York Carriage Works (Hansard, 25 January 1995)

§ Mr. Hugh Bayley (York)
Trains have been built at York carriage works for 150 years, and rail engineering underpins the local economy. The York works are not a smokestack industry from the past. Asea Brown Boveri, which owns the works, has invested £50 million in York in the past four or five years in buildings, machinery, technology and training. The York factory is the most modern of its kind in Europe and produces the only trains that meet the full European crash-worthiness certification. Despite that investment and those achievements, however, time is running out for the York works.
In the course of the past year, ABB has shed 900 of its 1,600 work force, and 10 days ago the company chairman said that he had only eight weeks left to secure a further order—and that if he did not succeed the corporate board in Zurich would have to decide to close York because a factory employing 700 people cannot be kept open if there is no work.
Are the Government saying that Britain can afford to throw away an industry and a plant as important as York just because the British Railways Board has in its wisdom decided to defer for two or three years placing an order for badly needed replacement trains? The ABB board in Zurich finds the Government's attitude utterly incomprehensible. That foreign company bought a chunk of the British Rail system and invested £50 million in York and a further £50 million in the Derby carriage works; yet it is being told that that investment must be written off. What kind of advertisement is that for inward investment or for the Government's rail privatisation policies?
York is currently building the first 64 of 600 class 465 carriages promised to commuters on the Kent coast lines. That stock is to be delivered later this year—three months ahead of the agreed date, which says something for the York works. Everyone expected the contract to roll forward to a second tranche. The existing contract has a follow-on clause, which would not have been included in the contract if British Rail, the Department of Transport, the Treasury and the company had not expected a further order to be placed.
The former Minister for Public Transport, the right hon. Member for Kettering (Mr. Freeman), said last year that he expected to receive British Rail's business case for a follow-on order last June and to be able to finalise an agreement with full Treasury and Department of Transport approval by September.
Just two weeks ago, however, everything was thrown into confusion. The British Railways Board announced a delay of four or five years until 1999 in any further orders for Networkers for Kent coast lines. The board said also that it did not intend to trigger the follow-on clause and felt that any future order would have to be subject to Europe-wide competition. If that happened, even if ABB were to win the contract, the York works would have closed before retendering was concluded.
The British Railways Board says that the reason for delaying is that there is no business case for ordering more stock at present, but that is not the view of Richard Fearn, director of South East Trains—the part of British Rail 317 which operates the service. In a letter last December to the hon. Member for Beckenham (Mr. Merchant), who was in his place a moment ago, Mr. Fearn said: I am currently working hard with colleagues in the Department of Transport to try to secure a much larger build so that we can fully replace our old trains on Kent Coast over the next two to three years. The view that there was no business case for further stock was not shared either by the right hon. Member for Kettering last May, when he said at the York Rail Forum: There is a prima facie case for Kent coastal rolling stock. The Central Rail Users Consultative Committee says that the average passenger loading on Kent coast trains in the morning peak is 2.6 per cent. higher than that permitted on safety grounds and that the overloading factor almost doubled in the past year. The Capital Transport Campaign produced figures this morning showing that the overloading factor on some trains is as much as 27 per cent. above the maximum allowed, including both seated and standing passengers.
No one claims that those ancient, overcrowded slum trains are fit for the purpose of carrying Kent coast passengers. They are history on wheels. In reply to a written question published in Hansard today, the Minister for Railways and Roads informed me that 424 out of 792 carriages on the Kent coast line date from 1959. Those carriages have been in continuous service longer than all but three Members of the House. They are clapped out and should be chucked out—I refer of course to the carriages, not to the hon. Members.
New trains would provide a better, cleaner, safer, quicker, more comfortable and more reliable service, and would divert traffic from road to rail. The introduction of new trains built at York on the Chiltern line increased the number of passengers by 40 per cent. immediately after they were introduced. If the Government are serious about shifting traffic from roads on to the railways on environmental grounds, the rolling stock replacement should go ahead.

§ Mr. Harry Barnes (Derbyshire, North-East)
My hon. Friend made the point that the ABB situation applies to Derby as well as to York. At a time when investment is required, there is investment blight because the Government's privatisation plans mean that planned development cannot occur. My hon. Friend made a powerful point in respect of the provision that should be made for public transport. Derby is very much involved in the debate.

§ Mr. Bayley
My hon. Friend makes an important point. I am aware that he and others of my hon. Friends representing Derbyshire constituencies have been campaigning hard for orders to ensure a future for the Derby carriage works. The whole country needs an investment plan that will sustain its railway manufacturing base.
New trains for the Kent coast lines would save fuel because their running costs are much lower; they would reduce maintenance costs and they would free space on Kent coast lines which is needed to provide access for Eurostar channel tunnel services until the new link is constructed.
There are also the safety considerations. The Hidden report into the Clapham junction crash stated that all slam-door carriages of 1950s vintage used by British Rail had to be either strengthened or scrapped by 1999: it did 318 not state that they all had to remain in service until 1999, which seems to be the decision that the British Railways Board has taken.

