HL Deb 07 February 1957 vol 201 cc602-30

3.17 p.m.

Order of the Day for the Second Reading read.

THE PARLIAMENTARY SECRETARY, MINISTRY OF DEFENCE (LORD MANCROFT)

My Lords, two months ago, your Lordships debated the Government's White Paper entitled Proposals for the Railways. The noble Lord, Lord Lucas of Chilworth, was pleased to call it a very searching debate. It was, indeed; and it is for that reason that I am not proposing to search again to-day over the ground that your Lordships traversed on November 27 last. The White Paper is, however, the background against which this Bill must be judged.

I would briefly remind your Lordships of the main points which emerge from the White Paper. The British Transport Commission, in their part of the White Paper, made a frank and detailed review of their financial position and of their future prospects. They have incurred substantial losses, and they foresaw that they must continue to do so for some years. But they thought that by about 1962 they should, by their own efforts, have overcome their financial difficulties. Meanwhile, there lay ahead a tough period, and in that period the situation must be tackled with urgency and with decision if it was not to become irretrievable. The physical needs of the railways would, and could, be met by the Modernisation Plan, but some action outside the Commission's own powers was necessary on the financial side. For this reason, the Commission urgently recommended to the Government that some financial plan should be adopted which, while it avoided any idea of subsidy, would place the Commission's undertaking on a firm basis during the critical years of reconstruction. They deliberately requested that any relief temporarily accorded to them, should be strictly limited, both in time and amount.

The Government, in their part of the White Paper, naturally agree with the Commission that the rôle of British Railways in our country's economy is a vital and indispensable one. They are satisfied that the measures which the Commission are taking should enable them to overcome past handicaps and provide the country with a modern and up-to-date transport system—a system, moreover, which will pay its way. In the view of the Government, it is in the basic national interest that the railways should be put in a position to achieve this result. The Commission and the Government are both agreed that subsidy would provide no answer to the fundamental problems of the railways, The object of this Bill, therefore, is to help the Commission to survive the transitional period without subsidy. It has been drafted so as to enable the Commission to set up financial targets within their own organisation and thereby preserve the financial self-discipline which is essential to their recovery.

The proposals of the Government fall broadly into two parts, and they receive rather differing treatment under the Bill. The first part of their proposals concerns the interest payable on sums borrowed to finance the Railways Modernisation Plan. Before some of the items in the Modernisation Plan have begun to earn revenue, these interest charges will be a heavy burden in the Commission's revenues. To ease this burden, we propose that the purposes for which the Commission are already authorised to borrow under the 1947 Transport Act should be expanded temporarily to include the payment of interest on capital moneys borrowed by the Commission for British Railways.

This arrangement has two sorts of time limit attached to it. In the first place, the capital borrowings to which it will apply are confined to borrowings in the ten years up to the end of 1965. By then the Modernisation Plan will be well under way, and should be paying, even after providing for interest. In the second place, the Commission will not be allowed to borrow to meet interest, beyond the end of the third year, after the year in which they borrowed the capital. Let me give an example. Let us suppose that in this current year, 1957, the Transport Commission borrow £x for British Rail ways. Then they will be able to borrow to pay the interest accruing on this £x in the years 1957, 1958, 1,959 and 1960 only.

In commercial concerns, the practice of capitalising interest on expenditure which will not fructify for some years is, as your Lordships will realise, well recognised. With such concerns the period is, I believe, usually the construction period of each separate asset, With the Railways Modernisation Plan, however, it would obviously be a practical impossibility to segregate the assets and to deal with them separately, or to determine how much of the cost of each asset was to be financed by borrowing and how much from internal funds. The expedient has therefore been adopted of striking an average, which will give a result broadly similar to that which would have been obtained by calculating precisely the unproductive period of each asset.

The period provided in the Bill is not in the Government's view ungenerous to the Commission, and the Commission themselves, I understand, regard it as a reasonable one, While a large main-line electrification scheme might take five or six years to complete, other schemes, such as the purchase of diesel trains, wagons and coaching stock, will obviously begin to earn revenue after much shorter periods. Any borrowings made under these provisions will be from sources which normally provide the Commission with their capital funds and will count against the limit of £600 million laid down by the Transport (Borrowing Powers) Act. 1955. So much for the first main purpose of the Bill, which your Lordships will find expressed in paragraph (a) of subsection (1) of Clause 1.

I now turn to the second part of the Government's proposals. It may help your Lordships to understand this rather complicated Bill if I emphasise that this second proposal is quite separate from the one I have just been talking about. It concerns the deficits incurred by the Commission on British Railways in 1956 and likely to be incurred in the next six years. This proposal is to give the Commission powers to borrow, by means of special advances, derived from the Consolidated Fund, the sums required to meet, first, the deficits on revenue account of British Railways during the years 1956 to 1962 inclusive, and secondly, the payment of interest on the special advances. This interest must, however, accrue not later than the end of the fifth year after that in which each special advance was made, but the Commission cannot borrow to meet interest accruing after 1964.

These powers to borrow by special advances to meet the railway deficits and interest on the special advances have not the same parallel, in normal practice, as borrowings to meet interest on capital monies borrowed. They are therefore treated differently. The money will be provided by the Government and will not count against the borrowing limit of £600 million fixed by the 1955 Act, to which I have just referred. The total amount which may be borrowed to meet the annual deficits on British Railways is, however, limited to £250 million. This is the kind of figure at which the Commission estimate the accumulated deficit will stand before they begin to reap any substantial benefit from their Modernisation Plan.

The sums which the Commission will be allowed to borrow by special advances from the Consolidated Fund will not be measured by the size of the revenue deficit incurred by British Railways taken by itself, Any surplus earned by the rest of the Commission's undertaking will be deducted from the purely railway deficit in fixing the amount to be borrowed. This provision was inserted quite deliberately, because the whole object of the Bill is to help the railways, which are the chief loss-makers. It is, in the Government's view, only right that the Commission should be required to use up any surplus they have earned on their other activities to meet railway deficits before they make use of the special loan facilities from the Consolidated Fund. The limiting period of 1956 to 1962 for the Commission's borrowing in respect of deficits, and the limiting period of five years in respect of interest on the deficits, have been fixed in the light of the Commission's estimates of the rate of improvement of their financial position. That is in paragraph (b) of the same subsection. Rates of interest on the advances to the Commission will be determined by the Minister, with the approval of thy Treasury. They will be based, broadly on rates of Government credit current at the time.

