London Underground (Hansard, 25 February 1997)

§ Madam Speaker
Statement—Sir George Young.

§ Mr. Roger Gale (North Thanet)
On a point of order, Madam Speaker.

§ Madam Speaker
Points of order come after statements, as I am sure the hon. Member recalls.

§ The Secretary of State for Transport (Sir George Young)
With permission, I should like to make a statement about our proposals for the future of London Underground.
London Underground is the last of the traditional transport nationalised industries, and the only major transport operator that is not in the private sector. Since 1979, we have privatised a wide range of transport businesses—for example, British Airways, the British Airports Authority and, indeed, London Transport's bus operating companies. All of them have gone on to prosper, raising money from the market to invest in better services for their customers. Only London Underground remains in the public sector, its status becoming increasingly anomalous.
Most recently, we have of course privatised the national passenger rail network—a process that has now been completed, with the award of the last franchise for ScotRail. The benefits are already becoming apparent: an increase in passenger numbers; and new investment is already taking place or is in the pipeline. Railtrack has plans to spend £4 million a day on maintaining and renewing the rail network, and on stations, depots and network enhancements. By 2001, Railtrack estimates that it will have spent £1 billion more than the regulator expected. In addition, franchisees are committed to investing around £1.5 billion in new rolling stock and more than £100 million in improvements to stations and other facilities.
The decisions to proceed with Thameslink 2000 and the channel tunnel rail link show that major new projects can be undertaken within a privatised railway. Benefits for rail users are being achieved at a decreasing cost to the taxpayer. In seven years' time, the private sector franchisees will require only about 40 per cent. of the support that British Rail estimated it would have needed to run the same services this year. Rail privatisation has shown that the fact that an industry is loss-making is no barrier to its successful transfer to the private sector.
Against that background, my right hon. Friend the Prime Minister announced in October that we would be considering whether the benefits of privatisation could be extended to London Underground. We have completed the initial stages of that work and the Government have concluded that privatisation is the right way forward. The package that I will outline to the House will deliver a higher-quality underground at an affordable cost to passengers and no extra cost to the taxpayer.
Our purpose is to structure the privatisation so as to ensure that the underground is brought up to modern standards as soon as possible. Our aim is to complete the modernisation and improvement programme—that is the elimination of the investment backlog—within five years 150 of privatisation. In recent years, London Underground's management has raised customer satisfaction by a sixth, increased scheduled train services to a level not seen in 25 years, increased the underground's operating surplus from nothing to around £200 million a year, and reduced the investment backlog from £2 billion to £1.2 billion. Despite those great strides, much remains to be done if we are to achieve the standards of service that passengers want, at a cost which they and taxpayers can afford.
We believe that privatisation is the only means of achieving these goals. Privatisation will enable the private sector to invest in the network and respond to passengers' needs, unconstrained by the restrictions of public expenditure controls, and will create the stable financial environment which is simply not achievable in the public sector, with all the other competing demands on taxpayers' money. We want to privatise London Underground as soon as possible so that passengers can start enjoying these benefits without delay.
In deciding on the detailed structure for the privatised underground, we shall need to take account of the network's unique nature and operating characteristics, and to obtain further technical and financial advice. Specifically, detailed work will now begin on three possible models: the sale of London Underground as a single business; the sale or franchising of vertically integrated lines or groups of lines, under which a single operator would be responsible for the stations, track and trains on each line or group of lines; or a structure like the national railways model, with a track authority owning the network and franchisees running trains on individual lines or groups of lines.
We are already consulting London Transport and the railway inspectorate, and we shall now widen our discussions to involve the other key players in the railway industry, and those with an interest in London's transport system, such as the London Pride Partnership and the London Regional Passengers Committee. We also intend to start the process of appointing advisers. Our aim is to publish in the summer a White Paper with our detailed proposals for the best structural option for the future of the underground.
As with previous privatisations, there have been a number of scare stories in the media in recent weeks. I want to set the record straight by giving 10 commitments to passengers and employees. First, safety must always be a top priority. I shall be consulting the Health and Safety Commission in order to ensure that, whichever structural option we adopt, the very high safety standards of the network are maintained.
Secondly, we are committed to a fully integrated network for passengers, including through-ticketing and freedom of interchange between lines. There is no question of breaking up the network. Passengers will be able to use different lines for a journey and to choose the most suitable route, using one ticket in exactly the way that they do now.