§ Mr. Stanley Orme (Salford, East)
I know that my hon. Friend is aware of early-day motion 404, which has been signed by 48 Members who are sponsored by the engineering union. I happen to be chairman of that union, the Amalgamated Engineering and Electrical Union. We are all concerned about the loss of manufacturing skills. The closure of the works would be a blow to York and to British industry generally. I hope that my hon. Friend will continue the campaign that he has led so magnificently. We must fight to achieve reversal of a policy that is based on privatisation and not on providing what is needed by the country.

§ Mr. Bayley
I am most grateful for my right hon. Friend's intervention and for the support that I have received from my hon. Friends on the Front and Back Benches. I know that my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) has been lobbying hard, and there are suppliers to the York works in his constituency.

§ Mr. Elliot Morley (Glanford and Scunthorpe)
Will my hon. Friend give way?

§ Mr. Bayley
In view of the time, I must say no to my hon. Friend. I thank him, however, for the support that he has given. Indeed, there has been support from hon. Members on both sides of the House. The hon. Member for Ryedale (Mr. Greenway) has supported the campaign. I know that hon. Members representing Kent constituencies have done so as well. There has been support throughout the country. I have received dozens of letters from people expressing concern about the threat to the York works. I have also had support from the EU's new Commissioner with responsibility for transport, who has taken a close interest in what has been happening.
I am not trying to score a party political point. Common sense says that the works should be saved, as does public opinion. Successive Conservative Ministers have said that the full fleet of Kent coast trains would be replaced and the present Minister has spoken to me on many occasions in the past two weeks since British Rail made its unfortunate announcement. Given the commitment of previous Transport Ministers, both to rail manufacturing and to maintaining that base, and to providing replacement carriages for Kent coast passengers, what will the present Minister do to ensure that a follow-on order is placed with the York works before the deadline, which is only eight weeks away? If no order is placed in the next eight weeks, the works will close.

§ Sir Roger Moate (Faversham)
I congratulate the hon. Member for York (Mr. Bayley) on securing this debate at such a crucial time and on the campaign that he has fought, together with my hon. Friend the Member for Ryedale (Mr. Greenway), whom he generously mentioned, to save the York works. I thank the hon. Gentleman for allowing me a few minutes to speak on behalf of the population of Kent and of all Members representing Kent constituencies, who make common cause with him on the campaign to secure an early order so that there can be a continuation of the Networker express construction programme.
319 I agree with the hon. Gentleman that this is not a party issue. It is common sense that we want to keep the production lines open at York. It is common sense also that we should not be deterred from placing an order for new rolling stock merely because, even by British Rail's admission, there is a time problem of a year or two.
I endorse all that the hon. Gentleman has said about the need for new rolling stock in Kent. In case there is any misunderstanding—there should not be—I emphasise that 16 new four-car units will be delivered for the north Kent service this year. They are coming ahead of schedule. There will be high-profile new trains on the network in the autumn timetable. They are just a start. They will whet the appetite of all Kent commuters, who will want more new trains. The 16 were always seen as just a start.
To be fair, there was not a firm contract arranged for the follow-on order. There was a clear understanding, however, that we were at the beginning of a continuous process to replace the Kent rolling stock. I pay credit to Network SouthEast. In good faith, it has always expected that there would be a follow-on order. It came as a surprise to us, therefore, when we heard that British Rail felt that it could not continue the negotiations.
Kent Members had a meeting with the chief executive of British Rail. It is on record that he said that the door is still open for negotiation, and we would all be shocked if earnest and serious negotiations did not follow to ensure that a way is found of placing the follow-on order for much-needed rolling stock. The existing rolling stock will be time-life expired in the next three to four years. It would be stupid indeed not to place a new order now, merely for the sake of a dispute about perhaps a couple of years, at the end of which the present rolling stock will be even less safe than it is now. It will be clapped out and breaking down.
We also need new rolling stock for jobs in Kent. It is needed as much in Kent as the York works needs to build it. Kent is happy to make common cause. Now it is for British Rail seriously to put together a business case to submit to the Minister. I should be extremely disappointed if my hon. Friend were to say that a good business case put by ABB to British Rail and by British Rail to the Minister was not likely to receive endorsement. I think that it is the will of the House that we should get on with replacement and have first-class rolling stock in Kent and for rail passengers everywhere.

