Railway Regulation (Hansard, 25 March 1998)

§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
One of the strengths of the House of Commons is its Select Committee procedures and the ability to take detailed evidence on matters relating to individual Whitehall Departments; to consider carefully their impact on legislation and on the future developments of particular industries; and to take account in every way of the varying views of those who are involved, in this instance, in transport.
I was thrilled to introduce the first report of the Transport Sub-Committee of the Select Committee on the Environment, Transport and Regional Affairs, on the strategic rail authority. The Committee is lucky in having representation not only from the Conservative party but from our colleagues from across the water in the Ulster parties, and I believe that it is capable of producing a high-quality piece of work.
I warmly welcome the opportunity to debate on the Floor of the House the result of Select Committees' deliberations. It is very sad when a Select Committee produces an enormously detailed and useful piece of work that is introduced at a press conference and gets some superficial publicity only if members of the specialist press happen to be present. I am grateful that the Liaison Committee has found time to recommend that we talk about the strategic rail authority this morning. I am also grateful to my colleagues on the Select Committee and to those who helped us to prepare the report.
When the railway system was fragmented, it became obvious that there would continue to be different political views on how the future of transport should be handled. The Select Committee decided not to look backwards, as we had produced a large report on privatisation before the general election, but it was clear from all the evidence we took that there were still real difficulties in railway transport.
The difficulties were not only in the structure of the existing privatised railways. It was hard to determine the best way forward, and there was an overall lack of a strategic view. We were heartened by the Secretary of State, who gave us a clear commitment, on behalf of the Government, to create a strategic rail authority. We saw our role as that of taking evidence that could help to construct that authority and ensure that it covered all the aspects of its responsibilities to the House of Commons that would make it a really effective and useful body. That is what the report delivers.
The consensus across the railway industry on the need for a strategic rail authority was heartening. Of course, some will feel that some of our recommendations went too far and will find them too political. The aims of an authority were not only accepted but asked for. Regardless of whether we spoke about the manufacturing industry, about those who deal with passengers or about those who deal with freight, it was clear that the lack of guidance, overall responsibility and forward planning was felt throughout the industry.
436 We took evidence on the roles of the various parts of the Government machine that deal with the railway industry: for example, the role of the regulator. We considered what the aims of a strategic authority should be, and how it should plan its use of Government finance. We deliberated how it should consider the various parts of the industry, in relation not only to one another but to the job that they are required to do for the passenger.
The strategic rail authority must, first and foremost, have responsibility to the customer, who is being badly served by the privatised railways, and to the taxpayer. It is an extraordinary fact that the taxpayer is paying double the subsidy that went to the old British Rail system, and receiving just about half the level of service. Performance is patchy across the railway industry as a whole, but it should be a matter of concern to every one of us.
We envisaged that, as the Department said, the authority should manage the existing franchise; develop a strategic vision for investment in the national network; act as a one-stop shop for progressing investment proposals; take responsibility for some of the functions currently exercised by the Secretary of State; promote integration between rail and other modes of transport; consider the need for voluntary action by the operating companies to win more passengers; and promote the needs of disabled passengers and the personal security of all rail passengers.
We also felt that there was a need for clear accountability. The taxpayer pays for the system and initiates the money-go-round whereby large sums move in a large circle that stops at a certain point. The House is responsible to the taxpayer.
We must have clear links between elected bodies and the rail authority. The Welsh assembly and the Scottish Parliament, as well as this Parliament and the regional decision-making bodies, will want to have a direct input into both the type and the quality of services. If we are to have a radical improvement in the integration of rail, a great deal of work must be done to maximise the benefits of the existing system and develop passenger and freight services.
Many of our witnesses gave a clear picture of the existing regulator's role and said that changes needed to be made and that the regulator would always have a role as an arbitrator between certain areas of the industry. We felt that, although the regulator's role needed to be revised, he should maintain an independent status, umpiring contracts and considering fair competition issues. A lot of the work of restoring the original requirement in section 4 of the Railways Act 1993 would mean, however, that he had to take guidance from the Secretary of State. The regulator accepts that he should not be operating independently.
We believe that, in discussing the future of the railway system, we should carefully consider the role of Railtrack, which is today with great fanfare launching its report on its future role, with many comments on its intended investment in the future of the railways. Many of us will regard those figures with some disenchantment—I shall not say disbelief; that would be ungracious and unacceptable—but it is important to remember that vast sums of public money go into privatised railway subsidies. Although subsidies are nominally paid to the train operating companies, most of that public money comes back to Railtrack in the form of track access charges.
437 The answer to my written parliamentary question of 3 November 1997 revealed that the subsidies paid to the train operating companies in 1996–97 amounted to £2.099 billion. The same answer revealed by some uncanny coincidence that the income to Railtrack from track access charges was almost identical. If that is not a back-door subsidy to Railtrack, I should like to know what is.

§ Mr. James Gray (North Wiltshire)
I do not wish to breach the all-party consensus of the report, but will the hon. Lady acknowledge that the £17 billion that Railtrack intends to invest over the next 10 years is much more than the public subsidy that she described, and certainly more than the Government would have spent had British Rail remained in their hands?

§ Mrs. Dunwoody
There are no plans for the extension of the main-line electrification network. Cities such as Sheffield, Aberdeen, Hull and Bristol will continue to be served by diesel trains for the foreseeable future. The west coast main line continues to deteriorate every day, and Thameslink 2000, which is to paid for by a massive debt write-off by the previous Government, looks as far as away as ever. I should be happy if Railtrack's figures materialised in practical investment terms.
The hon. Member for North Wiltshire (Mr. Gray) is a valued member of my Committee and knows that there is considerable disquiet about the way in which Railtrack does its accounting. It has not been transparent in the past, and maintenance is not regarded by most qualified accountants as a suitable heading in connection with investment. It is clear that Railtrack has not lived up to the previous record. It has needed to be prompted, to put it in the most polite way, by the authorities already because of the shortfall in investment. It is obvious that it has considerably underspent on track and structure renewals. There is a £385 million backlog on property maintenance. Those figures are a great worry, which we must consider carefully.
Our report sets out the belief that Railtrack should no longer control safety. Our railways have always had good safety, from the time when a man walked in front with a red flag. We are a little faster than that, although not on all privatised lines. The Committee believes that there is a problem in safety remaining part of the existing organisation. The time has come to set up an independent transport safety authority that would not only continue to safeguard the levels of care that have been endemic in the railway industry, but prove to the customer how independent it is and what a good job is being done at every level. We want Railtrack to lose that aspect of its work. We should like safety regulation and the safety standards directorate to be transferred to an independent safety authority.
We also make considerable recommendations on the need to transfer freight from road to rail. There is no point in Governments talking about that need unless there is a practical way of achieving it. I hope that our suggestions will be acted on.

