§ 5.16 p.m.
§ House again in Committee on Clause 1.
§ Lord Donoughue moved Amendment No. 2:
§ Page 1, line 8, after ("should") insert ("subject to subsection (1A) below").1209
§ The noble Lord said: It may be for the convenience of the Committee if we deal also with Amendment No. 15. The amendment goes to the heart of our worries about this privatisation paving Bill in so far as it relates to coal. It calls basically for a statement from the Government on their energy strategy and the role of coal within that strategy. We on this side of the Committee have called for such a statement many times before. The Government have not responded. They did not have an energy strategy. I felt that at times they seemed almost proud not to have an energy strategy. They had ideological postures: privatisation was good and everything should be left to market forces.
§ The Government had political prejudices against the mine-workers' union, but they had no energy strategy. Today we see the consequences of that policy vacuum: the looming destruction of the coal industry at great economic and social cost with no perceiveable compensating benefits. We see 100,000 people unemployed in mining and related industries in the coming year; we see our import bill on energy rocketing; we see gas demand and prices rocketing, and why? That is what the amendment is probing—why?
§ The only explanation we have received is the alleged free market in coal. We know that there is no free market in coal or in UK energy. The market is structured and biased against coal, and that has been caused primarily by the botched job of privatising electricity. There I agree wholly with what was said a little earlier by the noble Lord, Lord Peyton.
§ We have that policy vacuum: a free market which is not a free market but a market biased against coal. That all needs re-thinking and we need a clear statement on the Government's views. The basis of that re-thinking should be that as a nation we should not, first, abandon the long-term security of domestic energy. The underlying basis must be the long-term security which is provided by our huge coal reserves which constitute about a half of the reserves of the whole of the European Community. Prudently, we should not expose ourselves to the price fluctuations of foreign suppliers and the price rises if sterling depreciates, as we have learned it does periodically.
§ Surely, a small premium is worth paying to secure that, and within a few years it might not be a premium at all. It would be a premium to ensure the benefits of security of supply, the benefits of stability of price and the economic benefits that will arise for the balance of payments and for the public sector borrowing requirement. Those are the bases we hope to hear at some point are behind the Government's thinking in approaching privatisation.
§ I wish to draw the Minister's attention to the fact that the amendment also specifically refers to redundancies. I should like to ask the Minister about the number of miners currently being made redundant during the inquiry into coal. We hear quite appalling reports of pressure by the management of British Coal on the miners to take their redundancy money and run now, coupled with the threat that if they do not the terms will be reduced. This is before the inquiry has 1210 reported and I believe that it is quite outrageous. Will the Minister help us by informing the Committee how many miners have been made redundant in the 31 named pits—helpfully broken down into the 10 apparent lost causes and the other 21—since the inquiry was announced? Will she take steps to inform British Coal that it must stop intimidating miners into taking redundancies before the report has pronounced on the future of the British coal industry?
§ To return to the central thrust of the amendment on energy strategy, it is surely very positive and gives the Government an opportunity to set out their alternative strategy. Such an alternative strategy is perfectly possible. It should be based on the balanced mix of sources and the security of supply that I have mentioned. It should require the electricity generators to have contracts which preserve a viable coal industry for this country as part of that balanced mix of supply. It should stop the electricity distributors investing in higher cost gas generation; and it should stop the electricity distributors from passing on higher costs to the consumers. That involves the role of the regulator. Also, the regulator should be required to ensure that generators seek the cheapest source and such a strategy should have a depletion policy for our indigenous gas and oil reserves.
§ That seems to me the basis of such a strategy and it will, of course, have to face the fact that Britain's energy self-sufficiency ceases within a decade. It should be tailored to the European energy strategy and the Committee should note that the European Commissioner for Energy has expressed deep concern that Britain, with the largest European coal reserves and the most efficient production, is contemplating closing that down.
§ Such a strategy should avoid the contemplated wanton destruction of our coal industry; it should avoid the wanton depletion of Britain's gas reserves, with gas, a premium fuel, quite wrongly in my view used for bulk electricity production. It should avoid the wanton damage to the lives of all those people who work in the coal industry and related industries. Such a strategy must, I believe, be in the nation's interests and in the Government's interests.
§ The Minister in reply may say, "Well, all of this is before the inquiry". That would have been acceptable, and I should have spoken differently today and possibly have withdrawn the amendment if the Government had withdrawn the coal aspects of the Bill. But we must insist that, because the Government are proceeding with the Bill, it implies that they have an energy strategy, a coal strategy that lies behind it. Either they have one—and we should like them to pronounce on it—or they have a secret strategy and we should like it to be revealed. We want clarity on the energy strategy and the coal strategy for this country. The amendment presses for such clarity. I beg to move.
§ Lord Ezra
I support the amendment. I have for years felt that we should have a more coherent energy strategy than we possess at present. There is a policy for the different energy sectors, but when put together, regrettably, the policies do not add up to a strategy. There is or has been until recently a policy towards 1211 coal, but now that is being reconsidered. There is a policy towards nuclear energy; the gas electricity markets are regulated in different ways and the oil industry, of course, moves freely throughout the world. So in each sector we have a different approach.
Britain, as a major producer of all forms of energy, possessing a wide range of energy skills, should long before now have had a broad strategy. I am not talking about a detailed plan, a year by year objective or dividing up markets. I am talking about broad strategic objectives.
We hope that the coal inquiry, which has now been expanded into a general energy review, will give us some of the answers which we have sought by putting forward this amendment. Indeed, the amendment gives further support to the views which we expressed at an earlier stage when we sought to suggest—but did not obtain the vote of the House—that it might have been more sensible to come back to the Bill when we knew what the strategic thinking was. We should know that in a matter of two to three months. I hope that the noble Baroness, when she replies, will enlighten us as to the range of subjects which are likely to be covered in the strategic review and whether they encompass the issues set out in the amendment.