Thirdly, the London travelcard will be retained. Regular tube users attach great value to the travelcard, which allows people to use the same ticket to travel by underground, rail or bus, without any restriction on the number of journeys they make. It is used by around a million people a day and accounts for more than two thirds of underground journeys. Our proposals will explicitly safeguard its future.
151 Fourthly, the existing Londonwide concessionary fares arrangements, which are of critical importance to many elderly and disabled people who rely on public transport, will not be affected by our proposals. Fifthly, on wider share ownership, we shall seek ways of encouraging employees and passengers to acquire a real stake in the privatised underground.
Sixthly, for underground employees, pensions and travel concessions at the time of privatisation will be safeguarded. Again, depending on the option we choose, we will be seeking to encourage employees to participate in management or employee buy-outs.
Seventhly, we shall ensure that the private sector will be required to provide a guaranteed level of service broadly safeguarding the existing level of provision. The regulatory authority supervising the privatised underground, which will be independent of the train operators, will agree to changes in service levels only after carefully considering the benefits to passengers. Again, that is a wholly new safeguard.
The eighth commitment concerns station safeguards. We shall retain strong and effective statutory procedures to deal with any proposals to close stations. The safeguards will be just as rigorous as those that already apply to London Underground and to the national rail network.
The ninth commitment is that we shall introduce controls on fares. The guiding principle will be that, for at least the first four years after privatisation, average fare rises will be no more than inflation. That is a new safeguard; underground fares have not previously been capped.
We also intend to restrain fares in the run-up to privatisation, by capping average fare increases at inflation plus 1 per cent. a year. Again, there has been no such explicit protection in the past, and in practice fares have tended to rise faster than that. The House will recall, for example, that between 1974 and 1979 fares increased by 45 per cent. in real terms.
That brings me to the 10th commitment, on investment. In the recent debate about the future of London Underground, a consensus emerged on two key principles with which I believe that the whole House can agree.
First, it must be a top priority to accelerate investment in London Underground so as to bring the network up to the standards that passengers can reasonably expect for the 21st century. Secondly, that goal can be achieved only if we create a stable funding regime that will enable investment to be planned ahead with confidence.
We are therefore developing a special funding regime for recycling privatisation proceeds into investment, which recognises the unique situation and needs of the underground. Receipts from privatisation will be recycled to ensure that the modernisation of the underground's infrastructure is completed as quickly as possible, building on the work that London Underground is already doing.
Our aim is to achieve that end within five years of privatisation, with the private sector operator committing himself to modernising the assets for which he is responsible, in return for a guaranteed level of Government support to supplement the investment funds that he himself will raise.
After privatisation proceeds hav e been recycled to complete the modernisation of the tube network, most of any remaining surplus will be channelled into additional 152 support for London Underground, or for transport investment elsewhere in London or in other parts of the country.
As for modernising the underground's basic infrastructure, the House will appreciate that there is a maximum level of annual investment beyond which it is not practicable to go. At a certain point, for example, disruptions to services from renewal works across the network would become too great, or the programme would be beyond the capacity of the supply industry. Subject to those practical constraints, we aim to privatise the underground in such a way that the network is modernised as soon as possible.
London Underground estimates that the upper limit for sensible investment in the core underground each year is about £750 million. Of course, passengers are interested in the results of investment—punctual and reliable services—not in the sums spent. I believe that the private sector will be able to deliver the results that passengers want, more efficiently.
Privatisation and the new regulatory regime will focus on the results of investment. But assuming that annual investment would be about £750 million, about £350 million a year would be needed to maintain the network and to renew assets as they became too old. The remaining investment would be aimed at eliminating the results of the under-investment in the underground in the 1960s and 1970s.
Sustained annual investment of about £750 million in the core underground would be significantly above what has been managed before. In real terms, that is more than four times what was achieved in the 1970s, three times the investment made in the 1980s, and 50 per cent. more than the investment made so far in the 1990s. I do not believe that that rate of progress would be possible if London Underground were to remain in the public sector.
The 10 commitments that I have given today show our determination to protect and enhance the aspects of the underground that are valued by tube users and by Londoners generally. At the same time, privatisation will introduce private sector capital, ideas and energy to increase investment and to raise standards.
That is an outstanding package for tube users and for Londoners. I do not believe that anything as attractive would be possible under continued public ownership, and I commend to the House the principle of privatising London Underground.