§ The Minister for Railways and Roads (Mr. John Watts)
I congratulate the hon. Member for York (Mr. Bayley) on securing a debate at such a civilised hour and on presenting his case in such a civilised and well reasoned way. I pay tribute to his efforts and to those of my hon. Friend the Member for Ryedale (Mr. Greenway) and my right hon. Friend the Member for Selby (Mr. Alison) on behalf of York and those of their constituents who are employed by ABB.
I acknowledge the crucial importance of railway employment in York. I congratulate ABB and its work force on the efficiency improvements that have been achieved at York and at other sites since privatisation, with the benefit of the substantial investment to which the hon. Gentleman referred.
320 Given the age profile of the rolling stock fleet and the long life span of the stock, orders are cyclical, as was exemplified by the substantial orders—they were still under construction—for Networker trains to replace Kent inner suburban trains. It was inevitable that there would be a downturn in orders following that peak. The long-term replacement need is below the recent rate of new build.

§ Mr. Morley
I understand what the Minister says about the cyclical nature of orders, but the long-term investment and planning of companies such as ABB, for which my constituency is a major supplier, means that they find it difficult to switch on and off. It would be much better for rail commuters and manufacturing industry to have long-term orders.

§ Mr. Watts
Indeed. I recognise that it is desirable for us to have a vibrant railway manufacturing industry and, if it can be achieved, a less cyclical pattern of investment.
The downturn in commuting into London since the peak of 1989–90 has compounded the problem. In the late 1980s, it seemed that the Network SouthEast fleet would need to be expanded to meet growing demand. Instead, we have experienced a decline related to the recent recession. That has hit British Rail passenger revenue extremely hard. We expect to see some growth as recovery takes hold, but we cannot be certain when rail commuting will return to the peak of 1989.
British Rail's estimates of rolling stock requirements in the 1980s were made in good faith, as were any related comments made by my predecessors, my right hon. Friends the Members for Enfield, Southgate (Mr. Portillo) and for Kettering (Mr. Freeman). With hindsight, it is clear how commercial demand for new trains has changed since the 1980s.
The Government would welcome a further BR leasing deal following the current £150 million contract with ABB for Networker trains, subject to two points. First, there must be a commercial need for new rolling stock and a good business case for it. British Rail cannot scrap sound and serviceable trains prematurely. Those are matters of judgment. I have no intention of going further in commenting on the sound and serviceable nature of trains, because to do so would be inviting hon. Members, particularly my hon. Friends from Kent, to seek to lynch me or have me certified under the Mental Health Act 1983.

§ Mr. Jacques Arnold (Gravesham)
Should not British Rail take into account what its passengers think about its carriages, and also the commercial consideration that, if passengers do not think much of its carriages and switch to the coaches which run from Kent to London every day, its revenues will suffer. British Rail should take that into consideration.

§ Mr. Watts
My hon. Friend is right. I am sure that one of the features of the privatised railway industry will be a much greater responsiveness to the needs of passengers.
Those must be matters of judgment for British Rail. The Government cannot generate that commercial need or second-guess BR's judgment, although my right hon. and hon. Friends are free to do so.
Secondly, the financial terms offered by the private sector for financing the acquisition of trains must be acceptable as a long-term lease. Transfer of risk is 321 paramount here. A "genuine and substantial" proportion of risk must be taken by the lessor. It is not possible to lay down mechanistic rules, because of the complexity and subjectivity of the issue, but residual value risk is considered to be pre-eminent.
The previous £150 million leasing deal did not satisfy private finance initiative guidelines, but was approved exceptionally as a step towards developing a rolling stock leasing industry. Any subsequent deal will need to go much further on risk transfer. The industry has always been fully aware of that position and the Department is ready to do whatever it can to clarify the PH rules and to assist in configuring the deal, for which there is a good business case to fit within those rules. I have given that undertaking on many occasions, both in the House and in discussions outside.
The Government are committed to privatising the rolling stock leasing companies during the course of this year, but at present it is British Rail's responsibility, as owner both of the RoSCos and of the operating companies, to assess the business requirements for new trains. There is therefore no question, as the hon. Member for Derbyshire, .North-East (Mr. Barnes) suggested, of privatisation being responsible for the present position on orders. Uncertainty is not a factor. If there is a good commercial case and acceptable leasing terms, I am sure that the legal structure of ownership need not be an obstacle.
In making that assessment, BR looks at such factors as the capital cost of the trains, the projected cost of maintenance and any revenue to be gained from greater speed or reliability—points to which some of my hon. Friends have referred. It also looks carefully at the comparative cost of maintaining existing units. This is not a theoretical exercise, but one based on detailed experience of the condition and current repair cycles of components.

§ Mr. James Couchman (Gillingham)
When the rolling stock is passed over to the companies later this year, will the work and analysis that BR has done on the proposal to provide new trains on the Kent coast route be passed over to the leasing company?

