§ The Secretary of State for Transport (Mr. Alistair Darling)
With permission, Mr. Speaker, I should like to make a statement on progress in putting the ownership and operation of the rail network on a sound and sustainable footing, and, as part of that, steps to get Railtrack out of administration.
I shall keep the House informed over the next few weeks, but in the light of the conclusion of the sale and purchase agreement this morning between Railtrack Group and Network Rail, I thought it right to come to the House to set out the Government's strategy, progress so far and the next steps.
As the House knows, the High Court put Railtrack into administration last October. As the presiding judge said, the making of the railway administration order wasnot only appropriate, but absolutely essential".The Government's objective is to ensure that Britain's rail network is owned and managed by an effective and competent body and thus secure a sustainable long-term future for the rail network. To achieve that, the next step is to remove Railtrack from administration as soon as possible and place the network under new ownership and strengthened management, which is committed to improving service and safety. That is in everyone's interest: that of the industry, the work force and the travelling public alike.
On the 25 March this year, my right hon. Friend the Member for Tyneside, North (Mr. Byers) told the House of the bid made by Network Rail to acquire Railtrack from its parent company, Railtrack Group plc. Although other bids would have been considered, none was received. Network Rail is a public interest company limited by guarantee, and will be run for the benefit of the whole railway, concentrating on its core priorities of operating, maintaining and renewing the rail network. There will be no shareholders, and any operating surplus will be used for the benefit of the railway system.
The company will operate on a sound commercial basis with a board and management whose performance targets will be aligned to the Strategic Rail Authority's long-term plan, as well as to the obligations to its customers under its network licence. Its directors will be accountable not to shareholders but to the company's members, who will be drawn not only from the rail industry, but will include members representing the public interest and the Strategic Rail Authority. In this way, the directors of Network Rail will be answerable to people whose primary interest is in the long-term future of the railway.
Railtrack Group and Network Rail have now concluded a sale and purchase agreement to acquire Railtrack plc. I would like to set out in some detail the terms of that agreement. In line with its original offer, Network Rail will pay £500 million—of which £300 million will be provided by the Government—as well as taking over Railtrack's debt, which now stands at £7.1 billion. This includes loans from the European investment bank and the German bank, KfW, totalling just over £1 billion, which Network Rail plans to assume.
In parallel, London and Continental Railways is acquiring from Railtrack its interest in the first phase of the channel tunnel rail link for £295 million. At a cost of 972 £80 million, Network Rail will acquire the right to operate, manage and maintain the channel tunnel rail link and the concession to manage St. Pancras station. I can tell the House that Network Rail has already secured up to £9 billion of bridge financing from commercial banks to fund its acquisition costs and to refinance Railtrack's existing debt, as well as to fund the immediate operation of the railway.
Network Rail will also put in place additional commercial financing of up to £7 billion for its medium-term requirements. This is necessary to cover operational expenditure as well as to cover substantial cost overruns inherited from Railtrack, which will have to be met. Network Rail will also need—as would any owner and operator—access to back-stop contingency funding. For this reason, the SRA will provide additional standby credit facilities; this contingency funding of last resort has been set at £4 billion. Further details of this funding and of the short-to-medium-term standby credit facilities offered to Network Rail by the Strategic Rail Authority are set out in the two minutes that I am laying before the House in the normal way. The House will also wish to know that the Rail Regulator has today issued a statement setting out his approach to a request for an early regulatory review.
These are large sums by any standards, but they are necessary, given the size of the task facing Network Rail, and they would be needed by any successor to Railtrack. There is no escaping the fact that Britain's railways need very large-scale investment—investment that we believe is essential. It is because of the need for long-term sustained investment that the Government are, through the 10-year plan, increasing the average annual investment in the railways—on top of continued support for running costs—to £4.6 billion. That is more than three times the annual average in the 10 years prior to 1997.
The public are entitled to expect that this investment will be spent efficiently and effectively. That has clearly not been the case in the past. The new company, Network Rail, faces a legacy of poor management, and of very substantial cost overruns which will have to be met. For example, when it began, Railtrack estimated that the cost of the west coast main line project would amount to about £2 billion. It is now clear that the actual cost of the work will be considerably more than that. What is now needed is a competent owner and operator, which is why Network Rail's acquisition of the railway network is so essential to the future of the railways.
This agreement is a major step towards removing Railtrack from administration and putting the rail network back on a sound footing. The next stage in the process will involve Railtrack Group plc putting this offer to its shareholders at a special meeting, which is expected to be held next month. It is for the company to decide how much it can offer its shareholders.
The European Commission is also considering whether any aspect of the support being provided needs to be cleared as state aid. However, if the shareholders of Railtrack Group approve the bid at the special meeting and the appropriate clearance is obtained from the Commission, I expect to ask the High Court for an order releasing Railtrack plc from administration thereafter.
It is obvious that Railtrack could not have carried on as it was. Even the company recognised that last summer. What is more, the division and lack of common purpose 973 that characterised the railway system during the last few years was damaging and destructive to the interests of both the industry and the travelling public.
All the evidence shows that working together is crucial to the long-term success of the railway network. Over the past few months, despite the uncertainties of administration, the new management of Railtrack has enjoyed closer working relationships with the Strategic Rail Authority as well as the Rail Regulator and the train operators—which is essential if the network is to work effectively and efficiently to everyone's benefit.
