HL Deb 15 December 1992 vol 541 cc498-514

3.7 p.m.

Report received.

Clause 1 [Power to act in relation to proposals for transfer of functions, property etc.]:

Lord Clinton-Davis moved Amendment No. 1: Page 1, line 9, after ("transferee"),") insert ("provided the conditions specified in subsection (1A) below have been satisfied,").

The noble Lord said: My Lords, in moving this amendment, which stands also in the name of my noble friend Lord Underhill, perhaps it will be for the convenience of the House to consider also Amendment No. 3. I suppose that it is all about level playing fields.

The strict effect of these amendments is to prevent the British Railways Board from using its powers under the Bill until the information which has been set out in Amendment No. 3 has been published. That information relates to the Government's timetable for privatising British Rail. It relates also, among other matters, to the costs incurred in pursuing those proposals. That is in paragraph (c).

I justify this requirement on a number of grounds. First, there is considerable uncertainty about the timetable adopted by the Government and that is creating a substantial number of major problems for the board of British Railways. The amendment addresses that point but it also addresses a wider issue. The uncertainty is also causing problems for others; for rail travellers. They are very unclear about what is happening. It is causing problems also for local authorities, which have to face decisions about whether new rail investment should be supported. They are very unsure about which way to turn. At a time when both central and local government are trying to encourage greater use of public transport, this uncertainty is less than helpful.

The amendment is also designed to enable the Minister to shed rather more light than he has done previously on what is at present a very murky area. If the Minister were to argue—I hope he will not—that there is no need for him to engage in that task, I would say that a look at Hansard for the Committee stage of the Bill would destroy any such illusion. In referring to the 50 or so expressions of interest that the Government have received from the private sector in running franchised services, the Minister said: A useful response has been received from a wide range of interested parties, including nearly 50 expressions of interest in running franchised services and about 10 in leasing rolling stock. My right honourable friend is now considering the responses received to that document and hopes to be in a position to announce early in the new year the first services to be franchised".—[Official Report, 30/11/92; col. 1218.] At col. 1240 the Minister had this to say: Turning to rail privatisation, while the Government have received a number of expressions of interest in response to their franchising consultation document, it is far too early to know whether that interest will develop. Nor can it develop properly until the details of the transfer powers and other provisions in the main legislation have been considered".

In my submission, that second contribution introduced some doubt about the nature of the response to the franchising document and to the Government's intentions in consequence. It would be helpful if the Minister were to update the House on the nature of the response to the consultation document and also explain when the Secretary of State will in fact be making his announcement. There is some little doubt about that. The original date was for the end of the year. Then it was to be announced early in the new year. Perhaps the Minister can clarify the position.

There is also a measure of uncertainty about the Government's proposals for access and charging. This is an area with potentially major ramifications for the viability and costs of the rail services. We know that Coopers & Lybrand was commissioned by the Government to undertake a report into this matter. Indeed it is referred to in the White Paper specifically and referred to further in the franchising consultation document which stated that the Government planned to make their decision on the principles known by the end of 1992. That looks as though it has slipped a little. I would argue that because of the fundamental importance of this issue the Government should consult on the outcome of the consultants' report before publishing any conclusions.

I referred to the next matter briefly during the Committee stage. It was reported in the Independent on Sunday sometime last month that the Government had decided not to publish the consultants' report and they planned instead to publish their own report setting out a financial regime for sharing track costs. I pressed the Minister on these issues at the Committee stage. I asked him to comment on the accuracy of that report, to indicate whether there was any reason why the Government should not publish the consultants' advice and to confirm that there would be full consultation on this aspect of the Government's proposals. That was set out at col. 1297 of the Official Report of the second day of the Committee stage. This is what the Minister said in response: Coopers & Lybrand have been providing advice to the department as part of the work on the charging regime. That work is still under consideration. The results will be published shortly".—[Official Report, 1/12/92; col. 1299.] Again, it would be helpful if the Minister could confirm precisely what is going to be published. Is it to be the Coopers & Lybrand report after all, or is it to be a government report? Will the publication be a consultative document or a statement of government policy? Will the document deal with access and charging principles? When precisely will it be published?

These are two examples only of the uncertainties surrounding the programme and intentions of the Government. They both arise from the Committee stage on 30th November and 1st December. There is also a good deal of media speculation about the Government's timetable in relation to the main legislation and the introduction of franchising. A good deal of this uncertainty, which is not helpful, could be overcome if in response to the amendments the Minister could give a statement of the Government's intentions. I would hope that the statement could cover the likely timetable for the main legislation, the publication of further consultation documents and reports and the implementation programme, particularly in relation to franchising and the establishment of Railtrack.

