HL Deb 22 June 1981 vol 421 cc869-75

3.59 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)

My Lords, with the leave of the House, I should like to repeat a Statement made by my right honourable friend the Secretary of State for Transport in another place. The Statement is as follows:

"The Government have completed their examination of the report on main-line electrification. For this we have reviewed the prospects for the freight and inter-city businesses of the railway which could benefit from electrification, in order to judge the strength of their case for further, major investment. I had earlier met rail management and unions in the Rail Council to hear their arguments for further investment in the railway, and particularly in electrification, and to discuss the pressing need for increases in efficiency and productivity in railway operations, and I am seeing them again later today.

"This examination has had to take place at a time when the current financial position of the British Railways Board gives serious cause for concern. The trading position of the board has worsened during the year, and immediate substantial economy measures are now required. The Government for their part will continue to support the efforts of the board to meet the difficulties it has to face. But the Government will expect the industry's management and unions to play a full part in bringing about the necessary improvements.

"As far as the businesses are concerned, our aim is that as much freight as can economically do so should go by rail. But the future of the rail freight business depends crucially on reduction in its costs. If the efforts of the board to eliminate uneconomic capacity, and to secure new agreements on working practices, do not produce their results quickly, and costs are in consequence not substantially reduced then the rail freight business will continue to shrink. Only if these cost reductions are achieved will there be enough freight traffic on the railway to contribute significantly to the case for electrification. These are matters entirely in the hands of the industry, but the Government are bound to take account of progress on them in their further decisions on future investment.

"The Government's policy is that subsidy should go only to socially necessary passenger services such as the rural commuter services. The inter-city rail business, which could benefit from electrification, should be fully commercial. So far, in spite of large investment, the inter-city business has not made progress towards earning an adequate return on the assets employed. Immediate steps must therefore be taken to match the capacity offered closer to profitable demand. Given the necessary measures, services comprising the majority of inter-city business should be able to support new investment and win traffic on a commercial basis. I am accordingly asking the Railways Board to bring forward plans for an inter-city business that will achieve a fully commercial performance by 1985, and to start on the necessary changes immediately.

"Given the necessary will in all parts of the industry, these measures can succeed. There is no alternative if there is to be a healthy future for the large commercial railway businesses, which will benefit their customers and those who work in them, and justify a selective programme of mainline electrification. The Government are not prepared to give an unconditional commitment to the electrification of an extensive network and progress on electrification will depend on the achievement of the changes necessary to secure manpower reductions and improvements in productivity.

"I am therefore inviting British Rail to prepare and submit a 10-year programme of schemes for electrification only of those potentially profitable main-line routes where it is clear that the benefits could justify the investment. These should be presented together with the new commercial plans that are now required for the businesses. The approval of each successive electrification project will be conditional on the profitability of the investment in question and on the achievement of necessary improvements in productivity".

My Lords, that is the Statement.

Lord Underhill

My Lords, I thank the Minister for repeating that Statement. The Statement is very disappointing and very depressing. The final report of the joint study on main-line electrification undertaken by the Department of Transport and the British Railways Board was published earlier this year. This was the result of a three-year study. Therefore, the Minister already has all possible information. Is this study and the conclusions now rejected by the Government? Does the Minister also recall a debate in this House earlier this year when from all sides of the House there was general pressure for a bold scheme of railway electrification? Have the Government rejected commitment to a specific programme? Have the Government rejected a planned rolling programme? On page 3, paragraph 11.1 of the report, it is stated that a programme of electrification would require commitments from the supply industry and the workforce as well as railway management which the ad hoc approval of individual projects could not command. Have the Government rejected that part of the report?

Another clearly identified issue in the report asking for decision is "how much, how soon?". There is no reference to that in the Statement. The report considered in detail five options. The Government do not seem to have adopted any one of them. The section to which I have referred on "how much, how soon?" stressed that the best course would be to choose the largest and fastest achievable programme. The Government Statement refers to a 10-year programme of schemes only of potentially profitable main-line routes. The smallest programme considered by this important joint study was one to be completed in 15 years. Is this another example of rejection by the Government of the conclusions of the joint study? What is to be the criteria for profitability on the mainline routes?

Apart from the recession on the passenger side over and above rail closures in the rural areas which took place in the past, we now have rural bus services badly affected by the loss of profitable routes. This situation may be accentuated by the Transport Act of 1980. We also have the intense competition of the inter-city mail routes by the de-licensing of express coach services under the Transport Act 1980. Do not international comparisons of train kilometres per member of staff show that British Rail is among the best in Europe? Is it not recognised that there is already a commitment in this document by the rail unions to accepting changes that flow from any advocacy of new investment?

