§ 5.4 p.m.
§ LORD SANDFORDMy Lords, I beg to move that this Bill be now read a second time. This short Money Bill has two purposes. The most important in the present circumstances is to encourage British Rail to create a large number of extra jobs over the next two years. This will be achieved by Clause 2, which provides for the Board to accelerate a number of employment-generating investment projects. Those already planned involve 1,000 jobs in shipyards and about 800 in the rail workshops at Derby, York and Shildon. This does not include the secondary effect on suppliers, contractors and sub-contractors. The sum of £5 million mentioned in the clause does not of course represent the gross cost of the projects which the Board plan to accelerate. The total value of these stands at around £50 million, and includes such items as 600 new inter-City coaches, four ferries (three for the Isle of Wight and one for the Harwich—Hook service), 360 new hopper wagons and various track and signalling improvements. Under the clause, the Government will contribute the additional cost of carrying out the projects at an earlier stage than originally planned.
The second purpose of this short Bill is to enable the Boards to reconcile their 58 statutory duty to make both ends meet with their social obligation to restrain price rises. For this purpose, the Bill provides for special grants to the Railways Board and to the National Bus Company. The House will be aware of the history of the C.B.I. initiative to restrain prices. It was announced in July last year and was welcomed by my right honourable friend the Chancellor of the Exchequer. It was clearly right that the major nationalised industries should support that initiative. British Rail and the National Bus Company were willing, like the other nationalised industries, to play their part. But this placed them in a special difficulty, for in 1971 British Rail are expected to be about £15 million in the red and the National Bus Company about £1 million. Nor do the longer-term prospects of either Board suggest that they are likely to be able to offset these losses against future profits.
As the House will be aware, Parliament has given both Boards the statutory financial duty to break even "taking one year with another". Compliance with the C.B.I. initiative without some form of special assistance would clearly in these circumstances have left the Boards in breach of this duty. The Government have therefore concluded that they should be given these special grants: £27 million to British Rail and £7 million to the National Bus Company. It is, however, important to be clear that though these grants have their origins in the price restraint policy, they are not specific compensation for the losses incurred by the Board as a result of the C.B.I. initiative. The grants represent the sums needed to give the Boards a chance, with good management, to break even in 1972 and thus to put them in a position to fulfil their statutory duties.
The figures in the Bill are the outcome of negotiations and have been agreed between my right honourable friend, the Chairman of each Board and, of course, the Treasury. The House will note that the grants are not open-ended. The sums payable to the Boards have been fixed in advance and will not be subject to review in the light of events during the year. So there remains every incentive for proper management. If the Boards are able to improve their situation, the fact that the grant is fixed will gain them a corresponding benefit. And if they do 59 less well than expected they will have to deal with that situation, too. To sum up, the Bill will help to keep down prices and to create new jobs. On those grounds, I have no hesitation in commending it to your Lordships. My Lords, I beg to move.
§ Moved, That the Bill he now read 2a.—(Lord Sandford.)
§ 5.8 p.m.
§ LORD CHAMPIONMy Lords, I very much regret that I was unable to be present at the outset of the noble Lord's speech: I happened to be in a Committee and it took rather a long time to get hold of me. The result was that I missed the opening paragraph of the noble Lord's speech. I am sorry about that, because I gather he made some reference to figures which appear in the Bill and said that they were not to be taken as substantive and, in certain circumstances, could be very much improved upon or added to. Was the noble Lord talking about Clause 2 and the £5 million mentioned therein?
§ LORD SANDFORDMy Lords, perhaps I may intervene, because if the noble Lord took me to mean that he misunderstood me. I was at some pains to make it clear that these sums have been fixed and are not adjustable in the light of circumstances.
§ LORD HOYMy Lords, may I intervene for a second? Did not the noble Lord say that the sum of £5 million, which appears in the Bill, might well mean ten times as much; and did he not use the figures 5 and 50 in this respect? I was not quite certain what he meant.
§ LORD SANDFORDMy Lords, in that particular paragraph of my speech (in which I was referring to the purposes of Clause 2), I was making the point that the £5 million mentioned in the Bill is not the gross cost of the projects that will be brought forward as a result of this payment, but that the gross cost, and therefore the extent of its effectiveness, is £50 million—ten times as much.
§ LORD CHAMPIONMy Lords, I am grateful to the noble Lord; that certainly explains the point. I was under no illusion as to this £5 million: I realised that it was merely the cost of bringing the 60 work forward, and not the total cost of the work itself. This I was fairly clear about; but I understood that there was some little doubt about the figure which the noble Lord had used.