The establishment of a public-interest company in which the Strategic Railway Authority is represented will continue to foster this climate of better co-operation to the benefit of all concerned in terms of achieving the objectives set. The railways are critically important to the economic and social fabric of the country. There is now an urgent need to give the rail system stability, and I believe that this agreement is the right and best way of building a modern and efficient network.
§ Mrs. Theresa May (Maidenhead)
I thank the Secretary of State for his statement, and for giving me an advance copy. As this is my first opportunity to do so in the House, let me also welcome him to his new post.
I refer hon. Members to the declaration that I made on 14 January, which can be found in column 33 of Hansard.
Like the Secretary of State, I hope that today's announcement will bring an end to the damaging last few months of uncertainty on the railway, and that the new body will indeed succeed in bringing much-needed stability to the railway network—much needed because the Government's decision to put Railtrack into administration caused considerable and, in our view, unnecessary upheaval on the railways.
I am sure that the Secretary of State has seen this morning's press release from Railtrack Group. Page 8 says:On Friday 5 October, neither Railtrack Group nor Railtrack plc was insolvent".The right hon. Gentleman may recall his predecessor's claim that the reason for the decision to put Railtrack into administration was that it was insolvent. Indeed, on 7 November last year the Prime Minister told usthe fact of the matter is that the company was not solvent"— [Official Report. 7 November 2001; Vol. 374, c. 233.]Will the Secretary of State take this opportunity to admit that his predecessor and the Prime Minister were wrong to make such claims?
The Government have belatedly decided to compensate the Railtrack shareholders whom his predecessor so deliberately wronged. Notwithstanding the caricature that the Government tried to create, the people who were really wronged were not fat cats but thousands of employees and vulnerable pensioners whose savings were put at risk.
When the Government put Railtrack into administration, the former Secretary of State said:I decided that I could not give Railtrack a blank cheque.At the time, Railtrack was looking at a possible financing requirement of £1.7 billion. Now we see the Government guaranteeing funding of up to £21 billion—£21 billion of taxpayers' money. They said that they would not give a blank cheque, but that is exactly what they are doing.
974 The Government also said, through the former Secretary of State:we should not be seen as acting as guarantor of individual companies".— [Official Report. 15 October 2001; Vol. 372, c. 955.]Yet now they are acting as guarantor to an individual company. Nine months after pulling the plug on the company, after increased misery for passengers and the spending of hundreds of millions of pounds of taxpayers' money, the Government have done what they said they would not do.
It is reported that administration has cost £1 million a day. Has this not been a very expensive way for the Government to do away with a company for reasons of ideology?
It is reported that the Government's guarantee for Network Rail's financing will be on the books of the Strategic Rail Authority, but not those of the Treasury—it sounds rather like WorldCom accounting to me. Can the Secretary of State confirm that the Office for National Statistics has determined that that guarantee and any further such sum can remain off balance sheet for the Government? We all know that the only reason why the guarantee is necessary is that the City has lost confidence in the Government because of the way in which they handled Railtrack.
In his statement, the Secretary of State outlined the structure of Network Rail but did not say who would own the company. The travelling public and the taxpayer have a right to know that, so that they can properly hold it to account. Will the Secretary of State answer the question of who will own the company, and will he confirm that the company's members will be Government appointees—Government sitting on the board and Government guaranteeing the funding? What comfort can he give that he will not need to give a further blank cheque to the company?
The Prime Minister promised that the railways would be "basically fixed". The only thing that seems fixed about this deal is the Government accounting. As I said earlier, Conservative Members hope that Network Rail can be made a success. We have concerns about matters such as the financing, the structure of the company and the cost to the taxpayer, but what people are worried about is whether their train will be on time tomorrow morning. The fact is that this Government have not treated transport as a serious priority. Five years and three Secretaries of State later, the Government have been forced to sit up and take notice.
We wish the new company well. The Secretary of State has promiseda major step towards … putting the rail network back on a sound footing",but it will take more than a Government promise to sort out the mess that his predecessor created.
§ Mr. Darling
First, it would be churlish not to thank the hon. Lady for her good wishes on my appointment. I fear we part company on just about everything else she said.
I had not intended to spend too much time going over what has happened in the past but as the hon. Lady raised it, it is important to remind the House of the situation that the Government faced last autumn. It is not as if Railtrack was a healthy, flourishing, thriving company. Let us be 975 clear about this. Railtrack came to the Government about a year ago. Essentially, it asked for three things in order to carry on. One was that the Government should meet uncapped additional financial support. It also wanted us to underwrite the value of its shares, and a suspension of the regulatory regime for up to four years. No Government, of whatever political colour, could meet that sort of uncapped liability—[HON. MEMBERS: "They would."] I must correct my hon. Friends. No Government would. It is no wonder that the Opposition lack credibility. Let us once and for all be clear about the facts: we were faced with a situation where a company which we had given the benefit of the doubt for some time—perhaps too long—was completely unable to carry on trading.
The sole test that the judge had to face under the Railways Act 1993 was whether Railtrack could pay its debts. The Government's position was that it could no longer do so. That is why they asked the High Court to award the order. It is also worth reminding ourselves that sitting in that court was counsel representing Railtrack. Had he taken issue with anything said, counsel would have got to his feet and said so. Instead, he said absolutely nothing.
I turn to the other matters that the hon. Lady raised. She asked about the membership of Network Rail, a company limited by guarantee. Its membership will consist of about 100 or 120 members. On the assumption that the agreements will go through, a small nominating committee, completely independent of the Government, will invite applications to be members of Network Rail. It will include the train operating companies and people with an interest in the industry. Critically, the majority of its members will come from outside the industry—from passenger groups, and from the Welsh and Scottish devolved Assembly and Parliament—to ensure that a wide range of people are included, and it will be independent of the Government. That is a far better way to ensure that the money invested in the railways is spent on the railway system itself. I repeat that it is not the Government who will run the company; it will be independent.