§ Mr. Bill O'Brien (Normanton)
Freight is a significant factor in the report. The relationship between road and rail 438 transport—the intermodal system—must encourage more freight on to rail. A significant void exists there. Does my hon. Friend agree that we must impress on Ministers that the intermodal exchange between road and rail is important and should be developed?

§ Mrs. Dunwoody
The Committee not only emphasised that but offered various solutions, given the need for clear strategic planning if we are to achieve that useful aim.
We also suggested that customers have little idea who is responsible for what in a fragmented railway. It is all very well for those of us who understand what Railtrack is supposed to be and what train operating companies and ROSCOs—rolling stock companies—do. Customers waiting for trains, late or otherwise, have little understanding. We were disturbed because we did not believe that existing customer organisations were easily accessible or understood or that they were performing the task necessary to reassure customers.
If we are to have standards, customers must know what they are and how to complain efficiently and simply, and they must be sure that something will be done about their complaints. We suggested that the consumer organisations should be reorganised and given a much higher profile. They must have ways of advertising what they are doing and be given a bit of muscle, so that they can shout out for the passenger. That need is felt strongly by anyone who uses the existing system.
The SRA will provide a comprehensive, clear, single body reporting to the Secretary of State. It will analyse the needs and demands of the new railway system to find which aspects are failing. It will insist on high customer standards and ensure that investment goes where it is needed, when it is needed. It will seek high—quality standards so that the ways in which passengers receive services are clearly marked and capable of delivery. It should also promote a radical improvement of the integration of rail with other transport modes.
In achieving its aims, it will need to demonstrate to the public that we are no longer prepared to accept considerable amounts of taxpayer's cash going in without clear accountability and transparency of accounting procedures, and without direct responses to the needs of customers: high—quality rolling stock; high-quality services; clean, tidy and safe stations; and proper facilities for those who use the system.
To that end, we suggested that the Minister should seriously consider whether the British Railways Board should be used as a benchmarking facility. The franchises will have to be examined as they come up. Many of us believe that some of them will collapse before the end of the franchise period. The board could be used to judge the efficiency of the system and whether it is delivering what it should. There may even be a case, although there is political disagreement about this in the Committee, for the Government taking equity in Railtrack to ensure that there is a clear line of accountability to the passengers who use the service.
I hope that the House will not just debate the report, but act on it. It is a good report—although that may be rather immodest from the Chairman of the Committee. Again, I should like to pay tribute not only to the individual members, but to those who helped us prepare and take evidence.
439 The report looks forward, but—for obvious reasons—it will be differently interpreted in different parts of the House. However, it is constructive, useful and detailed, and it needs to be acted upon. I expect my Government to lead the way in giving that chance to the transport system of the new century.

§ Mr. Eric Pickles (Brentwood and Ongar)
It is a great pleasure to follow the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), and I should like to express my appreciation of the way in which she chaired the Select Committee. Those of us who know her know that she is a lady of considerable views, and it was a marvellous feat for her to chair a Committee in which there was a great deal of consensus. Speaking as someone who admires her for her views, I was pleased to see today that she occasionally returned to type.
This is the first major report produced by the Committee, and I wish to refer to the way in which Opposition Members have approached it. It is clear that the Government intend to have a strategic rail authority. We had a choice of either blindly opposing everything and trying to wreck the Committee, or of laying down benchmarks for when we examine the matter in a Bill. The latter was the right approach. The railways have gone through a period of considerable change and upheaval, and they need a period of stability in which long-term investment can be committed.
Railtrack and the train operating companies have an impressive programme of work planned, but investment takes time. I must take issue with the hon. Member for Crewe and Nantwich—£17 billion is a serious sum. Some £5.5 billion on maintenance is a serious sum. Some £8 billion on renewals is a serious sum, and enhancements of more than £3 billion involve a serious sum of money. As my hon. Friend the Member for North Wiltshire (Mr. Gray) said, there would have been nothing like those levels of investment within the public sector.
It is early days, but rail privatisation is following the same predictable path as previous privatizations—unpopular in its early stages, with all the cumulative ills of the past half-century being blamed on privatisation. If we were to substitute BT or British Airways for Railtrack in the current headlines, we could run the same stories as ran previously. Those who predicted gloom and despondency then had to eat their words, and they will have to do so again.

§ Mr. Ivan Henderson (Harwich)
Does the hon. Gentleman share my concerns and those of my constituents at two derailments in my constituency earlier this year? One involved a passenger train in which eight carriages out of 10 derailed. That had never been heard of before rail privatisation. Does he accept that there are occasions when Railtrack may be forcing contractors to do work on the cheap, something that affects not only the track maintenance but the employees of the contractors—all of which has happened since privatisation?