§ Mr. Gale
On a point of order, Madam Speaker.

§ Madam Speaker
I take points of order after statements.

§ Mr. Gale
The statement has been made.

§ Madam Speaker
A statement is a continuation of Question Time. It has always been the tradition that we take points of order after questions.

§ Mr. Gale
My point of order is relevant to the statement.

§ Madam Speaker
In that case, perhaps it could be put in the form of a question to the Secretary of State—if the hon. Gentleman catches my eye. There may be a glint in it already, but he must wait.

§ Mr. Andrew Smith (Oxford, East)
Is not this statement the ultimate Tory abdication of responsibility for transport in London, neither equipping London for the future nor making good the mistakes of the past? Is it not totally half-baked when the Secretary of State cannot tell us whether privatisation will be sale as a job lot, line by line, or as a track company and franchises? What makes him think that it will work, when he cannot even tell us how it will be done?
The Secretary of State referred to a guaranteed level of Government support. How much will that be? Is not there confusion at the very heart of Government when the Secretary of State tries to have us believe that the proceeds will go into the tube but the Chancellor tells a news conference this morning that he is relying on the money to balance his Budget? Does not that show that, having neglected the tube for years, with so much decay and disrepair, all the Tories have left is the dogma of run it down and sell it off, regardless of passengers' interests?
What confidence can the public have in the Secretary of State's list of commitments when in one breath he tells us that he is considering selling off the lines separately and in the next that there is no question of breaking up the network? Does he recall his words in the leaked letter of earlier this month? He said: I do not want to set existing service patterns in stone—some services may well be uneconomic". Was not his statement so qualified as to leave the way open for services to be cut and stations closed?
The Secretary of State extolled the benefits of rail privatisation. Is not the truth that under the Tories London would be threatened with the same chaos on the tube as we have just witnessed on South West Trains?
What notice has the Secretary of State taken of the warning from the chairman of London Transport, who said that privatising the tube was like putting a house on the market when the walls were falling down? What valuation has he made of the assets? Has he changed the estimate in his previous leaked memo that the sale could raise less than a tenth of the £13 billion reported value?
As with all the other privatisation excesses, would not this mean more fortunes for a few and misery for the many? Will the Secretary of State confirm what he said in that leaked letter: that it could cost more in subsidy to privatise the underground than the Government get back in sale proceeds?
How can privatisation some time in the next century raise the investment that is needed now? Would it not be far better to get moving straight away with public-private partnerships as Labour has proposed? Is not privatisation a desperate move by a Government bankrupt of ideas? Does not their dithering show that they know the dangers involved, and does the Secretary of State still agree with the Chief Secretary's assessment that the underground will be a unique and very difficult privatisation to sell to the public"? Is not this privatisation bad for London, bad for passengers and bad for taxpayers, because the Secretary of State can give no definitive guarantees about services or investment levels and cannot even tell us how much of the money raised he would use for investment? This is a privatisation that the British people will throw out at the ballot box, along with the Government who dreamed it up.

§ Sir George Young
I am disappointed that the Leader of the Opposition, who asked several questions about the privatisation of London Underground, did not stay to hear the statement.
The House and, indeed, Londoners will be deeply disappointed by the response of the shadow Secretary of State for Transport, which offered no hope and no commitment. Old Labour will not let him privatise; new Labour will not let him spend more. He is a shadow Transport Minister with nowhere to go. We have a coherent strategy. We have identified the funding and the commitments. We believe that it is an attractive proposition for Londoners.
The confusion on privatisation comes from Opposition Members, as we saw at the weekend over the Tote. One day they were to privatise it, the next they were not, and on the third day, they discovered that it was not theirs to privatise. The same will happen with this privatisation as has happened with every other privatisation: they will oppose it before we do it and afterwards say that it was perhaps a good idea after all.
On the hon. Gentleman's specific question, we shall require the private sector to modernise the underground's infrastructure as soon as possible. That will entail a given amount of Government subsidy, the amount to be tested in the market. That subsidy will be recycled from the privatisation proceeds that we receive. If, as we expect, there are proceeds left over, the majority will go to additional investment in London Underground or for other transport investment. The message to Londoners is this: mind the gap between what we offer for their underground and what the Labour party does not offer.

§ Mr. Peter Brooke (City of London and Westminster, South)
Does my right hon. Friend agree that those who oppose the privatisation of London Underground must explain why it should be an exception from a philosophy that has been such a success not only in this country but throughout the world? Does he further agree that those who in the final days of the Greater London council poured public money into fares subsidy rather than investment will find it difficult to make that case?

§ Sir George Young
I agree entirely with my right hon. Friend. It is true that, in the 1970s, resources did not go into catching up with the backlog but into keeping fares down. It is that backlog that we are trying to deal with. We have got it down from £2 billion to £1.2 billion over the past 10 years. I want to make faster progress with clearing that backlog. I believe that privatisation in the way that I have outlined is the key to that. I am grateful to my right hon. Friend for his support.

§ Mr. David Chidgey (Eastleigh)
Does the Secretary of State recall that his predecessor, at the beginning of rail privatisation, told the House that there would be no hiatus in investment? We have had four years of virtually no investment in our railways. [HON. MEMBERS: "What?] Up to now. The Secretary of State said that he expected the shortfall in investment to be made good over five years. If we take British Rail as an example, London Underground could be short of essential investment up to the millennium. That could leave the system in a state of disrepair, with services being cancelled and safety compromised.
155 Surely he understands that the huge asset value of London Underground means that there are other options for raising the money necessary to bring it up to a decent modern metro standard. Surely he sees the sense of allowing it to use its assets as a resource to borrow money and get the investment that it desperately needs now to give Londoners an underground system in which they can again take pride.

§ Sir George Young
If the hon. Gentleman wants to outline a conventional approach of increasing public expenditure funded by increased borrowing or higher taxation, he should come into the open and do so. He is wrong about investment. In real terms, investment is 50 per cent. above the level of the 1980s, and twice the level of the 1970s. On top of that, the Jubilee line extension is due to be completed in March next year. On current investment, this year's settlement left provision for the LT core business in 1997–98 unchanged. With private finance investment, total investment in the core business over the next three years should total around £1.5 billion. That compares with London Underground's estimate that £350 million needs to be spent each year on average to prevent the tube's backlog from getting larger. That puts the matter into better perspective.