Finally, perhaps I may deal with the question of costs, which is picked up in paragraph (c) of Amendment No. 3. It is important that Parliament should ensure that the Government get value for money from their expenditure. At some date in the future the Government's work on privatisation will be scrutinised by the Comptroller and Auditor General and the Public Accounts Committee. But meanwhile we have a right to know what expenditure has been incurred and what is planned. Not only are we entitled to that, but the country is entitled to it, because the costs are likely to be very substantial. I beg to move.

3.15 p.m.

Lord Ezra

My Lords, I support the amendment. It will be well known to the House that there is a considerable amount of concern about the way in which the railways are to be privatised under the Government's announced intentions. A large proportion of the population are affected by the efficiency with which our system operates. Doubts have been expressed about whether the proposals announced in the White Paper will lead to an improvement and whether the additional investment which most agree is necessary will be forthcoming. I should have thought that this is one area of privatisation where the Government ought to proceed with a certain amount of caution and step by step. The further step proposed in the amendment seems to be one which would help to alleviate growing public concern.

Lord Underhill

My Lords, before the noble Earl replies perhaps I may add two brief points. Does he remember that the Central Transport Consultative Committee, which is a statutory body, issued a report in which it stated that the White Paper is a statement of intent rather than a document giving clear detail as to how proposals will work out in practice? That is what the amendment is seeking. Has the noble Earl seen today's piece in the Guardian about a report issued by the Confederation of British Industry? I have not seen the report. I can only refer to the statement in the Guardian. It says: The Government's proposals for rail privatisation lack clarity and detail". It goes on to say: Far from encouraging private sector interest, there is a danger that privatisation will be a blueprint for bureaucracy". Those statements add to what my noble friend said when he so comprehensively moved the amendment.

The Earl of Caithness

My Lords, as the noble Lord, Lord Clinton-Davis, reminded the House, we covered a great deal of this ground in Committee. The amendments have to a large extent been met by what my right honourable friend the Secretary of State has said; nevertheless, I am happy to take this opportunity to give the House the information for which the noble Lord asked. First, the amendment requires my right honourable friend to publish his proposals for the future of British Rail. He has done so in the White Paper, New Opportunities for the Railways, which sets out the Government's proposals for the privatisation of British Rail. In paragraph 99 the White Paper makes it clear that legislation will be introduced to implement the proposals. That answers the second element of the amendment.

The next part of the amendment asks for timetables. As your Lordships' will be aware, the White Paper was published in July. The main privatisation legislation will be introduced as soon as we are in a position to do so. The Government are of course anxious to make progress in improving the quality of services to rail customers and therefore to have the necessary legislation in place as soon as possible.

The next element of the amendment asks for timetables for the publication of any consultation documents and reports commissioned from consultants. We published the consultation document on the franchising of British Rail services in October. In November we published a consultation document on the future status of the British Transport Police. We shall be publishing tomorrow a document setting out our views on representation. We intend to publish our proposals on access and charging early in the new year.

My right honourable friend has just received advice from the Health and Safety Commission, following a study of the safety implications of our rail privatisation proposals. My right honourable friend will want to consider carefully the recommendations put forward. We expect to publish the advice in January. We intend to publish a policy paper on pensions early in the new year. We shall issue a paper early in the new year setting out our proposals for investment in passenger rolling stock. We aim to announce our preferred options for freight in the first part of next year, following Mercer's study into the restructuring of British Rail's freight businesses.

As your Lordships will realise from what I have just said, an immense amount of information has been made public, and there is still more to come. The next part of the amendment is about franchising. As we have previously made clear, we hope to make an announcement early in the new year about the first services to be franchised. We hope to let the first franchises from April 1994. The separation of BR's track and operational responsibilities will take place when we establish Railtrack which we are planning should take place on 1st April 1994.

Finally, I turn to the last part of the amendment which refers to expenditure on privatisation. So far as concerns BR's expenditure, we believe that there is appropriate provision in the settlement for BR announced at the time of the Autumn Statement, but it is for BR to decide within its EFL. Details of the department's expenditure in connection with the privatisation of British Rail are included in the Supply Estimates approved by Parliament. For the current financial year (1992–93) that sum amounts to £3.35 million.