§ Baroness Denton of Wakefield
The amendment was tabled against a very different background from the one which exists today. Since the amendment was tabled the President of the Board of Trade has announced the terms of reference for the coal review. I hope that I shall be able to persuade the Committee that it covers the areas in which Members of the Committee are interested. I should not wish to anticipate the findings of the review. It is full and wide-ranging. It is considering views and evidence on the future of each of the 21 pits included in the context of the Government's energy policy, including the consequences of that policy for British Coal and the employment prospects for the industry.
The review will decide whether the case for closure at each of the pits has been fully made and whether it is sensible to mothball some of them. It is considering whether the market prospects for coal have been correctly assessed and, in consultation with the Director General of Electricity Supply, whether any company is abusing its position in the market place. The review is looking at the level of coal stocks, both at the pithead and the power station, and whether plans to run them down are sensibly phased. It is considering the consequences of the switch to gas in power generation and the relative costs of gas and coal-fired generation. It is looking into the latest estimates of likely reserves of gas. It is considering the present scale of gas generated power stations in production, being built and in the planning process.
In that connection the review is examining the use of the consent powers of the Secretary of State for Trade and Industry under the Electricity Act 1989. The review is also considering the implications of the statutory obligation on electricity suppliers to purchase non-fossil power, including that from nuclear sources.
The review is exploring the opportunities for the private sector in the production of coal. It is 1212 considering the existing and anticipated level of imports and their wider economic implications. The review is also giving due regard to Scottish and Welsh interests and it is also giving consideration to the particular needs of Northern Ireland. I think the Committee will agree that this constitutes a comprehensive review.
In addition, I should add that the President of the Board of Trade has appointed outside consultants to report on the viability of the 21 pits; to report on the prospects for British Coal, including any alternative markets that may exist for coal; and to comment generally on the competitiveness of British Coal as an organisation. The team conducting the review has been established as a new and independent entity within the DTI. As has already been said today, evidence will be published to the fullest extent possible except where the information provided is confidential for commercial reasons. The President of the Board of Trade is also giving as much assistance as possible to the inquiries of the Trade and Industry and Employment Select Committees.
A White Paper will be published early in the new year setting out the results of this comprehensive review in the context of the Government's energy policy. It will make clear the consequences of that policy for British Coal; the implications for individual pits and the employment prospects for the industry. The President of the Board of Trade will present the conclusions and the Government's future decisions to Parliament, which will of course be able to debate the issues fully.
The noble Lord, Lord Donoughue, raised the specific issue of voluntary redundancies since 13th October. I understand that there have been 4,614 voluntary redundancies since that date. Of these, 1,776 were at 10 pits. I am sorry that I do not have the figures for the other 21 pits but I shall obtain them and write to the noble Lord. I heard the noble Lord's comment on the situation of the miners. I suggest that he underestimates the ability of the British coal-miner to make his own decisions. I believe that what I have just described is a sensible and constructive approach to the coal industry's needs at this stage and that the amendments before us suggest a more fixed position. I hope I may ask the noble Lords concerned to withdraw the amendment and await the results of the review in due course.
§ 5.30 p.m.
§ Lord Jay
Before the noble Baroness sits down I hope she will answer my following question. As she referred to the wider economic implications of these policies, have the Government seriously considered the point that I raised on Second Reading; that is, it is not merely our future balance of payments security but also our defence security that must he considered in conditions where nearly 80 or 90 per cent. of our electric power supplies have become dependent on oil rigs in the North Sea and gas installations and on oil tankers bringing oil to this country from far afield? In the light of our experiences in the past two wars—I do not propose to argue this now—has that matter been 1213 considered seriously with defence advisers as well as economic advisers either in the review or in the Government's own internal discussions?
§ Baroness Denton of Wakefield
I am pleased to assure the noble Lord that it is the Government's policy to ensure adequate secure and diverse supplies of energy. The noble Lord's points on Second Reading were taken into account.
§ Lord Donoughue
I thank the Minister for producing the figures on redundancies, which were helpful. I believe they have not been published elsewhere. Does she acknowledge that those figures are worrying and that that number of redundancies is nearly 10 per cent. of the entire workforce? What the Minister has said is that nearly 10 per cent. of the workforce has left since the inquiry into the future of the workers was announced. If she accepts what I have said—my remarks are based upon good information from the mines—that a large number of these miners are leaving under circumstances that they consider intimidatory on the part of the Coal Board management and they are threatened that if they do not run and take their redundancy now they will receive less in future, does not the Minister agree that such a situation is intolerable? Does she not accept that the Government should publicly state that an inquiry is being held into the future of the coal industry and one possible outcome of that inquiry, we hope, is that there is a good future for British Coal and a good future for British miners in it? It is quite intolerable that British Coal's management should attempt to pre-empt the outcome of that inquiry and to secure the results of the closures that were originally intended before the inquiry was reported.
§ Baroness Denton of Wakefield
There has been enormous media coverage of the coal issue and of the review. I do not believe that British miners are unaware of what is happening in their industry. It is not for me to comment on their individual choices.
§ Lord Donoughue
I wish to consider further what the Minister has said in reply to this amendment, although much of what she said was helpful and constructive. I may wish to return to this matter on Report. For the moment, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Clinton-Davis moved Amendment No. 3:
§ Page 1, line 8, after ("should") insert ("subject to subsection (1B) below").