§ Dame Angela Rumbold (Mitcham and Morden)
May I warmly congratulate my right hon. Friend on his announcement? After many years of trying to improve London Underground, those of us who live in London and use it all the time will welcome the opportunity for investment in London Underground continuing year on year rather than having to be considered annually. That has been one reason why it has been so difficult to plan and improve investment in London Underground. Will my right hon. Friend confirm that users of the Northern line, which culminates in my constituency, can look forward at long last to a programme that will improve both the stations and the running of that line so that they can get to and from their work comfortably, on time and at ease with the whole programme?

§ Sir George Young
My right hon. Friend is right. London Underground wants stability and confidence of funding for its long-term programme so that it can have a strategic approach. So long as it remains in the public sector, under whatever Government, it will be subject to the annual bids and counter-bids of the public expenditure round. Putting it outside the public sector guarantees it continuity of funding.
My right hon. Friend will know that new trains for the Northern line are on the way. As I outlined in my statement, it is my ambition that, within five years of privatisation, the backlog will have been removed. I have heard no other scenario that achieves that objective in that time scale.

§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
Does the Secretary of State agree that the unhappy, packed travellers who are increasingly jammed in on an unsafe and ancient system will understand that his proposal is not a means of acquiring new investment, or of changing the savage cuts that he has imposed this year, which have put back safety measures like the replacement of escalators for at least two years, but a simple commitment to a brutal transference of taxpayers' assets at well below their worth? As with rail privatisation, large sums of money will go to accountants, estate agents and lawyers, without a penny going into a new rail system.

§ Sir George Young
What we have not heard so far from the Opposition is an alternative strategy for getting the necessary resources to drive up the quality and quantity of investment in the London underground. The Opposition are unable to match the offer that I have put before the House. On the hon. Lady's specific points, there has been no reduction in next year's resources from this Government for London Underground. So, far from being a "brutal" privatisation, it is a user-friendly privatisation with a transparency that we have not had before, with receipts being recycled back into the underground for the benefit of passengers. The hon. Lady's description of that as "brutal" defies belief.

§ Mr. John MacGregor (South Norfolk)
Does my right hon. Friend agree that the Opposition's reaction was reminiscent of what they said when rail privatisation was first announced and that, in practice, all their threats and fears have been proved to be wrong? Will it not be the same in this case? Will not they quickly forget the words that they have used today? I agree with my right hon. Friend about capital investment. Given the shadow Chancellor's position and the many demands which Labour Back Benchers would make for other public expenditure if the Labour party ever came to power, is it not clear that there would be no hope of capital investment in London Underground under a Labour Government?

§ Sir George Young
I am grateful to my right hon. Friend. He has been around the course before me in respect of British Rail, and I am inspired by his example. Last week we heard Railtrack's statement on its network management strategy for spending sums that would simply have been beyond our reach had the railways remained in the public sector. That is the goal that we want to secure for London Underground. My right hon. Friend is also right to contrast the posturing that we are seeing now with the reaction that we shall see in a few years' time, once we have successfully privatised London Underground. Labour Members will have to eat their words and recognise once again that our privatisation policy was the right approach.

§ Mr. Tony Banks (Newham, North-West)
Is the Secretary of State really suggesting that London Underground will be sold off and that the receipts from privatisation will go back into London Underground, thus enhancing the value of the undertaking to the private owner? Is it not rather like me selling my house to the Secretary of State and then giving him the receipts of the sale to improve the house? It is like a burglar breaking in and then being given the compensation that the victim receives from the insurance company. Where is the economic model and sense in such a proposal?
When the Secretary of State sets his mind to getting the value of London Underground, will he take into account the enormous redevelopment value of the underground stations throughout the capital city? Lastly, will he tell us which other capital city with a metro system like ours has put it into private ownership?

§ Sir George Young
This Government are happy to lead the world in their policy on privatisation, and I am confident that others will follow us in our privatisation of London Underground, as they have followed us in privatisation of other state-owned industries. I did not follow the logic of the hon. Gentleman's questions.

§ Mr. Tony Banks
No, because there is none.

§ Sir George Young
Let me try to explain to him that the London Underground has value as a business, from two sources, and privatisation will crystallise that value. First, London Underground is already making an operating surplus, which covers part of the investment programme. London Transport expects the operating surplus to grow substantially. Secondly, a privatised underground will be much more efficient, which will result in better operating efficiency, better marketing and the more commercial use of property assets. Privatisation will, therefore, accelerate the Underground's progress towards self-sufficiency and help to unlock the value of the undertaking, thereby generating the receipts to attack the backlog.