Lord Clinton-Davis

My Lords, I thank the Minister for that helpful reply. He gave a number of important details which had not been given previously, and the House will appreciate that. We shall be referring to pensions in another amendment, but we shall wait with considerable interest to see what he says about that in the policy paper. To leave BR to decide how much will be spent on that does not carry us very much further. Do the Government have no idea from discussions that they have had with BR what the likely amount involved in the privatisation expenditure will be? Is the Minister unable to tell us? I am happy to give way to enable him to respond to that point.

The Earl of Caithness

My Lords, with the leave of the House as this is Report stage, on this occasion I hope that the House will permit me to say that it is entirely for BR to decide. Much of its expenditure will depend upon the timing of this Bill and the next.

Lord Clinton-Davis

My Lords, the public will want to know. Whether we will obtain that information from BR is open to doubt, but we shall return to that issue later. While the Minister has been helpful, I am bound to say that I do not believe the process towards privatisation is as easy as he suggests. We have a number of policy papers, consultation documents and so on coming. That indicates that the Government have not yet made up their mind about a number of critical issues, particularly in relation to franchising and the role of freight. However, as the Minister has said, we shall be able to examine that issue later. I thank him once again for his response. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 2: Page 1, line 9, after ("transferee"),") insert ("(and the transferee has agreed to fulfil the conditions specified in subsection (1B) below)").

The noble Lord said: My Lords, it may be for the convenience of the House if we discuss also Amendment No. 4. This is very much a probing amendment. It arises because of the deep anxiety that has been expressed about the possibilities of redundancy in relation to or in anticipation of privatisation. In recent weeks BR has declared 5,000 redundancies, and there are reports of a further 20,000. I hope that they will not come about, but nonetheless there are widespread reports published in the respectable press.

Against that background considerable uncertainties remain. They affect most of all the workforce and those who depend upon it. As one goes into this area of privatisation, there is no doubt that it is a very uncertain world indeed. We know that there has already been a setback in relation to Charterail. It was an unhappy episode. I shall not comment upon it further as the firm for which I consult represented Charterail. So I had better not say too much about that, but the fact is clear. It was a setback suffered not just by Charterail but by the Government because of their intentions to transfer more freight from road to rail. We shall no doubt return to that point in further debates.

One has only to see some of the comments made in yesterday's "Panorama" programme which spelled out those uncertainties. The noble Lord, Lord Ridley, expressed his deep anxiety about the private sector and the subsidies that it would require. He said that loss-making lines were not an industry but a service. One has a problem with a continually loss-making industry because at the end of the day one does not know how much public subsidy to give a private concern.

My noble friend Lord Underhill has already intervened in relation to the CBI report. I have not seen it, but it has been quoted widely. Against that background, doubts and uncertainties prevail. I cannot help feeling that in this area franchisees—if there are any who take up the franchises, and I suppose there will be—will be placed in a somewhat precarious position, at least for some considerable time. Uncertainties as to the amount of subsidies to be provided, whether or not they are to be monopolies and so on will add to those uncertainties.

I raise that issue in the light of a recent case far removed from the railways affecting Clark's ice cream company. It was the second largest ice cream manufacturer in the country having taken over part of the business from Lyons. The company recently collapsed. Some 128 of its employees discovered that the company could not meet the redundancy payments to which they were entitled. If that can happen in such a company, it can happen anywhere. It is therefore important that the Government spell out the assurances that they can give in order that the anxieties of many railway workers can be allayed.

The amendment is a probing amendment. We spell out in general terms one of the lines which might be taken. That might not be wholly appropriate but we wish to hear the Government comment not necessarily upon the amendment but on the spirit underlying it. I do not pose as an expert on redundancy issues, but I wish to know from the Government whether the ideas that I have expressed have any basis. If so, what do the Government propose to do in order to assuage the deep anxieties expressed across the industry? I beg to move.

3.30 p.m.

Baroness Denton of Wakefield

My Lords, the effect of the amendment, if it were directed at the substantive privatisation legislation, would be to require successor bodies to British Coal and British Rail to establish a fund of sufficient size to finance the redundancy payments which would have been available to employees of British Coal and British Rail had they not been transferred to successor bodies under that substantive privatisation legislation.

I have no objection to our discussing the subject today in general terms because even though it is not relevant to the Bill, I recognise that it is of genuine concern to all those who currently work for British Coal and British Rail. In the context of those privatisations, the Government attach great importance to the maintenance of employees' rights for those employed in the two industries. I can assure the House that all employees transferred under a transfer scheme in the course of the privatisation of British Rail and British Coal will receive the benefit of the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981.

