Railtrack (Hansard, 24 November 1994)

§ The Secretary of State for Transport (Dr. Brian Mawhinney)
With permission, Madam Speaker, I should like to make a statement about the future of Railtrack, which has been a Government-owned company responsible for rail infrastructure since April this year.
The Government intend to privatise Railtrack within the lifetime of this Parliament. We shall do that using the powers provided by the Railways Act 1993. Although the precise details and timing will be announced later in the light of market conditions, I can confirm that Railtrack will be floated on the stock market and that everyone will have the opportunity to buy shares.
The Government believe that privatisation offers the best future for Railtrack, for passengers and freight and for train operators. It will allow greater use of private sector skills in managing the network, improving Railtrack stations, delivering efficient track maintenance and encouraging investment in the upgrading of railway lines. It will provide even greater scope for private capital to be injected into better facilities. Railtrack will be better able to deliver improvements in the service that it provides to operators and, therefore, to passengers.
Privatisation has been one of the great achievements of this Government since 1979. It has transformed former state-owned industries and brought real improvements for customers and employees alike. It has brought new management techniques and new sources of investment. It has spread ownership throughout society. Indeed, Britain's example has been copied around the world.
The Department of Transport has been at the forefront of that programme. The National Freight Company Ltd., Sealink, National Express Ltd., Associated British Ports, the British Airports Authority and British Airways are all thriving in the private sector. This announcement paves the way for the creation of another important private company.
The privatisation of Railtrack will be the most significant single step in the process of transferring the ownership and operation of Britain's railways to the private sector. The Government have set the target of franchising a majority of train services by April 1996. That target remains. The Franchising Director will shortly start the pre-qualification process for the first franchises. The Government will be selling the rolling stock leasing companies next year. Privatisation of British Rail's infrastructure services units, British Rail Maintenance Ltd. and other businesses is already in progress and the transfer of British Rail's domestic freight services to the private sector should be completed by the end of 1995.
Privatisation will enable Railtrack to provide a better service, bringing substantial benefits to train operators, passengers and other rail users, and to investors. My announcement demonstrates the Government's continuing commitment to privatisation. It demonstrates our continuing commitment to railway privatisation. It demonstrates our continuing commitment to improving rail services. Above all, it demonstrates our continuing commitment to passengers and to our national economy.

§ Mr. Michael Meacher (Oldham, West)
In answer to the statement, I make it clear, without equivocation, that Labour remains wholly committed to a publicly owned 730 rail system because that is what best serves the travelling public, industry and commerce, and the nation at large. This privatisation, if it were to go ahead—and that is a very big "if'—has nothing to do with the dictates of transport policy. It is driven entirely by the Government's desperate desire to make a quick financial killing to finance Tory tax cuts in time for the next election. This is a classic example of the Maples memorandum in action, giving priority to getting a Tory Government re-elected, however much it damages the interests of the nation at large.
Does the Secretary of State for Transport recall that the Minister for Public Transport told the Standing Committee in February last year: Railtrack, at least for the foreseeable future, will be in the public sector"?—[Official Report, Standing Committee B, 25 February 1993; c. 445.] Does the right hon. Gentleman recall that until only a few months ago, Tory Ministers constantly repeated that Railtrack was to stay in the public sector while the passenger franchises and freight companies were sold off?
Is not it clear that this privatisation is now being hurriedly brought forward because there is little or no investor interest in the franchises, for the very good reasons that the train operators' profitability will always depend on political decisions about the level of subsidy and that their major fixed costs—rail access charges—will remain outside their control? As much the same objections apply to privatising Railtrack, 90 per cent. of whose income will come from train operators, is not it now also clear that the right hon. Gentleman will be obliged, if he proceeds, to sell it off at any price that removes the risk for investors while still leaving the taxpayer to pick up the bill for that risk?
The right hon. Gentleman will recall that his right hon. and learned Friend the Chancellor of the Exchequer stated in his leaked letter to the Prime Minister of 15 November that the privatisation of Railtrack was now integral to the Budget arithmetic. Will the right hon. Gentleman confirm that Railtrack assets had been valued at about £6.5 billion and that a sale at any lesser price would be ripping off a unique national asset simply because of the Government's manic desire to fund tax cuts at any cost before the next election?
Does the right hon. Gentleman recognise that while the Tory party is looking to its interests in the matter, the country and the travelling public will pay in the future? Does he acknowledge that Railtrack's pushing up rail access charges is bound to be passed on in higher passenger fares? Does he recognise that there will be nothing to stop a privatised Railtrack engaging in an orgy of asset-stripping of real estate? Does he accept that a privatised Railtrack undermines the whole regulatory and safety framework of the railways? Does he admit that the mass of leases and contracts that will be required will generate a further mountain of bureaucracy?
This privatisation, if it were to happen, would be deeply damaging to the long-term interests of the nation and the travelling public. We shall fight tooth and nail to stop it happening.

