HL Deb 24 May 1968 vol 292 cc940-52

1.55 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are satisfied in view of the Railways Board's latest Annual Report that the principle of the "Basic Railway" could not be carried further by the Board, both for passenger and freight traffic, to reduce considerably running costs without damaging the service.

The noble Earl said: My Lords, I feel that I should apologise to the House, first of all, that at five minutes to two on a Friday afternoon I am inflicting this Unstarred Question on railways. However. I feel that I am inflicting it on only a few Members; and in fact, on none of my own Party. It was impossible to put down this Question for a day next week, before Whitsun, due to certain circumstances which I am sure the noble Lord, Lord Winterbottom, will appreciate, and I was most keen to have it heard before the Whitsun Recess, in view of the pressure of work to follow.

The 1967 Railways Board Report, as the House will know, has shown an operating deficit even worse than I think anyone had forecast—over £90 million, and £19 million up on the previous year; and all of this despite the considerable reduction in services over the past few years, despite the reduction in staff and the closure of numerous stations and railway lines. One must remind oneself that all of these measures were taken in the good name and cause of reducing the deficit, often in the face of considerable public outcry, considerable objection and hardship. Yet not one of these reductions or measures appears to have had the slighest effect on the seemingly relentless and unstoppable increase in the decrease. It is therefore even more disquieting to read from the Report of 1967, under the section "Looking Around the bland statement This is a year of change and of new hope.

While one can understand the sentiment of change if the somewhat tattered Transport Bill finally comes home to roost, there is nothing, so far as one can see, to offer new hope beside the fact that the railways are passing much of their revenue-earning traffic over to the newly constituted National Transport Authority. I hope, therefore, that the noble Lord will think it reasonable if to-day one puts to the Government, as the custodian of the public purse, the same sort of questions which the noble Lord may have noticed in a newspaper report recently, of an angry lady shareholder of a public company—which company, I may add, showed far better results than British Railways. The questions that should be asked are. First, do the Government think that the present services really give us a true value for money? Secondly, can the Government explain how they intend to see that the Railway Board's objectives to reduce drastically the present deficit of £90 million to a break-even point by 1971 can be achieved? Lastly, do the Government think that enough effort has been made to reduce running costs of both passenger and freight services on the basis of the "basic railway" principle?

The noble Lord may reply that the present Government in the last three years have carried out more intensive study and published more White Papers on railways than any previous Government before them. I am sure that most of us who have to plough our way through these White Papers would agree. There was, first, Transport Policy, published in July 1966. Then there was, Railway Maps, in March, 1967; and, finally, Railway Policy, in November, 1967. The noble Lord will know as well that part of the terms of reference for the Steering Group who were appointed to inquire into railway finances, and whose Report was incorporated in Railway Policy were to: restore stability to an industry which has been the subject of continual change and uncertainty. Yet, despite these intensive examinations and White Papers, I do not believe that the instability of the industry has been improved, for the particular reason that quite contrary statements have been made in the White Papers.

In 1966, for instance, the White Paper, Transport Policy, stated that the future objective of the railways would be based on the statement that "Commercial viability is important but secondary." A year later, a change of tone took place in the railway policy, which stated that the railways were to be given realistic financial objectives with a view to breaking even on the commercial lines by 1971. In 1966, we were told that 400 miles of passenger lines and 1,330 miles of freight lines were to be closed, yet in 1967 this figure had risen to 2,200 miles. In March, 1967, when Railway Maps were published they showed a number of passenger lines due to be closed which had been reprieved by the Minister herself only a year previously, and after, as noble Lords well know, the most intensive investigations and tremendous thought, and, of course, at considerable public cost. These lines included the Peterborough to Grimsby line, the Central Wales line—where I believe the T.U.C.C. hearings have only just ended, for a second time on this line—and the Darlington to Richmond line. My Lords, with this type of evidence in mind, I do not think that the industry has been made any more stable than it has been in the past.

One other matter which I think bothers many people when they examine the Railways Board's Annual Report is the way some of the capital investment programme has been placed. These are, of course (and one would entirely agree with them), programmes of electrification of lines and liner-trains—schemes which are, without doubt, of tremendous importance; and we know that this large-scale recapitalisation plan is to come in the Transport Bill. Over the past six years there have been some capital investment programmes amounting to approximately £10 million pounds, which have been no more than white elephants. There are certain examples such as the new marshalling yard at my home town of Perth. It cost, I think, over £800,000 and was boasted of as the most modern marshalling yard in Europe. Yet it was scrapped two or three years later.