§ The noble Lord said: In moving Amendment No. 3 I wish to speak also to Amendment No. 16, which is the amendment which sets out the essence of our case. The Government are being extremely optimistic against the weight of so much evidence from independent sources and from people with substantial consulting practices of repute as regards the merits of their proposals. What we are seeking to do here is to determine whether further information and evidence should be forthcoming from the Government before this paving Bill is adopted by this Chamber.1214
§ I have said that the Government are being optimistic and I suggest the difference between optimists and pessimists is that the optimists are not really in a position to know the facts. I do not think the Government know the facts, or have revealed the facts to the public, if they know them, about their real intentions. Our case is that the proposals of the Government for privatisation cannot be seen in a vacuum. They have to be viewed in a way that enjoins the wider issues of transport policy. The White Paper has made no effort at all to set out the role of the railways and how that role is to be fulfilled in the context of what we have called for; namely, an integrated transport policy.
§ I know the Minister's predecessor did not believe in an integrated transport policy. He professed not to understand what it meant. But it is something that most people in all sectors of the transport business understand perfectly well. It is known in the European Community and I hope this Minister will not share the view of the Minister's predecessor. We are saying that the objectives, including the environmental and safety ones that the Minister intends the railways to meet, should be set out. We also say that the railway programmes and projects he believes will be needed to meet those objectives should be set out.
§ Perhaps I may point out that there is an error in paragraph (b) of Amendment No. 16, which should read "he will need to meet". I apologise if that is our fault, but I believe that it is self-evident.
§ The third strand of the argument is that the financial and other support which he intends to provide towards the achievement of those programmes should also be set out.
§ We believe that the Government have established the wrong priorities for their transport policy. The emphasis on road construction and on alterations to roads is in marked contrast to the provisions made for rail, notwithstanding—and we shall return to the argument at a later stage—the environmentally friendly nature of rail compared with road transport.
§ The concept upon which the Government have based the notion of privatisation is the alleged success of bus privatisation, which they constantly pray in aid. We say that we should learn the lessons of bus privatisation before we proceed with these proposals. Contrary to the Government's argument, bus privatisation augurs very badly for rail. It has resulted in poorer services, fewer passengers, greater use of older vehicles and the neglect of more remote areas. We fear that that could well be the situation in relation to rail.
§ We argue that this is a destructive diversion from the essential need for increased investment in a railway industry which is suffering from one of the worst investment programmes in the European Community. In the Autumn Statement the Chancellor announced that spending on rail was to be reduced still further over the next three years, from £2 billion this year to £1 billion by 1995–96. The recession has reduced BR's income by some £400 million, has led directly to the loss of 5,000 jobs, announced only the other day, and to some investment plans having to be deferred, if not abandoned altogether. Against that background, we 1215 are entitled to know the Minister's answer to the case that has been adduced by reputable consultants on behalf of Transport 2000. Steer Davies Gleave has concluded that there will be a risk of further reduction in investment for a number of reasons: fragmented decision-making between rail track and train operators; difficulties in buying or leasing rolling stock; higher track charges, especially for freight; and conflicts between franchising passenger services and allowing open access to the tracks. If the Minister disputes that, as presumably he will, perhaps he will tell the Committee why.
§ One of the most difficult areas in this connection is the position of passengers in the South East. They will bear the brunt of even larger than average fare increases on busy commuter routes into London. Despite old trains and deteriorating reliability and punctuality, and all the other inconveniences that they suffer, they are the people who effectively subsidise so much of the more profitable services run by BR. The swingeing fare increases have been described by Major-General Lennox Napier, the chairman of the Central Transport Consultative Committee, as "unreasonable and unacceptable". It is not irrelevant that against that background London Underground and bus fares are also to be increased by swingeing amounts. Travelcards will cost 14.3 per cent. more.
§ Worse is to follow. This is an industry which is beset by loss of income as a result of a reduction in the number of travellers. Income has fallen by £80 million over two years. The industry is unable to cash in on property sales in view of the recession presently affecting property prices.
§ There is a risk—which the Minister could not possibly deny—that rail fares will rise. There are a number of particularly important issues which I commend to the Government. I do not propose to rehearse them now. They have been put to him by Transport 2000. Specific policies are required to deal with those issues. If the Minister wishes to challenge me on that matter I can return to it later.
§ Mr. John Prescott, who leads for the Opposition on these matters in another place, described the increases as the Tory Party's rail privatisation tax. He went on to say that they are being levied to make some rail services profitable for selling off and to compensate for the £3.5 billion reduction in subsidies imposed on British Rail by the Government. I believe that he was absolutely right when he said that.
§ The Government claim that they are responsible for huge investment in British Rail. Like so many other claims made by this Government it needs to be viewed with a measure of scepticism. The fact is that half the funds available in the current financial year are tied to Channel Tunnel related projects. In 1990–91 only a quarter of railway investment grants came from government; the rest was raised within BR itself. Since 1983 government support for the railways did not increase in real terms: it decreased by 34 per cent. The result is a continually worsening situation, as the travelling public are best able to judge.
§ I turn to the White Paper, in case the Minister asserts that the White Paper provides that transport policy. In my submission it does nothing of the kind. 1216 It gives scant attention to the issues of congestion and the environment. There may be one or two words about the environment. It does not mention the question of a national rail strategy. It says nothing about the provision of rural services or those affecting peripheral communities, which we shall deal with tomorrow. It says nothing about the relationship with other modes of transport. Apart from a few comments about the Channel Tunnel, it says nothing about our relationships with European transport systems, particularly rail, and this only a few days before we complete the framework for the single market.