§ Dr. Mawhinney
The hon. Gentleman is wrong in just about everything that he says, but that does not come as a surprise to Conservative Members. To try to suggest that this privatisation has only just occurred to the Government is to ignore the hours and hours that right 731 hon. and hon. Members spent in the House on the Railways Bill, which culminated in the Railways Act 1993, during which it was made clear repeatedly that we would move British Rail into the private sector. That is what we shall do today.
The hon. Gentleman quoted my right hon. Friend the Member for Kettering (Mr. Freeman), the then Minister for Public Transport. Let me add two other quotations to those cited by the hon. Gentleman, which he—selectively—forgot to mention. The first is by my noble Friend Lord Caithness, the then Minister of State, who said on 15 July 1993: We have made it clear that Railtrack's existence as a Government-owned company will last only until it is feasible to transfer it to the private sector."—[Official Report, House of Lords, 15 July 1993; Vol. 548, c. 354.] My right hon. Friend the Member for Kettering said in Committee on 16 March 1993: Railtrack will initially be in the public sector, supported by the Government … through revenue charges. We hope that ultimately the infrastructure itself can be transferred to the private sector, but I cannot forecast when that will be."—[Official Report, Standing Committee B, 16 March 1994; c. 783.] I can tell the hon. Gentleman and the House that today I can forecast when that will be. It will be during the lifetime of this Parliament. I recognise from the hon. Gentleman's quotation in today's edition of The Times that he understands that this will be a popular move with the public. What he needs to understand is that the Government have a commitment to the taxpayer and to the investor and they will make judgments in terms of selling in the light of market conditions at the time. I shall not be drawn beyond that.
As for the hon. Gentleman's point about access charges, he clearly does not understand the system. He needs to understand that access charges will be negotiated between Railtrack and those who are operating on the rails and that those charges must be covered by the regulator. He has forgotten to mention that point. As for safety, perhaps he will be encouraged to know that the Health and Safety Commission is fully satisfied with the proposals before the House.
Finally, I must say to my right hon. and hon. Friends that I hope that they will notice where the hon. Gentleman started. He started by saying that Labour Members were still in favour of the railways being in the public sector. He made no commitment to reverse the privatisation process and the country at large will have taken notice of that omission.

§ Mr. Peter Bottomley (Eltham)
The statement is a welcome step, which follows yesterday's presentation of a Bill to secure one of the most widespread, expensive rail investments—the channel tunnel high-speed link, which will do a great deal to add to the prosperity of the railways, not only to London but up the east coast, where it will knock an hour off the journey. We are told that the assets are £6,000 million. Does my right hon. Friend agree that we need to achieve higher capital spending, more use of the railways, lower current subsidies and a more competitive option compared with the roads and that we do not need the Opposition's idea of quangos, which would have half of British industry under the appointments that they as politicians would wish to make?

§ Dr. Mawhinney
My hon. Friend is absolutely right. He is very knowledgeable about those matters, so it is 732 entirely understandable that he should be right. He draws attention to the importance of Railtrack being able to have access to greater and freer investment, and that is important. However, he also draws attention to the very important improvements in efficiency, which will come from the proposals and from Railtrack being in the private sector. That has been demonstrable in all the other privatisations and it has been to the benefit of the consumer.