§ Mr. Steve Norris (Epping Forest)
Having had a direct responsibility for London Underground for nearly five years, may I place on record my warm appreciation of the work of the management of the Underground, who have done a huge amount to increase the efficiency of the system? I assure my right hon. Friend that they are the first to point out that, even with those efforts, it has not been enough. There is a backlog, despite levels of Government investment of the order of six or seven times those under Labour.
If my right hon. Friend accepts that fare payers cannot be asked for limitless additional revenue and that taxpayers are already paying a record amount, does he agree that it would appear utterly perverse for purely ideological reasons to deny the Underground the substantial billions of extra investment that a privatisation could unlock? Is it not clear that the position in which the Labour party has put itself is laughable and perverse, and that the only losers by the adoption of such a policy would be the people of London, who will see through the sterility of Labour's argument?

§ Sir George Young
I am grateful to my hon. Friend. The dogma comes entirely from Opposition Members. I draw their attention to a leader in The Independent on 29 January 1997, headed "Privatisation should be pragmatic, not dogmatic". That leader advocates the privatisation of London Underground.
My hon. Friend is right to pay tribute to the work of Peter Ford and his team, which I recognised in my statement, as I do now. I hope that, depending on which structure we choose, there will be opportunities for employee investment in a new structure. My hon. Friend again reminds the House to mind the gap—the gap between what we have put on the table for London Underground and what the Opposition have failed to provide to match it.

§ Mr. Ken Livingstone (Brent, East)
Can the Minister explain the gap between his predecessor's promise to the House of Commons in 1984, when the Conservative Government passed legislation to take London Transport out of the hands of the Greater London council, that that was being done to tackle the gap in investment and end under-investment in the tube, and what he says 13 years later—that there is still under-investment in the tube?
Does the Minister recall that, in each of the three years of the Labour administration from 1981 to 1984, when London Transport was taken over by the Government, we made proposals for a major programme of investment in the London tube, and that each year the Conservative 158 Government vetoed them? Those proposals included the proposal to build the Jubilee line, which would have been working for the past eight years if the Conservative Government had not vetoed it. Why should Londoners believe the Conservatives now when they were lied to in 1984?
Will the Secretary of State get in touch with Sir Horace Cutler, the leader of the Tory group on the GLC in the mid-1970s, who commissioned an internal report for the Tory group on the potential for privatising the tube, and decided not to proceed with the proposal when that report pointed out that the only way in which the tube could be privatised would be to decimate off-peak services and reduce them to no more than two trains an hour?

§ Sir George Young
I hope that the hon. Gentleman heard the commitment that I gave about services. That deals with the scare story at the end of his remarks. Let me give some figures, not from my Government but from his Government, to contrast our commitment to investment in London Underground. Core investment last year, excluding private finance, was more than three times as high in real terms as in 1979. At today's prices, core investment in 1979 was £172 million, compared with £576 million in 1995–96. Those statistics give the true story about commitment to London Underground.

§ Mr. Peter Bottomley (Eltham)
On the history of the matter, is it not true that, when the GLC controlled London Underground, it put political placemen on the board, held board meetings that went on hour after hour, and had virtually no capital programmes? I welcome my right hon. Friend's announcement. It is good for passengers, and makes economic, financial and political sense. The only people for whom it is bad are the Labour Opposition, who will have to explain to transport correspondents, political correspondents and passengers how they will achieve the levels of capital investment now promised to create a modern underground system.

§ Sir George Young
I am grateful to my hon. Friend. In his usual succinct way, he has put his finger on the key issues that will be of concern to Londoners between now and May.

§ Mr. Tam Dalyell (Linlithgow)
May I ask a question of fact? What figures does the Department of Transport have for the repair of all the aging Victorian tunnels—many of which are suffering deterioration—at the same time? There are those who are expert in stone who say that such structures do not last for ever, and that difficulties in tunnel maintenance will come together on a major scale. What figures are available to the Department of Transport?

§ Sir George Young
The principal figures available to my Department are those that have been supplied by London Underground, whose best estimate of the extent of the current backlog is £1.2 billion.

§ Mr. Iain Duncan Smith (Chingford)
Does my right hon. Friend agree that the key consideration for my constituents who use the London underground regularly is the future quality and frequency of service? My right hon. Friend will have noted that the undertakings that he has given should be backed up when the privatizations 159 take place. Is it not the case that any alternative must be demonstrated to have money behind it? If the Government still have their hands on the assets, private business men will not want to go near any investment programme, as they know what will happen halfway down the line when the Government pull out, as the Opposition would do if they were in power?

§ Sir George Young
My hon. Friend is right. I gave guarantees on service levels. I made it clear that the private sector will be required to provide a guaranteed level of service, broadly safeguarding the existing level of provision, and that there will be an independent regulatory authority supervising the privatised underground, independent of the train operators, which will agree to changes in service levels only after carefully considering the benefits for passengers. That is a wholly new safeguard.

§ Mr. Keith Hill (Streatham)
May I remind the Secretary of State that it was the Labour Government who opened Hatton Cross station, the three Heathrow stations and also the Jubilee line, which was the last major programme of underground construction in London? Which of the uneconomic services—I think I quote him correctly—does he expect to be cut under privatisation?