§ The White Paper deals unsatisfactorily with the problems of fragmentation of responsibility for safety and loss of the benefits of network integrity for passengers and freight. If it deals at all with the question of asset stripping it does so very unsatisfactorily, yet that is a matter of considerable importance. The document says little that is adequate about the future role of PTAs and PTEs. Again, we shall return to that issue with another amendment. There is a host of issues, including others that I have not mentioned, to which we shall have to turn specifically when we debate other amendments.
§ There is also another matter which is of continual concern to people who use the railways. The de-manning of stations affects safety, particularly that of women. That is an issue about which I should have thought the White Paper would have had something to say, but it does not.
§ We believe that there are serious doubts about the programmes which the Government wish to pursue. We fear that dramatic increases in fares and freight charges will be necessary to meet the unsubsidised fees of the rail track authority. That will lead to a greater use of road transport—the very thing that we should be seeking to avoid.
§ I do not propose to say very much more, except in conclusion that we believe that it is essential that the Secretary of State should publish a national rail strategy in the context of the wider issues to which I have already referred. We recognise that rail plays a crucial part, as it has for many years, in local and regional transport strategies. It provides vitally important links with rural areas. It is vital that the strength of the existing rail network should be used as the basis for further development and innovation to meet the challenges set by congestion and the deteriorating environment. The challenge and the way in which the railways can meet it should be one of the cornerstones of national rail policy; and included in that approach, and some would say central to it, is the involvement of local government. The Government have not begun to set out their policies with regard to those issues. I beg to move.
§ Lord Ezra
Just as in the previous amendment we pressed hard for an energy strategy within which the policy for coal could be identified—and that is now to take place—so, I believe, with equal force we can press for a general transport review within which the railway strategy can be placed.
The history of the railways since the war in Britain has been a very unfortunate one, for the simple reason that, under successive governments, we could not 1217 make up our minds whether it was to be a public service or to be run as a profitable business. In the end neither objective has been clearly achieved. With the Government's plans for privatisation, a unique opportunity arises for a strategic review so that we can see where railways and the transport service of the country are to go in the future, with all the challenges that we face, at home within the single market and further afield. I hope that the noble Baroness will be able to reassure us that the Government intend to produce such a strategy.
The Earl of Caithness
I was very surprised to see these amendments on the Marshalled List. At first I thought that the noble Lord, Lord Clinton-Davis, had not taken note of the White Paper that my right honourable friend the Secretary of State produced in July, which, if any Members of the Committee have read it, answers many of the points in the noble Lord's amendment.
It became quite clear as the noble Lord spoke that the reason for the amendment was to have a general bleat about privatisation, make a Second Reading speech and refer very little to the amendment in front of him. He also wanted just to raise the general point that he did not like privatisation; he preferred to tell people exactly what they should do and what mode of travel they should use, which is a different philosophy from that of the Government.
He mentioned one or two other points which he said were a matter for amendments later on, which they are. It is appropriate that we consider them when they are raised later.
For Members of the Committee who took the amendments in the same way as I did, which was as seeking information about what my right honourable friend had said, I think it is worth saying that the White Paper, New Opportunities for the Railways, which was published in July, made our strategy quite clear. It is to improve the quality of rail services by creating new opportunities for private sector involvement; to ensure continuity of services; to ensure safety; and to provide value for money. We are anxious to make progress in improving the quality of service to rail customers and therefore to have in place as soon as possible the necessary legislative framework.
The Government intend to bring forward the necessary legislation as soon as they are in a position to do so. The Bill before us today paves the way for that legislation and for the greater involvement of the private sector in the operation of the railways. Again, this is a point of confusion in the mind of the noble Lord, Lord Clinton-Davis. He still has not understood the difference between this Bill and the main Bill on privatisation. This Bill does not provide any powers for the implementation of privatisation. Doubtless the noble Lord will make the same speech when we come to the main privatisation Bill.
In summary, the key proposals for the railways are: that the existing passenger services be franchised to private sector operators; that the freight and parcels business be transferred to the private sector; for new rights of access to the rail network for private 1218 operators; for the restructuring of BR to separate out a track authority, Railtrack, and passenger service operations, which will continue to run passenger services until they are franchised; to appoint a rail regulator and a franchising authority; to provide opportunities for the private sector to purchase or lease stations; and to provide improved grant arrangements for individual rail services or groups of services.
A further important step was taken when in October my right honourable friend issued a consultation document The Franchising of Passenger Rail Services, which the noble Lord did not mention but which gave further information on how the franchising system will work and sought views from prospective franchisees about how franchising might best be carried out. 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.
The noble Lord's amendment refers specifically to safety and the environment. Let me make it abundantly clear beyond peradventure that safety is of prime importance to us. That is why one will find in the White Paper a whole Chapter, Chapter 6, devoted to the subject of safety.
The noble Lord then went on to the subject of the environment. He said that there was precious little in the White Paper on the environment—"a word or two", he said. Perhaps I should refer him to the whole paragraph on page 16, paragraph 75.
The amendment also suggests that within a rail strategy my right honourable friend should specify railway programmes and projects to meet stated objectives. Although British Rail is subject to the constraints of a nationalised industry, it is expected to act as a commercial organisation and set its own investment priorities within the external finance limit. It would not be appropriate for the Secretary of State to specify the detailed projects and programmes of British Rail or any other rail operator.
Finally, we come to a point on which the noble Lord did major; namely, the financial support to be provided. The Government's commitment to the railways has been underlined in recent years by record levels of investment. Investment stands at around £1 billion in 1991–92 and a further £1.5 billion is expected for 1992–93. Over the past two years Network SouthEast has invested over £850 million, and since 1986 over 1,200 new vehicles have been delivered. On InterCity, the electrification of the east coast mainline was completed last year at a cost of some £475 million.