I must now turn to the important question of repayment of the loans. As I have already emphasised, both the Commission and the Government are determined to avoid any element of subsidy. Your Lordships will see that Clause 2 of the Bill firmly establishes the Commission's obligation to repay the advances. There is, however, considerable flexibility as to the method and timing of the repayments, to fit changing circumstances. Except for the initial repayments, which the Commission are required to make before the end of the seventh year—the amount of which is left to the Commission's discretion—control rests with the Minister and the Treasury. The Commission are required to begin repayment not later than the seventh year after the year to which an advance relates. This means that repayment of the first advances must begin in 1963. These provisions (like the date beyond which the Commission will no longer be able to obtain special advances) are related to the probable date by which we all hope the Commission should begin to get out of the red. They are given a target at which to aim. On the other hand, the discretion left to the Commission as to the timing and amounts of the initial repayments in respect of each advance may well prove useful to them if they should, happily, have a windfall or, on the other hand, if progress to the turning point is not quite so rapid as we all hope.

After the seventh year, control passes to the Treasury and the Minister. It should titer he easier to make a more realistic assessment of the Commission's capacity to repay advances and to determine whether the period should be, say, fifteen or twenty-five years. The advances relating to each year will be the subject of separate directions. There is, therefore, considerable scope for varying directions in respect of later advances, according to the development of the Commission's financial position. If, after a direction has been given, circumstances should vary either way, the direction can be varied to meet the new circumstances.

May I now deal briefly, and as simply as I can, with some of the accounting provisions which the Bill contains, The Commission are anxious that their revenue account should not show a heavy and increasing balance of deficit, either during the period of reconstruction or for some time afterwards. If it were not for the liability of the Commission to continue paying interest on their issued capital, which is all fixed-interest-bearing, the problem would be of an entirely different character. In similar circumstances, an ordinary company with equity stock would declare no dividends for the time being. Its shareholders would raise hopeful eyes to their reward in the future. Having regard to the future prospects of the railways, it is reasonable that the Commission should be allowed to transfer to what is, in effect, a suspense account, the railway deficits they will incur, after paying interest on British Transport Commission stock, during the reconstruction period, as well-as the additional interest they have to pay through borrowing to finance these deficits. Consequently, Clause 3 of the Bill requires the Commission to carry to a Special Account the deficits on British Railways and the interest which can be met out of moneys borrowed under the Bill. There has also to be carried to this Special Account the accumulated deficit on the Commission's revenue account at the end of 1955.

The total amount carried to the Special Account is to be reduced by such amounts as the Commission think fit. These amounts must not be less than the amounts which the Commission are required by the Bill to repay. In addition, the Minister, with the approval of the Treasury, can direct that the amount standing in the account in respect of the deficit up to the end of 1955 shall be reduced by such amount as they think fit. The gradual process of reduction will continue until the Special Account is extinguished. The Special Account has the merit of providing a simple way of modifying, in order to take account of the new arrangements, the Commission's general duty under the Transport Act, 1947. Under Section 3 of the Act, the British Transport Commission have a general duty so to conduct their undertaking, and to levy such charges, as to secure that the revenue of the Commission is not less than sufficient for making provision to meet charges properly chargeable to revenue, taking one year with another. This Bill modifies that duty to the extent that, in making this calculation, the Commission are not required to have regard to any amounts for the time being standing in the Special Account.

I do not, of course, want to give your Lordships the impression that this Bill in any way leaves the Commission without financial obligations in respect of the railways. On the contrary, the Commission will have a duty to repay moneys advanced to them; to keep within the ceiling of £250 million imposed on the special advances to meet deficits; and gradually to clear off the amounts standing in the Special Account. The arrangements are, I hope your Lordships will agree, flexible enough to ensure that, as the financial position of British Railways improves through modernisation and other measures, as the period during which the Commission can make transfers to the Special Account comes to an end and as the amounts standing in the Special Account become smaller and smaller, so the general duty of the Commission to break even progressively stiffens until it is ultimately as unqualified as it was under the 1947 Act.

Clause 4 defines "British Railways" for the purposes of the Bill. It is the Government's intention that the facilities for which the Bill provides should apply only to the railways as generally understood and to those activities which are incidental to the running of the railways. The Commission's accounts show separately the results of the various activities in which they are engaged, and therefore this definition should give rise to no practical difficulties. If, however, there should be any doubt whether some part of the Commission's undertaking is or is not part of British Railways, for the purposes of the Bill, the question falls to be determined by the Minister.

That, then, is the Bill which we have before us to-day. It is, as your Lordships will, I know, by now agree, a complicated Bill, but this is inevitable if we are to enable the Commission to tackle their problems, as they should do and as they themselves earnestly want to do, on a sound commercial basis, and also to preserve a proper sense of financial discipline within their undertaking. An out-and-out subsidy, which would have been much easier for me to explain, simply would not do this. Indeed, as the Commission themselves say in their Memorandum, to rely, in effect, on an indefinite subsidy would be disastrous to the self-respect of the undertaking, disastrous to their urge towards efficiency and disastrous to the basis of their relations with the public who now own them.

It is easy, my Lords, to deride British Railways and to make jokes about them, as is our custom with other time-honoured institutions like plumbers and mothers-in-law. I, however, am one of those who believe that, with all their faults, British Railways are, on the whole, providing a much better service to the community than the community is always prepared to admit—and that despite appalling difficulties, few of which are of their own making. In the course of the two and a half years in which I had the honour to represent Wales as Under-Secretary of State at the Home Office, I travelled nearly 30,000 miles on 13ritish Railways. I must confess that I saw remarkably little of the dirt, discourteousy and delay which some people, unhappily, seem to experience whenever they travel by train. But it is no use blinking the fact that, again for reasons largely outside then, control. British Railways have fallen sadly behind the times, particularly in the matter of equipment. From my own experience, however, it seems to me that most—I repeat most—of the men and women working on the railways are doing everything in their power to put matters to rights. It does not however rest wholly in their power, Hence this Bill.