Then there is the Bletchley flyover, built at a cost of between;£3½ million and £4 million to improve the freight lines to Oxford; and then we find that the Oxford line is ultimately closed. There are also the new divisional offices at Cambridge, Plymouth and Shrewsbury, all of which have been made redundant through a change of policy. Lastly, we come to a number of stations that were recently re-equipped and have now been withdrawn. My Lords, I suggest that these examples in the industry show a lack of long-term planning.

If I may turn briefly to the suggestion in my Question of exploring and deploying further the basic railway concept for both freight and passenger traffic, the noble Lord, Lord Winterbottom, will, I know, understand that the concept was pioneered by the Eastern Region under the guidance of the then General Manager, Mr. Fiennes. And in Mr. Fiennes's recently published book I Tried To Ran a Railway, he is quoted as saying: They laid it down in general that rural railways did not pay, which was true; and never could pay, which was false. He then went on to describe how the basic railway concept was derived, which is a question of reducing the running costs to the minimum, operating single track, unstaffed halts, simplified fares, and so on. He then quoted an example. I think the rather staggering example, of how his staff saved the East Suffolk Line; and here we were told that the costs were reduced from the stated £250,000 a year down to £84.000.

This example, I know, was followed up by the Railways Board, to their credit, but there are, I believe, many other lines, particularly freight lines, which also come within this category. The Railways Board have long taken the view that their wagon load traffic will sooner or later be eliminated and transferred to train load traffic or liner trains. And because of this, about 15 per cent. of the wagon fleet in the last couple of years has been withdrawn, leaving at certain peak periods the wagon fleet unable to cope with the traffic available.

As the noble Lord will know, other railways in the world take a different view of wagon fleet traffic and the viability of it. West Germany, for instance, have designed a small 200-horsepower diesel locomotive specially to cope with the wagon load traffic to and from the sidings. Against this, near to London recently a 1,000 horsepower British locomotive was seen pulling three wagons, and in charge of this load was a driver, a co-driver, a guard and a shunter. This is one small example where I would suggest that the running cost could be examined and reduced rather than services entirely withdrawn.

My Lords, I would end by saying that I hope the noble Lord will not simply reply to-day by saying that this is a matter for the Railways Board. I would remind him that the responsibility of the Government is to see that public money is judiciously and prudently spent, and £90 million is an awful lot of money to be signed away on this year's Railways Board account. I should also like, in conclusion, to ask the noble Lord for a Government assurance to-day that the Railways Board, in trying to achieve the financial objectives set forth to reduce the present £90 million deficit to a break-even point by 1971 on their commercial lines, will not be reduced to cutting back drastically existing services to the detriment of users. This is what many people feel will result, and I hone the noble Lord will take this opportunity firmly to allay their suspicions.

2.7 p.m.


My Lords, I must share the responsibility with the noble Earl for keeping you here over the luncheon period to-day. As the noble Earl knows, I am going abroad next week, and it is for my convenience in reality that the debate has taken place to-day. I am grateful to the noble Lord for raising this subject. We all know his keenness on efficiency and economy in transport, and his Question this afternoon gives me an opportunity to outline what the Government are doing to encourage real efficiency on the railways. This gives me a chance, in advance of the arrival of the Transport Bill from another place, to explain some of the implications of the Government's policy; and we are glad to take every opportunity to get wider understanding of our purpose and how we hope to attain it.

I should at the outset make clear that operational methods of reducing running costs on the railways are matters of management for the Railways Board. It is the Government's function to set the framework in which the Railways Board operate. I hope that noble Lords will bear with me while I outline this framework and tell them how it will lead to railways which serve the needs of the nation better than could have been hoped for than if the Railways Board had to continue to operate under the 1962 Transport Act. The Government's policy aim is clear: we want to make the maximum economic use of the railways. The noble Lord has pressed us to reduce running costs without damaging the service. That is what every transport operator strives to do provided—and this is an important proviso—that the service in question is worth continuing. This is precisely what the framework which I have mentioned will help and encourage the Railways Board to do.

The first step is to put the railways on a sound realistic financial footing. The Board will be recapitalised so as to bring their total liabilities into line with the capitalised earning power of their assets. This will give the Board a fair and reasonable prospect of achieving and maintaining a break-even position over the years ahead, against the framework provided by the Bill and—this is most important—given good management. In no way does this recapitalisation featherbed the railways so as to conceal their costs or inefficiencies: quite the reverse. It is only by giving the Railways Board the sort of capital value which any commercial body would give them under a major reconstruction—that is by estimating their future profitability given good management—that the annual revenue account will become a fair measure of success or failure of the industry's management.

