§ 4.15 p.m.
§ LORD SANDFORD
My Lords, with the agreement of your Lordships' House I should like at this point to repeat a Statement which is being made in another place by my right honourable friend the Minister for Transport Industries concerning the finances of the British Railways Board. The following is the Statement:
" Despite the Board's efforts to cut costs, their financial position has deteriorated over the past year. Price restraint reduced their income: the 1519 coal strike caused a loss of traffic and reduced income by £18 million: £10 million of business was lost through the subsequent rail pay dispute: the high level of the settlement has added to the Board's costs.
" As was always clear, the Board will therefore need to make fare increases in September to help meet the cost of the settlement.
" Even so, the Board now expect a deficit of £40 million in 1972—over and above the amount of £27 million we provided in the Transport (Grants) Act—and a comparable amount in 1973. The Board at my request have, since the autumn, been reviewing their long-term prospects. It is clear that some new financial support will be needed and that new legislation will be required. There is an immediate need to meet their cash flow shortfall, which amounts to some £50 million-£60 million over the rest of 1972. A Supplementary Estimate will be presented to the House in due course in respect of this requirement. Any sums needed in the meanwhile will be issued from the Contingencies Fund.
" I have also to-day given my consent to proposals from the Railways Board for restructuring their field organisation. These proposals, and the reasons for them, were described in the Board's Second Report on Organisation which I laid before Parliament on April 21. They involve the creation of 8 Territories to replace the present structure based on Regions and Divisions, which no longer meets today's requirements. The changes are expected to result in further staff reductions of between 4,500 and 6,500, but these should largely be accounted for by normal staff turnover. The Board estimate that the changes will save at least £10 million a year in administrative costs after full implementation. The Board have assured me that they will do their utmost to minimise the adverse effects and inevitable inconvenience to their staff."
§ My Lords, that concludes the Statement.
§ 4.19 p.m.
§ LORD CHAMPION
My Lords, we are grateful to the noble Lord, Lord Sandford, 1520 for repeating that Statement. We can welcome the fact that the Government are facing up to the consequences of the loss of traffic brought about to some extent by the prolongation of the coal strike and the rail pay dispute. On both of these issues, with some justification, we charged the Government at the time with their failure to take appropriate action to shorten the period of the disputes—action which, in turn, would have lessened the deficits which we are now facing. The noble Lord told us that £18 million was regarded as the amount of the loss due to the coal strike and that £10 million was the loss due to the pay dispute. Can he tell us how much was due to price restraint which flowed from the C.B.I. initiative?
On the question of fare increases in September, has the estimate made by the Board and the Government of the amount needed to cover the likely cost of the acceptance by the Board of a further C B.I. initiative been taken into consideration by the Government at this time? On the concluding part of the Statement, I welcome the assurance of the Board that they will do their utmost to minimise the adverse effects and inevitable inconvenience to the staff resulting from the proposed reorganisation. In this connection, I am bound to say, as a man who worked for a long time on railways and knows a little about them, that this will be a further upset to the staff which has over a comparatively short period seen a reduction of 250,000—a tremendous number—resulting purely from rationalisation. Perhaps I may add that the staff knowledgeable in these matters are of the opinion that the continual structural changes introduced in the past to make major economies have in many instances had the very opposite effect. The industry is never permitted to settle down. This has been going on throughout the whole of the post-war period, and I am sure that the railways have not had a fair deal in this connection.
§ LORD TANLAW
My Lords, I also wish to thank the noble Lord from these Benches for his Statement. The cash flow shortfall as shown from his Statement is quite a serious one. It is to be hoped that the measures suggested at the end of the Statement will become fruitful. Every railway in the world makes losses, and 1521 British Rail is no exception. It is recognised that support from the public is necessary to maintain a public rail service. But if a long-term funding operation is not undertaken there will be a mammoth increase in motorway expenditure and so on. I should like the noble Lord, Lord Sandford, to tell us what plans the Board have for long-term funding of the British rail system. With regard to the cash flow, this is a normal shortage which can occur in any railway system in the world, but I should like to know what the longterm plans are. Are there any plans for consultation with the European counterparts of British Rail? This is a feature that should be looked at, especially in terms of funding, because I feel they have the same problems. Finally, may I ask the noble Lord the Minister whether the British Railways Property Board is doing its best to raise funds by releasing property in central London which is needed for housing and is also a source of revenue for the Board?