It is no use thinking that, without some such measure as this, we can see the major improvements for which the Modernisation Plan provides: improvement of the speed and reliability of freight services by fitting all wagons with continuous brakes by new and extended marshalling yards and modernised railheads; and, on the passenger side, the achievement of faster, cleaner and more punctual services through electrification and other measures. In short, we cannot hope to see the restoration of our railways to their old and proud position of world pre-eminence, unless the British Transport Commission are given this means of bridging the few anxious years that he ahead. I therefore commend to your Lordships this means of so doing and trust that you will give the Bill a Second Reading.

Moved, that the Bill be now read 2a.—(Lord Mancroft.)

3.35 p.m.

LORD LUCAS OF CHILWORTH

My Lords, before I deal with the Bill before your Lordships' House, may I offer a word of welcome and commendation to the noble Lord who has moved its Second Reading? This is the first occasion on which he has had to stand at the Government Dispatch Box and speak upon transport matters. The noble Lord has tackled many tough assignments. Believe me, he has got one now of the toughest character, but if he tackles it with the charm and efficiency with which he has moved the Second Reacting of the Bill, I do not think any noble Lord, wherever he sits in your Lordships' House, will have the slightest complaint. The noble Lord has, of course, been optimistic—one of the things that I think anybody who talks on transport matters requires above everything else is optimism. But maybe he has been over-optimistic.

I do not intend to go back and traverse old ground, but the simple, unvarnished truth of what the noble Lord is doing this afternoon is to ask your Lordships to pass a Bill which will underwrite the losses of British Railways to the tune of £320 million. Of course, £320 million is a lot of money in any language, and that is the minimum. That is the amount written in the Bill—£70 million up to date and £250 million in the next six years, when it is hoped that the British Transport Commission are going to enter a balance and start to make a profit. As the noble Lord said, that is what they say they will do. But I have sufficient experience in the world of industry and commerce to know that I have made my fortune many and many a time on paper, but each time somehow, something has happened to disappoint me. So I am going to ask your Lordships to look at this a little more critically.

At the present time this country is facing a terrific problem. We are grappling with this problem of defence expenditure. That sum of £1,500 million has got to be reduced. At the present time it is proposed to spend £1,200 million upon the railways. We are going to spend money on the modernisation of the coal industry. The Central Electricity Authority have plans for spending millions of pounds that will eventually take traffic away from the railways, because, instead of transporting the coal from the mines to the power stations, they are going to build the power stations at the mines and transport the current on 175-foot pylons all over the country. Then we have facing us the colossal expenditure of atomic energy stations. Then we have the roads.

I am not going into the virtues of any of those things. There is, by the way, one matter which your Lordships sometimes lose sight of and about which I asked a Question, the Answer to which appears in the OFFICIAL REPORT of January 22. I had it in mind then to ask how much had been spent on the hydro-electric scheme in Scotland. The answer is shocking. It adds up to £150 million. That may be good. But do you not think it is time that we asked ourselves whether we are shovelling all the taxpayers' money on to the right heap, and whether we are getting value for the money? It may be that we are. The noble Lord comes here this afternoon with a most optimistic picture. He asks the taxpayers of this country to underwrite £320 million on the basis of what I have termed an optimistic forecast. My Lords, we have been through a trial period, because, unfortunately, fortuitous circumstances have led us during the last week or two into an era where we have more than ever to depend upon the railways.

What are the facts? Do they teach us anything? When we were debating this matter last on November 27, I ventured to make a few observations in which I questioned whether the assumptions upon which all these proposals are based were valid. The British Transport Commission estimate that, by modernisation, they are going to increase their passenger traffic—I think I am right in saying but the noble Lord will correct me if I am wrong—by somewhere in the region of £33 million per annum, and freight by £55 million per annum. I ventured to say that those estimates were unrealistic; that the assumptions upon which these financial estimates were based would never be reached. I am confirmed in that opinion. I remember saying that those assumptions lost sight of the evolution of the industrial set-up in this country. Time goes on. The fabrication in our industries is such that short, door-to-door conveyance is the method of the future. I said that railway transport of freight within a radius of forty miles had practically disappeared.

What has been the experience during the time of petrol rationing? The Times has asked a lot of questions; the Manchester Guardian has replied to most of them. The Manchester Guardian said only yesterday that the railways will never carry the traffic because road transport is preferred. The percentage increases are very low—this, in spite of the fact that there was every indication that the Government by the way the petrol rationing scheme was first operated, were using the policy of forcing traffic on to the railways. In what other way can you interpret the Ministry of Transport edict that no supplementary petrol would be given to road hauliers until half their basic ration had been used? The Minister said in another place only the other day that to-day the railways were being run more efficiently than ever. I beg to question whether that is an accurate statement. The noble Lord has just said that when he travelled 30,000 miles he could find nothing wrong with the railways.

LORD MANCROFT

No, I did not say that.

LORD LUCAS OF CHILWORTH

Or that what was wrong was so trivial that it really did not add up to very much. That is the impression I got.

LORD MANCROFT

I said that my impression was that it was not anything like as bad as everybody else seems to find it.