§ Mr. Paul Tyler (North Cornwall)
Can the Secretary of State be more forthcoming about the amount that the sale of Railtrack is expected to produce? Is not it true that a large number of book assets such as the Severn tunnel, the Forth bridge, the Tamar bridge and viaducts in more remote parts of the country are liabilities in the longer term, so the net proceeds of this exercise, after the costs of privatisation, could be as little as £1.5 billion, which is only a one penny yearly reduction in income tax? Is it worth going through this performance for that result?
Can the Secretary of State give us a cast-iron guarantee that this whole disruptive exercise will retain a national rail network to every part of the United Kingdom, however remote and peripheral?

§ Dr. Mawhinney
We are seeking to move the railway industry to the private sector for the benefit of the consumer. The hon. Gentleman does not seem to understand that. He and his hon. Friends took exactly the same line on every single privatisation brought before the House in the past 15 years. They tried exactly the same arguments, scare stories and smears, aided and abetted by the Labour party. They were proved wrong in every single case, and they will be wrong in this one as well.
As for the assets and their value, the hon. Gentleman knows perfectly well that I will not answer that question, and he knows why I am not in a position to answer it. This is a commercial transaction that will be undertaken in the light of market conditions when the time is right, for the benefit of taxpayers and investors.

Several hon. Members
rose—

§ Madam Speaker
Order. After those original exchanges, I want brisk questions and brisk answers. There are two more statements today and there is a good deal of business to go through. I am asking for short questions and quick responses.

§ Mr. Nigel Waterson (Eastbourne)
I urge my right hon. Friend to take with a very large pinch of salt the semi-pledge of the hon. Member for Oldham, West (Mr. Meacher) to renationalise British Rail, because we have seen that sort of pledge time and again. When Railtrack is privatised, we shall see what vigorous management and private capital can do to an industry, as has happened with British Airways, British Telecom and a string of other utilities and companies.

§ Madam Speaker
That was not a question. I have just reminded the House that I want to hear questions. That was a statement and I do not want statements from Back Benchers. I want questions. Very quickly, please, Minister.

§ Dr. Mawhinney
My hon. Friend is absolutely right. When we both read Hansard tomorrow, I think that he 733 will find that the hon. Member for Oldham, West (Mr. Meacher) made absolutely no pledge to renationalise British Rail.

§ Mr. Hugh Bayley (York)
I speak for consumers when I ask the Minister to cast his mind back to the beginning of the year when Railtrack announced its track access charges. The train operators were astonished that the charges were twice as high as they were under British Rail. Will the Minister tell the House how a private monopoly will provide a better deal for the travelling public than a public service railway?

§ Dr. Mawhinney
As has happened in every single privatisation, which the hon. Gentleman refused to support and now recognises has been a success, the private sector will bring efficiency gains and market and management skills to the negotiations on access charges, which, as I have already reminded the House, will be subject to approval by the regulator.

§ Mr. John Greenway (Ryedale)
Does my right hon. Friend agree that, historically, most companies that have been privatised have invested considerably more in infrastructure and in their industries post-privatisation, and that that should lead to an expansion of the railway system? In the meantime, can he assure the House that Railtrack will not be denied much-needed investment while it is in the public sector?

§ Dr. Mawhinney
My hon. Friend is absolutely right about the investment record of companies that have moved from the public sector to the private sector. That is partly the reason why the level, quality and sensitivity of services to consumers have improved in those businesses, and will improve in this industry as well.

§ Dr. John Marek (Wrexham)
Is not it true that, if the Railtrack privatisation goes ahead, charges for passengers will go through the roof, and that the Minister is seeking privatisation because he wants to gratify some of his sleazy friends in the City by allowing them to develop more much-needed car parks and city centre projects? I agree with the Minister: our Front Bench has not said that the railways should be renationalised. But when the truth comes out, does the Minister accept that our Front Bench will then say that we have to bring Railtrack back into the public sector?

§ Dr. Mawhinney
We shall see. I do not intend to become involved in the private grief of the Labour party, nor will I get into the gutter of the second part of the hon. Gentleman's question. He asked about fares. The Railways Act 1993 gives the Franchising Director the specific duty of ensuring that fares charged by franchisees are reasonable. I hope that the hon. Gentleman will be encouraged by that.

§ Mr. David Atkinson (Bournemouth, East)
I welcome my right hon. Friend's statement. In the light of it, what are the prospects for stations such as Bournemouth Central in my constituency, which has long been covered in scaffolding and needs multi-million pound restoration 734 work that has not been forthcoming under British Rail? Can my constituents look forward to an early restoration of that station as a result of the statement?