The next step is to recognise that there are many passenger rail services which will never show a profit but for which there is a real social need. These services will be grant-aided. If the community needs them, it is right that the community should pay for them. We cannot allow railway lines simply to fade away under economic pressures, where the livelihood of the people depends upon them. But, equally, it is quite unrealistic to expect the Railways Board to bear the losses on the unremunerative but socially necessary passenger services which the Government wish it to maintain. These grants will be determined by my right honourable friend the Minister of Transport service by service and in the way which will give the Board the greatest incentive towards economy without damaging the service required. We get right away from the debilitating deficit grant financing; no longer shall we pay in respect of actual losses incurred but grants will be based, over periods not exceeding three years at a time, on the assessed net losses over the period, given efficient management and operation.

Then there is a third way in which the Government are setting the framework for greater efficiency of operation. We shall be paying the Railways. Board over the five years 1969–73 grants on a tapering basis and up to a total of £50 million towards the cost of surplus track and signalling equipment while they eliminate it from their system. As a legacy from the past, there is considerable surplus capacity, actual and potential, on the railways, principally in the shape of excess track mileage. This is an inherited liability of the railway system which ought to be eliminated as quickly as possible. Otherwise there is continuing expenditure on maintenance which adds considerably to the operating costs of the railways. It was therefore obviously right that a programme for its elimination from the system should be drawn up and carried through with greatest possible despatch.

This programme is now being drawn up, and indeed has to be settled by, the end of this year. There are, however, good practical reasons why much of this surplus cannot be eliminated as soon as it is identified. In many cases it will involve alterations to alternative routes, the rationalisation of services, the installation of improved signalling, and even changes to stations. Works of this nature may well take a number of years, and in the meantime the Railways Board will be continuing to face the expenditure on keeping the surplus capacity going. The Government have therefore decided upon a tapering grant over a finite period which will provide the maximum incentive to the Board to eliminate this surplus from their system as quickly as they can, but which at the same time recognises the fact that the Board will have to carry much of this surplus capacity for a number of years.

These are the main provisions of the Transport Bill which will affect the future efficiency and economy of the railways. They will have a realistic capital base on which to build their future. They will be paid grants, in a way which gives them the greatest possible incentive to efficient operation, towards the cost of passenger services which the nation needs but which cannot be expected to pay their own way. There will be a programme designed to reduce the running costs of the system as quickly as possible over the next five years. These measures and others taken in the Transport Bill, such as the setting up of the National Freight Corporation to provide an integrated freight service using rail wherever this is efficient and economic, and the new licensing proposals which will help the Railways Board to compete for traffic which they can handle efficiently, will give the Railways Board a completely new look.

This new look will also be seen among all those who work for the Railways Board, for we believe that the men in the industry cannot be encouraged to give of their best, nor can the public be given the service it has the right to expect, unless a sense of stability and self-confidence is restored to the industry. The publication by the Government and by the Railways Board in March, 1967, of their basic route network for development has helped to restore stability and confidence and for the first time for many years railwaymen can look towards a secured future.

This, then, is the framework against which to look at ways in which the running costs of the Railways Board can be reduced without damaging the service which the community expects from them. It is for the Government to set up the framework and to see that it works properly. But it is for the Railways Board to run the railways. We have not I made it easy for them. They have a very tough task ahead. That task is simple enough to define: can they keep in the black? From January, 1969, the Board must pay their way. There will be no more deficit grants. Not only will they have to break even, but they will be obliged to establish a general reserve, as any commercial undertaking would do.

The Board must continually cut their coat acording to a changing cloth. Fares and charges, subject always to the Government's prices and incomes policy, must be flexible and adaptable to changing circumstances. For the railways will never again enjoy the old monopoly position which they held a long time ago. They are fighting and will continue to fight in a tough competitive field, and this, as well as the discipline of the balance-sheet, will keen them on their toes. But, as I have said, it is for the Railways Board to run the railways. They must work out train frequencies, timetables, operating methods and all the broad and detailed aspects of running a highly technical commercial undertaking. Noble Lords may like to know of a few of the measures which the Railways Board are taking to improve their operating efficiency.

Strenuous efforts have already been made by British Railways towards reducing their costs while maintaining a high standard of service. Their Annual Report for 1967 records that, leaving aside the effect of increased wages and other costs, they have by various means reduced working expenses by £23 million —a pretty substantial sum. This process continues as plans already made come to fruition.