LORD LUCAS OF CHILWORTH

It depends on what the noble Lord's feelings are. I suspect that his version of it, speaking from the Government Dispatch Box, is slightly different from what it would be if he happened to be in Opposition. He should consult his noble friend Lord Swinton, about the inefficiency. I remember Lord Swinton's tirades in 1947 and 1953. Bin let us have a few facts. Every day I travel over a hundred miles to come to your Lordships' House, and all but twelve of those miles are covered by train. I travel from Oxford to Paddington. Only four times this year have I arrived at my destination at the same time as the timetable stated that I should. On only six occasions have I been less than twenty minutes late; on one occasion I was an hour and three-quarters late; on another, over an hour late, and on another three-quarters of an hour late. That is for a journey of fifty-three miles. One night I sat in a Paddington to Oxford express train for one hour and twenty-three minutes at Maidenhead station. It took the railway authorities all that time to remove the last but one coach from the train because it had developed a hot axle-box. Every morning I walk on to Oxford station sand I ask the ticket collector, "What is wrong to-day?" On Tuesday last he said, "I'm sorry, sir, but it is three-quarters of an hour late already and has not arrived yet." I said, "What's wrong?", and he replied, "Oh, the engine has broken down. They have had to put a goods engine on." That train arrived at Paddington station an hour late. The week before that he said, "It has got a bad steamer to-day." is that efficiency? That is my own personal experience.

Before I leave the passenger aspect—the noble Lord knows the journey I am describing—may I say that if the noble Lord would travel in some of these trains he would hear a number of business men from the Midlands, and what they say would not marry up with what he has said. One said to me recently, "I have given up making any engagements in London before midday, because I cannot keep them. "On the occasion that I am speaking about I was coming up to your Lordships' House to attend a Committee, and I had to keep six people waiting for an hour. Is that efficiency?

VISCOUNT ESHER

Perhaps the noble Lord should not have nationalised these things.

LORD LUCAS OF CHILWORTH

I am not talking about what should have been done. Perhaps the noble Viscount could make a helpful remark as to what should have been done in the situation which would have faced any Government in 1947, when the railways were completely bankrupt. Nationalisation of the railways—if he wants to discuss that—had been the policy of all Governments, even that of Mr. Winston Churchill, right the way back for as many years as I can remember. So the noble Viscount's remark was not very helpful.

Now, my Lords, I had some goods sent to my house. There were three small packages. They had to travel only forty miles. They came by rail and it took exactly three, weeks for them to travel those forty miles. They were all despatched at the same time, on the same day, and arrived at intervals of two days three weeks afterwards. So I thought I would make other inquiries, because my industrial contacts were telling me that the cost in freight for goods that now have to be transferred from road to rail is frightening. I have here some figures. I have had them all checked and authenticated. I will take only a few examples: Food, bacon and butter in bulk, 50 per cent. increase in freight rates; mixed groceries in privately-owned containers, same type as railway containers, increase 100 per cent.; textiles, Manchester to London, 50 per cent. increase; bricks, Bedford to London, an increase of 17s. 6d. per thousand; concrete blocks, 200 per cent. increase; consequent increase in the cast of building small house entirely of concrete blocks, £50. The correspondence in The Times is illuminating. Cost of furniture removal from Darlington to Peterborough: by road, £82; by rail, £145 10s. Fifty tons of metal: quotation by British Road Services, £1 14s. 6d. per ton; by British Railways, £5 9s. per ton.

Then, take speed. I have had this checked. The average road journey of heavy consignments from the north of England to London is 48 hours. The present average time by rail works out at ten days—five times as long. What is the cause of that? It is no good the noble Lord saying, "The7e is nothing to grumble about." These are facts, not airy theories. The truth is that the railways are not attuned, mentally or physically, to do this work. I believe that is well illustrated by the letter in The Times written by the Public Relations Adviser to the British Transport Commission. I will read it to your Lordships: While British Railways are endeavouring to the fullest extent to offer competitive rates, rail transport is pre-eminently suitable for the mass movement of goods and merchandise in full wagon and full train loads. Individual cases are bound to occur where it is more economical for comparatively small lots of traffic to be carried by road rather than by railway. … In some recent cases, mentioned by your correspondents, it would appear that they were quoted the appropriate ordinary rates on the books, whereas it is usually possible for the railways to quote fully competitive rates for traffic in truck-loads. Will somebody tell that gentleman in the British Transport Commission some of the facts of life? The vast bulk of British industry—other than the minerals traffic—people who manufacture goods in this country do not manufacture 10-ton loads once in six months. That is why road traffic has gained such an ascendancy—because the average piece of freight in this country is small. This gentleman goes on to say: In every case where a trader is contemplating diversion of traffic to rail, we suggest that the local goods agent or district commercial officer be fully consulted on all aspects of the trader's requirement, so that the most advantageous rates can be quoted according to the circumstances of the traffic. When I started in industry and commerce I was told that if I wanted to sell anything I had to go out and sell it; that I could not afford to sit down and wait for the customer to come to me. Here it is said: "Better rates are available than those quoted if people will only go and see the Commission." But I thought the railways wanted to get business. Which brings me to the point I made in your Lordships' House on November 24 last: a live, dynamic, commercial instinct is needed within the railways. The noble Viscount, Lord Esher, spoke of nationalisation. Do not forget that when the road haulage industry was nationalised we took over many thousands of lorries and thousands of men who had been connected with those lorries and had built up their little businesses from small beginnings by dint of going out and getting the traffic.

That is the fundamental reason why I tell the noble Lord, Lord Mancroft, quite frankly, that what we are debating to-day is whether to put off the evil day for another six years before we have to decide what we are going to do. Is this to be a subsidy or is it not? I must speak the truth as I see it, and I believe that there is not a hope of a chance of these deficits ever being wiped off. I do not want to deny the railways a modernisation plan, but such a plan will not do this. The railways must modernise their attitude of mind. It is not enough merely to spend £1,200 million on new equipment. As I have said, chromium-plated trains will not do what live men will do. What we have to do is to persuade the railways to spend money on men. Men are the secret of all this. Because if we continue with the present "dead beat" system on the railways, no painting of trains in different colours or putting men in different coloured uniforms will ever succeed.