The noble Lord, Lord Clinton-Davis, spoke of an industry which is far removed from either of those under discussion today. Again, I point out that the assurances on entitlements will be properly safeguarded. That relates to the post-privatisation period as with the privatisations of Telecom, water and gas. The Government will ensure that suitable measures are put in place at privatisation to safeguard future entitlements.

If this House felt that it wished to provide in legislation for the measure in the amendment the time to do so would be when the main privatisation legislation was presented. It is an important subject and I hope that my assurances will be of value to the noble Lord. I also hope that he will accept that the provision is not appropriate for the Bill before us today and that he will withdraw his amendment.

Lord Donoughue

My Lords, I wish to speak briefly about the British Coal part of the Bill. Anxiety about redundancies is central to the discussions about the industry even more so than about British Rail. There is much consideration about the future of the rail industry but the worry is that the coal industry may not have a future. We welcome the total commitment behind the Minister's assurances.

Although we understand that general assurances are all that the Minister can give at the moment, and while on the whole they are received properly in this House, they do not provide individual miners looking to their future with a contented night's sleep every night. Miners need to see the detailed assurances and guarantees and the detail that will operate after privatisation and subsequent transferences. I hope that the Minister, her colleagues and officials, will bear in mind that the sooner the detailed assurances can be provided the better that will be for the miners whose jobs are threatened. We must bear in mind that according to the Rothschild scenario redundancies lie ahead for at least 20,000 miners. Even since the report was announced, 10 per cent. of the mineworkers' force in this country have taken redundancy. The issue is central and although we are grateful for the general assurances, individual miners need to see the specific guarantees.

Lord Clinton-Davis

My Lords, I am grateful to my noble friend for his comments on the coal industry. Sadly, both industries are affected by substantial redundancies. I echo his point that those who work in the industries should know precisely where they stand. However, the Minister has given a helpful reply and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 3 and 4 not moved.]

Lord Clinton-Davis moved Amendment No. 5: Page 1, line 14, at end insert: ("(1C) In the exercise of his powers under this section, the Secretary of State shall require transferees to guarantee the continuation of pension rights and concessionary arrangements for both existing and retired employees; and such guarantees shall apply in the event of subsequent transfer of the function of the relevant corporation to successive transferees.").

The noble Lord said: My Lords, the amendment deals with pensions. In a previous reply the Minister indicated that the Government will soon be publishing a document dealing with the situation. Although similar amendments were debated in Committee we thought it appropriate to table these amendments because the Minister's replies on that occasion were in some respects unsatisfactory and vague. We thought that we should give the Minister the opportunity to clarify the position. Perhaps she can do so notwithstanding the document which is to be produced on the rail industry. We have heard nothing about the coal industry in that regard and my noble friend may wish to intervene later.

In Committee the Minister was good enough to say that although she did not consider the Bill to be the right vehicle for discussing the issue, it was a matter of moment. Hundreds of thousands of people are likely to be affected by the pensions situation, and she did not consider it an unreasonable subject to be addressed in Committee. Indeed, nor could that be the case on Report.

The matter is important as regards potential franchisees. They must know where they stand in relation to the pension rights of others and their obligations in that regard. In preparing for privatisation, it is part of the job of both British Rail and British Coal to address the issues to the satisfaction of their employees past and present.

The noble Baroness said on 30th November at col. 1226 of the Official Report: As was the situation with previous government privatisations, we will ensure that the pension entitlements of existing contributors and of past employees of both industries are properly safeguarded". Ministers have, of course, said that before. The noble Baroness then continued: There would be no circumstances in which a potential purchaser of the coal industry could be attracted by the potential of any predatory gains from the pension funds. Such an option could not be countenanced by the Government". I hope that she can give chapter and verse as to what the Government will do when the situation is not only well on the road towards privatisation but when the industries have been privatised and the original franchisees or purchasers are no longer holding their purchase but have transferred it to some other entity. How can the Minister give the assurance she gave on 30th November? But I hope she will be able to reassure us.