§ 4.23 p.m.
§ LORD SANDFORD
My Lords, as I said in the original Statement which I repeated, the loss of business due to the rail pay dispute was £10 million; the cost of the settlement is of the order of £40 million to £50 million. The Transport (Grants) Act was in the main designed to enable the British Railways Board to keep in line with price restraint policy and the cost of that was virtually the whole of the cost of £27 million. The fare changes to be made this September which will involve an overall average increase of some 5 per cent.—with freight charges rising on average by 2½ per cent. and passenger fares rising on average by 7½ per cent.—are as much as the British Railways Board can make and keep within the price restraint policy. But, even so, there is a deficit of £40 million to be met in 1972.
I note the points of the noble Lord, Lord Champion, about reorganisation, but I would make the further point that this is the first major reorganisation in the main administrative structure since nationalisation, and during the intervening period there has been a reduction in staff from 650,000 to 200,000. In answer to the noble Lord, Lord Tanlaw, I would say that one of the things that my right honourable friend has now asked the British Railways Board to do is to iden- 1522 tify those remaining sectors of the railway network which can continue to be run, in the opinion of the Board, on a commercial basis, and to reconsider those other sectors which need to be maintained and run with wider policy considerations in mind. I note what the noble Lord had to say about discussions with our European counterparts, but I cannot comment on that at the moment. I would certainly confirm that the British Railways Property Board are increasing the release of property to aid the cash problem, and, as I have said in connection with other matters in this House, they are making a significant contribution to the solution of the housing problem in Greater London.
§ BARONESS GAITSKELL
My Lords, may I ask the Minister whether the Government have any idea of what is going to happen to the men who are redundant?
§ LORD SANDFORD
My Lords, as I think my right honourable friend made clear in his Statement, most of the reduction will be accounted for in the ordinary process of staff turnover and retirement and so on; but, of course, those members of staff who are made redundant will receive their full compensation redundancy pay.
§ LORD LEATHERLAND
My Lords, the procedure of the House limits my right to that of asking a question, so here it is. Are the Government aware of the increasing amount of heavy traffic which is being carried on and diverted to the already overcrowded roads; and secondly, have the Government any plan in mind for diverting some of this traffic, at least, to the railways?
§ LORD SANDFORD
My Lords, I think that that point was covered in my answer to the noble Lord, Lord Tanlaw. Of course, where the railways can carry this traffic commercially and it is advantageous to them, that will happen without further ado. But there are certain wider environmental policy considerations which might well lead to a decision to keep certain branches and lines open although they are no longer commercially viable.
§ LORD BOYLE OF HANDSWORTH
My Lords, the noble Lord said, correctly, that this is the most important and far-reaching change in organisation since 1523 nationalisation and it will therefore put greater responsibilities on the British Railways Board. May I ask the noble Lord whether he will take note of what was said in the Interim Report of the Top Salaries Review Body on the desirability for a more flexible approach to the payment of Board members and, in particular, on not ruling out using the top half of the scale where this might seem to be appropriate in the context of greater responsibility?
§ LORD SANDFORD
My Lords, I am grateful to the noble Lord for that observation and I will draw the attention of my right honourable friend to his remarks.
§ BARONESS ELLIOT OF HARWOOD
My Lords, following the question put by the noble Lord, Lord Leatherland, may I ask my noble friend whether he would suggest to the Board that they might endeavour to get some of the enormous quantities of timber now carried on the roads carried by the railways, timber being a commodity which neither deteriorates nor is in any way injured by being transported slowly by rail? A vast quantity of timber is now carried on the roads which could well be carried upon the railways.
§ LORD SANDFORD
My Lords, I am sure that all of us appreciate the environmental advantages of doing that, but there is a very large part of the railway network which is grant aided already, and this cannot go on indefinitely.
§ LORD COLYTON
My Lords, may I ask my noble friend whether, before any major changes on these lines or reductions in services are carried out, Parliament will have an opportunity of debating the matter?
§ LORD SANDFORD
My Lords, as the noble Lord knows, I cannot give that assurance myself. I will bring the point to the attention of my right honourable friend.