The noble Lord sought to put into the minds of the Committee the fact that there was less money in reality for British Rail as a result of the Autumn Statement. Let me reassure the Committee that that is not the case. We have allocated to British Rail £239 million more over the next two years compared with previous plans. The investment is much higher now in real terms than it was in the late 1980s.
1219 The noble Lord referred to the question of fares, but that has been covered in oral Questions in this Chamber, and it would be wrong of me to go back over the same well worn ground.
Following BR's re-organisation, investment in infrastructure will remain the responsibility of the public sector Railtrack. The intention is that Railtrack will operate on a commercial basis, with its investment financed from charges to operators for use of the track network. However, we have said that we will be prepared to provide direct grants for infrastructure investment in the railway where, for example, a project although not earning an adequate financial return, achieves a satisfactory cost-benefit return when wider benefits are taken into account. The Government also want to encourage private sector involvement in rail investment. For passenger services, the Government are particularly keen to see the private sector investing in rolling stock—for example, through the development of a leasing market—and we are currently exploring ways that this might be achieved.
Sadly, the noble Lord did not raise the question of the leasing of rolling stock. It was a very important part of the Autumn Statement made by my right honourable friend. It offers great benefits to British Rail, and it will be able to lease £150 million worth over the next three years. Clearly a lot of what the noble Lords, Lord Clinton-Davis and Lord Ezra, have sought in their amendments have been met by the White Paper. Other comments of the noble Lord will be dealt with in later amendments.
§ 6 p.m.
§ Lord Clinton-Davis
The Minister's response was thoroughly unsatisfactory but it was not unexpected. It is a travesty of the truth—but it is typical of the Minister because he believes it—to say that we on this side of the Committee want to tell people what to do, how to travel and so forth. We want to give people a proper choice but it must be based on an equality of standards between road and rail in terms of investment and the like. That does not exist at present.
The Minister did not begin to refute the case that I made. He does not like the amendment and is perfectly entitled not to like it. He is also perfectly entitled to be purblind about the issues and ignore all the criticisms which are being made not only by me but by many reputable organisations which have sought to make representations to his department. It is recognised that the Government are bent on pursuing this policy and having been recently elected they have a period of perhaps years in which to do so. But surely they should not be so resistant to the desire to ensure that the mistakes which were made elsewhere are not repeated in respect of this important industry. However, it appears that the Government are not prepared to encounter such arguments.
The Minister says that it is all in the White Paper. Not at all. The Minister has not rebutted the fact that the White Paper is scant on many material issues. It does not set railways in the context of a proper 1220 transport policy. The Government are absolutely blind to that and therefore they are likely to make serious mistakes.
I believe that my case and that advanced by the noble Lord, Lord Ezra, was corroborated rather than rebutted by the Minister's comments tonight. He insisted that there are record levels of investment in this country. However, he carefully avoided comparing those levels, whether record or not, with the situation that persists among our major competitors in the EC. There is overwhelming evidence to show that our efforts are puny by comparison. The amount of research and development and investment which has been undertaken in France and Germany puts our efforts in pure light.
As regards the leasing of stock, I am delighted that the Government have at last recognised the argument that the Opposition has been putting forward for years. We were told that that would be incompatible with the requirements of the public sector borrowing requirement. That case was argued on previous occasions by his predecessor and by the Minister. If the Minister wants to borrow our clothes that is fine if it will benefit our railway industry. However, he has chosen to be almost frivolous about the amendment and therefore it is necessary to test the opinion of the Committee.
§ On Question, Whether the said amendment (No. 3) shall be agreed to?
§ 6.3 p.m.
§ Their Lordships divided: Contents, 67; Not-Contents, 132.1221
|Division No. 3|
|Addington, L.||Jay, L.|
|Airedale, L.||Jay of Paddington, B.|
|Ardwick, L.||Jeger, B.|
|Attlee, E.||Jenkins of Hillhead, L.|
|Blackstone, B.||Jenkins of Putney, L.|
|Blease, L.||John-Mackie, L.|
|Boston of Faversham, L.||Judd, L.|
|Bottomley, L.||Llewelyn-Davies of Hastoe, B.|
|Carmichael of Kelvingrove, L.||McIntosh of Haringey, L.|
|Carter, L.||Mallalieu, B.|
|Clinton-Davis, L.||Mason of Barnsley, L.|
|Cocks of Hartcliffe, L.||Merlyn-Rees, L.|
|Dean of Beswick, L.||Milner of Leeds, L.|
|Donoughue, L.||Mishcon, L.|
|Dormand of Easington, L.||Molloy, L.|
|Ennals, L.||Morris of Castle Morris, L.|
|Ewing of Kirkford, L.||Nicol, B.|
|Ezra, L.||Ogmore, L.|
|Falkland, V.||Pitt of Hampstead, L.|
|Fitt, L.||Prys-Davies, L.|