§ Mr. Pickles
I ask the hon. Gentleman to read the evidence from the Deputy Prime Minister. I specifically asked him about such claims, and he said that there was no evidence that Railtrack had in any way compromised itself in terms of safety. On this occasion, the Deputy Prime Minister's word is good enough for me.
440 In a perverse way, the change of Government has made the commitment of capital slightly easier, because there is a realisation that there is no possibility—as the hon. Member for Crewe and Nantwich said—of renationalisation. The old British Railways Board is dead, and soon, we hope, will be forgotten. The future of the railways remains firmly in the hands of the private sector. The Committee was not attempting to renationalise the railways or to make them vulnerable to short-term political interference. Those points might have been better made before privatisation, as the taxpayer would have received considerably more money had the uncertainty been removed.
We have seen a steady growth in passenger numbers, reversing the decline that occurred over a number of years. The evidence suggests that passenger growth could be as high as 25 per cent. by 2005. It is important that we look at the subsidy, which is set to decline over the next 10 years, and we must remember that a lot of BR debt was taken on by the companies.
The hon. Member for Normanton (Mr. O'Brien) and the hon. Member for Crewe and Nantwich referred to freight, which BR largely neglected. A 20—year decline in this country was reversed once English, Welsh and Scottish Railways took over. Less than 6 per cent. of freight in this country is transported by rail. On the continent of Europe, the figure is a more impressive 15 per cent. The evidence from EWS was that it was likely to triple its business within 10 years, and it is not unreasonable to suggest that, by 2010, 20 per cent. of freight will go by rail. That is 20 per cent. of a growing market.
There are a number of practical restraints on the further expansion of freight, and those need some attention. First, there is the problem of the restrictive loading gauge. If we are to see any significant increase in freight, we must ensure that high gauges are available. That will allow new international containers to be used, and it will also allow for the possibility of increasing the capacity of wagons by about a third. More importantly, it will allow piggy—backing of heavy goods vehicles. The last point was referred to by the Deputy Prime Minister as vital for haulage in the long term.
There is a considerable conflict between the needs of passengers and the needs of freight. Improvements for passengers—faster trains and more frequent services—often work to the detriment of freight. We must understand that there are environmental considerations, including noise problems. Much of freight is moved at night. I live about half a mile from a busy railway line, and I have noticed an increase in the amount of traffic in the past few months. Constituents who live closer to the track have started to complain—not unnaturally—about disturbed sleep.
We must remember that most of our freight is not time-critical: a load is sent off, but it does not matter whether it arrives the following day or a couple of days later. However, if we are to increase the amount of freight that travels by rail, we have to be able to carry time-critical freight, which means that people will be able to guarantee that a load leaving Aberdeen can be in Brentwood the following morning.
The Committee also gave consideration to the problems of international rail travel. The channel tunnel has not yet proved to be the catalyst in persuading road hauliers to
441 switch to rail; in fact, the tonnage carried is roughly 40 per cent. of the predicted level. The cost of travelling through the tunnel and on continental railways is such that it starts to become economic only when there is the prospect of travelling through the Alps. Continental European railways are still heavily nationally focused, and it remains, peculiarly, easier to get a truck across a European border than it is to get a train across; trucks have to fill in fewer forms, and the process is quicker.

§ Dr. Alan Whitehead (Southampton, Test)
Might not our concentration on the channel tunnel prove to be to the detriment of the 96 per cent. of British imports and exports that go through ports? In addition to the other measures that the hon. Gentleman suggests, it might be a good idea to follow a policy of ensuring that Railtrack improvements relate to movements in and out of ports, especially bottlenecks in freight movements immediately around ports.

§ Mr. Pickles
I do not take issue with that at all, but I believe that the channel tunnel plays an important part in the expansion of rail. I find it difficult to explain to constituents who are hauliers why it is considerably more expensive—three times more expensive, according to the Road Haulage Association—to take a heavy goods vehicle through the tunnel than to send it in the shuttle, which uses the same track and the same tunnel.
The report covers two controversial matters: the equity share in Railtrack and the British Rail Board competing for franchises. We received little evidence on that, except from Save Our Railways and the Labour Finance and Industry Group, both of which seemed to take a similar position on most issues of substance. To my way of thinking, the credibility of Save Our Railways was somewhat dented when it had to withdraw some exaggerated claims in front of the Committee, as hon. Members can read in the second volume at paragraph 197.

§ Mr. Gray
Is my hon. Friend aware that Save Our Railways' offices are in precisely the same place as the rail unions' offices and that it is, to a significant and majority degree, financed by the rail unions?

§ Mr. Pickles
I am grateful to my hon. Friend for making that point, of which I had not been aware, even though, at times when listening to Save Our Railways' evidence, it was like living on the last page of George Orwell's "Animal Farm", when it was no longer possible to tell the pigs from the people.
Although the strategic rail authority may care to consider whether the Government should take an equity share in Railtrack, it would be madness to do so. It would achieve nothing: not a single mile of track would be laid, nor an additional carriage purchased, nor a single station made cleaner; there would be nothing but the resonance of old clause IV.
As the report states, for the British Rail Board to compete on a fair and transparent basis", it would have to be in the private sector. If it were in the public sector, it would intimidate and prevent fair competition. Any analogy between BRB competing for a 442 franchise and a local authority contracting out to a direct labour organisation is frankly ridiculous. There was no evidence to support that view, other than from Save Our Railways and the Labour Finance and Industry Group.
If the strategic rail authority becomes a hands-on authority, second-guessing commercial decisions, it will fail. If it takes away powers from the Department of the Environment, Transport and the Regions and remains truly strategic in nature, it may succeed. It needs to tackle that delicate and crucial balance between the needs of passengers and those of freight. Above all, in the words of the report, the SRA needs to foster a climate that encourages private investment in the railways".

§ Mr. Bill O'Brien (Normanton)
I wish to raise with the hon. Member for Brentwood and Ongar (Mr. Pickles) one point that I consider to be a significant factor in this debate. When the previous Government privatised the railway industry, the franchises given to many of the companies were so short that the companies now feel that it is not possible to invest in new rolling stock or the new materials that are required to ensure that they can meet the demand for passenger and freight services. The Conservative Government did not give sufficient thought to the way in which the privatisation should have taken place, and I hope that the Select Committee's report will address some of the deficiencies of the privatisation programme.

§ Mr. Pickles
May I ask the hon. Gentleman a simple question? Is he advocating that the franchises should now be extended and, if so, by how long?