I know that this is a delicate matter, but I want to ask the noble Lord to consider it. Why is it that though we have here an industry with a turnover of £700 million a year, employing 800,000 souls, the top executives are the worst paid in this country? I am told—perhaps the noble Lord will tell me if it is wrong—that it is because of the edict of the Treasury that the Chairman and top executives of the British Transport Commission can only be paid rates equivalent to top-ranking civil servants. I want to ask the noble Lord whether that is true. I have also heard it said: "Of course, if you paid commercial salaries, if you competed for top executives with Imperial Chemical Industries, the Imperial Tobacco Company, Unilever, or any organisation of that kind, there would be trouble down below." I contest that. I would say that some of the most contented staffs in this country are those who work for the Imperial Tobacco Company, those who work for I.C.I. and those who work for Unilever. Why? Because they are amongst the highest paid. I have never heard anyone connected with any of those staffs question what Lord Dulverton got or what Lord Heyworth got or what Lord McGowan got. Indeed, speaking from my own experience in industry, it is those who get high salaries who know the value of high wages. If you are going to pay top executives mean salaries you are going to get mean minds.

I want to say to the railways and to the trade unions: you have to bring a new thought into this matter. I was speaking the other day to one of the finest fellows on the railways that I know: he is a chief ticket collector, and he has done forty-five years in the railway service. He has now got into the high-ranking salary bracket of £7 10s, per week. He has never had a rise in all his forty-five years of service that his union did not get for him. In such a case there is no incentive at all. The only people on the railways who have any incentive are the porters: they get it, via the pockets of the passengers, in tips. I have been told for years that it is impossible to bring incentives into railway employment. I do not believe it. The same was said of industry generally years ago, but it has proved to be entirely wrong. Incentives exist in every branch of industry, and until there is a different outlook, right from the top to the bottom of the British Transport Commission, the expenditure of this money—this £1.200 million which is to be paid for modernisation of the railways—will never be worth while, because men matter more than machines.

My Lord, I have taken the liberty of saying these things because I believe them to be true. They are based on my own experience in industry. I want to ensure that if a man is the best ticket collector, or if a man is the best inspector, he will get a better wage than the worst people in such jobs. He certainly does not do so to-day: all are paid at the same rate. I can well imagine that if I had tried to work on that system in my business I should have gone bankrupt years ago. The same I feel is true of the noble Earl, Lord Woolton.

THE EARL OF WOOLTON

I never tried it.

LORD LUCAS OF CHILWORTH

It is a most "dead-beat" policy. And then wonder is expressed why the railway unions have a perpetual wage claim in! Can we really wonder at it? Every employee in private enterprise industry has a perpetual wage claim in, for he is always struggling to impress upon those above him that he is worth more money than he is getting. But that sort of effort is useless on the railways. No matter how a man strives, he gets a rise only when his union gets it for him. Do you think that a modernisation scheme will work when conditions like that exist.

Of course, we shall give this Bill a Second Reading. It may be that some of your Lordships will still be in this House in six years' time, when repayment of this underwriting becomes due. I hope that shall still be here. If I am, I shall be able to remind your Lordships of what I have said to-day. With the competition that the railways will have to face in the future, with the natural tendency that exists—except in the case of long hauls—for people in trade to have their goods carried from door to door, it is impossible to put the clock back. That is not the fault of the railways; it arises from the size of this country, and from the fact that to have goods manhandled from the Factory floor to a truck, from the truck to a wagon, from the wagon again to a truck, and from the truck to the factory floor, all in the course of a journey of twenty or thirty miles, is more than British industry can stand.

I have quoted figures, if the noble Lord would like me to give him fuller details, I shall be happy to do so. They are based on present day statistics of road and rail, and they show that, on the average, there is a 50 per cent, increase in charges for everything that is put on the railways. It costs 50 per cent. more than to have the goods sent by road. It really is necessary that there should be some commercial instinct in this business. Such an instinct must be stimulated. There must be this change from the top of the British Transport Commission right the way down to the bottom. There is nothing wrong with the men, but for years they have been dead-beaten and frustrated. Why is it that, of all industry, the railways are more troubled than any other by discontent about wages? It is for the reason which I have just given. So I take it upon myself to say these things.

As I have intimated, we shill give this Bill a Second Reading. We wish it well; we wish the railways well. They are an essential part of the economy of this country. But do not think that the railways can do a job in respect of which the economics of this country are so strongly against them. Undoubtedly much of the traffic which now goes by rail will go back to the roads when petrol rationing ends. More goods traffic will go back, and so will more short-distance passenger traffic that is, of course, un less the Government make that physically impossible by never going back to unlimited supplies of petrol. There is undoubtedly a field for the railways, but let them be really efficient in that field. Do not let the Government try to bulldoze things on to a method of transport which is out of date so far as the requirements of modern British industry are concerned.

4.8 p.m.

LORD HURCOMB

My Lords, I suppose it might be thought that I ought myself to be among the people who find it easy to understand the provisions of a Bill of this kind, since I have been steeped in its subject matter for a good many years. I should like to thank the noble Lord who has moved the Second Reading for the clarity with which he brought out its main structure and provisions. I am sure that he cannot have found it easy to do that on coming to do it for the first time.

No one disputes the necessity for the Modernisation Plan if the railways are to fulfil their function, or to get near to fulfilling their maximum function. And no one can dispute the need for some relief to the British Transport Commission from their statutory obligations if the Plan is to proceed. Not everyone, of course, will agree that the Plan in itself will be found, six years, fifteen years or twenty years hence, to have disposed of the transport problem. I remain of opinion that that problem was not just conjured out of existence by the 1953 Act—indeed, the necessity for this Bill is proof enough of that. Things might—and in my opinion they would—have looked a little different and rather better if the Government had seen their way at once to provide the capital necessary for re-equipping the railways and to refrain from insisting on the mistaken policy of intensifying competition between road and rail and on breaking up the national road haulage organisation which was beginning to operate successfully.