§ Mr. Watts
I am sure that the work and the knowledge that has gone into the assessment of rolling stock requirements will not be lost when the RoSCos are privatised.
As we know, British Rail reached a decision not to exercise the option offered by ABB for replacement trains for Kent coast services. BR concluded that the current fleet could continue in service until 1999, when substantial expenditure on heavy engineering costs would have been required to keep the trains in service. That conclusion is clearly unwelcome news to many commuters and to many of my hon. Friends, but BR has a duty to look at the matter on a commercial basis.
Following the recent meeting between BR and hon. Members representing constituencies in Kent, however, BR indicated that it would wish to re-examine the commercial case if an improved offered were received from ABB. If BR then concludes that the negotiated deal represents good value for money, it would come to the Department with a case under the private finance initiative, and I give an undertaking to look at any such case urgently with my right hon. Friends both within the Department and elsewhere.
322 BR's recent decision not to exercise the option is not due to a lack of Government funding. BR rejected the proposal based on its assessment of the commercial need for trains. The November Budget settlement had no role to play in that judgment.

§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
Tell us another fairy story.

§ Mr. Watts
The hon. Lady may like fairy stories, but I am trying to give the House the facts as they are.
British Rail has invested £4 billion in new rolling stock since 1979. Almost 4,000 new vehicles and locomotives have entered service in the past 10 years. In the former Network SouthEast area alone, more than 1,600 new vehicles have been delivered since 1986 for various lines. Overall support for the railways provides this year for investment of about £1 billion.

§ Mr. Michael Alison (Selby)
Will my hon. Friend bear in mind that if the issue is to be looked at again in 1999 or thereabouts and ABB has gone out of operation, the lack of competition in carriage production will mean that it may cost BR a lot more than it would if it went for the order now?

§ Mr. Watts
My right hon. Friend makes an important point which reinforces what I said earlier about the desirability of maintaining a vibrant manufacturing industry.
The hon. Member for York raised important questions about the safety of the remaining mark I electrical multiple units on former Network SouthEast services. It is an acknowledged fact that modern rolling stock designed with integral bodies has greater collision resistance than the older mark I stock. The same is true of developments in other modes of transport.
As regards day to day service, condition rather than age is the critical factor. All rolling stock is subject to a rigorous inspection and maintenance regime. Mark I rolling stock is fit for purpose in spite of its age. Rolling stock would not be put into service by BR if it was not fit for purpose.
I shall now deal with the specific recommendations in the reports on the Clapham and Cannon street accidents. Appendix G of Sir Anthony Hidden's report recognised: The inventory of Mark I coaching stock is large, and much of it has not reached an end of its economic life, nor will do so by another decade or more. The report went on to say, it could be forcibly argued that there are more rewarding candidates for large capital investment in the railway than would be incurred by early replacement of these vehicles. Sir Anthony Hidden did, however, recommend that British Rail shall carry out its stated programme of research into the structural integrity of its rolling stock within its planned timescale of completion by April 1991. Recommendation 55 went on to say: On completion of the programme BR shall discuss its conclusions with the Railway Inspectorate and obtain their agreement to the structural changes necessary to strengthen all relevant rolling stock with a subsequent lifespan of eight years and over. In April 1991, BR concluded that it would not be reasonably practicable to carry out structural changes to mark I vehicles. I understand that the Health and Safety Executive's railway inspectorate agreed with BR's conclusions.
323 The decision to replace the rolling stock involved in the Cannon street accident had already been taken by BR at the time that the inspector's report was published. I understand that the replacement programme for Kent link trains should be completed this April, when all the older trains will have been withdrawn on that route.
Turning again to Kent coast services, I recognise the urgency of the issue for ABB Transportation. BR is continuing discussions with ABB on a modified proposal. I am keeping closely in touch with developments and will continue to maintain close contact with my right hon. Friend the Member for Selby, my hon. Friend the Member for Ryedale and the hon. Member for York as matters develop. I think that we have had constructive discussions as the matter has developed, and I offer an undertaking to keep in touch with the right hon. and hon. Members concerned.
We are ready to help with the private finance aspects of any proposal that BR might submit to the Government. We are considering with British Rail how best to deal with that component. We do, of course, have recent experience of how a rolling stock deal can be fitted within the rules of the PFI, because we have recently concluded the agreement for the supply of Northern line trains for London Underground within the terms of the PFI.
This is not uncharted territory. There is a pattern, there are ground rules and there is experience on which we can draw. More immediately, however, it is for British Rail to decide whether there is an acceptable proposal which meets its business requirements, and it is for ABB to decide whether it can offer such a deal. If it can offer British Rail a deal that it cannot afford to refuse, with the help of my Department it should be possible to fit it within the rules of the PFI. I hope that the interests of both York and Kent can then be better served.