§ Mr. O'Brien
I can advise the hon. Gentleman that my right hon. Friend the Secretary of State for the Environment, Transport and the Regions is now considering representations from some of the franchisees, particularly Great North Eastern Railway, which is suffering from overcrowded trains and having difficulty meeting demand. My right hon. Friend is rightly giving consideration to the circumstances of a very competitive line in an area that will improve considerably as time goes on. There is one proviso, which is that the companies keep fares at a level that people can afford; otherwise, there is a danger that we might have a railway system that is out of the reach of many of those who would like to use it. My right hon. Friend has to look at many factors when considering the extension of franchises, and I support his views on that issue.
I felt that I had to draw the attention of the hon. Member for Brentwood and Ongar to the deficiency in the hurried rail privatisation programme of the previous Administration, although I do not want to move away from the Select Committee report. There are pages of evidence from the various witnesses, who contributed well to the work of the Committee. In each case, there was general support for the introduction of the strategic rail authority and, with the support in the House and within the industry, there is a fair wind for the Committee's proposals. 1 make that point to my right hon. Friend the Minister because I consider that the Government must act on at least some of the recommendations in the report. Failure to do so would impede the programme for an integrated transport system, which the report could help to bring about.
443 That was the point that I made when I intervened on my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody). We need to have the integration of road transport with rail transport to ensure that freight provision, which has been neglected for so long, can be improved. Although in the past rail freight has been moved during the night, there is evidence that some freight trains are being moved by day. That will help freight movements to take place within a reasonable time and, as a result, people will increasingly accept the possibility of moving freight by rail.
Hon. Members will have received briefing material from the Scottish, Welsh and English railways, setting out some of the anxieties that they expressed to the Select Committee—directly and in briefing material—about the introduction of the strategic rail authority. We are advised that they are introducing new locomotives and new wagons, which shows that greater capacity is needed to move freight by rail.
I emphasise that we must try to remove lorries from the motorways and, in many instances, from towns and cities, by transferring freight to rail, so that it may enter city centres without creating road traffic. I make a plea to the Minister to examine the evidence that has been submitted on overcrowding of some trains—especially on the east coast main line—and the evidence submitted by Lord Berkeley and his colleagues on the movement of freight.
I conclude my remarks because I know that my colleagues, who took evidence for many long hours, want to make a contribution. I believe that the Government should act on a significant amount of that evidence, and I hope that the Minister will take note of the contributions that have been made.

§ Mr. Tom Brake (Carshalton and Wallington)
Although I welcome the opportunity to debate the report, I regret the fact that none of my party served on the Transport Sub-Committee, which considered this matter in so much detail. However, I have read the report, and there is much in it that the Liberal Democrats can support.
We welcome the fact that the report draws attention to failings in the regulatory system introduced by the previous Government in their headlong ideological rush to privatise the network. The report says that, under the Conservatives, the Rail Regulator was left with no enforceable obligation on Railtrack to spend the cash from public subsidies on maintenance and renewal of the network". That appears to be a major omission, as does the fact that the Rail Regulator was left without scrutiny powers over the rolling stock companies.
The Rail Regulator had to dismiss Railtrack's 1997 network management statement as unsatisfactory because of a significant backlog in investment. Earlier today, Railtrack had an opportunity to show that it took last year's red light seriously. I hope that it will be evident from this year's network management statement that Railtrack acknowledges that it has a role in the development of the country's infrastructure.
The results of biannual customer satisfaction surveys produced by the train companies, which must have been of great interest to passengers, remained unpublished for many years. I am sure that the volunteers who run the Bluebell railway could have run the railways better than the previous Administration did.
444 Looking to the future, many of the report's recommendations would have been implemented even if a strategic rail authority had not been established. We support more demanding train service quality targets. We strongly support the moratorium on the sale of land by the British Railways Board, which is a source of major concern. If one is trying to extend a network, it restricts one's scope if all the prime sites that can be used are being sold.

§ Mr. Gray
If the hon. Gentleman considers the report carefully, he will see that there is no question of a moratorium on the sale of land by the British Railways Board, but that there is a question of Railtrack being given the same opportunity as other bidders when land is sold. That is a different matter. There is no presumption in the report that the right of the British Railways Board to sell land will be interfered with.

§ Mr. Brake
I thank the hon. Gentleman for that intervention, but the report specifically mentions a moratorium.
We strongly support the retention of the fines and penalties levied on the train operators for immediate reinvestment in passenger benefits rather than the Chancellor's slush fund. We support the shift of responsibilities for safety matters from Railtrack to an independent body, although it is worth confirming that, as was said earlier, the safety record appears to have remained very good, even after privatisation. We support the relaunch of the rail user committees. Those organisations are supposed to represent passengers, but I am afraid that their profile appears to be no larger than the stickers that are stuck in train carriages.
Our support for the report is qualified. We question how strategic the strategic rail authority will be if all the report's recommendations are adopted. There is a great risk that, by taking on so many of the operational tasks performed by the Office of Passenger Rail Franchising and the Rail Regulator, the strategic rail authority will lose its focus and neglect key objectives, such as that of developing a vision for investment in the national rail network. The strategic rail authority should be about strategy and broad objectives; it should not be about the timetabling of the 7.23 am Connex South Central service from Carshalton Beeches to Victoria. Moreover, the creation of the strategic rail authority should not involve such an upheaval in the rail industry, or such a diversion of funds, that no progress is made in clearing the backlog of between 15 and 20 bottlenecks in the system.
We seek clarification of the funding arrangements for the strategic rail authority, especially as a sharp drop in subsidy is planned for the train operating companies—from £1.8 billion this year to £0.8 billion in 2002–03. It would have been preferable had greater consideration been given to the establishment of a strategic transport authority. That would, by necessity, have had a very restricted remit, to avoid the prospect of the operational overload that already worries us in relation to the smaller responsibilities of a strategic railway authority.
The Government have repeatedly stated their intention to produce an integrated transport policy. What better way is there of promoting such a policy than through the auspices of a strategic transport authority? For example, that strategic transport authority might take responsibility 445 for devising the Government's programme of CO₂ reduction in relation to transport. That is an area where, if action is not taken almost immediately, the Government will not have a snowball in hell's chance of meeting the Prime Minister's commitment to a 20 per cent. reduction by 2010, or even the Deputy Prime Minister's more modest commitment to ensure that, in 2002, traffic does not exceed 1997 levels.
The Liberal Democrats approve of many of the measures in the report. We shall monitor the development of the strategic rail authority, but we shall pull the emergency cord if the authority grows into an inflexible, unwieldy beast, with an appetite for detail but no vision.