Obviously no purchaser is going to say, "My motive in purchasing part of the coal industry or the rail industry is so that I can make a rich picking". A purchaser is not going to say that. But if the opportunities are there and if there are no satisfactory constraints, I believe that that will not be far from the minds of some. Not all people are honourable. Previous assurances have been given in relation to other privatisation measures. When British Rail hotels and Sealink were sold off I pointed out that the pension arrangements were far from satisfactory following those privatisations. The Minister said, again on 30th November, at col. 1227: The noble Lord earlier raised the subject of pension rights of employees of British Rail hotels and Sealink. We are aware of the arrangements that have been made and they are being taken into account in the arrangements that are currently under consideration for the future of the pension rights at privatisation under the present proposals. Those arrangements have been noted". Implicit in that is a concession that the arrangements that had been made previously in relation to those two areas of privatisation, British Rail hotels and Sealink, were less than satisfactory. Otherwise the Minister could not have said that. That being the case, how can we be assured that the Minister is capable of giving the kind of assurances that she has given, and that they will be translated into practice? That is a matter of considerable moment.

The Minister then referred to the matter of advice. She stated at col. 1227 of the Official Report: British Coal and British Rail will wish to be well advised on the crucial issue of pensions".

I entirely agree with her on that point. But presumably the best possible advice was available when schemes did not work out as well as they should in previous instances. Can we be assured that the advice will be sought elsewhere than from those particular precedents? The Minister said later in reference to another point I made about converting the British Rail pension scheme into an industry-wide scheme that that was one of the options that the Government were currently considering. Presumably that will be dealt with in the document promised by her colleague, the noble Earl, Lord Caithness. Can we be told something about the other options that are under consideration? How many are there and what in general terms do they amount to?

There is another issue which we have raised previously that is not covered in this amendment. I shall press this point again because it is a matter of considerable importance. We firmly take the view, in the light of circumstances that have arisen in the fairly recent past, that pensioners or potential pensioners should be entitled to a proper share in the administration of their pension funds. I hope the Minister can elaborate a little more on this matter than she was able to do last time, particularly as regards the coal industry because, as I have said before, there appears to be no document on this issue as regards the coal industry—perhaps I am anticipating something—although we have heard that a document will be issued shortly as regards the rail industry. I beg to move.

3.45 p.m.

Lord Donoughue

My Lords, I wish to speak in support of my noble friend Lord Clinton-Davis. I apologise if my throat and voice finally give way before I finish speaking. As regards the coal industry, it is the widely accepted view that pensions must have statutory protection in the light of much recent experience. This will, of course, be subject to the Government's own general decisions in the pension field and we await the findings of the Goode Committee. However, it will be some time before that committee reports. I believe it has taken evidence today. Coalminers will wish to receive assurances well before the committee reports. We need guarantees on existing benefits for existing retired members of the industry and we need guarantees that present working contributors will continue to accrue rights even if they are, as miners, transferred elsewhere within the industry.

I referred to an issue in Committee to which the Minister did not respond—a statutory guarantee as regards actuarial surpluses. We need such a guarantee. The House is probably aware that the surpluses in this area are quite huge but a pension holiday has been given to British Coal. It would be helpful if it was made clear that that pension holiday will not carry over to transferees. We all understand the problems the Minister faces in being specific at this stage and she has been very helpful, but it would be even more helpful if she could assure us that future arrangements will take account of this matter.

I wish to stress again what I said in connection with a previous amendment. The assurances are general but these are issues of great concern that can be resolved only when the detailed arrangements are available. We need detailed guarantees on pension benefits and on the provisions for change in pension arrangements. We need guarantees on surpluses, which I have just mentioned, and on the governance of pension schemes to ensure that the governance of pension schemes cannot be altered later to the detriment of schemes' members. I trust that the Minister and her colleagues will ensure that these areas of concern will be addressed and that the suggestions and remedies we have proposed—we proposed a number in Committee —will be positively considered.

I wish to pick up the important point raised by my noble friend Lord Clinton-Davis about subsequent transferees. It is no good having guarantees which operate only at the first stage because after selling on there would be no guarantees. It would be helpful if the Minister could assure us that all guarantees will apply to all subsequent transferees down the line.

Finally, the noble Earl, Lord Caithness, told us that a number of announcements were to be made about rail. He said that the Government will publish a statement on rail pensions in January. Will it apply just to rail pensions or will it also cover coal pensions? If it does not cover coal pensions, will the Minister give us some idea when there will be a statement on coal pensions?

Lord Ezra

My Lords, I should like to support the amendment. Although we raised the issue at Committee stage it is of such importance that I believe that we are justified in raising it again at this stage. In recent times there has been considerable debate about the validity of pension schemes, and the schemes which we are considering are very large indeed, affecting several hundreds of thousands of people.