I think the Minister was right to stress (and I take it for granted that he has stressed) the limited nature of the Bill itself. Otherwise, the House might find itself entering into a long discussion on the amount and the nature of the grants payable under the 1968 Transport Act; that is, in relation to the unremunerative services run as a part of the social need services of the country. I understand that these are not embodied in this Bill, and therefore I think we ought not to discuss them. I propose to confine my remarks to the terms of the Bill, which I regard as uncontroversial, and it will not be opposed by us on this side.
My Lords, the Bill needs to be carefully examined in order to see whether the sums provided for in Clause 1 are sufficient to comply with the Government's requirements, as embodied in the C.B.I. initiative, as to holding price and fare increases within the 5 per cent. limit. On that aspect I note that in the other place on February 2 Mr. Eldon Griffiths said, in effect, that the figures of £27 million and £7 million were arrived at only after the most vigorous scrutiny, and that the sums had been agreed with the Treasury. I understand that the noble Lord has made exactly the same point here this afternoon. He further made the point that the Railways Board would be left in a position where it would be barely able, even with this grant, to meet its statutory obligations. The fact that this Bill had its Second Reading in the Commons on February 7 makes it clear that the vigorous scrutiny and the Treasury agreement took place before the miners' strike had so devastatingly hit the economy of the country and, of course, the finances of the Railways Board. What has to be remembered in this connection is that coal and coke traffic accounts for nearly one-half of the Board's revenue from its freight train traffic, and certainly well over one-half of the tonnage. In 1970, coal and coke carriage brought in some £96 million. On the face of it, my Lords, it looks as though a seven-week stoppage of the pits and a further period during which output will inevitably fall well below the normal output must mean a 61 loss of income to the railways of some £13 million—and there will be no savings to be offset against that loss. That £13 million seems to me to swallow up immediately nearly one-half of the sum allocated to the railways from the £34 million provided for in Clause 1 of the Bill.
That decline in coal receipts is only one factor in the sums we have to do; for, to the loss of coal traffic there must be added the cost of the economic recession, which was calculated to have cost the British Railways some £18½ million in 1971. I realise that a part of that may have entered into the calculation for the period to be covered by the Bill. As to the period for which the grants set out in the Bill are to run, it will be, as I read the Bill, for one year only. It will not be an annual grant for the period of the C.B.I.'s initiative, if that runs beyond the one year, and if the C.B.I. initiative on the 5 per cent. runs over into the next financial period we may well see another such Bill early next year. Indeed, if my calculations are near the mark, we ought to be seeing another such Bill during the course of this Session of Parliament. In this connection, I noted the use by the Under-Secretary of State, Mr. Eldon Griffiths, of the fashionable word "special" when seeking to justify this grant-in-aid.
My Lords, the last comment that I have to make about the Railways Board's position is to repeat a part of a sentence from the Board's 1970 Report:
The Board will be able to remain viable only if the existing freedom to vary prices according to the financial needs of the industry and market is retained.Certainly the Board cannot remain viable if it is unable to raise its prices and does not receive sufficient by way of grant-in-aid compensation to offset the loss incurred. There is just one other factor in connection with the statement of the Board about remaining viable: if prices are held back for a period and the grants are then stopped, the resulting price increase will come with devastating steepness. This is one of the factors that must be taken into consideration in this connection. If at the end of the period this Bill is intended to cover the Railways Board is then to say, "We must now be viable; we must increase our prices to the extent necessary", I am afraid the increase will be a very steep 62 one indeed, and the Railways Board—and indeed, I am sure, the Government of the day—will be under some pressures and in some difficulty as a result. I hope that when the noble Lord, Lord Sandford, comes to reply he will deal with those aspects of the matter under discussion.My Lords, some of the factors that have mentioned in connection with the railway undertaking must apply to some extent to the National Bus Company. Less transporting of miners to the pits; a tendency for people to stay at home during threatened and actual black-out periods; and the general effect of a continuing, and even much enhanced, trade recession must all be hitting the National Bus Company very hard indeed, for there seems to be no possibility of catching up to-day the passenger receipts that were lost yesterday.