§ Sir George Young
I made no reference to any uneconomic services being cut; on the contrary, I made it clear that there would be guarantees based broadly on the current level of provision. I am interested in more provision. That is why we are investing in the Jubilee line extension—some £2 billion. That is why we are investing in the Croydon tramlink. That is why we are investing in Thameslink 2000. That is why we are building the channel tunnel rail link through Stratford into St. Pancras. That is why I welcome the Heathrow express. There has not been such a commitment to investment in the public sector transport network in London for many, many years.

§ Mr. Richard Tracey (Surbiton)
My right hon. Friend will recall that London Underground asks the Government for £700 million every year, which is the sum that it needs to produce a truly modern metro. It is obvious that his solution is the only one that will work properly. Given the financial demands of health, education and law and order, there is no way in which taxpayers could be expected to produce £700 million for the London underground. Does my right hon. Friend agree that the Labour party's analysis of service needs is totally hollow? No private sector investor would produce money for collapsing embankments and tunnels when there was no cash stream.

§ Sir George Young
I agree entirely with my hon. Friend's first point. I hope that London Underground, London First and other organisations that advocate more Government investment in the underground will welcome the initiative that I have outlined today. I also agree with my hon. Friend's second point.

§ Mr. John Fraser (Norwood)
Despite what the Secretary of State said in his opening statement, is he aware that a brand new Victoria line was constructed to Brixton in my constituency under a Labour Government in the 1960s? That line, which would never have been constructed by a profit-motivated privatised institution, 160 now forms an indispensable part of London's transport system. Is it significant that the Secretary of State's 10 points contain nothing about the construction of new underground lines and concentrate entirely on shoring up existing structures? Where will new structures for the underground come from?

§ Sir George Young
The hon. Gentleman will know that the Jubilee line extension is being built. It is a £2 billion investment, and will be opened next year. I mentioned a number of other major investments in public transport in London in response to the hon. Member for Streatham (Mr. Hill)—such as the Croydon tramlink, which is not far from the constituency of the hon. Member for Norwood (Mr. Fraser).
At the beginning of my statement, I explained that our approach to railway privatisation proved that it was possible to construct new lines with a privatised industry. That is how the channel tunnel rail link is being built. The new lines that the hon. Gentleman and I want to see will be more likely to progress if we can move the industry into the private sector.

§ Sir Michael Grylls (North-West Surrey)
Does my right hon. Friend agree that the best hope for a first-class underground system that will benefit all Londoners lies with moving it into the private sector and away from political control? Private capital—without limit, if that is viable—would benefit everyone. It is obvious that there is nothing new about new Labour: it is still old Labour, which lives for nationalisation and opposes anything to do with the private sector.

§ Sir George Young
My hon. Friend has summarised my views exactly, both on the right approach to the future of London Underground and on the Opposition's attitude to my policy. It is only a matter of time before they amend their views.

§ Mr. Clive Soley (Hammersmith)
There is a whiff of creative accountancy about the Secretary of State's statement which must be explained. If the travelcard is to stay the same and be interchangeable between the various companies that the Secretary of State must envisage, if the concessionary fare system is to remain, if services are to be broadly as they are today, and if prices are to be cut, where will the competition come from—unless it is based on a very cheap sale which, by its nature, must be short-lived?

§ Sir George Young
If we went down the franchising route, there would be an opportunity for competition among potential franchisees—as we have seen with British Rail. If we opted for privatising the organisation as a whole, there would an opportunity for bodies to bid in competition for it. If we opted for share flotation, there would be an opportunity to fix a price that maximised the value to taxpayers. There are many ways of introducing competition. I ask the hon. Gentleman: what sort of competition is there at present?

§ Mr. Harry Greenway (Ealing, North)
Does my right hon. Friend recall that the GLC not only cut London Underground's services savagely in the early 1980s, but doubled the fares in a single year? We do not need any lessons on underground service provision and fares from 161 the Labour party. Its only proposal for London Underground is to do nothing. We must have some action. My constituents must have a better service: they need an escalator at Greenford station, better standards at Northolt station and improvements at Ealing Broadway station. That work will occur as a result of my hon. Friend's statement, and I support it.

§ Sir George Young
The largest single increase that I have been able to find took place between 1975 and 1976—an increase of some 25 per cent. in real terms. The House will remember that, when we approached the privatisation of British Telecom, there were many forecasts that telephone kiosks either would not work or would be closed. We have heard a similar propaganda campaign today. It was not true then. It is not true today.

§ Miss Kate Hoey (Vauxhall)
Will the Secretary of State give a categorical assurance that, between now and the general election, not one single penny of Government money will be spent on advisers, consultants, and all the trappings of even starting to look at the scheme? Does he agree that the voters of London should be given a choice in this matter, and that that will happen on general election day?

§ Sir George Young
Certainly not. I made it clear in my statement that I propose to consult a large number of organisations that have an interest in this policy. I see no reason why the potential benefits to Londoners should be delayed for a single day.