Incidentally, I am glad that the hon. Lady now welcomes the fact that Railtrack is out of administration. When asked in February this year whether she still thought it right to invent Railtrack, she said that she did. She has changed her mind, which is very encouraging indeed.
The hon. Lady also asked an important question about support arrangements and the finance available to Network Rail. As I have said, no matter who took over from Railtrack, it would be necessary to find substantial funds to take over the debt and meet existing commitments, and to meet the substantial cost overruns that Railtrack face, and which the successor body will have to pick up.
There is another matter about which the hon. Lady has been spectacularly wrong in the past few months, which is probably why she did not mention it much today. She has always maintained that Network Rail would be unable to raise private funds, but it has already raised £9 billion, and at extremely competitive rates. It is of course absolutely right that, initially, the Government should stand behind the Strategic Rail Authority, which is providing credit facilities for Network Rail. Such initial support will fall away as the bridging loans are 976 securitised, and ultimately, through the SRA, the Government will simply stand behind the £4 billion long-stop contingency funding that will be made available. However, on any view—be it a totally private or a totally public company—the Government, through the SRA, would need to help get the company out of administration.
I welcome the hon. Lady's concession that this Government are ending a period of uncertainty. I should point out, however, that above all we are ending a period of extremely damaging uncertainty, division and argument, which so characterised a botched privatisation that should never have taken place. More importantly, I also welcome the comments of those outside this House who are involved in the industry, who said today that this is a good chance to begin rebuilding the railway system, and to establish a properly operating system that is valued by public and private customers alike. I believe that this is a major step forward, which should therefore be welcomed by everyone in this House.
§ Mr. Don Foster (Bath)
I thank the Secretary of State for advance notification of his statement, and I welcome him to his new and very challenging post. I also congratulate him on beginning on a high with this welcome announcement of the start of the process of Railtrack plc's being taken out of administration. As he sought to dwell on historical matters, I hope that he will acknowledge a strange irony. It is almost a year to the day since his predecessor said that my proposal to turn Railtrack into a not-for-profit company wouldintroduce paralysis into the system".—[Official Report, 3 July 2001; Vol. 371, c. 137.]His predecessor carried out a welcome U-turn, and notwithstanding our belief that the handling of the issue led to some confusion, unnecessary cost and loss of confidence among private investors, we welcome it.
However, there is one U-turn that we do not welcome. The Secretary of State's predecessor told the House categorically that no additional money would come from the Government to compensate shareholders. Since May 1996, shareholders have received some £700 million in dividends and they bought Railtrack in the first place at a knock-down price because it was undervalued by some £6 billion. I therefore see no justification for further compensation to shareholders, especially in the light of the right hon. Gentleman's predecessor's assurance that it would not be forthcoming.
Will the Secretary of State acknowledge that Network Rail does not really know what it is getting with the deal? On several occasions before administration, Railtrack failed to produce a full asset register. The asset register that the administrators were expected to produce by April has not been forthcoming, and today's statement by Network Rail specifically states that it will take the company a further 18 months to produce a full asset register androbust and realistic forecasts of the level of expenditure necessary to meet its output obligations.In view of those uncertainties, can the Secretary of State tell the House whether the deal includes those properties managed by Spacia? Will they now become part of Network Rail and can he tell us at what point Government underwriting for the company will end?
The statement is welcome, but I hope that the Secretary of State will acknowledge that ending the conflict between passenger safety and shareholder profit has been 977 very necessary. We look forward to seeing whether the change of ownership will bring about an improvement in performance.
§ Mr. Darling
I am grateful to the hon. Gentleman for his opening remarks and I look forward to working with him. He raises two substantive questions. First, he asked about the compensation for shareholders. My view on that is straightforward. The sooner that Railtrack is out of administration and the business handed over to Network Rail, the better for everyone concerned. The Government will receive a cost advantage for that, and that is why the payment to shareholders is justified. For the avoidance of doubt, I confirm that the payment is available now provided that the shareholders of Railtrack accept it quickly at the extraordinary general meeting. It will not be available indefinitely and no one should be under any illusions about that.
Secondly, the hon. Gentleman asked about Railtrack's assets. He is right to highlight one of the problems that faced Railtrack in that it did not seem to have a grasp of its asset base or its cost base. One of the problems confronting Railtrack was the upgrade of the west coast main line and one reason why costs overran substantially was that contracts were let before the scale of the work required became apparent. That is not efficient in business terms, but it is beginning to change.
My predecessor, my right hon. Friend the Member for Tyneside, North (Mr. Byers), deserves credit for the fact that in the past few months the industry has worked together more closely than in the past. Railtrack, under John Armitt, its new chief executive, who is an engineer, has undergone a sea change in its attitude to what needs to be done, and that is very encouraging.
I should have dealt with a point raised by the hon. Member for Maidenhead (Mrs. May), and the hon. Gentleman also asked me about transparency. Network Rail's accounts will be accounted for under the Strategic Rail Authority. The big difference with what happened with Railtrack is that we will be able to see exactly what money went in, where it was spent and what is owned. In other words, under the new system we will have complete transparency, which was not always the case with Railtrack. That is becoming increasingly obvious as more and more information comes to light.