§ Dr. Mawhinney
Clearly, I am not in a position to anticipate Railtrack's decisions. I shall certainly draw my hon. Friend's point to the attention of Railtrack, but I know that he will agree that prospects are improved by my statement.

§ Ms Glenda Jackson (Hampstead and Highgate)
Given that Railtrack currently operates on an 8 per cent. return on investment, will the Minister assure the House that, post-privatisation, that will prevail as access charges will still need taxpayers' subsidy? As my hon. Friend the Member for Wrexham (Dr. Marek) said, any such profit should be ploughed back into the rail industry and not into the pockets of the Government's friends in the City.

§ Dr. Mawhinney
I am announcing the start of a process that will culminate in a prospectus followed by flotation on the stock market. The hon. Lady will have to wait for the prospectus.

§ Mr. Richard Alexander (Newark)
As, predictably, the Opposition are making heavy weather of what is basically an attempt to improve efficiency and the delivery of service in the railway system, can my right hon. Friend assure the House that what he has announced has nothing to do with possible future tax cuts?

§ Dr. Mawhinney
My hon. Friend is on a good point. We are today carrying forward the consequences of the legislation passed by the House, which made it clear that the Government's view was that British Rail in all its aspects would offer a better service to customers if it was in the private sector than it has offered over the past 40 to 50 years. I pay tribute to the staff and management of British Rail, who over recent years and within the constraints of the system have sought to provide a better service.
My hon. Friend will have noticed that Labour Members are huffing and puffing, but that they have no policy. They will not commit themselves to the maintenance of the nationalised industry, to putting more money into the system or to a privatised industry. They will not commit themselves to anything, and the country will notice that.

§ Mr. Andrew Mackinlay (Thurrock)
Who will have control of the British Transport police following privatisation?

§ Dr. Mawhinney
I think that the hon. Gentleman will find that there will be no change as a result of my statement.

§ Mr. Harry Greenway (Ealing, North)
Does my right hon. Friend agree that stations will be cleaner, that public address systems will be used more to inform passengers of difficulties, and that in every way passengers will have a better service? Does he see the inconsistency of at least some people in the Labour party, who are against clause 4 but who want to keep Railtrack in public ownership?

§ Dr. Mawhinney
My hon. Friend is on a good point and has given some illustrations of the benefits that are likely to accrue to customers and passengers as a 735 consequence of the freedom, the extra management skills and the extra investment that are likely to flow from the movement of Railtrack into the private sector.

§ Mr. D. N. Campbell-Savours (Workington)
Now that the Secretary of State has taken this mammoth decision to proceed, can he give me and my constituents in west Cumberland an absolute assurance that the line from Carlisle through west Cumbria to Barrow-in-Furness will survive under privatisation? May we have that assurance because my constituents will be watching us on television this evening?

§ Dr. Mawhinney
I am pleased to hear that the hon. Gentleman's constituents are so interested in our proceedings. I have made it clear to the Franchising Director that I expect him to present minimum service specifications on broadly the present timetable.

§ Mr. Stephen Day (Cheadle)
Can my right hon. Friend give an assurance about the scheme that is currently being brought together on the west coast main line for important works south of Crewe? Is he sure that that line, which is important to my constituents and to the whole of the north-west, will not in any way be hindered by the legislation, but that its chances of getting finance from the private sector may be improved?

§ Dr. Mawhinney
My hon. Friend is right to point to the important part that the west coast main line plays within the Railtrack infrastructure. He will know that Railtrack is in the process of reviewing the steps that need to be taken to upgrade the line, and we are looking for private sector partners to be involved in that. None of the process will be damaged; it may be enhanced, but it certainly will not be damaged by what I have said today.

§ Mr. Nigel Spearing (Newham, South)
Will the Secretary of State assure us that Railtrack will be sold off as a single unit, and if not, on what criteria will he supervise its disintegration, particularly in respect of signalling, the cost of expensive bridges and tunnels and their replacement and maintenance, and the prevention of small parcels of land in cities for terminal stations and other yards being sold off to speculators? What criteria will he have in all those matters?