§ Mr. George Stevenson (Stoke-on-Trent, South)
The importance of the report is that it is forward-looking.
The hon. Member for Brentwood and Ongar (Mr. Pickles), spoke about a period of stability. If that means maintaining the status quo, with our railways not delivering what we want them to deliver, I would disagree with him. I suspect that many of the interests running our railways see stability in that way. The report is not about the stability of the status quo, because the status quo is not acceptable.
The hon. Member for Brentwood and Ongar also spoke about Railtrack's plans for investment—good: we live in hope, and we hope that those plans become reality. Heaven knows the amount of public money that was squandered by the previous Government on privatising the railways. It was billions. The amount of public subsidy has doubled since privatization—a fact which I am sure the hon. Gentleman would acknowledge. One would expect some hard evidence of the improvements that we are promised. In the public interest we can demand that those improvements take place. We shall wait and see.

§ Mr. Gray
Evidence is in place already. Is the hon. Gentleman aware that Railtrack's investment in the first six months of last year was 38 per cent. higher than in the first six months of the previous year?

§ Mr. Stevenson
I am also aware of the damaging criticism of Railtrack's record by the regulator and the Health and Safety Executive. That is not a political point that we need waste the time of the House debating, as the hon. Gentleman seems determined to do. Well-respected outside organisations are extremely critical of Railtrack's investment record. The report rightly concerns itself with that criticism.
The hon. Member for Carshalton and Wallington (Mr. Brake) referred to the intention that the public subsidy should be reduced over the next few years. I know that that is the intention, but if it is reduced to £0.8 billion, it might bring us back to the level of public subsidy that existed under the dead hand of British Railways. If many more such dead hands are removed, the Treasury will have apoplexy, because every time a dead hand is removed, the public subsidy doubles. I am sure that that is not what the Government want.
The significance of the report is that it tells Government that we need to take a strategic view of our railway infrastructure and provision. That never occurred to the 446 previous Government. They were concerned only with privatising and fragmenting the railway system, which is what happened. The report points out to Government that, if the railways are to play the economic, social and environmental role that the country wants them to play, a strategic overview is essential.
The Committee was of the unanimous view that we cannot achieve that strategic approach with the present fragmented system. It would be impossible, and the Government should not waste their time trying to do it. We therefore strongly support the concept of a strategic rail authority, which would have an over-arching responsibility to bring a strategic view to a critical provision in our transport sector. As the hon. Member for Brentwood and Ongar rightly observed, that provision brings not only enormous challenges but enormous potential. We want the strategic rail authority to play a central role in ensuring that that potential is achieved.
That is the first point that needs to be made to my hon. Friend the Minister, who is listening intently to the debate. That message is the factor of overriding importance that the Committee considered when we took evidence and deliberated on the contents of the report.
The second aspect that I would underline is the difficult but crucial concept of public confidence. It is true that there is no hard evidence to suggest that safety is being compromised by Railtrack and the train operating companies, but there is undoubtedly a public perception that the profit motive will ultimately override those considerations. We examined the matter carefully.
Public confidence is essential if the Government are to succeed in the enormously important task of reinvigorating our railways. In that regard, the report makes several recommendations, one of which is crucial—that we should no longer tolerate the responsibility for safety being left with Railtrack. There must be a separate, free-standing body to examine the issue dispassionately, far removed from the profit motive and commercial interests. The public interest must be its overriding responsibility. If, at the end of the debate, my hon. Friend will say that the Government will pursue that aim vigorously, they will have done the railway industry, the country and the public at large a great service.
My final point involves a different aspect of the public interest. How do we bring to bear the enormous influence—not interference, but legitimate influence—of Government, for which the report calls and which most of us want? How can we, for example, tolerate a situation where the rolling stock companies were given a licence to print money?

§ Mr. Gray
indicated dissent.

§ Mr. Stevenson
It is no good the hon. Gentleman shaking his head. When the Angel leasing company was sold off, Nomura bank of Japan made a windfall profit of £750 million without lifting a finger. The report challenges the House and the Government to decide whether there is a legitimate public interest when public resources are milked away like that, producing no beneficial effect on the economic, social and environmental objectives in which our railways can play such a big part.
I am delighted that the report concludes that we can no longer tolerate the rolling stock companies being completely unregulated. Public interest demands that such 447 activity be brought within the confines of positive and effective regulation so that we may see exactly what is happening. That is one example of how the public interest—which was our overriding consideration when we addressed these factors—would be well served by the Government.
I listened with interest to the points made by the hon. Member for Carshalton and Wallington, who said that the strategic rail authority should not become a great amorphous body that is involved with the 6.30 train travelling from point A to point B. People will travel not on the strategic rail authority but on the 6.30 train from point A to point B. However, the strategic rail authority should have legitimate concerns about what is happening.
We cannot continue to tolerate the present situation: an individual turns up at a railway station and finds that the train to Euston is not running; he is told that the next train is scheduled to leave in an hour but, when he tries to book on that train, he is informed that there is no guarantee that it will run either; the individual then asks, "Well, what do you advise?", and a representative of the privatised rail company at the railway station tells him, "Our advice, sir, is not to travel by train."
Must we continue to tolerate a situation whereby an individual turns up at a railway station and sees a notice saying, "We are issuing tickets only for travel today"? What happens if that person wishes to travel tomorrow? When we ask about such matters, we receive no explanation. Is that serving the public interest? I guarantee that the information I have offered to the House is correct, because I was that individual.
The report is positive and forward-looking. It does not go over the entrails of the chaos created by the previous Government. We know all about that. I look forward to the day—in the not too distant future—when this Government, of whom I am so proud, enact the majority, if not all, of this report's recommendations.