§ Mr. Robert G. Hughes (Harrow, West)
Does my right hon. Friend agree that he has announced today an enormous opportunity for London as a vibrant and successful city, and an opportunity for a much better rail service for all our constituents who use it regularly? Was not he right to say that the hysterical reaction from the Labour party spokesman is entirely in line with everything that the Labour party has said about every single privatisation, not just rail privatisation? Labour told us that British Telecom would have to close all its telephone boxes, and that British Airways would not be able to fly to regional airports. They have been wrong every time, and Londoners simply will not believe them this time.

§ Sir George Young
My hon. Friend is right. The House will remember that the right hon. Member for Glasgow, Garscadden (Mr. Dewar), who is now the Opposition Chief Whip, said that British Airways will be the pantomime horse of capitalism if it is anything at all."—[Official Report, 19 November 1979; Vol. 974, c. 125.] That is the sort of hysterical pronouncement that we have grown used to from Opposition Members when we propose the privatisation of something in the transport industry.

§ Ms Margaret Hodge (Barking)
How much money has the Secretary of State set aside for financial and technical advice? Advice on privatising British Rail cost the British taxpayer £450 million. How much will it cost to privatise London Underground? What expenditure has been cut? The Secretary of State, both in this job and in his former job, was a keen advocate of the private finance initiative. 162 On the privatisation that he announced today, is he saying that his Government have failed to bring forward constructive private finance initiatives that would ensure proper investment in London's underground services?

§ Sir George Young
No expenditure has been cut to take forward the policies that I have just outlined. Any expenditure on advisers is a good investment if it secures an industry, if it drives up the quality of services, and if it improves its investment record and eliminates the investment backlog.
No Administration has taken the PFI forward with greater enthusiasm than this one. There are a number of private finance initiatives being advanced within London Underground, but as the chairman of London Underground made clear last week to the Transport Select Committee, the PFI cannot reach all the investment backlog. Some of the work cannot be completed under a PFI deal. Whatever progress is made with the PFI, we are still left with an industry in the public sector that is subject to all the public expenditure constraints of any other nationalised industry. Privatisation addresses both those problems.

§ Mr. David Lidington (Aylesbury)
Does my right hon. Friend agree that my constituents will judge his proposals by whether they work in practice: for example, by bringing forward the much-needed upgrade of Metropolitan line infrastructure; by assisting the cross-rail project to go ahead; and by ensuring that, when my constituents get to Baker street or Marylebone, the escalators work? Will he confirm that the purpose of his proposals is to allow capital investment to take place to provide the improvement in service that my constituents seek?

§ Sir George Young
On the latter point, the answer is, of course, yes. I hope that everybody will judge the proposals on their merits. It is not some dogmatic proposal. We have looked at London Underground. We have asked ourselves what its needs are. We have come up with a tailor-made package that addresses the problems of London Underground. That is not dogma, but common sense.

§ Mr. Harry Cohen (Leyton)
Have not the Government run down the London underground in the years leading up to this statement? The Minister's so-called commitments would not be worth the paper they are written on if the Tories got a dreaded fifth term. When the election was out of the way, the Chancellor would get his hands on the money and the Secretary of State would move on. The proposals would cost London passengers and taxpayers dearly. Have not the Tories shown by this privatisation proposal that they have given up on London commuters altogether?

§ Sir George Young
The people who have given up are those who have failed to produce an alternative scenario that provides the benefits to Londoners that I have outlined. We have not neglected investment in London Underground. I shall not repeat the figures, because I have already quoted them twice, but they show a dramatic increase in investment in the core network between the 1970s and 1980s and now.

§ Mr. John Marshall (Hendon, South)
My right hon. Friend will be well aware that I have instigated more 163 Adjournment debates calling for increased investment in London Underground than any other hon. Member. London Underground was starved of cash when it was under the control of a strategic authority for London May I welcome the statement, which will lead to increased investment to complement the £430 million PFI initiative for the Northern line, and the £25 million investment at the Morden and Golders Green depots? I thank my right hon. Friend for giving Londoners the assurances on concessionary fares schemes, quality of service and maximum fares for which I asked on 10 February.

§ Sir George Young
My hon. Friend has always been a staunch advocate of London Transport, and I am delighted to have his support. He may have secured more Adjournment debates on London transport than anyone else, but I have answered more Adjournment debates than anyone else.

§ Mr. Gordon Prentice (Pendle)
Is it true that last year £1,229 million of debt was written off when British Rail assets were transferred to Railtrack? Why did the Secretary of State's list of 10 points not include debt write-off? In all the other privatisations, billions of pounds of debt was written off so that the privatised companies could start work with a clean sheet of paper.

§ Sir George Young
London Underground has no debt.

§ Lady Olga Maitland (Sutton and Cheam)
Having travelled on the London underground all my life, I congratulate my right hon. Friend on taking this important step in privatising the service. Will he confirm that it will provide an excellent opportunity to recycle receipts into new services, such as the extension of the Northern line from Morden to Sutton? Does he agree that only with such new investment and privatisation can we pave the way for new services and provide badly needed resources, which the Labour party would deny London Underground?