Like the Railways Board the National Bus Company is expected to maintain reasonable financial equilibrium by means of fare increases introduced at the earliest possible moment after it has become obvious that they are necessary. The National Bus Company suffers from the fact that there is always a delay caused by the procedure before the traffic commissioners when seeking permission to raise fares. This is something which is estimated to have cost the National Bus Company some £3 million in 1970. It is bound to be a worrying prospect for the company if fare increases are to be held back this year and then, at the end of the C.B.I. initiative period the company has to ask for a steep rise to cover the deficit which it will then have to face, not only because the company has not been able to increase fares to cover the loss (which I think is inevitable) over and above that taken care of by the £7 million grant, but also the loss sustained by reason of the restrictive nature of the traffic commissioners' procedure. These are some of the factors which emerge from this Bill.
I must admit, my Lords, that I have very little to say about Clause 2 of the Bill because it seems to me to been pretty straightforward way of trying to bring forward expenditure in order to add to employment prospects at a time when such expenditure is sadly needed. I repeat that I understood what the noble 63 Lord was saying about the fact that this £5 million was the cost, the price, only of bringing these schemes forward and was not the value of the amount of work which would shortly be put into the economy as a result of this Bill. Altogether, this is a Bill which we have no wish to delay; but I must add a warning that it will have to be followed quite soon by another to offset the effect of the coal strike and the continuing recession in which we find ourselves and with which the economy of this country is beset.
§ 5.20 p.m.
LORD HAWKEMy Lords, I must apologise for having missed the opening remarks of my noble friend who began rather earlier than I expected. I think Clause 1 is inevitable in this Bill; but I particularly welcome Clause 2, although I regard it as very late and very little. I believe that when private investment is held back through lack of confidence and when money is piling up in the economy, it is the Government's business to borrow and to spend on those things which will not get done in a period of full employment and which there is now a wonderful opportunity of getting done. If only Ministers would regard the present situation as an opportunity and not as something to weep over we should get going much quicker. I could have advocated these policies in the unemployment debate, but I was laid up at the time.
Railway material goes straight to heavy industries; and I do not think that bringing forward £5 million is really half enough to do the job I have just mentioned. Many railway schemes can be shown to show a profit on the capital invested, but I want to put forward another yardstick. With reference to the roads, all sorts of learned statisticians produce figures to prove that delay on the roads costs so many tens or hundreds of millions of pounds a year. How they make their calculations I have no idea, and whether they are accurate I do not know but those of your Lordships who happen to live in the Southern Region of British Rail will have noted the inevitable derailments which occur at intervals. Those derailments produce utter chaos throughout the entire suburban commuter system. If delays on the 64 roads produce these great losses, undoubtedly delays of one or two hours or more in the worker getting to office or factory must presumably produce similarly great losses.
I understand that these derailments are caused through mixing modern stock and old short-based goods wagons in the same goods train which is travelling too fast for the old ones. I should have thought that it would have been a very wise move for the Government to advance the railways sufficient money to get these old wagons replaced as quickly as possible. All this is grist to the mill of heavy industry and the community would benefit by the elimination of these appalling delays and frustrations, mental as well as physical, caused by not getting to work at the right time. For that reason, I suspect that this £5 million is quite inadequate. I even wonder whether British Rail have a programme to replace these wagons. If they have not, I am sure that it would be of great benefit to the economy for them to produce one very quickly and to place orders as soon as possible.
§ LORD SANDFORDMy Lords, I am grateful for the acceptance the House has given to this Bill and for the approval expressed for its purposes, particularly the purposes set out in Clause 2. I hasten to confirm, for the benefit of my noble friend that as the noble Lord, Lord Champion was good enough to endorse, the value of the projects brought forward as a result of this grant is not £5 million but £50 million. It includes (and perhaps my noble friend did not hear me say this) 360 new hopper wagons, which I think is what he was talking about. There are limits to the number of projects you can bring forward; nothing is gained by bringing forward projects which are not in themselves profitable and productive. Nevertheless, I am grateful for what noble Lords have had to say about that.
I am also grateful for what Lord Champion said about the new circumstances created by the coal strike. He is right to infer that the calculations and negotiations (to which I referred) in arriving at the £27 million and £7 million for the Railways Board and the National Bus Company respectively were calculations and negotiations undertaken and completed before the coal strike. The coal strike creates a new situation. The 65 noble Lord was right to remind us of the damage caused to the economy, and to the economy of these particular bodies, by that strike and of the additional difficulties with which it has involved them. The only point that I would make by way of conclusion is that that reinforces the importance of passing this Bill, whatever may happen in the future.
§ On Question, Bill read 2a: Committee negatived.