§ Mr. Richard Ottaway (Croydon, South)
I begin by congratulating the Environment, Transport and Regional Affairs Committee on choosing this subject for its first report. The Deputy Prime Minister and his colleagues have made it clear that they intend to give transport a high profile in this Parliament. Therefore, it is right to address the issue at an early stage.
The Select Committee has made it clear that it intends to follow the debate closely. Under the wise stewardship of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), it will clearly be a robust debate. The hon. Lady has clear views about the type of transport system that she wants to see. With great respect to her, I think that the language she employed today is a lot stronger than that used in the report. The tone of the speech by the hon. Member for Stoke-on-Trent, South (Mr. Stevenson) was also much stronger than that of the report.
I sense that the hon. Member for Crewe and Nantwich may have wished for a more robust report. Her approach differs from my own, but at least we share the same objective. We want to achieve a satisfactory solution, although we differ about the means of securing that solution. From a reading of the Government's evidence, it is apparent that the hon. Lady's approach may be 448 stronger than that of the Government. That will create difficulties for the hon. Lady and the Government, as I believe that they are on the same side.

§ Mrs. Dunwoody
So they tell me.

§ Mr. Ottaway
The report's central premise is that it welcomes the Government's proposals for a strategic rail authority. The Government have produced no firm proposals in that regard, but the nature of the report is immediately clear when it states that the SRA should be responsible for strategic planning, co-ordinating and supervising the activities of the rail industry". The hon. Member for Crewe and Nantwich put her own interpretation on that statement—indeed, I believe that the statement is open to interpretation, and I suspect that the Government may interpret it slightly differently when they draw up their plans.
The report rightly does not recommend a strategic transport authority at this stage. I will go further and say that I hope that it does not recommend a strategic transport authority at any stage. I believe that the Government are the strategic transport authority: they have the powers, the funds—and, I hope, the vision—to embrace all community issues.
It is interesting to note that the report does not criticise the principle of rail privatisation. That is not surprising when one considers the effective role of Conservative Members on the Committee, including my hon. Friends the Members for Brentwood and Ongar (Mr. Pickles), for Wiltshire, North (Mr. Gray) and for Runnymede and Weybridge (Mr. Hammond). The report is full of constructive criticism, but it accepts the overall privatisation principle. I am delighted that, in its recommendations, the report states: The purpose of the Strategic Rail Authority should be to … foster a climate that encourages private investment in the railway". That point was made by my hon. Friend the Member for Brentwood and Ongar but not mentioned by the hon. Member for Crewe and Nantwich. The conclusion is welcomed by Committee members, some of whom, I confess, I thought felt differently.

§ Mr. Gray
Does my hon. Friend agree that it is rather curious that the tones of old Labour have reverberated around the Chamber this morning more strongly than they resound in the report? The same applies to press coverage of the report last week. For example, a headline in The Times said, "Greater state control of rail urged by MPs". Does my hon. Friend agree that the report proposes a modest administrative change and in no sense attacks the principle of privatisation?

§ Mr. Ottaway
I am very grateful to my hon. Friend.

§ Mr. Stevenson
If that is your story, stick to it.

§ Mr. Ottaway
The hon. Gentleman implies that he does not agree with my hon. Friend. I believe that the report is fairly balanced and that the Government will probably be rather pleased by its tone, which differs from the personal inclinations of some Committee members.

§ Mrs. Dunwoody
Does the hon. Gentleman accept that the goal of a Select Committee is to reach a consensus? 449 I know that it will come as a shock to the hon. Gentleman to learn that I hold different views from the hon. Member for Brentwood and Ongar (Mr. Pickles). He is a most remarkable Member of Parliament, but not one with whom I agree on every point regarding the political development of this country. That means that the report will not reflect all my beliefs; nor will it reflect everything that the hon. Gentleman believes. Its tone is consensual and its strength comes from that very quality.

§ Mr. Ottaway
I am obliged to the hon. Lady. She confirms my suspicions that the report is welcomed neither by her side nor by my side of the Committee—although it will probably be welcomed by the Government.

§ Mrs. Dunwoody
That is not true.

§ Mr. Ottaway
The hon. Lady has just said that she does not believe in much of the report. I am sure that the whole House—and, indeed the whole country—has heard her words.
In reaching its conclusions, I have no doubt that the Committee was influenced by the evidence given by the passenger transport executive organisations, which were no particular friends of the previous Government but which are inclined not to condemn the policy. It is very early days in the privatisation of the railways and, although there is much justified criticism at present, I believe that it is wrong to take a snapshot of the railways as they stand in March 1998 and say that privatisation has failed. I do not think that privatisation will fail.

§ Mr. Brian H. Donohoe (Cunninghame, South)
Can the hon. Gentleman tell us when he will confirm that there is a problem?

§ Mr. Ottaway
I shall turn to that issue in a moment. Frankly, I think that the real effect of privatisation will not be felt for three, four or five years. When some of the investment comes on stream, I believe that the hon. Gentleman will defend railway privatisation like a good Tory. There will be a marked change of attitude in a couple of years.
I have a great deal of faith in franchisees' ability to improve services, and such improvements will result largely from the economic freedom achieved by privatisation. Privatisations over the past 50 years have all struggled initially. One of the first privatisations, that of British Telecom, was unpopular and passionately opposed by the Labour party. Newspapers and Labour Members gleefully reported on the number of telephone kiosks that were not working. The criticism was similar in style to that which is being heaped on the railways. People were right to criticise BT then, and they are right to criticise the railways now. However, no one in their right mind would say that privatisation of BT was a mistake. The 450 company is a world beater of which Great Britain can rightly be proud. In four or five years, that will be the case with the railways.

§ Mr. Donohoe
rose—

§ Mr. Alasdair Morgan (Galloway and Upper Nithsdale)
rose—

§ Mr. Ottaway
I give way to the hon. Member for Cunninghame, South.

§ Mr. Donohoe
Why did a previous Chairman of the Select Committee call railway privatisation a poll tax on wheels?

§ Mr. Morgan
Does the hon. Gentleman agree with those—

§ Mr. Deputy Speaker (Mr. Michael J. Martin)
Order. The hon. Member for Croydon, South (Mr. Ottaway) should answer the first intervention before he deals with a second. He cannot take two at a time.