Has not British Railway's percentage of routes electrified at the moment been among one of the lowest in Western Europe? Is not the assistance from Government funds to British Rail among the lowest of any railway system in Western Europe? Do the Government accept paragraph 13 on page 69 which refers to the benefits which can accrue to our export performance from a bold and vigorous programme of rail electrification which would assist the electrical industry? After the Minister has met the unions and rail management today is there likely to be a more happy report given to the House?

4.6 p.m.

Viscount Simon

My Lords, I should like from these Benches to thank the noble Lord, Lord Bellwin, for repeating the Statement. I agree with the noble Lord, Lord Underhill, in that I find it disappointing. Perhaps the most surprising aspect in the Statement appeared quite early on when the Secretary of State, through the Minister, was telling us that he had had discussions with the management and unions and was having another meeting later today. I would have thought that in those circumstances it would have been very helpful to us if we had had the Statement after he had attended that meeting and seen how much progress had been made; otherwise we do not know what the situation is. As the noble Lord, Lord Underhill, reminded us, in the joint statement prepared previously the unions had committed themselves to help in bringing this development into operation. I should have thought it is a great pity that we have to take a Statement now.

Having said that, I would add only one point to what the noble Lord, Lord Underhill, said. Running a railway cannot be an operation without risk. If we are going to say that nothing can be done unless we know that this, that or the other will be possible we shall make no progress whatever. This is surely the experience of the business with which noble Lords opposite are very familiar. Recognising the difficult financial situation we are in, I feel that a more forward-looking view by the Government is called for.

In particular—and I think this echoes a question put by the noble Lord, Lord Underhill—may I ask what estimate is made about recovery from the recession? This is absolutely vital. This is a long-term investment, and I am sure that the Government do not believe that we are never going to get out of the recession. No doubt if the whole work could be carried out quickly it would not at this stage be profitable, but surely it must be based on the assumption that we are going to get out of the recession, that there will be a bigger demand and that that demand will finance the investment. I do not think that I want to say anything else at this stage. I look forward to hearing what the noble Lord, Lord Bellwin, has to say.

Lord Bellwin

My Lords, I listened carefully to what both noble Lords had to say, and I would respond first to the noble Lord, Lord Underhill, who asked: Was the study now being rejected? I say that, no, it is not rejected at all. I would remind him that the report was conditional, and it was conditional upon certain achievements; for example, on the continuation of the flourishing side of the inter-city programme and certain improvements. Unhappily, it has to be said that has not taken place, and at no stage was it said there would be a blanket commitment to invest come what may. Indeed, what we are now proposing is not the ad hoc approval of individual projects at all: it is a promise of a running programme provided that sensible conditions are met.

Indeed, I am sure the noble Lord will not need reminding that the Railways Board themselves in 1980 produced a report and a programme, and unhappily that, too, so far is not being achieved. What we are saying here is that we cannot go on as a country for ever taking on more public investments unless we can be sure they will be worth while. What we have done as a result of this statement is to take a very hard look at the big commercial businesses of British Rail that would benefit from electrification. I am referring to inter-city and to freight. It is no part of our policy that these businesses should depend on subsidy. Inter-city already demands very big investment and so does freight, but the sad truth is that inter-city has not been making progress towards full commercial viability, and this is something that we absolutely must have. The noble Lord asked: "how much and how soon?" I hope "as much as possible and as soon as possible", but it has to depend on the criteria I have referred to already.

The noble Lord, Lord Underhill, also asked whether the Government accepted that benefits could accrue to exports. Of course, the Government were themselves parties to the report and therefore we are not saying other than that this is a desirable step to take. This is what we want to see come about, but it must come about as we achieve a state of commercial affairs that we can afford and that we should be making progress, which unhappily we have not been making. He also referred, as did the noble Viscount, Lord Simon, to the meetings with the trade unions and management. The noble Lord said that it might have been better to have the Statement then. Well, my Lords, I make no comment upon that. My right honourable friend decided that this was the appropriate moment to make his Statement; I am repeating it here and I am glad to do that.

Lord Taylor of Gryfe

My Lords, one is tempted to engage in a railway debate concerning a Statement of this kind. I will refrain from that temptation but it may be that when the discussions with the Railway Council are completed it would be possible to go into these matters in greater detail because at that time we shall know the results and how far there is a commitment on either side to the electrification programme.

May I say just two things? First, the Statement in itself will cause great disappointment not only in railway circles but in the dependent engineering industries. There are a large number of industries which could have benefited substantially from this kind of investment, and therefore this ought to be looked at not only in a railway context but in terms of the whole problem of job creation in the heavy industries which are being diminished daily. In assessing the profitability or efficiency of the railways, would the Minister keep in mind that the railways are an essentially a service industry and their efficiency is bound to be affected by the downturn in the total economy? If 80 per cent. of the freight business is in coal, steel or oil for the power stations and all these industries are suffering severely, the railways have still to carry their standing costs. Inevitably that is reflected in the economy of the railway, so I hope that in any assessment of the efficiency that is made, attention will be paid to the total dependence of the railways on these other industries. There is very little they can do if those industries are depressed and they are carrying less freight traffic.

