alistair	Jackson, Glenda (H'stead)
Davidson, Ian	Jackson, Helen (Shef'ld, H)
Davies, Rt Hon Denzil (Llanelli)	Jamieson, David
Davies, Ron (Caerphilly)	Janner, Greville
Davis, Terry (B'ham, H'dge H'I)	Johnston, Sir Russell

Jones, Barry (Alyn and D'side)	Pope, Greg
Jones, Ieuan Wyn (Ynys Môn)	Powell, Ray (Ogmore)
Jones, Lynne (B'ham S O)	Prentice, Ms Bridget (Lew'm E)
Jones, Martyn (Clwyd, SW)	Prentice, Gordon (Pendle)
Jones, Nigel (Cheltenham)	Prescott, John
Jowell, Tessa	Primarolo, Dawn
Kaufman, Rt Hon Gerald	Purchase, Ken
Keen, Alan	Quin, Ms Joyce
Kennedy, Charles (Ross,C&S)	Radice, Giles
Kennedy, Jane (Lpool Brdgn)	Randall, Stuart
Khabra, Piara S.	Raynsford, Nick
Kilfoyle, Peter	Redmond, Martin
Kinnock, Rt Hon Neil (Islwyn)	Reid, Dr John
Kirkwood, Archy	Rendel, David
Leighton, Ron	Robertson, George (Hamilton)
Lestor, Joan (Eccles)	Robinson, Geoffrey (Co'try NW)
Lewis, Terry	Roche, Mrs. Barbara
Livingstone, Ken	Rogers, Allan
Lloyd, Tony (Stretford)	Rooker, Jeff
Llwyd, Elfyn	Rooney, Terry
Loyden, Eddie	Ross, Ernie (Dundee W)
Lynne, Ms Liz	Rowlands, Ted
McAllion, John	Ruddock, Joan
McAvoy, Thomas	Salmond, Alex
McCartney, Ian	Sedgemore, Brian
Macdonald, Calum	Sheerman, Barry
McFall, John	Sheldon, Rt Hon Robert
McKelvey, William	Shore, Rt Hon Peter
Mackinlay, Andrew	Short, Clare
McLeish, Henry	Simpson, Alan
MacIennan, Robert	Skinner, Dennis
McMaster, Gordon	Smith, Andrew (Oxford E)
McNamara, Kevin	Smith, C. (Isl'ton S & F'sbury)
McWilliam, John	Smith, Rt Hon John (M'kl'ds E)
Madden, Max	Smith, Llew (Blaenau Gwent)
Maddock, Mrs Diana	Snape, Peter
Mahon, Alice	Soley, Clive
Mandelson, Peter	Spearing, Nigel
Marek, Dr John	Spellar, John
Marshall, David (Shettleston)	Squire, Rachel (Dunfermline W)
Marshall, Jim (Leicester, S)	Steinberg, Gerry
Martin, Michael J. (Springburn)	Stevenson, George
Martlew, Eric	Stott, Roger
Maxton, John	Strang, Dr. Gavin
Meacher, Michael	Straw, Jack
Meale, Alan	Taylor, Mrs Ann (Dewsbury)
Michael, Alun	Taylor, Matthew (Truro)
Michie, Bill (Sheffield Heeley)	Thompson, Jack (Wansbeck)
Michie, Mrs Ray (Argyll Bute)	Tipping, Paddy
Milburn, Alan	Turner, Dennis
Miller, Andrew	Tyler, Paul
Mitchell, Austin (Gt Grimsby)	Walker, Rt Hon Sir Harold
Moonie, Dr Lewis	Wallace, James
Morgan, Rhodri	Walley, Joan
Morley, Elliot	Wardell, Gareth (Gower)
Morris, Rt Hon A. (Wy'nshawe)	Wareing, Robert N
Morris, Estelle (B'ham Yardley)	Watson, Mike
Morris, Rt Hon J. (Aberavon)	Welsh, Andrew
Mowlam, Marjorie	Wicks, Malcolm
Mudie, George	Wigley, Dafydd
Mullin, Chris	Williams, Rt Hon Alan (Sw'n W)
Murphy, Paul	Williams, Alan W (Carmarthen)
Oakes, Rt Hon Gordon	Wilson, Brian
O'Brien, Michael (N W'kshire)	Winnick, David
O'Brien, William (Normanton)	Wise, Audrey
O'Hara, Edward	Worthington, Tony
Olner, William	Wray, Jimmy
O'Neill, Martin	Wright, Dr Tony
Orme, Rt Hon Stanley	Young, David (Bolton SE)
Parry, Robert
Patchett, Terry	Tellers for the Noes:
Pendry, Tom	Mr. Jon Owen Jones and
Pickthall, Colin	Mr. Eric Illsley.
Pike, Peter L.

Question accordingly agreed to.

Mr. Anthony Steen (South Hams)

On a point of order, Mr. Deputy Speaker. About 10 days ago, my hon. Friend the Member for Weston-super-Mare (Sir J. Wiggin) raised the question why the police were no longer providing assistance to hon. Members who wished to get to a Division. Such assistance requires the police to be in Parliament square when a Division is called.

I raised this issue a few hours ago, but since then I have learnt that my hon. Friend raised it 10 days ago, but no action has been taken. I had difficulty getting to the House for the Division. Apparently, the new superintendent of police has decided that all police based in Parliament square should be removed when a Division is called and should not help hon. Members to get to the House to vote. That is in breach of our Sessional Orders—

Mr. Deputy Speaker

Order. I am grateful to the hon. Gentleman, but he will realise that the debate is guillotined. I assure him that I will report the matter to Madam Speaker and ensure that it is looked at tomorrow morning.