As I have said, the Transport Bill provides for the losses on running unremunerative passenger services retained on social grounds to be met by a series of grants. In preparation, joint working parties drawn from the Ministry and the Railways Board are carrying out a detailed review, service by service, so that my right honourable friend the Minister can ensure that grant will be paid only where he is satisfied that the service accords with social need. This, of course, includes being satisfied that all reasonable economy measures have been taken. The conversion of stations into unstaffed halts, the conversion of station buildings to provide smaller and more easily maintained accommodation, the use of conductor guards, the conversion of branch lines into "one engine in steam" working, other means of simplified signalling, the revision of locomotive and stock working diagrams to reduce the number of locomotives and the amount of rolling stock required for a given service—these are all examples of factors which are brought under review in these cases.

On those passenger services which are profitable, the emphasis is of course different. Here the Railways Board, while giving new thought to all means of reducing the working costs, have as their objective the maximising of net revenue. Thus on the Inter-City services the Board believe that additional speed, even though costly, is likely to be fully justified by increasing patronage.

In the freight field, the development is towards carrying the traffic in fewer but larger and faster trains. The increasing use of the developing freightliner services is becoming familiar; as is the merry-go-round operation of heavy trains of coal traffic between colliery and power station and the continued expansion of company trains specially designed to meet industry's need for the efficient transport of vital materials; for instance, steel. For other traffic the National Freight Train Plan, which has been introduced in stages over the last two years, has been instrumental in reducing train miles by over 8 million per annum and has cut the number of marshalling yards by a third. The noble Earl mentioned a new yard that was made redundant. Perhaps the economies justified the scrapping of that new yard.

The implications of carrying a given traffic load in fewer trains are immense. Fewer but larger and modernised terminal stations can provide a better service; the reduced number of marshalling yards cuts down the costly sorting of wagons and reduces the transit time of goods; the number of locomotives and train crews are reduced. These plans are being developed in consultation with trade and industry and are aimed to bring modern transport systems at minimum cost into services for the nation's transport users. This is particularly true in the case of domestic coal distribution where, in harmony with the National Coal Board and the coal distributors, the railways are pursuing a policy of establishing concentration depots. This has had the full support of the Prices and Incomes Board as a means of minimising the cost of coal to the consumer.

My Lords, in his speech the noble Earl laid great stress on the potential benefits of the "basic railway" concept. I have already given some details of the areas in which similar ideas are being applied, of those where it is not appropriate, and of the reasons why changes cannot always be as rapid as we should wish. I can assure your Lordships that when they consider the future of an unremunerative rail passenger service the Railways Board always go very carefully into all the possible ways I have already mentioned of economising in operation costs before proposing closure. Should closure nevertheless be proposed, my right honourable friend the Minister of Transport would never give his consent unless he was satisfied that this had been done.

But noble Lords must not exaggerate the possibilities of the "basic railway" as a means of avoiding closure. It has, unfortunately, only limited potential. Losses on services are often of too high an order to be offset, other than marginally, even by the most stringent operating economies. Conductor guard working is often impracticable because, for instance, of peak traffic flows or the need for station staff to keep people off live rails. Such reasons can also restrict the introduction of unstaffed stations. Singling of double track does not always save much money, and can in itself prove expensive, particularly when signalling changes are necessary. Singling of track brings no reduction in the cost of maintaining bridges, culverts, viaducts and so forth, all of which depend upon the width of the formation itself.

My Lords, I hope that I have been able to show your Lordships in what I have said that the Government's policy is such that the Railways Board will lave every incentive to offer as economic a service as possible, but that economy is not a complete and final end in itself. The touchstone of a sound railway policy is the extent to which it meets the country's overall transport needs. There remains a need for constant vigilance and flexibility, for constant adaptation to new and changing circumstances, for the intelligent seizing of opportunities and for the anticipation of demand. In short, my Lords, the Government intend to give the Railways Board a real chance of playing their proper part in the economy of our country in the conditions of to-day, and I know that the Board, and all who work for them, will do their best to meet the challenge.


My Lords, before the noble Lord sits down, I wonder if he could give us the assurance for which I asked at the very end of my short speech: that the railway lines will not be reduced below 11,000 miles, in view of the "break-even" point which, as I mentioned earlier, the Railways Board have to reach by 1971.


My Lords, as the noble Earl will appreciate, this is a highly technical subject, on which I am not an expert. I shall, however, discuss the matter with my right honourable friend and write to the noble Earl with an answer.

House adjourned at twenty-three minutes past two o'clock.