§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
Is my right hon. Friend aware that this is a most welcome and long overdue statement? Railtrack has not served the community well. Ever since it was pushed into the private sector at the time of the fragmentation of the railway industry it has faced enormous problems. With its poor management and poor targets to hit, it was not capable of providing the level of care that the railway system desperately needed. Will the Secretary of State undertake to look closely at the amount of money that the new company will need? It is clear that considerable shortfalls exist.
I am sure that all hon. Members strongly support the tribute that my right hon. Friend has paid to John Armitt, but will he also undertake to discuss with the new company the need to look closely at how it works with contractors? The travelling public are sick of constant excuses. The infrastructure is very old and needs considerable maintenance, but it is not being enhanced 978 and improved at the speed or in the manner that is required. Will my right hon. Friend please look carefully at the system of contractorisation?
§ Mr. Darling
My hon. Friend raises two good points. First, in connection with the amount of money that the railway system needs, the Strategic Rail Authority has been speaking to Railtrack and its chief executive, John Armitt. It has been looking at a number of measures to determine what money is required and what investment is necessary, with a view to bringing benefits for rail passengers as quickly as possible.
In the past, too much attention may have been placed on what might be in 10 or 20 years' time, and not enough on what the position will be in the next five years or so. I am determined to ensure that we achieve year-by-year improvements in the service, and that the public see those changes as quickly as possible. One of the most urgent examples of where improvements are needed is the west coast main line, about which my hon. Friend the Member for Crewe and Nantwich knows a great deal.
My hon. Friend also raised the substantial matter of the use of contractors. That is of concern because one of the problems with Railtrack was that, when it was set up, it almost set out to be a virtual company. It did not do very much itself but used third parties to discharge its obligations and deliver its objectives—hence the growth in the use of the contractors.
I believe that, under any system—public or private—there will be third-party contractors. I have discussed the matter with John Armitt, and it is clear that, in the past, not enough attention was paid to ensuring that contractors did what they were supposed to do. There were many checks on the process—the tick-box approach—but not enough attention was paid to whether, and how satisfactorily, the work was done.
I have made it clear to John Armitt that, in future, the public will expect money to be invested properly, and that we will get what we pay for. I know that Richard Bowker, the head of the SRA, is also concerned about that. As far as safety is concerned, everyone must ensure that there is end-to-end accountability, regardless of who people work for and who they are answerable to. That is crucial, and we must see that the necessary mechanisms are properly in place.
I am grateful to my hon. Friend the Member for Crewe and Nantwich. The points that she made are extremely sound, and I attach great importance to them.
§ Miss Anne McIntosh (Vale of York)
I begin by declaring my interest in Railtrack. I welcome the Secretary of State to his post, and wish him every success where his predecessors have failed.
I wish to speak about the independent Rail Regulator. I do not want to go over the whole sorry saga, but many questions were raised about the advice that the Rail Regulator gave the Secretary of State's predecessor, the right hon. Member for Tyneside, North (Mr. Byers), which that right hon. Gentleman indicated he would overrule. Does the present Secretary of State agree that if the new company announced today is to succeed, there should still be a prominent role for an independent rail regulator?
Will the Secretary of State explain why he proposes to downgrade the role of the independent Rail Regulator, and to institute a regulatory board? What will be that board's 979 status? How important will be the advice that it gives to the Government? Does the right hon. Gentleman not agree that the board will compromise the very independence that I presume the Government hold dear?
§ Mr. Darling
No, I do not. The Government have made it clear several times now that, as and when legislative opportunities arise, we will establish regulatory boards to back up regulators. That is becoming common practice, and the help that it gives to regulators has been welcomed by them. The week before last, I made an announcement emphasising the importance that we attach to independent economic regulators. Before I made that announcement, I discussed the matter with the regulator. He is happy with the proposals, and in fact has an informal board already. There is therefore no difficulty in that respect.
The regulator has welcomed today's announcement. Strikingly, however, bodies such the Association of Train Operating Companies and Network Rail have welcomed the work of the economic regulator. Tom Winsor has done a very good job over the past few years and I am quite sure that he will continue to do so. However, I think that most people will welcome a regulatory board to help and give greater depth to his deliberations. That approach is not unique to the rail industry—the Government are doing it in relation to all other regulators as well. Therefore, I do not think that the hon. Lady's points have any substance and believe that most people outside this place would accept that.
§ Mr. George Howarth (Knowsley, North and Sefton, East)
I, too, congratulate my right hon. Friend on these proposals, not least because there will be appropriate and clear lines of communication.
Now that my right hon. Friend has the opportunity to turn his attention in a different direction, will he agree to meet my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle), myself and others to discuss the excellent proposals Merseytravel has for a tram scheme in Liverpool?
§ Mr. Darling
For the avoidance of doubt, we will not be transferring Merseytram to Network Rail. I am aware of the Merseytram proposal, and I understand my hon. Friend's concern. I will be more than happy to meet one or both of my colleagues to discuss it at a convenient time.
§ Mr. Michael Jack (Fylde)
Will the Secretary of State—to whom I also bid welcome—say who will set the financial performance criteria for Network Rail? To whom will it be answerable for the achievement of those performance criteria? Who will audit its accounts and, specifically, when can we expect a detailed statement of precisely what constitutes the upgrade of the west coast main line?
§ Mr. Darling
On the right hon. Gentleman's latter point, the Strategic Rail Authority is discussing with Railtrack, the train operating companies and, assuming that everything goes ahead, soon Network Rail how best to deliver an improvement to the west coast main line. That is likely to take a few months yet. I am not promising an oral statement but I will make sure that the House is kept informed in some way or another, because many 980 right hon. and hon. Members have a direct interest in what happens on the west coast main line and we all want to see it improved.