§ Mr. Ottaway
I beg your pardon, Mr. Deputy Speaker. I was dealing with them as a job lot.
I do not agree with the point made by the hon. Member for Cunninghame, South about railway privatisation being a poll tax on wheels. It will come right in the long term. He has fallen into the trap of thinking that the position today will continue in perpetuity, and that railway privatisation has therefore failed.

§ Mr. Morgan
Does the hon. Gentleman agree with franchisees who argue that franchise periods are too short to make the necessary investment and that the Conservative Government got it wrong?

§ Mr. Ottaway
I shall come to that point in a moment.

§ Dr. Whitehead
Is not rail privatisation structurally different from other privatisations because the market relationship between carriage and track charges clearly acts against social policies, such as carrying more freight by rail? Labour Members have suggested that the structural institutionalisation of the possible failure of the system is a problem.

§ Mr. Ottaway
I think that I understand the hon. Gentleman's point, but freight is a success story of privatisation.
BT is a world-beating company that we can be proud of, and in the long term we shall be proud of Railtrack, which is involved in discussions about the channel tunnel rail link, is a possible bidder for London Underground and announced today a £17 billion package which the hon. Member for Crewe and Nantwich churlishly did not to welcome. The strength of the company in the private sector justifies the privatisation. The old, nationalised British Railways Board would not have been able to match Railtrack's investment and its involvement in the channel tunnel rail link and London Underground.
We all know that the west coast main line is hugely unreliable, but Virgin proposes a £1 billion order for 130 tilting trains that will knock 90 minutes off the 451 journey time from London to Glasgow and reduce the trip to Birmingham to 75 minutes. Labour Members should be patient: just as BT became effective, we will have effective railways in three or four years' time when the investment has been made.
I am the first to admit that, 18 months after the completion of privatisation, there are problems, some of which are becoming clearer. There is an important distinction between current railway operations and long-term investment plans. In the short term, the passenger service is everything. My constituency contains 11 commuter stations in the Connex South Central area. I watch developments closely; after an excellent start and increased services, the service has become unreliable and unacceptable. Trains do not have enough carriages, and conditions are squalid at peak times; but trains are becoming victims of their own success. Passenger numbers are increasing, and the forecast is that they will continue to rise.
The Deputy Prime Minister believes that that is largely explained by the well-established link between rail use and economic growth. However, it cannot wholly be explained by that link, and, not surprisingly, the Office of Passenger Rail Franchising took a different view and expected passenger growth of 24 per cent. over the next five or six years. I share that view, because improvements brought about by rail privatisation—better stations, improved services and falling fares in real terms—will make a heck of a difference to public attitudes, and will go a long way to achieving the strategic objectives of both the previous and the current Government.
There is a problem with continuity of investment as the end of the franchise periods approaches, as the hon. Member for South Antrim (Mr. Forsythe) said. A weakness of the franchise system is that the Government of the day were so nervous that they took a number of precautions to deal with any failures, but the system is short on mechanisms to cope with success and a large growth in demand.
Although under no obligation to do so under the terms of the franchise, Great North Eastern Railways wants to improve its rolling stock, which is not old, but unexpected passenger growth is causing serious problems. As the hon. Member for Normanton (Mr. O'Brien) said, short franchise periods make it difficult to fund further investment.
I am pleased that the Select Committee has strongly recommended that the strategic rail authority should have the power to offer guarantees to existing franchisees who propose to invest in new rolling stock, and that subsequent franchisees should be required to take over the lease for such stock. The tone of the recommendation is a little heavy, but the SRA should address the issue and I am pleased that it is a priority.
An interesting passage of the report deals with freight, which is an unambiguous success story of privatisation. The report does not quarrel with that. The nation's main freight mover is English, Welsh and Scottish Railways, which has about 90 per cent. of the market. EWS reports a 30 per cent. increase in freight train miles in the past 18 months.
452 The Select Committee suggests that the SRA should consider how to increase freight carrying, but companies seem to be doing well without the SRA intervening. The Minister appears restless. How much time does he need to make his winding-up speech?

§ The Minister of Transport (Dr. Gavin Strang)
I need 15 minutes.

§ Mr. Ottaway
I shall conclude my remarks.
Although Conservative Members have reservations about the report, we have no difficulties with the thrust of it. Such a complex privatisation needs constant fine tuning. The previous Government would have concluded that a strategic rail authority was necessary during this Parliament. However, I urge the Government to adopt the lighter touch proposed in their evidence to the Select Committee, given that a strategic rail authority, not an executive rail authority, has been proposed.

§ The Minister of Transport (Dr. Gavin Strang)
I congratulate my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) and her fellow Select Committee members on their thorough and wide-ranging report on the Government's proposals for a new rail authority and railway regulation.
The Government welcome the report, and we shall consider its recommendations carefully when finalising our plans for the railways, which will be published in a few months.
The Committee's report is timely: it is almost exactly a year since rail privatisation was completed. In that year, the industry and its customers had to try to come to terms with the massive upheaval that was imposed on them by the fragmentation of the network. During that time, the shortcomings of privatisation have become all too obvious. Many passengers are not getting the service improvements that were promised by the previous Government. In that year, a few people have made fortunes from the railways, but many passengers have been short-changed.

§ Mr. Graham Stringer (Manchester, Blackley)
Does my hon. Friend agree that the proposed acquisition of Great Western by First Group is an example of the rail privatisation leading to the creation of millionaires at the expense of the travelling public? The privatised railways are in danger of creating more millionaires than the lottery. Does he further agree that the franchising director should not let that acquisition go ahead until there has been proper consultation and proper equity among the franchisers? He should not use his position improperly to pass on some of the benefits to a franchise that is not involved in the takeover.