That, however, is not the point this afternoon: it is the situation that has, in fact, been created that we have to face—the situation with which this Bill sets out to deal. Though the Bill does not in any fundamental sense reorganise the finances of the British Transport Commission, I support it because it relieves the Commission from the statutory predicament in which, through no fault of their own, they find themselves placed. And it does so without abandoning the important principle that, over a period, the Commission must pay their way and keep their finances in balance. In effect, the Bill says that the principle of solvency and the basis of being self-supporting may be regarded as satisfied and maintained if the balance is achieved, not, as hitherto, taking one year with another, but taking one decade, or rather more than a decade, with another. If we are not careful, in order to achieve that balance, we may be taking one generation with another, and that is an unfortunate stretching of a very sound principle. But I agree with the merit of seeking to retain it.

What is the only practical alternative, especially as it is outside present policy to depart from the encouraging of road competition? As the noble Lord, Lord Mancroft, said, the alternative is a subsidy, and to that many strong and, in the view of many of us and certainly in my view, fatal objections can be urged. One great merit of this Bill is that, even though all that the noble Lord. Lord Lucas of Chilworth, has said turned out to be true, in form it does not depart from that principle, the adherence to which at this moment, I think, is absolutely essential, if that is once admitted, the actual methods adopted in the Bill seem to be apt for their purpose. There is no escape from carrying forward deficiencies and borrowing the amount required to meet them. It is regrettable that not only the deficiencies themselves, but also the interest on the deficiencies, which is going to amount to many millions of pounds, has to be accumulated and held over for liquidation at some time in the distant future. But again, apart from a subsidy, what is the escape?

The other relief offered to the Commission is permission to capitalise interest, and that, I think everyone is agreed, is legitimate in the circumstances and backed by ample precedents which Parliament has made in dealing with statutory authorities, quite apart from what may be the practice in large commercial concerns. So I would say that the scheme, as a device for financing the deficiencies for the next few years, is well devised. Indeed, I think its authors are to be congratulated upon its ingenuity. While it makes no difference to the burdens which eventually will have to be repaid, it does relieve the Commission from a very real predicament, as I said just now.

It lifts from their shoulders the incubus of having to show a heavy working loss on their business in their annual accounts, and though that relief may be more a psychological one than, ultimately, a financial one, nevertheless it is real. By lifting that incubus from their shoulders, it will make it more difficult for the critics in so many quarters, who are always anxious to denigrate the management of our nationalised public utilities, to throw stones at the Commission and say, "You are making a heavy loss". They generally also say, "You are making it at the expense of the taxpayer"—which, of course, is not really correct, and never was, More important than that, perhaps, the removal of this incubus should be good for the morale both of the management and of the men all down the line. It seems to me that the Commission are entitled to expect more than ever from every member of their staff individually and collectively, through the elaborate machinery of consultation which has been established, united and enlightened acceptance of changing technical conditions; and on that many financial consequences may depend.

There is one ether point on which I should like to comment. The total deficiency accrued in the Commission's accounts up to the end of 1955 is to be carried to the new Suspense Account. But noble Lords will have noticed that thereafter only the deficiencies in respect of British Railways may be so treated. That means that the rest of the British Transport Commission's activities, treated as one business, must continue to pay their way, taking one year with another. In that respect the Bill has not departed at all from the principle of the 1947 Act; and this covers not only road haulage, the docks, the canals and, I hope, the catering services, but also London Transport. London Transport is excluded from the provisions of the Bill: it must pay its way, taking one year with another. It never was true that London was "salted", as used to be said in favour of other sections of the Commission's business. Quite the contrary: large numbers of Londoners were carried at fares below cost. I am glad that the Government think that wrong, and though I cannot help remembering that they "wobbled" a hit on that question three or four years ago, nevertheless they have now come down on the sound side.

I am far from criticising their present attitude or the provisions of the Bill in this respect. Nevertheless, is it not time that something more was said about the capital liabilities of London Transport? London Transport serves an enormous proportion of the total population of the country, and serves it very well; but there are many directions in which Londoners are entitled to somewhat better services, always on the principle that they will pay for them, if they are provided. I think that that mates up with something which the noble Lord, Lord Lucas of Chilworth, said. The capital liabilities in respect of London Transport ought not to be left out of account in considering what will be the future capital requirements of our economy as a whole.

In particular, there are two or three items of London Transport's undertaking which seem to me to call for some fairly early treatment. Fortunately, it was possible after the war, in the early days of the Commission, to renew the bus fleet without delay. That was a great asset and advantage. But how long are North and North-East London to go on waiting for the new tube? In the proposals which had the privilege of submitting to the previous Government some years ago, that tube was known as "Route C". It has now been more attractively labelled the "Victoria Tube". But I wonder whether giving it a "local habitation and a name" has made it yet anything more than an "airy nothing".

Another part of London Transport undertaking which must receive some attention before long is Lots Road Power Station. Its modernisation has long been overdue, and, when it is undertaken, must swallow up a good many millions. In that connection, I should like to ask this question. When it is undertaken, by whom is it to be undertaken? Will it be by London Transport, or by the new generating authority, as might be more appropriate? But in one way or another there is a big capital liability ahead in respect of that power station. My point is that heavy liabilities which must exist ought not to be left to come in at the end of the queue, for London Transport is an important part of the Commission's total undertaking, although it is left out of the Bill that is now before your Lordships. I do not expect a reply to these questions from the noble Lord this afternoon, but possibly he may be able to say something about some minor reliefs to which I did refer in our last debate. Is it possible to give the Transport Commission and the railways, in particular, some relief in respect of their old and anomalous obligations in regard to bridges on public highways and to level crossings? Those will not amount to a vast amount of money, but they do amount to something, and absorb the time of their staff.

Apart from such points and from the machinery of the Bill, I agree with the noble Lord, Lord Lucas of Chilworth, that it is important to realise the extent of the burdens which are being transferred to the future. It is all the more important to do so, as he said, in view of the general economic difficulties which this country is going to face in the next few years. At the moment, the railways are, no doubt, benefiting from the restrictions on road transport; but on their own computations—which, by the way, assumed that they would be free to adjust their charges in their own discretion without any intervention from the Government, and assumed, also, that the general economic conditions of last autumn would continue to prevail; in other words, that there would be no further inflation—they are expecting to accumulate a deficiency of between £300 and £400 million, purely on revenue account, a figure which I think would have shocked your Lordships had it been mentioned two years ago.