The appointment of auditors is a matter for Network Rail. The company is limited by guarantee; its directors are answerable to its membership, and they will set the performance targets. Network Rail is also responsible for delivering the objectives set by the Strategic Rail Authority. One of the changes that we have made since coming to power is to bring more cohesion into the railway system. What was lacking in the past was a strategic direction to ensure systematic increases in investment that resulted in more people using the trains for travel as well as increasing freight. That is what the Strategic Rail Authority is there to do. However, Network Rail is an independent company, limited by guarantee. The directors are answerable to its members for its performance as well as its stewardship of the company, which is what the right hon. Gentleman is concerned about.
§ Glenda Jackson (Hampstead and Highgate)
May I welcome my right hon. Friend to his new position and also welcome his statement? With regard to investment in our new railways, who will have the lead voice in deciding the prioritisation and plan for work? Will it be Network Rail or the Strategic Rail Authority? Who will have responsibility for those railway lands still in existence which may not at first sight be necessary for railway expansion or modernisation but which could be further down the line?
§ Mr. Darling
I thank my hon. Friend for her welcome, and apologise to the last few speakers who also congratulated me—I appreciated their remarks. It is nice to make hay while the sun shines; I do not suppose that it will always be this way.
It is for the Strategic Rail Authority to set out the key objectives, and for Network Rail to deliver them. Network Rail is responsible for delivering on the contracts that it enters into, whether they relate to the west coast main line or the suburban rail network, but the SRA lays down the strategy. There is now a clear sense of direction. The SRA will discuss with Network Rail. the train operating companies and others what the priorities should be, something that was missing in the past.
On any lands that Network Rail has acquired that are surplus to requirements and not needed, it is for the company, not the Government, to reach a view on whether to dispose of them. I will certainly look at any particular point that my hon. Friend may wish to bring to my attention.
§ Mr. Nick Gibb (Bognor Regis and Littlehampton)
Although he referred to it, the Secretary of State failed to answer one of the key questions put by my hon. Friend the Member for Maidenhead (Mrs. May): how will the contingent liability represented by the £4 billion lending of last resort by the SRA be accounted for in the national accounts? To that end, what is the right hon. Gentleman's estimate of the risk of its being drawn upon?
§ Mr. Darling
I thought that I had dealt with that point. The SRA is providing facilities, first, to enable Network Rail to raise money to acquire Railtrack plc, to meet its 981 immediate operating costs and to take over its debts, which are about £7 billion. Network Rail has raised £9 billion commercially; it is also taking over the European investment bank loan and the other loan to which I referred. The company has already raised that money from the private sector and it intends to securitise it. The process will start later this year and, contrary to the comments of some Opposition Members, there is much interest in it in the markets. That contingent liability will therefore fall away.
Secondly, the regulator has indicated that he will hold consultations on an early review. My expectation is that, in due course, the second tranche of funding—the £7 billion—will also fall away, until it, too, is taken over by purely private sources. The remaining backstop finance is £4 billion and that will remain a contingent liability. I very much hope that it will not be called down, because I hope that by that time Network Rail will be operating on a sound basis.
I repeat what I said to the hon. Member for Bath (Mr. Foster): the SRA will account for the moneys going to Network Rail, as the hon. Member for Maidenhead spotted—not difficult, as it was all over the newspapers. The process will be open, transparent and above board.
My statement may have been over long. I went into a great deal of detail because I was anxious that the House should understand everything, but finally—for the sake of completeness—I have laid two minutes before the House, which set out in full detail, chapter and verse, with all the supporting correspondence, exactly what the contingent liabilities are; how they will he covered; and where they are accounted for: so if the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) cares to spend the rest of the afternoon in the Library with a wet cloth over his head, he is welcome to do so.
§ Mr. Eric Martlew (Carlisle)
Is my right hon. Friend aware that there will be great enthusiasm on the west coast main line for the new rail company and that no tears will be shed for the demise of Railtrack? I have two questions. First, is my right hon. Friend convinced that money will be available to provide us with a fast, modern, reliable rail service on the west coast main line? This week, we have once again experienced tremendous disruption.
Secondly, Railtrack was negotiating with Virgin to buy up to 10 new railsets. As Railtrack failed to deliver the second phase of upgrading—PUG II—will Network Rail have to pick up that debt, too?
§ Mr. Darling
Perhaps I may repeat what I said earlier about the west coast main line and the upgrades: now that Railtrack's books have been opened by the administrator, it has become apparent that some of the assumptions that had been made do not hold good. During the past few months, the SRA has been talking to the train operators—other companies are involved as well as Virgin—and to Railtrack to decide how best the west coast main line can be upgraded to bring year-on-year improvements systematically. As my hon. Friend knows, urgent attention to many points on that line could bring substantial benefits, whereas other places could be dealt with at a later stage. That work is still under way. I am hopeful that it will be concluded in the autumn, as I have been told. At that time, I shall ensure that, in one way or another, my hon. Friend and the rest of the House are kept informed so that they know what is happening.
982 We are spending about £4.6 billion a year on average, which is three times as much as was spent during the 10 years prior to 1997. I am determined that, as that money goes in, we should try to ensure that people see improvements year on year. It may take a long time to reach the ultimate conclusion, but we need to make sure that each year brings changes that will make a difference, especially for passengers on the west coast main line. It is perhaps an indictment of successive Governments that the last substantial, large-scale investment in that line was in the 1960s when many of us were still at school.