My experience is related to the coal pension schemes. I can say that during the whole of the life of the schemes, from their inception in 1947 right up to the present, both contributors and pensioners have had complete faith in both the staff and the mineworkers' schemes. We are entitled to ask the Government that, in their privatisation measures for the coal industry, they ensure that that confidence can be maintained, bearing in mind in particular that, in the case of the coal pension schemes, a vast number of people are already pensioners and depend on regular receipts from that very well managed scheme for their livelihood. We are not talking about 10,000, 20,000 or 30,000 people; over half a million people are involved.

Therefore, I should like to press the Minister to give us an assurance that when the legislation comes forward it will include some statutory provision to support the interests of both contributors and pensioners in the schemes.

Lord Ewing of Kirkford

My Lords, before the Minister responds perhaps I may detain the House a little longer. I apologise to your Lordships, because I come late to these debates. However, for many years I have had a strong interest in public sector pension schemes. In my days as an employee in posts and telecommunications, when that industry was part of the Civil Service, the pensions were non-contributory. When it became a public corporation pensions became contributory. When British Telecom was privatised during my service in another place the division of the pension fund caused deep concern. It still causes concern because British Telecom has taken a pension contributions holiday over the last two years while employees have continued to contribute.

The point that I wish to make, and which I am sure the Minister will take on board before she replies, is that in British Coal, which is being franchised, and British Rail, which is being privatised, we are dealing with industries which are in desperate need of massive investment for modernisation. That was not true in the case of other privatisations which have taken place, whether British Gas, British Telecom or British Airways. The need for massive investment was not as apparent as it is in the case of British Coal and British Rail. Against that background of the need for massive investment there will be a temptation for those taking over British Coal on the one hand and British Rail on the other to try to gain access to the resources of the pension funds in order to fund the modernisation that is so desperately needed. If any two industries ever needed their pension funds protected they are most certainly British Coal and British Rail. I hope that the Minister will take that on board in her reply.

Baroness Denton of Wakefield

My Lords, I thank noble Lords for their input on this subject. The matter of pension rights is not directly relevant to the Bill, but I recognise the real anxiety, both among those whose pensions and concessions will potentially be affected and among Members of this House, that those should be safeguarded. I assure the noble Lord, Lord Donoughue—and I hope that his voice lasts until the end of this Report stage, for the benefit of all—that no one recognises more the need for reassurance and for individuals to know what the future holds for them as soon as possible. However, I do not believe that we help those individuals by indulging in speculation in advance. I believe that in this situation it is important to bring the coal review to the House as soon as it is reasonably possible to do so.

The noble Lord, Lord Clinton-Davis, asked for assurances. I am sure that he appreciates that on this occasion I can give only a general assurance and that specific matters will have to wait until the detailed arrangements on these matters are brought forward with the main legislation. The noble Lords have given us a full picture of the matters which are of concern and to which they will draw our attention when the main legislation comes forward.

Perhaps I may also assure the noble Lord, Lord Clinton-Davis, that the Government take note of the experience of previous privatisations and use that knowledge to the benefit of restructuring. I endorse the comments of the noble Lord, Lord Ezra, concerning the respect for the British Coal pension fund and the unique relationship between the number of pensioners and the number of working miners, which is very special. Those factors are well known and are borne in mind.

I can tell the noble Lord, Lord Ewing, that we shall take account of the experience of the past. In the case of the privatisation of water there was a need for modernisation, and therefore some similarity with the present case.

Perhaps I may draw the attention of noble Lords to the fact that my honourable friend the Minister for Energy and my honourable friend the Minister for Public Transport have on several occasions given assurances that great attention will be paid to safeguards—assurances which my noble friend Lord Caithness and I have repeated here. The pensions of present contributors and former employees will be safeguarded at privatisation. In due course it will be for noble Lords to examine the strength of those safeguards when they come before the House.

If the findings of Professor Goode's pensions law review committee are available when the matter is brought before the House, then obviously they will be taken into account. Perhaps I may mention for the benefit of the noble Lord, Lord Donoughue, that the paper mentioned relates to rail only and not to coal, as he would expect. We have ahead of us, first of all, the coal review and then the issues which follow behind.

I hope that those assurances and the fact that we recognise the matters which are of concern to noble Lords will make it possible for them to withdraw the amendment.