I do not know whether the noble Lord in his reply will wish to tell your Lordships what, in the present view of the Government, is the maximum figure to which these deficiencies are likely to amount, or what is likely to be the period in which they will be liquidated. The proposals of the Government have, to some extent, varied the estimates in the table set out by the Commission in the White Paper. Generally, I think, though the ultimate result will be much the same, they will give more relief to the Commission in the early years, but will defer and prolong the rate at which the accumulated deficiency will be paid off. I think that is the general effect.

For my own part, I wish the Modernisation Plan every success. I am satisfied—though I think that in some respects the original calculations were optimistic; not so much in regard to their ultimate effect, as to the pace at which the benefits will accrue—that in general the Modernisation Plan must secure large economies in the cost of railway operation, and also considerable results in increasing receipts, more especially from passenger traffic. On the goods side, there are other factors which I presume were fully taken into account by the Commission. There is a possible change in the movement of coal, and there is the fact that so much of the movement of general merchandise which is in the hands of "C" licence holders is there not on account of price, or of service, in the narrow sense, but because the movement of the goods under the immediate eye of the man in charge of the factory is part of the manufacturing process. That is a factor which even an active commercial policy on the part of the railways is going to find difficulty in overcoming. Nevertheless, I agree that the Modernisation Plan will improve the financial prospects of the railways substantially.

But, when all that is said and done, I could wish that the present proposals did not cast quite so heavy a burden on quite so distant a future. What really is accomplished by carrying forward revenue deficiencies of hundreds of millions in the hope of liquidating them, if all goes well, in fifteen or twenty years? By doing so, no doubt we extricate the Commission from the immediate impasse in which they are placed by circumstances and by their statutory obligations, and we give them an easement, to which they are fully entitled, as the noble Lord, in quoting their own Memorandum, said, during these critical years of reconstruction. Yet I feel it would be a mistake to suppose that that is a complete solution, or that we shall really solve the economic problems underlying the transport situation by a scheme of deficiency financing of this kind, however apt, however ingenious, and however flexible. I think the provisions to which the noble Lord referred, and described so clearly, for keeping a control over the future as it develops are most necessary, and I hope they may be found to be sufficient to prevent us from drifting again into a position which, by its magnitude, becomes completely unmanageable.

I hope the noble Lord, Lord Mancroft, will, at any rate, agree that what we must not do is to rest on the assumption that all is going to be well, if everything goes well, some fifteen or twenty years hence, when very few people who are now responsible will be here to answer for the results. It is important not just to wait five or six years, but every year, as well as in four or five years' time, to make a close review both of the absolute figures and, what is more important, of their trend, and not to push the problem now facing us always into a more distant future.

4.32 p.m.

LORD MONKSWELL

My Lords, the Bill before us is concerned with the spending of vast sums of money, and I suppose that it conies under the heading of a Money Bill. In that case we can do nothing to alter it. All we can do is to offer criticism. That is essential, and it is impossible, unless there is that freedom, to criticise the details of the Transport Commission's scheme. I hope that this freedom will not be denied me, though I rather gathered, from the remarks of the noble Lord who introduced the Bill, that the Government "swallow" the Transport Commission's programme as it stands. It seems to me that that is quite an impossible way to start upon it.

We are presented with a scheme which is described as railways "modernisation." It was originally to cost £1,200 million, though I understand that the cost has since gone up. Most of the developments promised were things that would have had to be done anyhow, like improved signalling, a smoother permanent way, and that sort of thing. The two promises that stand out above anything else are the improved goods traffic and the supersession of the steam locomotive, The information available with regard to the latter—except for the huge sums that are to be spent upon it—is extremely vague. The recasting of the goods services in a country like Great Britain, where trade of such a retail character has such a strong hold, is so technical and so controversial that I cannot express any strong opinion on it.

But the matter of the supersession of the steam locomotive is quite a different thing. It must be responsible for quite half the total proposed expenditure, and the advantages are of the most doubtful and shadowy kind. It is true that in many foreign countries electrification has made considerable progress, but these are mostly countries where there is plentiful water power, In the United Sates, where they have diesel traction, the oil companies are all-powerful. In all cases, there is an extraordinary reluctance to publish the comparative results. Even now, British Railways are saddled with two kinds of electrification and a good deal of diesel traction; and other things like gas turbines and straight atomic energy, are coming along. The Government do not really know what they want at all, yet apparently they are so anxious to give the impression that they are doing something that they are rushing the country into this enormous expense, which is exceedingly likely to have no effect except that of increasing inflation. If the Government are determined to spend all this money, it would be much better to put it into the roads, which will be of some use to us all.

4.37 p.m.

LORD BUIZDEN

My Lords, I stand here quite unrepentant and unashamed as an ex-railwayman, still convinced that, given certain conditions, the railways have a great future in this country. My noble friend Lord Lucas of Chilworth is away for a moment or two, and therefore I do not want to go into any great detail with regard to his criticisms. But one or two things I am bound to say. The first is with regard to railways going out looking for business. In every district throughout the country, some of the keenest and brightest young men have been put of this job of development, and I venture to say that if, suddenly, there is a change—as there has been a change, owing to petrol shortage—and goods have to travel by rail, instead of, as previously, by road, those goods have travelled without the railway industry having an opportunity of quoting special rates for the particular consignments. On that point, I would ask those in charge of the business of quoting special rates whether they might not consider the procedure to be adopted. At present, a figure is quoted; then, if that figure turns out to be too high, the representative has to bring that information back, when a lower figure is quoted, and so on. From my own experience, I know that in that backwards and forwards business traffic is often lost, because in the interval it has gone by road. I suggest that the lowest possible figure should be given to the railway representative, and that he should have discretion as to how he handled that figure.

We have had instances of delays by railway. The figures which the noble Lord gave in regard to the time taken in transit by full load traffic I would categorically dispute. It is not in accordance with the facts as I under stand them to be. I know there are delays, but if it were possible for me to check up the number of parcels that might go astray in road transport clearing houses, where parcels are aggregated and then passed on from one firm to another, the instances my noble friend gave of small parcels being delayed could be easily paralleled with goods delayed by roads.