|Gallacher, L.||Rea, L.|
|Galpern, L.||Redesdale, L.|
|Gladwyn, L.||Richard, L.|
|Graham of Edmonton, L. [Teller.]||Seear, B.|
|Stoddart of Swindon, L.|
|Greene of Harrow Weald, L.||Strabolgi, L.|
|Gregson, L.||Taylor of Blackburn, L.|
|Grey, E.||Tordoff, L. [Teller.]|
|Hampton, L.||Varley, L.|
|Harris of Greenwich, L.||Wallace of Coslany, L.|
|Healey, L.||White, B.|
|Houghton of Sowerby, L.||Williams of Elvel, L.|
|Howell, L.||Winchilsea and Nottingham, E.|
|Irvine of Lairg, L.||Young of Dartington, L.|
|Ailesbury, M.||Lauderdale, E.|
|Aldington, L.||Lawson of Blaby, L.|
|Archer of Weston-Super-Mare, L.||Leigh, L.|
|Long, V. [Teller.]|
|Arran, E.||Lyell, L.|
|Astor, V.||McAlpine of West Green, L.|
|Astor of Hever, L.||McColl of Dulwich, L.|
|Banbury of Southam, L.||Mackay of Ardbrecknish, L.|
|Barber, L.||Mackay of Clashfern, L.|
|Belhaven and Stenton, L.||Macleod of Borve, B.|
|Belstead, L.||Mancroft, L.|
|Bessborough, E.||Margadale, L.|
|Blatch, B.||Marlesford, L.|
|Blyth, L.||Marsh, L.|
|Boardman, L.||Merrivale, L.|
|Boyd-Carpenter, L.||Mersey, V.|
|Braine of Wheatley, L.||Milverton, L.|
|Brookeborough, V.||Monk Bretton, L.|
|Brougham and Vaux, L.||Mottistone, L.|
|Butterworth, L.||Mountevans, L.|
|Cadman, L.||Munster, E.|
|Caithness, E.||Murton of Lindisfarne, L.|
|Campbell of Alloway, L.||Nelson, E.|
|Carnegy of Lour, B.||Norfolk, D.|
|Carr of Hadley, L.||Norrie, L.|
|Clanwilliam, E.||O'Cathain, B.|
|Clark of Kempston, L||Orkney, E.|
|Cochrane of Cults, L.||Oxfuird, V.|
|Colwyn, L.||Park of Monmouth, B.|
|Constantine of Stanmore, L.||Pearson of Rannoch, L.|
|Cox, B.||Pender, L.|
|Craigavon, V.||Peyton of Yeovil, L.|
|Cranborne, V.||Platt of Writtle, B.|
|Crickhowell, L.||Prentice, L.|
|Cumberlege, B.||Rankeillour, L.|
|Davidson, V.||Reay, L.|
|Denham, L.||Rees, L.|
|Denton of Wakefield, B.||Rennell, L.|
|Eccles of Moulton, B.||Renwick, L.|
|Elles, B.||Rodger of Earlsferry, L.|
|Elliot of Harwood, B.||St. Davids, V.|
|Elliott of Morpeth, L.||Shannon, E.|
|Elphinstone, L.||Sharples, B.|
|Elton, L.||Shrewsbury, E.|
|Faithfull, B.||Skidelsky, L.|
|Fanshawe of Richmond, L.||Soulsby of Swaffham Prior, L.|
|Fraser of Carmyllie, L.||Stewartby, L.|
|Gardner of Parkes, B.||Stodart of Leaston, L.|
|Gilmour of Craigmillar, L.||Strange, B.|
|Goschen, V.||Strathcarron, L.|
|Greenway, L.||Strathclyde, L.|
|Gridley, L.||Strathmore and Kinghorne, E. [Teller.]|
|Hailsham of Saint Marylebone, L.|
|Harmar-Nicholls, L.||Tebbit, L.|
|Harmsworth, L.||Terrington, L.|
|Haslam, L.||Teviot, L.|
|Hayhoe, L.||Thomas of Gwydir, L.|
|Henley, L.||Trumpington, B.|
|HolmPatrick, L.||Ullswater, V.|
|Hood, V.||Vaux of Harrowden, L.|
|Hothfield, L.||Vivian, L.|
|Howe, E.||Wade of Chorlton, L.|
|Hylton-Foster, B.||Wakeham, L.|
|Jeffreys, L.||Wise, L.|
|Johnston of Rockport, L.||Wynford, L.|
|Kimball, L.||Young, B.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 6.11 p.m.
§ Lord Clinton-Davis moved Amendment No. 4:
§ Page 1, line 8, after ("should") insert ("subject to subsection (1C) below").
§ The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment Nos. 1222 12,14, 17 to 19 and 32. This is a rather complicated set of amendments, made even more complicated by the fact that we are dealing with two industries and there are not necessarily common denominators in each.
§ The first two amendments to which I shall refer are Amendments Nos. 4 and 17. Amendment No. 4 is the paving amendment and Amendment No. 17 deals with consultation requirements with members of the British Rail pension scheme, the British Rail superannuation fund committees of management representing the workforce, the appointment of advisers and the appointment of advisers with the consent of the members.
§ Amendments Nos. 19 and 32 deal with a requirement for transferees to guarantee the continuation of pension rights and concessionary arrangements. Amendment No. 22 also deals with that as regards changes made to the British Rail pension scheme and the line workers pension fund and so on. It deals also with a requirement that there should be laid before both Houses a statement certifying such changes for the protection of the interests of the members and beneficiaries or an enactment by statutory instrument to that effect. My noble friend Lord Donoughue will deal with that in so far as it affects coal.
§ Amendment No. 18 affects the coal industry. It deals with the question of consultation and is similar to the amendment to which I have just referred. That will also be dealt with by my noble friend. Amendment No. 12 deals with balloting when there is a change of scheme. My noble friend will deal with Amendment No. 14 concerning coal.
§ I turn to those amendments which affect the rail industry. I believe that all those amendments—as do those relating to coal—concern people in employment or who have been in employment with British Rail. We contend that those rights must be maintained, as must be the rights of their dependants. We have serious doubts about that matter.
§ As regards the rail pension funds, British Rail operates a number of pension schemes. In one way or another they cover almost 350,000 people. The assets of the British Rail pension scheme amount to something in the order of £7.25 billion. We are talking about substantial sums. The present benefit structure has led to a situation in which substantial benefits were paid following considerable surpluses that arose. Those matters have been dealt with generously, properly and equitably; for example, death in service payments are four times salary and all pensions are fully index-linked to the retail prices index.