Lord Clinton-Davis

My Lords, once again I thank the noble Baroness for her reply. I also welcome the intervention in these debates for the first time of my noble friend Lord Ewing whom I am delighted to see, as a very good friend of mine, on these Benches.

The Minister may rest assured that when the main Bill comes before the House we shall examine the strength of the safeguards to which she referred. On this occasion the Minister will have a great deal of time before we debate that Bill in this place and we shall wish to see the clearest possible assurances and details so that there can be no room for doubt on the part of pensioners, future and current.

In those circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

4 p.m.

Lord Clinton-Davis moved Amendment No. 7: Page 2, line 15, at end insert: ("(4A) Notwithstanding subsection (4) above it shall be the duty of the British Railways Board to write to the Secretary of State and to any authority calling for bids for franchises of functions currently run by the British Railways Board, detailing proposals—

  1. (a) for the organisation of its functions, property, rights or liabilities to enable it to bid for the award of any franchise under privatisation proposals; and
  2. (b) for the running of any service being offered for franchising.
(4B) Any proposals made under subsection (4A) above shall be considered by the franchising authority as bids for the franchises unless the Secretary of State makes an order that they shall not be so considered. (4C) The power to make an order under subsection (4B) above shall be exercised by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament.").

The noble Lord said: My Lords, this amendment deals with the duty of the British Railways Board to respond to the bids for franchises that are called for by the Minister. We have discussed this matter in some depth, but I found the replies of the Minister less than satisfactory.

There seems to be a colossal inconsistency between the Government's position in relation to the right of a public authority to be able to tender for agreements in this respect and its rights in other respects. Let us take the case of London Underground. London Underground has been operating competitive tendering in engineering and support activities for many years. Until last year, there was a joint working party between management and unions to review the position. The public sector won two out of four contracts outright in, I think, 199I—certainly it was around that time.

Some three-quarters of contracts put out to tender in local government and in the health service have stayed in-house. The Government have not objected to that. They have said that they want value for money. But somehow in this case the Government have refused—I shall come in a moment to whether or not they are entitled to do so—or have purported to refuse British Rail the right to make a tender bid.

Research was undertaken recently at the London Business School which showed that for local authorities which took on private contractors for refuse collection ahead of compulsory competitive tendering, after an initial saving the costs rose considerably. The argument that is adduced is that without an in-house service to sustain competitiveness, contractors are free to take advantage of the authorities and there is a case therefore for maintaining an in-house service so as to keep sufficient technical expertise to be able to monitor and evaluate contractors. So how would British Rail be able to go about that in the future? After all, even on the Government's showing, it will continue to be a powerful entity.

In my judgment the Minister has failed to address three essential points in the response that he made to the amendment when we discussed it at Committee stage. He confirmed that British Rail would continue to operate services either where franchising is not being introduced or where the franchising authority rejects bids from the private sector. He said that on 30th November (Hansard, col. 1232).

So there is a danger in that scenario that British Rail will become—I used this phrase last time—an operator of last resort. It is likely that the last areas to be franchised will be those with least commercial opportunities. That is very clearly the view of the Minister's noble friend Lord Ridley, who said last night in the "Panorama" programme that the Government had picked all the plums out of the privatisation pudding and British Rail would continue as a loss maker. He said that he did not know the extent of the subsidies that would be required. I have not quoted him exactly, but that was the purport of it. The Confederation of British Industry added in the programme that the rail proposals lacked clarity and detail. There can be no greater example of that than in this instance.

So private sector bids are less likely to be acceptable in the circumstances I have described in relation to those areas with least commercial opportunities. It looks as though in those circumstances British Rail will be left with the prospect of operating difficult services but with no incentive to develop and improve them.

The Minister went on to say (at col. 1232): Of course, it will be open to the franchising authority to reject all bids from the private sector should none represent value for money, in which case BR would continue to operate the service". So he rather corroborates the point that I have just been making.

What the Minister failed to explain is how the franchising authority would reach such a decision if British Rail were not in a position to bid. There is no single value-for-money factor which can possibly be used. If BR were in a position to bid it would automatically provide a benchmark against which private sector bids could be considered. It would provide British Rail with an incentive to prevent it becoming an operator of last resort.

It seems that the Minister is objecting to BR bidding for franchises because it would limit the opportunities for private sector involvement. How does he reasonably sustain that posture? BR's monopoly, about which the Government are so concerned, would no longer exist. If the private sector bidders are as innovative and imaginative as the Minister considers, the franchise authority would accept their bids rather than those of British Rail. If the private sector's bids are not as attractive as those of British Rail, why should not British Rail continue to operate the service? I think that the Minister has to reply to those points.