§ Dr. Mawhinney
For the purpose of brevity, let me remind the hon. Gentleman of what I said in my statement. I said: I can confirm that Railtrack will be floated on the stock market and everyone will have the opportunity to buy shares.

§ Mr. Anthony Coombs (Wyre Forest)
I warmly welcome the legislation. Will my right hon. Friend say, so that I can confirm it to my constituents in Kidderminster—particularly those who use the Kidderminster to Birmingham line—that, as a result of the legislation, as was the case with the privatisation of 736 telecommunications, there will be more investment in their rail lines, more choice and better pricing and that they will get a far better service overall?

§ Dr. Mawhinney
My hon. Friend has explained precisely and accurately the benefits that we expect to flow from the announcement that I have just made.

§ Mr. Dennis Skinner (Bolsover)
Will the Minister guarantee that, unlike other privatisations, no Tory Minister on leaving the Government will be allowed to serve on the privatised board?

§ Dr. Mawhinney
The hon. Gentleman knows better than most the guidance that covers the behaviour of Ministers and ex-Ministers.

§ Mr. Barry Sheerman (Huddersfield)
Is the Minister aware that many people in British manufacturing industry believe that the only process that his Department has been in the forefront of is the destruction of our engineering base? Is he further aware that if there are no orders for rolling stock, within months Britain will have no rolling stock manufacturing capacity, in just the same way as his Department destroyed the bus and coach industry in Britain?

§ Dr. Mawhinney
What nonsense. It is true, however, that British Rail is conducting a review of rolling stock. I understand the pressures to which the hon. Gentleman is referring. I know that there is a degree of urgency surrounding the issues and I do not dismiss them lightly, but he knows as well as I do that it is not for me to make those judgments, although I note with care the concern that he expressed.

§ Mr. Thomas Graham (Renfrew, West and Inverclyde)
After the deregulation of the buses, many parts of Britain were completely isolated and no longer had a bus service. A number of communities rely totally on Railtrack services. Will the Minister give us an assurance that those who have been isolated because of Government deregulation of the buses will have a lifeline to the main centres of their communities?

§ Dr. Mawhinney
I have to say to the hon. Gentleman that those communities have not been isolated because of Government policy, but as a consequence of a number of decisions taken in each locality. I repeat the comment that I made earlier to the House, that the Franchising Director knows that I expect him to bring forward minimum service specifications for the franchises broadly in line with the present timetable.

§ Mr. Andrew F. Bennett (Denton and Reddish)
Given the Secretary of State's enthusiasm for a proper public transport system and his enthusiasm for this measure, can he tell me how it will improve public transport in Greater Manchester before the next general election?

§ Dr. Mawhinney
The public transport infrastructure in Greater Manchester has already been improved in the past few years, as the hon. Gentleman is well aware. I shall not anticipate any statements that may be made from the Dispatch Box over the next two years, but I am quite clear that the people of Manchester will benefit, as will the rest of the country, from increased investment, increased 737 management skills and increased sensitivity to what the customer wants, which are represented by today's statement.

§ Mr. Tony Banks (Newham, North-West)
Can the Secretary of State explain how more consumer choice will result from converting a public monopoly into a private monopoly? As he is so proud of the number of privatisations that have been carried out by his Department, when does it intend to reduce the number of Ministers in the Department, given that they have fewer responsibilities?

§ Dr. Mawhinney
If the hon. Gentleman had been paying attention on 20 July, he would have noticed that the number of Ministers in the Department fell from five to four. I take that as a compliment and, with my colleagues, I shall seek to live up to the work rate that the five previously did.
As for the broader point that the hon. Gentleman makes, he needs to understand that the movement of Railtrack is but one part, although a significant part, of the movement of British Rail into the private sector. I am absolutely clear in my mind that when the railways are subject to the market, to competition and to the efficiency gains that will flow from the management and the investment that will be brought to bear in the private sector, the same result will accrue as has previously accrued with other transport industries. The result will be that passengers, those who wish to move freight and other train operators will see benefit for their customers.