§ Madam Deputy Speaker (Sylvia Heal)
Order. May I make a plea for concise questions and answers, as a lot of hon. Members still hope to catch my eye?
§ Pete Wishart (North Tayside)
I shall be brief, Madam Deputy Speaker.
Will the Secretary of State further describe the new board of Network Rail? For example, what will be the proportion of rail user groups vis-à-vis rail operators? May I further press him to describe how the nations and regions of the United Kingdom will be represented in the new structure?
§ Mr. Darling
As I said earlier, it is absolutely essential that representation should be drawn from throughout the United Kingdom because, unlike the hon. Gentleman, I believe that the integrity of the United Kingdom is very important, not least in the railway system. I repeat that the company will have 100 to 120 members, and they will be widely drawn from different interests, as well as from different parts of the country. The board will be a very much smaller, more businesslike organisation. It will be focused on delivering the business, and it will not be a representative body of all the various constituent parts. The board will be a businesslike, commercially focused organisation; the membership will be more widely drawn.
§ Helen Jackson (Sheffield, Hillsborough)
I welcome my right hon. Friend to his new post. Does he recognise that his predecessor's action last autumn was so warmly welcomed by the majority of the travelling public simply because they believed that the Government were prepared to put investment in passengers, trains, stations, track and signalling before the endless investment back into a failed company and its shareholders? That drove the public support, but may I ask for an assurance that the additional funds used to bring Railtrack out of administration quickly are not at the expense of any investment proposals at present on the stocks in the network? Furthermore, may I ask my right hon. Friend to ensure that the north of England and the north of this country, as distinct from the suburban areas around London and simply the west coast main line, get the proper infrastructure in the future? We in the north have our expectations, as well as the rest of the country.
§ Mr. Darling
As my hon. Friend will know, I have a passing interest in the northern part of the country. I am responsible for the rail track right up to the most northerly point of the Scottish mainland, as well as that around Sheffield, so I have some sympathy with what she says. Clearly, it is for the SRA to produce proposals to ensure 983 that the money is well spent to benefit as many people as possible, but the travelling public are important, no matter where they are.
My hon. Friend asks about funding. Two things are necessary in relation to the railways. First, there has to be adequate funding. Through the 10-year plan, the Government have allocated very substantial sums on an unprecedented time scale. Spending is never normally allocated so far ahead. Secondly, it is necessary to have a competent operator. That was not the case with Railtrack. I believe that Network Rail has a far better structure.
In relation to my hon. Friend's last point, the Government, through the SRA, are providing credit facilities to enable Network Rail to raise commercial funding precisely because we believe that it is very advantageous to get private and public money into the system; it needs both. I want to ensure that as much public money as possible goes into improving the network, and the sooner we get the rescue of the railway system completed and Network Rail operating satisfactorily, the better things will be for everyone concerned.
§ Chris Grayling (Epsom and Ewell)
Will the Secretary of State tell us whether Network Rail be accounted for as a subsidiary of the SRA? Will any of its debt appear as public borrowing? Will any of the finances raised from the private sector not he covered by facilities or guarantees from the SRA?
§ Mr. Darling
I suggest that the hon. Gentleman joins the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) in the Library this afternoon with his wet cloth. He will see that it is all set out. The position is that the SRA will account for the business of Network Rail so that everyone concerned can see what money is going in and where it is going. The Office for National Statistics is another body, which is independent of Government, that simply classifies these things as economic statistics. The point made by Opposition Members therefore has no substance. The key point is that, unlike under Railtrack, people can now see where the money is going. I commend the minutes to the hon. Gentleman. He will find all the information that he wants in them, in some detail.
§ Mr. Dennis Skinner (Bolsover)
I heard my right hon. Friend refer to the board a couple of times. He said that it would be cast in a broad fashion. Will he ensure that none of the invitations goes out to the usual chattering classes? Will he take close guard to ensure that there are no Tories among the 120 people, or the smaller group? They caused the trouble in the first place. If there are any Tories in that group, they will leak to their friends in the press before you can say "Jack Robinson". The last thing that we should do is force them to have a loyalty oath. Like my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), we do not believe in them.
§ Mr. Darling
I strongly believe that the membership of the company should be composed of people who have the railways at heart, first and foremost. I take slight issue with my hon. Friend, however, in that I know that there are still many decent people who are Conservatives, who are appalled by the attitude of the current Tory party 984 leadership towards these matters, and who believe that we are right about the future of the railway system, and that the Tory party is wrong.
§ Bob Spink (Castle Point)
Will the Secretary of State make investment available to Network Rail to enable it to deliver on the London, Tilbury and Southend line the objectives that the Strategic Rail Authority has set, particularly the 50 per cent. increase in passenger numbers over the next few years, bearing it in mind that that line is already running over capacity? That will mean that Network Rail will have to put down new track and a new station, perhaps—I hope—on Canvey Island. I believe that 3,000 of my constituents on Canvey Island use that line each day, and 5,000 people in my constituency as a whole do so. They have been very long-suffering, and they deserve a break—they deserve new infrastructure.
§ Mr. Darling
I am glad that the hon. Gentleman's constituents are enjoying the fruits of the economic success in this country. I shall say two things to him. First, we have made substantial sums available to invest, and the Strategic Rail Authority has the job of identifying where that money is best spent. I have no doubt that it will consider many commuter lines running into London.