My final point relates to European Community law. Is it in fact consistent with Community law that British Rail can be excluded from this process? Is it consistent with the law relating to public procurement, or indeed with competition law? Perhaps the Minister would let us have his views on that point. I beg to move.

The Earl of Caithness

My Lords, I was very surprised to see this amendment on the Marshalled List. As your Lordships are aware, an exactly similar amendment has already been discussed at some length. The purport of this amendment is exactly the same as Amendment No. 5 moved at Committee stage. We spent a lot of time on it in Committee. The noble Lord has spent nearly eight minutes on it now. It was negatived at Committee stage and it rather goes against the Standing Orders of the House that we have to discuss the matter again. The noble Lord has brought no new issue before us.

I have explained that our policy for the railways is genuinely one of privatisation. We see very real benefits to passengers from the transfer of responsibility for running services from the public to the private sector in terms of new management, new approaches, fresh thinking, greater responsiveness to passengers and greater efficiency. It is our policy that BR should not be allowed to bid for franchises. It amuses me that the noble Lord, Lord Clinton-Davis, now calls in aid his old enemy, the noble Lord, Lord Ridley. For years I suffered in the Department of the Environment when he was a commissioner. My noble friend Lord Ridley could do absolutely no right in this world. It now appears that he can do no wrong.

Through franchising we intend to seek the greatest possible involvement of the private sector in the provision of services while retaining a necessary and clearly defined role for the public sector in the form of the new franchising authority, in specifying the services that are needed, on setting minimum quality standards and in paying subsidy. I have made it clear before and do so again that we will continue to have subsidy available for franchises where necessary. There is no reason to suppose that franchising will be restricted to profitable or to commercially attractive services.

I believe that it is misconceived to think of BR submitting a bid for a franchise as a public sector body. Of course the franchising authority will be able to look at the cost of BR continuing to provide a service, and we have made clear that it will not be obliged to grant a franchise should it not deem any of the bids it receives to offer good value for money. If no franchise is granted, BR will continue to run the services until a successful competition has been held.

The nub of the question comes down to one of whether BR should be allowed to bid for franchises. The noble Lord, Lord Clinton-Davis, says that it should. We wish to involve the private sector as much as possible. That is for the benefit of the consumer. That will be for the benefit of the railways. And that is why—

Lord Clinton-Davis

My Lords, before the noble Earl sits down—

The Earl of Caithness

I have not sat down.

Lord Clinton-Davis

I am sorry, I thought that the noble Earl was about to do so. He looked as though he was gathering his papers in the way that the noble Baroness, Lady Thatcher, used to gather her handbag, and I was a little worried. Will he deal with the point about European Community law, to which I addressed some comments?

The Earl of Caithness

My Lords, so far as I am aware none of our proposals contravenes European Community law, but I will look into the specific point.

Lord Clinton-Davis

My Lords, I was right. The noble Earl was about to sit down; I therefore seized my opportunity. The noble Earl has neither addressed the issues any better today than previously nor has he begun to confront them. He just ignores the evidence and the inconsistencies. The inconsistencies are apparent to all because they have arisen right across the local authority sector, right across a number of public authorities, including London Underground and many others, and he has given no compelling or convincing answer why British Rail should be excluded.

The only thing one can say is that the Government are wracked with dogma, and not for the first time. I am surprised that the Minister can say nothing more about the issue of European Community law. He says he believes—he may even be convinced himself—that there is nothing in the point that I have raised. But again he has not argued the point. It is pure assertion that he is satisfied that European Community law is met. The House is entitled to more information from the Minister than we have received.

One cannot satisfactorily resolve these issues in oral questions because the Minister cannot be sufficiently probed on such occasions. Perhaps the Minister would care to write to me on the issue. It is of considerable importance in relation to public procurement law and in relation to competition law. I am not satisfied with what the Minister said. I hope that he can indicate with a nod of the head—because without the leave of the House I think that is all he can do—or perhaps with the leave of the House answer the point I have made and say whether he will correspond with me about that issue. May I give way to the Minister on that point before I sit down?

I am disappointed. I get letters like confetti from the Minister. Why I cannot get one on this little occasion I have no idea. Why is he so unforthcoming? The law can be stated for him. He has the legal services available. I hope that he will reflect further on the matter. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.