Turning to the salaries of the top executives, I do not know—I am not party to Cabinet secrets—but, if my memory serves me aright, I believe my noble friend was Parliamentary Secretary to the Ministry of Transport when the railways were brought under national ownership. I should have thought that the Minister of Transport together with his Parliamentary Secretary would have had sonic knowledge of, and some say in, the rates of pay which were fixed for the higher executives. Bearing in mind the experience of the Co-operative Movement in regard to rates of pay, I do not know whether my noble friend's chief, the Minister of Transport, had any say in the rates which were fixed for the high executives in the British Transport Commission, or whether they were left entirely for the Treasury to fix. How is it that in British electricity the rates of pay paid to, the higher executives are comparable with the rates of pay and salaries in outside similar competitive employment? Did the Minister in charge of that particular nationalisation Bill see to the fixing of that figure, or why was the Treasury more lenient in that connection than in others?

As regards the purposes of this Bill, I feel we must accept it as long overdue justice. I wonder how many noble Lords remember that before 1939, out of their very meagre resources, the railways of this country spent on modernisation and re-equipment a sum of no less than £200 million, an expenditure which enabled the railway companies to take the strain when war broke out in 1939. As one who was engaged in the railway service during the major portion of that war, I can assure your Lordships that it was a strain meeting the air raids, and dealing with the traffics which had to be carried and got to their destinations in spite of the air raids. In order to use that £200 million for re-equipment and modernisation, the railways had to screw their shareholders down to the lowest possible figure of dividends. With what result? I have always regarded the second agreement which was forced on the railways by the Government in 1941 or 1942 as distinctly unfair to the railway interests, in any case. I believe I am correct when I say that the result of that agreement was that over £100 million found its way into the pockets of the national Exchequer.

I am sure that a moment's reflection will allow your Lordships to see that, when the railways were handed back again under the Transport Act, after the strain of war conditions, the fact that they had not been able to spend anything on capital equipment and the fact that the permanent 'way, rolling stock and everything had been run down owing to war-time conditions, meant that the new Transport Commission had a tremendous job to face. I am not overstating the case when I say that from 1939 right up to date—and in this the Labour Government have to take their share of responsibility—the railways of this country and British transport have been starved of capital development. I wonder whether the deadening psychological effect on men and women of working under such conditions as I have described has ever been realised.

Everything was in a dilapidated condition. In any case, the condition of the stock, the permanent way—and the offices, too, as I know to my cost added enormously to the problems of the normal day-to-day working. It is a curious psychological fact that, within the last— few months or so, now that conditions have been made better—with good lighting, and painting, the rooms for the staff have been brought up to a modern decent standard—there has been a tremendous improvement in the morale of the staff employed. But I am bound to say that among certain sections of the staff, the discipline—or perhaps I ought to say the lack of discipline—is really deplorable. It does not apply to all the men in the particular sections. There are various reasons for it. Perhaps the frustrating conditions which I mentioned a little while ago have some bearing on it.

On the other hand, there are other reasons. I believe—and here my noble friend was getting along the right lines—that, although it is always difficult to discuss wages and salaries without turning them into political questions, the differentials between the basic rates and the rates of those in supervisory positions to-day are quite inadequate. In many instances, it does not pay a man to take promotion. If, on top of that, he has to face, in a supervisory position, the problems which arise from full employment, where on, the slightest reproof a man will say. "Give me my cards"—and, believe me, it is not said quite so politely as that —a man will not take a supervisory position. Therefore, I want to assure your Lordships that those conditions which I have mentioned are breaking the hearts of railwaymen of 45 and upwards. They know it: they see the causes of it, and deplore it bur. with the material which they have to handle, they can do nothing about it at all.

My Lords, it seems to me that the proposals before us to-day are a challenge to the railway industry. If I may just follow up the Point made by my noble friend Lord Hurcomb as to the finances. I would suggest that at the appropriate moment, not toe far ahead, there ought to be an inquiry into the financial structure of the industry, and also an inquiry as to what services are provided by the railways for strategic reasons and maintained at a loss, and whether other services which are rendered to the Government are adequately paid for. I would suggest that the efficient working of a railway system in time of war is as essential as the provision of aeroplanes and things of that kind.

I should like to suggest that in these brief five years an attempt be made to bring a new spirit into the railway industry. It seems to me that now, under conditions of nationalisation, the three great trade unions in the railway service should have a far wider and responsible position, and should not simply regard it as their job every year to submit a claim for improved wages or salaries. In the Press the other day there was a paragraph which rather took my eye. It said that the General Secretary of the National Union of Railwaymen—a man for whom I have the utmost admiration—after turning down the Commission's latest offer of a wage increase, hurried off to a meeting of the Railway Productivity Council. Important as that work at the top may be, it is not there that the work will be done. I venture to suggest that the challenge has got to be met during the next five years, and that every railway employee ought to be a publicity officer for his industry. I believe that, latent in the rank and file of the railway service, there are still men and women of good will. If they were harnessed to the cause or working and co-operating at all levels to restore the prosperity of the railways, that could be done.

I suggest that the vast number of noncommissioned officers of the trade union movement in, the railway service, such as the branch committee men, the collectors and the executive committees—all men and women to whom the rank and file look for leadership in many things, because, after all, in any movement, whether in the church or in a trade union, only an active minority do the work and they are looked to for light and leadership—should be fully seized of the responsibility of restoring the prosperity of our railway industry. If that could be done, if the three trade unions co-operated in that way, I believe that a marvellous change could be effected in managing the railways of to-day. Perhaps I might continue my speech after the Royal Commission.

THE EARL OF ONSLOW

My Lords, I am obliged to the noble Lord. Perhaps he would carry on afterwards. I would suggest that the House adjourn during pleasure for the Royal Commission at five o'clock.

House adjourned during pleasure.

House resumed.