Secondly, when the hon. Gentleman is travelling on one of those trains, he might like to say to his constituents that a lot of money is being invested through the 10-year plan, and that, if the Tories were re-elected, that would be cut, as they oppose every penny of that additional investment.
§ Mr. Kevin Hughes (Doncaster, North)
There can be no doubt in anybody's mind that Railtrack was an abject Tory failure; it is as simple as that. I welcome my right hon. Friend's announcement today, and I wish him well in his new post. May I press him further on contracting out? I accept that there will be a need to contract out to third parties. What worries me, and, I think, other rail users, is contracting out to fourth, fifth and sixth parties, as there seems to be no mechanism for checking them. What we do not want is people working on rail maintenance who do not have a clue about what they are doing.
§ Mr. Darling
As I said to my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), I am extremely concerned that there may not be the necessary supervision of contractors. As my hon. Friend the Member for Doncaster, North (Mr. Hughes) says, it is not only subcontractors who are involved but sub-subcontractors. Many contractors work extremely well and efficiently, are very well supervised, and the job is well done. There is concern, however—in Railtrack, too, to give it credit, as well as elsewhere in the industry—that, in some cases, there is not enough end-to-end accountability, not just to make sure that a process was followed or that someone ticked the right boxes to say that they did certain things, but to make sure that whatever should have been done was actually done.
As I said to my hon. Friend the Member for Crewe and Nantwich, I met John Armitt a couple of weeks ago to express my concern about that issue. He is well seized of 985 the problem and very concerned about it. Before Railtrack comes out of administration, it and then Network Rail will pay a great deal of attention to this issue. It is important that we are satisfied that we are getting what we are supposed to be getting and—critically in terms of safety—we must be sure that the work that is supposed to be done is actually done. My hon. Friend the Member for Doncaster, North makes a good point, and I thank him for his kind remarks.
§ Mr. Henry Bellingham (North-West Norfolk)
Is the Secretary of State aware that confidence in my local line is now picking up after the tragic Potters Bar crash?
However, there is a real problem with parking at King's Lynn station. My constituents find it very difficult to find parking places there after 8 am. The car park needs extending and, although the land is owned by Railtrack and the SRA, no one seems able to make a decision. Will the Secretary of State look at that issue urgently, because we need to encourage local rail users?
When does the Secretary of State expect the Health and Safety Executive report on the Potters Bar tragedy? If it finds that there was not malicious interference, but negligence on the part of the subcontracting firm, Jarvis, will he order a full public inquiry so that we can consider in detail the whole issue of subcontracting?
§ Mr. Darling
On the hon. Gentleman's final point, it would not be wise of me to pre-judge the HSE report's conclusions. Everyone believes that it is in the best interests of all concerned to have the report as quickly as possible, and the HSE may publish further interim reports to keep people informed. Once I have the conclusions, I will consider them and come to a view.
On the hon. Gentleman's point about King's Lynn station, I am intrigued by the fact that Conservatives Members, having argued for years that the railways should be privatised and taken away from Government, are the first to ask detailed questions about the parking arrangements at their local stations. The SRA is charged with that responsibility, and I will pass on his concerns to it. However, as he has now raised the issue and because the chances are that I will be in King's Lynn at some point, I shall find out what the position is. If there is anything further that I can add, I will let him know.
§ Kali Mountford (Colne Valley)
I pay tribute to my right hon. Friend for his announcement. Its key elements are the move from shareholder interest to public interest and the programme of investment, and it is important to bring those two elements together. Given the many demands that have been made of him today and the high public expectations that will result from the announcement, is it not crucial that a programme of work 986 is developed so that public confidence can quickly accrue to the new company? People's expectations will include better disabled access to platforms and improvements to railway lines. May I put in a bid for cross-Pennine routes while I am at it? Public confidence in the new network will be built if the SRA can announce soon how it will meet people's reasonable expectations.
§ Mr. Darling
My hon. Friend is right. Money and a competent operator are necessary. I hope that we now have both.
On my hon. Friend's more general point, we set up the SRA to ensure that we have a considered approach to these matters. It is now under extremely good management and I have not the slightest doubt that it will work with others to make sure that we get a decent railway. That will take time—let us be clear about that. There is a huge backlog of underinvestment over many years, but I hope that we shall see an improvement year on year. The SRA and others are very much seized of that point.
§ Mr. Andrew Miller (Ellesmere Port and Neston)
In welcoming my right hon. Friend to his post, may I remind him of his words about the new company spending money efficiently and effectively, something on which I am sure we would all agree? On subcontractors, does the nature of the change give us an opportunity to renegotiate contracts with some of the subcontractors to bring about the changes that he described to my hon. Friends the Members for Crewe and Nantwich (Mrs. Dunwoody) and for Doncaster, North (Mr. Hughes)?
§ Mr. Darling
I am sure that Network Rail will want to look at that, but I am not in a position to talk about individual contracts. However, I am sure that not only Network Rail, the Strategic Rail Authority and the train operating companies but, for obvious reasons, some of the subcontractors will want to ensure that the system works. The present situation is not entirely satisfactory.
§ Clive Efford (Eltham)
My right hon. Friend will be aware that many Labour Members think that Railtrack was merely laundering public money into private hands while giving the illusion of trying to run a railway. His statement about its demise is welcome.
My right hon. Friend referred to the fact that it is essential to deal with repairs and maintenance and the scrutiny of the quality of work carried out. Will he also ensure that the accreditation of the workers who do the work that is essential to the rail service is checked and that training is provided to ensure that they are competent? Given that forewarned is forearmed, can we learn lessons from that specific issue for the management and running of the public-private partnership for London Underground, because some of the contractors are involved in both services?