§ Sir George Young
My hon. Friend draws attention to an aspect of the announcement that has not featured much in this question and answer session. The first call on the privatisation receipts will be the backlog that needs to be tackled. After that, we anticipate a surplus, the majority of which will be put back into transport in London and outside. People will be able to bid for projects, such as the one to which my hon. Friend referred. I hope that that additional feature of privatisation will be widely welcomed.

§ Mr. Paul Flynn (Newport, West)
Did I understand the Secretary of State to promise that a privatised underground will be a financial triumph, just as the channel tunnel was? Will he make it clear what he is saying about services, because he keeps using the word "broadly"? Will the level of service be guaranteed? Will it at least be at the present level?

§ Sir George Young
The answer is yes, broadly. We shall ensure that the private sector will be required to provide a guaranteed level of service that broadly safeguards the existing level of provision. There must be an element of flexibility, but the regulatory authority that will supervise the underground, which will be 164 independent of the train operators, will agree to changes in service levels only after carefully considering the benefits to passengers. That safeguard does not exist now.

§ Mr. David Winnick (Walsall, North)
Given that there are, at the most, nine weeks to go until the general election and six until the election campaign, does the Secretary of State realise how irresponsible it would be to spend public money on advisers, when there is every indication that the scheme will never go ahead? Will the right hon. Gentleman think again, and—as my hon. Friend the Member for Vauxhall (Miss Hoey) rightly suggested—let the people of London decide at the election? To use public money in the way that he intends would be totally irresponsible, and could not be justified.

§ Sir George Young
The people of London will, of course, decide, and I hope that their decision will be influenced by our plans for London Underground. I hope that they will contrast what I have outlined this afternoon with the complete absence of any comparable strategy from any other party. As for making progress with the policy, I see no reason to delay the progress that I want to make. I believe that it will have real benefits for Londoners, and I want to get on with it as fast as I can.

§ Mr. Simon Hughes (Southwark and Bermondsey)
What is London Underground's current asset value? Will it be possible to sell it at less than its asset value? Will there be a limit to the profit that can be made on the on-sale of any of the assets? Why does the Secretary of State not contemplate, as one option, retaining public ownership while allowing London Underground to borrow entirely as it would wish in the private markets? I understand that London Transport would be perfectly happy for it to do that.

§ Sir George Young
If we did that, it would simply score as public borrowing or public expenditure. There is no way of using creative accounting to solve the problem. As for the proceeds from this privatisation, as with other privatisations, the Government are not making an estimate of those in advance.

§ Mr. Gale
On a point of order, Madam Speaker. I apologise for trying to intervene earlier, but the matter that I wished to raise related to the statement.
I seek your advice in regard to the conventions of the House. Just over a week ago, the Leader of the Opposition instigated a motion of censure against my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food. When the likely result of the vote became known, the Leader of the Opposition ran from the Chamber and hid behind his spin doctors in his room behind your Chair.
This afternoon, in the full glare of the television cameras and in a public performance, the Leader of the Opposition asked three questions relating to the future of London Underground; yet, when the statement was made, he saw fit to leave the Chamber and not listen to the answers.

§ Mr. Dennis Skinner (Bolsover)
And Major did?

§ Mr. Gale
With great respect, my right hon. Friend the Prime Minister knew the answers. The Leader of the Opposition clearly did not.
165 My question to you is this, Madam Speaker. Is it not a convention of the House that those who ask questions stay to listen to the answers? Whether or not the Leader of the Opposition has the courage to stay and listen to answers that he might not like, should he not have the courtesy to do so?

§ Madam Speaker
This is rather a political argument. The Opposition have their own shadow Ministers to ask questions of the Secretary of State.
As for convention, may I make this point? This morning, I heard the Secretary of State say on the radio that he had a statement to make to the House today, and that he would not divulge what was in it. I applauded that. He did go on a little to say what would be in it—but, if we are speaking of conventions, I have always applauded Secretaries of State who say, "Yes, I have a statement to make, but it will be made to the House of Commons first."
As for Leaders of the Opposition, I do not know where they sit on these matters. I do not know whether they want to watch the television in their room, or stay on the Opposition Front Bench.

§ Mr. Tam Dalyell (Linlithgow)
On a point of order, Madam Speaker. Ministerial gesticulation from a sedentary position, however well intentioned, is no substitute for clear statements in Hansard. Will you give the Secretary of State an opportunity to say whether the £1.2 billion to which he referred covers simply tunnels, or a good deal else?

§ Sir George Young
Further to that point of order, Madam Speaker. I will see whether I can obtain an estimate from London Underground of the proportion of the total backlog that relates to tunnels.

§ Madam Speaker
I think that it would be better to be absolutely clear, so that other hon. Members also know the answer, and to place a question on the Order Paper. I think that that would be very helpful.