" —(1) A franchise agreement may include provision with respect to the fares to be charged for travel by means of the franchised services.

(2) Subject to the other provisions of this Act, if it appears to the Franchising Director that the interests of persons who use, or who are likely to use, franchised services so require, he shall ensure that the franchise agreement in question contains any such provision as he may consider necessary for the purpose of securing that any fares, or any fares of a class or description, which are to be charged are, in his opinion, reasonable in all the circumstances of the case.

(3) Every franchise agreement shall include provision requiring the franchise operator—

1. (a) to participate in every approved discount fare scheme,
2. (b) to charge fares, in cases to which such a scheme applies, at rates which are not in excess of the levels or, as the case may be, the maximum levels set by the scheme, and
3. (c) otherwise to comply with the requirements of every such scheme,

if and to the extent that the franchised services are services, or services of a class or description, in relation to which the approved discount fate scheme in question applies.

(4) The discount fare schemes which are to be regarded for the purposes of this section as "approved" are those which are from time to time approved for the purposes of this section by the Franchising Director.

(5) In this section— discount fare scheme" means any scheme for enabling persons who are young, elderly or disabled to travel by railway at discounted fares, subject to compliance with such conditions (if any) as may be imposed by or under the scheme; discounted fare" means a lower fare than the standard fare for the journey in question; scheme" includes any agreement or arrangements.

Mr. Freeman

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker

With this we shall discuss the following amendments to the Lords amendment: (a), in line 13, at end insert 'and every appropriate travelcard scheme.'.

(b), in line 20, after 'scheme', insert 'Or travelcard scheme'.

(c), in line 21, after 'fare', insert 'and travelcard'.

(d), in line 32, at end insert '"travelcard scheme" means any scheme for enabling persons to travel by railway, or by railway and other specified forms of

Mr. Steen

Further to that point of order, Mr. Deputy Speaker—

Mr. Deputy Speaker

The crux of the issue is clear to me. It is an important issue, and I can give the hon. Gentleman full confidence that it will be looked at in detail tomorrow morning.

Amendments made: (b), in page 54, line 36, after '20' insert '21, 23'.

(c), in page 72, line 2, at end insert—

'( ) every notice of a determination under section 22(4) above;'.— [Freeman.]

Lords Amendment No. 32 agreed to.

Lords Amendment: No. 33, after clause 24, to insert the following new clause—Fares and approved discount fare scheme—

transport in a described geographical area, during a described period of time, subject to compliance with such conditions (if any) as may be imposed by or under the scheme.'. and Lords amendment No. 37.

Mr. Freeman

Amendments Nos. 33 and 37 are important, and I shall be as clear and succinct as I can be in introducing them. They deal with the commitment on fares control that we gave on Report. That has resulted in the amendment, which gives the franchising director the power to ensure that franchise agreements contain provisions to ensure shat all fares are reasonable. The Government believe that the amendment fulfils the criteria that we set out during the debate.

The amendment also covers discount schemes for the young, the elderly and the disabled, and their protection under the franchise agreements.

The franchising director will have powers to safeguard travelcard schemes. My right hon. Friend has given a specific commitment in regard to London; there are powers in relation to travelcard schemes outside London, but London is what is covered so far. We believe that broadly similar provisions could apply outside, but we have made no decision about that.

I hope that the House will agree that the amendments fulfil commitments, and are to be commended.

9.45 pm

Sir John Stanley (Tonbridge and Malling)

I should like to speak briefly to Lords amendment No. 33, with particular reference to subsection (2).

This is a significant amendment, which was not printed in the Bill at any time during its previous consideration by the House of Commons. As my right hon. Friend the Minister has said, it introduces for the first time a provision enabling the franchising director to ensure, in the interests of the travelling public, that fares in the franchised services remain reasonable.

It is also worth referring to the genealogy of the amendment. We have heard a great deal from Opposition Members about the alleged potential implications of the proposals for fares; but the existence of this significant provision in the Bill owes nothing to the Opposition Front Bench—or, as it happens, to the Liberal Democrats. It was tabled on Report, as amendment No. 237, by my hon. Friends the Members for Ashford (Sir K. Speed), for Taunton (Mr. Nicholson), for Harrow, East (Mr. Dykes), for Lewes (Mr. Rathbone), for Ravensbourne (Sir J. Hunt), for Brighton, Kemptown (Mr. Bowden) and for Macclesfield (Mr. Winterton), and myself. On the following day, it was accepted in principle by my right hon. Friend.

I consider the amendment significant and substantive. I highlight just two features which illustrate that. First, there is the use of the phrase "shall ensure" in relation to the franchising director. The fact that that phrase is used—rather than the phrase "may ensure"—represents an important statutory obligation. The second important feature flows from that wording. By virtue of being statutory, the obligation is clearly justiciable—which means that, ultimately, any of the new consultative committees, any transport users association and, indeed, any individual member of the travelling public will have an opportunity to take legal action against the franchising director if he fails to discharge his obligation in relation to the reasonableness of fares.

I am delighted that this important amendment has been tabled, and I hope that the House will give it warm support.

Lords amendment agreed to.

Mr. Deputy Speaker

I understand that it may be the wish of the House to deal formally with Lords amendments Nos. 34 to 252, and to proceed to a debate on Lords amendment No. 253. If that is so, before I call the Minister to move formally to agree with the Lords amendments Nos. 34 to 252, I must draw the House's attention to the fact that privilege is involved in the Lords amendments Nos. 36, 40, 45, 56, 65, 83, 97 and 104.

Lords amendments Nos. 34 to 252 agreed to. —[Some with Special Entry.]