§ Dr. Norman A. Godman (Greenock and Port Glasgow)
May I point out to the Minister that rail safety looms large in the minds of my constituents following the tragic deaths of two young men in a rail accident caused by a mindless act of vandalism? Will he retract what he said about the Health and Safety Executive giving the privatisation a clean bill of health? Did not the HSE point to 28 areas of public and safety concern, which may well be exacerbated by this appalling decision?

§ Dr. Mawhinney
I understand the particular concern that the hon. Gentleman has for safety in the light of the experience to which he has just referred. I assure him, as I have done on other transport matters in the four months during which I have had this responsibility, that I yield to no one in my commitment to ensure that every aspect of transport in Britain is as safe as possible. The Health and Safety Commission has examined in detail every aspect of safety in relation to the new railway and is fully satisfied with the arrangements.

§ Mr. John Gunnell (Morley and Leeds, South)
The Minister is aware of the difficulties that many of the privatised companies that were formerly British Rail Engineering Ltd. are in as a result of the shortfall in rolling stock orders due directly to privatisation. Is not it necessary for him to give some idea in the prospectus of the Government's plans for rail in the next 10 years? Surely the likely profits for investors will depend directly on Government policy.

§ Dr. Mawhinney
The decisions about investment in rolling stock are for those who have the responsibility of managing the system. As for giving an idea of the prospects for the railway industry in the next 10 years, I 738 should have thought that that was precisely what I was doing today. I have done it precisely because I have confidence that the decisions that we have just announced are likely to lead to an improvement in the service; in the quality of the service and—it is my personal belief—also in the extent of the service.

§ Mr. Harry Barnes (Derbyshire, North-East)
Is it logical to privatise Railtrack because it is impossible for the Government to privatise the Post Office?

§ Dr. Mawhinney
I am happy to tell the hon. Gentleman that we are talking about Railtrack today and that it is perfectly possible to do that, having announced that we intended to do it. The actions that will ensue will be the best possible answer to his question.

§ Mr. Peter Hain (Neath)
Has not the Secretary of State in his statement today turned the whole of the Government's privatisation case on its head by putting the sale of Railtrack before the franchising of rolling stock? Does not that confirm that this is a panic statement, created by the gap in the Government's finances following their humiliating backdown over Post Office privatisation?

§ Dr. Mawhinney
The hon. Gentleman was not listening. I said that Railtrack would be moving into the private sector by way of a stock market flotation during the lifetime of this Parliament. I also said: The Government have set the target of franchising a majority of train services by April 1996.… The Government will be selling the rolling stock leasing companies next year. Privatisation of British Rail's infrastructure services units"—

§ Mr. Hain
We know all that.

§ Dr. Mawhinney
The hon. Gentleman does not know it. He clearly was not listening because he asked the question that he did. We shall see. The hon. Gentleman and I will judge the actions, not his rhetoric. But let me finish. Privatisation of British Rail Maintenance Ltd. and other businesses is already in progress and the transfer of British Rail's domestic freight services should be completed by the end of 1995. The hon. Gentleman should recognise that that is part of a package approach, and all of it stems from the legislation to which, no doubt, he objected, although he has nothing to put in its place.

§ Mr. Donald Anderson (Swansea, East)
The Secretary of State has just said that after privatisation the ownership of the British Transport police would remain unchanged. As the ownership of the police is currently vested in Railtrack, does that mean that the BTP will be privatised? Does the right hon. Gentleman have any particular contributor to Tory party funds in mind?

§ Dr. Mawhinney
The hon. Gentleman knows the status of the independent transport police, answerable to Her Majesty's inspector, and I have no change to announce.

§ Mr. George Foulkes (Carrick, Cumnock and Doon Valley)
Will the Secretary of State now give a straight answer to the question that he has been dodging with some pre-arranged gobbledegook? If the privatisation goes ahead, precisely how will he guarantee the continuation of the whole rail network, including lines that are important to Scottish tourism, such as the highland line, and vital links to Northern Ireland, such 739 as the Stranraer line? How can the right hon. Gentleman guarantee that such lines will continue if his privatisation goes ahead?

§ Dr. Mawhinney
I am grateful to the hon. Gentleman for allowing me to say yet again that the Franchising Director has responsibility to produce minimum service specifications. He is instructed by me to do so broadly on the present timetable, and that is the sort of assurance that any honourable and reasonable Member of the House would be happy to accept.