May I also suggest that if we are concerned about the efficiency of the railway company we are in a sense putting the cart before the horse because the efficiency of the railway depends upon increased investment. Consequently, if they were to get the increased investment they would reflect, I hope, improved efficiency. I support completely the determination of the Minister and the board to secure some relaxation of overmanning practices, and I hope that we will have the opportunity of returning to this matter.

Lord Bellwin

My Lords, if I may just make a brief comment on the observations by the noble Lord, Lord Taylor, that the railways industry is a service industry, indeed; but one has to look at the amount of investment already being made in terms of the external financing limits, which have in fact gone up to £790 million and for this year are to be £920 million. The Government have also increased the cash ceiling on the PSO grant for 1981 to £678 million, which is £23 million higher than that previously planned. So I think it is fair to say that the Government recognise the role of the railways and that this is really a problem with which everyone together is faced in trying to achieve what we are trying to achieve.

The noble Lord referred to the dependence of the railways on other industries. I think that is a fair comment, but it does not get away from the very basic fact that the freight business of the railways is very much hampered by gross overmanning. There is no point in trying to hide that, because British Rail's own studies have shown that freight train crews are among the least productive in Europe. That does not help anyone, and so we must work together with all concerned if we want to get to the point where we really can afford the investment that we all want to see.

Lord Cledwyn of Penrthos

My Lords, is the noble Lord aware that the inter-city lines are not necessarily the most important or potentially the most profitable? Is he also aware that Wales, which has been substantially deprived of a network of railways, is now dependent in the main on the line from Euston to Holyhead and that from Paddington to Fishguard? The line from Euston to Holyhead is one of the oldest lines in the country and is a link with Dublin. Would he say briefly whether, for example, the Government regard that line as being included in the category of those which should be electrified in the first tranche?

Lord Bellwin

My Lords, of course I cannot comment on an individual situation, but if the noble Lord would like me to write to him about it I would be glad to do so. One has to say that of course there are bound to be some lines which will be profitable and some which will not be, but the totality of it is that the inter-city trains are only running to 30 per cent. of capacity. This is a considerable problem that faces us again if we are all trying to get to where we want to be.

Lord Nugent of Guildford

My Lords, is my noble friend aware that we on this side of the House are much reassured by the Statement that he has made? Is he aware that, while we all recognise what an attractive idea it is to proceed with major electrification, both from the point of view of the efficiency of the railways and their operation and from the point of view of the supplying and contracting industries, unless the investment can show an adequate return, this is not going to benefit us as a country? This will be an additional burden for all of us to carry, and for all the earning industries of the country to carry out of their profits. We are much reassured that my noble friend, and his right honourable friend in the other place, are insisting that there should be shown an adequate return on these particular sections of electrification that are being proposed, because only in this way can we be sure that we are really going to benefit by it.

Therefore, may I ask my noble friend whether he is aware that we should expect him to produce progress reports, if this project proceeds—as I hope it will—showing how the prospect is turning out? We can then be sure that each section, as it does proceed, really shows an adequate return and that it is accompanied by firm commitments to reduce the heavy overmanning that we are all well aware exists throughout the railways. Therefore, will my noble friend assure me that those aspects will be closely watched?

Lord Bellwin

My Lords, I do not want to anticipate what might be said at the meeting to which I referred earlier. But it may be helpful to my noble friend if I say that it is intended in any case that there shall be discussion at the time of the annual report which the board brings out, and to look at progress that is being made and at projects that may be brought forward, subject to the conditions which I have mentioned. But I want to repeat, in case there should be any misunderstanding, that, basically, the Government are in agreement with the report in which they took part; it is only that that report was conditional and that we are anxious to see that we do not embark upon things that might lead us, as my noble friend has so rightly said, into even more difficulties than we have at the present time.

Lord Barnby

My Lords, I rise, stimulated by the intervention of my noble friend, because I urge that there be the most careful consideration given to the development of the proposal, and, particularly, to the largesse given by the Opposition. As a member of the first Electricity Board, which was charged with the standardisation of frequency of the country, I know that we then proceeded to urge the transfer of generating stations from coal to oil. One can see what a tremendous and tragic mistake that was. So in this case, I urge the most careful consideration of high expenditure on this matter.

Lord Bellwin

My Lords, I have nothing to add to that. I heard what my noble friend said.