§ While the Government have promised protection of pension benefits and the establishment of broadly similar schemes after privatisation, the fact remains —and we exercise grave doubts about the situation —that any subsequent employer seeking to reduce costs could take any or all of the following actions. Steps may be taken to end the matching of additional voluntary contributions by employers. Steps may be taken to amend the one-sixtieth accrual rate for pensions or to amend the one-fortieth accrual rate for tax free lump sums. Index-linking may be reduced to a maximum of 5 per cent. Proposals may be made to 1223 lower the death-in-service payment and there could be a reduction in the 10-year membership enhancement for early ill-health retirements. Wholesale workforce reductions may well enable the surplus earmarked for maintaining a reduced contribution rate and additional voluntary contribution matching to be used for an employer contribution holiday. I seek a reassurance from the Minister about that. Now is the time that we seek those reassurances. We do not wish people to discover later that they are in a very difficult position.
§ We draw little comfort from previous privatisations that have taken place; for example, some of the British Rail subsidiaries. All the companies concerned—British Transport hotels, Sealink, the National Freight Consortium plc, and so on—were required to establish their own pension schemes to protect the benefits of members following privatisation. None of those schemes has led to an increase in benefits to anything like the level presently offered by the British Rail pension scheme. Indeed, in some cases there have been substantial reductions and employer contributions holidays.
§ Let us take the example of the hotels. Many of those changed hands on a number of occasions and their pension schemes remain unimproved or have even been closed. Experience shows that privatisation, even within the railway industry, has not been altogether happy. The employer has frequently identified possible savings and greater company profitability by reducing pension costs. Notwithstanding all the efforts made to safeguard the situation before the businesses were sold, subsequent events have resulted in inferior pension benefits being paid and consequently, there has been less protection for employees and their families.
§ The situation is not unlike that in other privatisations that have taken place. We believe that workers in those industries, who in many instances have given a life time of service to them, are entitled to rather better provision than they have been given. They are certainly entitled to assurances which we hope will be forthcoming from the Government.
§ The only way in which the system can properly be safeguarded so far as concerns past, present and future employees is for British Rail's pension scheme to be redesigned on an industry-wide basis. There is no technical reason why that should not be done. It has been done in other cases. We should be able to proceed on that basis, and I hope that the Government will be forthcoming. We regard this debate tonight as a probing debate into the Government's intentions, and I hope that we may get a rather more satisfactory reply from whoever is replying than we did to the last debate where the reply was derisory. This is not an issue that is susceptible of being dealt with on that basis because many hundreds of thousands of people are vitally affected and involved.
§ To turn to advice, it is important that good, independent and objective advice should be available, and that that should be done by openly consulting with potential and actual pensioners and dependants. This should be done free of pressures and influences 1224 on the part of subsequent employers, whose interests may well be different from, or even in conflict with, their pensioners. This is a critical situation where transparency is important and the public interest is clear. I hope that the Minister will be forthcoming. My noble friend will deal with some of the issues affecting the coal industry. I have not touched on those as they are not within my remit, but there are substantial common denominators. I beg to move.
§ Lord Ezra
Perhaps I may speak on the coal industry pension fund. That raises important issues just as the rail fund does, as the noble Lord, Lord Clinton-Davis, mentioned to us. In the case of coal, the value of the fund and the number of people affected are just about getting on for double that of the railways. It is very large indeed. The fund is currently worth about £13 billion, which is probably 10 to 15 times what the business will be worth when sold. It is much larger than the business we are talking about privatising.
There are a large number of people involved, of whom the bulk are people in receipt of pensions or with deferred pensions because of the rapid rundown, particularly in recent years, of the size of the coal industry. Therefore, it makes it a special problem. The numbers are quite stupendous. There are two schemes. In the case of the staff scheme, there are 16,500 contributing members, but there are 74,500 pensioners with another 12,500 with deferred pensions. In the case of the mineworkers' schemes, there are 35,000 serving members, 270,000 pensioners, and 260,000 with deferred pensions. We are talking about half million people in the mining schemes either in receipt of pensions or who have deferred pensions to which they are entitled.
It is obvious that in any changes that are made in these pension funds as a result of the process of privatisation there should on the one hand be full consultation (which some of these provisions are about) and full protection. I think it necessary that in this paving Bill there should be something to that effect. I should like to recall to the Committee that in the case of the electricity industry the Electricity Act 1989 gave clear statutory protection for pensioners and serving members at the time of privatisation. I should be interested to know whether it is the Government's intention in the case of railways and coal to give similar statutory protection.
§ Lord Donoughue
In this complex grouping there are five issues: consultation; guarantees; the ballot question; a separate fund for the already retired; and ways of changing the schemes. Regarding coal (the guarantees and the changes in the separate fund) on consultation and on advisers for coal —that is, Amendment No. 18—I will endorse the points made in relation to rail by my noble friend Lord Clinton-Davis. The same principles apply. I support the ballot amendment because it seems to me the best form of consultation.
On the guarantees—Amendment No. 19—the funds in the coal industry pension funds total in value over £13 billion. In the light of recent experiences with pension funds, I think it is accepted that we need
1225 statutory protection. We need a guarantee of existing benefits for existing retired members; we need a guarantee that currently working contributors continue to accrue rights even if those members are transferred to work elsewhere in the industry. It is important that subsequent changes of working situation should not in any way affect the rights of members. The noble Lord, Lord Ezra, mentioned the electricity supply pension scheme, and that seems to be a model giving statutory protection. I hope that the Minister will be able to assure the Committee that that will operate here. I believe that the noble Lord, Lord Wakeham, when Secretary of State in another place, gave undertakings to the colliery managers that these guarantees would operate. I should like to hear that that is still the case.