§ Mr. Darling
As I said, it is not the employment of contractors in itself that is the problem because that has always been a feature of the railway system. What is at issue is whether proper controls are in place to ensure that contractors and subcontractors are trained and competent to do the work and, critically, to ensure that the work is done. I do not take the view that just because someone is not directly employed by the main owner-operator, 987 whether that is public or private, there is something wrong with them. After all, most of the population work for companies in precisely that position. What is important, though, is to ensure that there is end-to-end accountability and that clear controls are not only in place but enforced.
§ Rob Marris (Wolverhampton, South-West)
As a frequent user of the west coast main line, I welcome my right hon. Friend's statement. The west coast main line, which serves my constituency, has improved in the past six months, but much more needs to be done.
Does my right hon. Friend share my lack of surprise that Railtrack continues to deny that it was insolvent, given that trading while insolvent is a criminal offence for which directors can be held personally liable? Will he say a little more about the membership of the board and of Network Rail, the company limited by guarantee, especially in relation to trade union representatives because it is important that they are fully involved in the interests of modern industrial relations?
§ Mr. Darling
In relation to membership, I said that there will be between 100 and 120 members, who will be nominated by a special committee set up for that purpose. Membership will be open to anyone who has the interests of Network Rail and the railways at heart. Of course it will be open to unions, although bearing in mind what I have read over the past few days, one or two of them may not want to be involved. If they do, however, I am sure that the invitation is there.
My hon. Friend is right about the west coast main line, which is improving all the time. New Virgin trains will shortly start to appear and people will see a difference in the quality of rolling stock, which Virgin cross-country trains are also using. I want to ensure that the changes announced today and the work of the Strategic Rail Authority and others mean that we get a better railway system year on year. I am confident that that will happen. The investment is available and the right structures are now also in place.
§ Mr. Tom Harris (Glasgow, Cathcart)
I congratulate my right hon. Friend on his statement this morning and express the hope that it will bring forward the day when we at last have a direct rail link between Glasgow city centre and Glasgow airport. Does he agree that the good wishes expressed by the Conservative party for Network Rail will ring hollow in the ears of the British public given that the only time that it expressed any interest in the rail network was when it hoped to make a fast buck by selling it off?
§ Mr. Darling
The Conservative party is very much on its own in still believing in its heart of hearts that Railtrack could have carried on. That is the view of the shadow Chancellor and the hon. Member for Maidenhead (Mrs. May). They still think that Railtrack was a flourishing and going concern, whereas the High Court held that it was not. They have always had a rather grudging attitude to railways and public service in general.
988 I suspect that, as we move on over the next two or three years, the big issue will be this: we have put in place substantial long-term investment. On the basis of the Conservatives' current economic policies, they would cut it; they are against every penny of that increased investment. Without investment, all the changes to structures in the world will make no difference. It is investment—sustained investment—that will make the difference. As the hon. Member for Maidenhead has been wrong on just about everything that she has ever said about Railtrack, this is a golden opportunity to move on, as her former leader used to say, and start looking at the Conservatives' policy in relation to investment in the railways.
§ Mr. Mark Lazarowicz (Edinburgh, North and Leith)
I very much welcome the clear message from my right hon. Friend to the shareholders that the current offer will not be on the table indefinitely. Given that, unfortunately, it appears from press reports that there are still some shareholders who are minded to reject the deal, does my right hon. Friend agree that it would be totally unacceptable if this revival of the rail network were to be sabotaged by anyone trying to extract an even higher settlement than the current one, which is very generous in all the circumstances? If any inordinate delay were to be caused by such tactics, would he consider legislating to bring about the establishment of Network Rail as soon as possible?
§ Mr. Darling
As I said, the £300 million is not there indefinitely. It is there provided we get Railtrack out of administration quickly. An extraordinary general meeting is to be fixed for, I believe, July, and I very much hope that a majority of shareholders will vote to go ahead with the sale and purchase agreement.
I am pleased that the board of Railtrack Group is recommending that the offer be accepted; a large number of shareholders have already said that it is the right thing to do. I hope that all the shareholders will reflect on not only the benefits of the offer but the fact that the alternatives, which do not include the £300 million, would mean a long period of litigation with lots of expenses. Surely it would be far better to put all this behind us and ensure that we get Network Rail set up.
Above all, let us remember that the principal people whom we are here to serve are our constituents as a whole—shareholders and non-shareholders alike—who want the railway network to be operated by a competent body, backed by the necessary investment. That is the best way to get the railways going again. I very much hope that all the shareholders of Railtrack Group will reflect on that and vote in the way that I think is appropriate.
§ Dr. Julian Lewis (New Forest, East)
On a point of order, Madam Deputy Speaker. You will be aware that Mr. Speaker has, on a number of occasions, admonished Ministers and reminded them of the importance of making announcements first to the House and only then to the media. On Radio 4 at 12 noon today, the headlines and the attached story were that the Transport Secretary was going to make the announcement that we have just heard, 989 and I believe that you will find, if you look into it, that the detail in that news story was too great to count as just a general airing of fact that a statement was going to be made. Will you please investigate this matter? Particularly bearing in mind the record of the previous Transport Secretary in spinning the news, it would be a shame if his successor were to go down the same path so early on.
§ Madam Deputy Speaker
I note what the hon. Gentleman has said but I think that on this particular occasion, intelligent press speculation would not have been too difficult.