§ Dr. Strang
I agree with my hon. Friend that huge and unjustified private profits have been made from the resale of assets. The case that my hon. Friend cites looks like another example of that. He asks about the franchising director. Because of the shortage of time I shall not reply to that now, but shall write to my hon. Friend.
The Committee's report highlights well the shortcomings that we inherited from the previous Administration. We saw those problems coming, and that 453 was why in opposition we consistently opposed rail privatisation. When we came to power in May we found a railway system that had been broken into a hundred pieces, and no strategic vision for the development of the network. Even the industry regulators acknowledge that the regulatory structure can be confusing. The railways were crying out for some leadership and direction.
Everybody acknowledges that the challenges facing the rail industry cannot be solved overnight. However, the Government have made clear their intentions. We aim to put the railways at the heart of a truly integrated transport policy; to win more passengers and freight to rail and, above all, to make sure that the railways are run in the public interest. That is why we are taking a long, hard look at the present regulatory structure, and why we have taken action within it where we can.
The House will recall that on 6 November I announced the first fruits of our review of railway regulation. We issued the franchising director with new objectives that deal with the issues that matter most to passengers—investment in decent rolling stock and stations, high standards of punctuality and reliability and the protection of passenger rights. We approved the franchising director's new planning criteria to provide an effective framework for developing and implementing worthwhile rail investment that will improve the range and quality of the services for rail users. We also agreed a voluntary concordat between Ministers and the Rail Regulator to give the regulator a clear sign of what the Government want for the railways.
We have also taken action on rail freight. We have revitalised the freight grants scheme and have increased its budget to encourage more rail freight. We have also secured commitments from the French Government and Eurotunnel that are designed to get a better deal for rail freight through the channel tunnel and beyond, not only by English, Welsh and Scottish Railways but by potential new entrants to the market.
Our measures on passenger and freight operations have been widely welcomed. Some train operators have played their part by taking steps to improve their services to passengers, but the overall picture is still unsatisfactory and there is much more to do. As the Committee's report states, the recent bulletin from the Office of Passenger Rail Franchising on the performance of the train operating companies in 1997–98 shows that punctuality and reliability on about half of the route groups surveyed were worse than in the preceding 12 months. The comments by the hon. Member for Croydon, South (Mr. Ottaway) reflect that deterioration.
I shall now turn to the centrepiece of our proposals—the new rail authority. Our manifesto contained a commitment to create a new rail authority to provide a clear, coherent and strategic programme for the railways, so that passengers' expectations could be met. I am pleased to note the Committee's endorsement of that proposal and of our aim for more effective and accountable railway regulation. The Committee made some detailed recommendations about the authority's functions. Of course, we shall carefully consider those recommendations in drawing up the new authority's detailed functions.
454 It may be helpful to hon. Members if I outline the general areas in which we expect the new authority to operate. We said in our manifesto that the new authority would combine the functions of the franchising director and some functions of the Department of the Environment, Transport and the Regions. We do not necessarily regard those functions as the limitation of the new rail authority's remit. The likely areas of responsibility for the new authority, many of which are referred to in the Committee's report, will include managing and enforcing existing franchise contracts; developing a strategic vision for investment in the network; promoting integration between rail and other modes of transport; promoting voluntary action by train operators to win passengers; protecting the needs of disabled passengers; and balancing the needs of passengers and freight users.
In addition to those likely functions, my right hon. Friend the Deputy Prime Minister stated in his oral evidence to the Committee that we shall also consider how consumers might be represented on the new authority. We envisage that the new authority will play an important role in encouraging more freight on to the railways.

§ Mrs. Dunwoody
rose—

§ Dr. Strang
I shall give way to my hon. Friend, but should like to make progress.

§ Mrs. Dunwoody
The Minister will look carefully at the role of customer services, will he not, because at the moment passengers are not being well served? That is an important matter.

§ Dr. Strang
I am grateful to my hon. Friend for her intervention, but in the few minutes that are left I should like to comment on safety, which some hon. Members, including my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) emphasised.
The Committee's recommendation that transport safety regulation, should be focused on a single, entirely independent authority goes wider than railways. It would be a significant change in present arrangements for transport safety regulation, and would raise some complex issues. The United Kingdom's transport safety record is relatively good, and we would need to ensure that any new body would be more effective than current arrangements.
In terms of the railways, the Committee drew attention to mark 1 rolling stock and the installation of a train protection system. It recommended that Railtrack should be relieved of its role in safety regulation and that its safety and standards directorate should be transferred to an independent safety authority. The railway inspectorate's last annual report revealed that some operators have tried to reduce safety levels to the minimum that is allowed, saying that maintaining or improving on the status quo is too costly.
The Government are determined that no privatised railway company will be able to put private profit before public safety. I have already made it clear to the House that we look to the independent Health and Safety Commission as the safety regulator to ensure that standards are maintained and, where necessary, improved.
455 In the context of train protection and mark 1 rolling stock, I have written to the chairman of the Health and Safety Commission to make it clear that he should produce any formal proposals that he considers necessary, and I understand that Health and Safety Executive officials are working on such proposals.
The current arrangements for the present division of safety responsibilities were proposed by the Health and Safety Commission. Accordingly, we shall need to consult it before responding to the Committee's recommendations. When the commission proposed those arrangements, it said that in due course a full review should be carried out of the arrangements for setting and promulgating railway standards. I have asked the chairman of the commission to bring forward that review and to consider as part of it the extent to which Railtrack's current role in enforcing standards as well as in setting and promulgating them might be transferred. I am pleased to announce that the chairman of the commission has agreed and has said that the review will begin immediately.
The debate has been constructive. My hon. Friend the Member for Crewe and Nantwich was characteristically forthright in introducing the debate, and lucidly set out the issues. In the time available to me, it has not been possible to cover all the Committee's detailed recommendations. However, it is already plain from the Committee's report and from representations that we have received that our proposal for a new rail authority has widespread support. It was striking that even the Opposition spokesman, the hon. Member for Croydon, South, said rather lamely that, if the Conservatives had been elected to government, they would have proposed such a rail authority.
Passengers want the railways regulated in a way that is firm, fair and accountable. They should have a public service ethos, should not be driven solely by the profit motive and should be fit for the 21st century. Our proposals are a major step in the right direction and will help to create a climate in which the railways can flourish as part of an integrated transport system.