It would also be appropriate to have statutory guarantees in the area of actuarial surpluses. In other words, statutorily prohibiting that the surpluses should be used for any purpose other than the benefits of the members. These surpluses are huge moneys. I think there was a surplus of £1.5 billion between 1987 and 1990. The pensions contribution was calculated on that basis by British Coal. Will that pension contribution holiday—I think it was through to the year 2,000—carry over to the private buyer? I should like to resist that. The surplus, we say, should be for the benefit of members, including improving benefits or reducing contributions.
Amendment No. 32—the provision for changes—provides some statutory protection and a proposed certification. The changes in the interests of members should extend to the changes in the governance of schemes. There it is important that the governance of these schemes should be statutorily entrenched. There is a great deal of thought being given to the model governance for pension schemes at this moment, and a number of proposals have come forward. It would be desirable for these schemes that the governance should be entrenched so that a private buyer cannot later change the governance. The chairman should certainly be an independent trustee. The employer should have less than 50 per cent. of the representatives, and the workers representatives and independents should be more than 50 per cent.
We are probing. We should like to know the Government's thoughts on the future governance of these schemes. How do we make sure that some future private buyer, who may be three purchasers along the way, does not change the governance to the detriment of members?
Finally, I should like to mention the proposal for separate schemes—Amendment No. 14—and pick up a point that the noble Lord, Lord Ezra, made about the numbers. There are over 250,000 retired beneficiaries. At the time of privatisation, 90 per cent. of members will be retired beneficiaries. There is no reason to transfer their pension rights, which are calculated at £11 billion out of the £13 billion, to private owners. Those members will not have worked for or had any relationship with the new owners. 1226 There is no reason why the buyers of all or any part of British Coal should get their hands on the enormous funds involved.
It would not be a difficult matter to split the schemes. There could be one scheme for currently working members, who would represent about 10 per cent. They would have guaranteed benefits under the guarantee clause, with good governance that is entrenched statutorily, and there would be no changes without the permission of Parliament or of members, as is provided for by the various clauses. There could be a separate fund, a retired scheme, for 90 per cent. of the members. It would be separate and free-standing with the surpluses being for the benefit of the members only. Such an arrangement would be very acceptable to the industry and it would properly protect the interests of those involved.
§ 6.30 p.m.
§ Baroness Denton of Wakefield
As the noble Lord, Lord Clinton-Davis, stated, the amendments and their grouping are complicated, but they are probing amendments and I hope that I shall be able to reassure noble Lords in the course of the reply. They are important matters.
The provision of pensions and concessionary benefits, which are included in Amendment No. 19, is an important issue about which employees of the coal and rail industries are rightly concerned. Numerous assurances have been given by my honourable friends the Ministers of State for Energy and Public Transport that pension rights will be safeguarded at privatisation.
None of the amendments is appropriate as an addition to the Bill, which, as we have made clear, is solely designed to give powers to British Coal and British Rail to enable them to consider the Government's proposals and to allow them to prepare for privatisation. The Bill does not allow for the implementation of those proposals, which would require further legislation.
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. My honourable friend the Minister of State for Energy has made that position clear in another place. I hope that that reassures the noble Lord, Lord Donoughue. 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 wholeheartedly endorse those sentiments.
Similarly, my honourable friend the Minister of State for Public Transport is in no doubt about the importance of this issue in relation to the privatisation of the railways. Both he and my right honourable friend the Secretary of State for Transport have taken a number of opportunities to emphasise that point in another place. Since then, the rail privatisation White Paper has been published and it confirms that the pension rights of existing contributors and past employees will be properly safeguarded.
§ Lord Clinton-Davis
I am sure that nobody would cast doubts on the bona fides of the noble Lady or those of her honourable friend. However, past precedents do not bear out what she is saying. I could cite many examples where there have been serious distortions of the position once privatisation has taken place or after the passage of some time. That point is concerning people and I hope that the noble Lady can deal with it.
§ Baroness Denton of Wakefield
I am very happy to deal with that point at this stage. 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.
The security of the rights now enjoyed by members and pensioners of the British Rail scheme is of the highest priority. The subject of pensions is a complicated issue that requires careful consideration, the more so in the case of British Coal pension funds, where, as the noble Lord, Lord Ezra, pointed out, the ratio of beneficiaries and future beneficiaries to current contributors is uniquely high.
The details of any proposals are not a subject for the Bill and would require further legislation. The Bill is a technical measure and contains no powers to enable the Government to take any action on pensions. It would be quite inappropriate to make a specific reference to pensions in the Bill.
British Coal and British Rail will wish to be well advised on the crucial issue of pensions. All departments undertake inquiries to establish the professional competence of any adviser who is appointed by the Government and I have no doubt that British Coal and British Rail too will undertake such checks as they believe necessary in the appointment of their own advisers. They will wish to ensure that they are in receipt of the best possible advice—advice that will help to ensure that pension arrangements can be established which will safeguard pension entitlements. They will wish to appoint advisers in whom they and all those concerned can have complete confidence. That is a matter that must be left to them.
The mechanism for the appointment of advisers to the Secretary of State or to either of the corporations is not an appropriate matter to include in the Bill. Nor is it appropriate for representatives of the workforce to be given a power of veto, which would be the effect of the proposed subsections, in relation to the appointment of advisers by the Government, British Coal or British Rail.
I should like to add that conversion of the British Rail pension scheme into an industry-wide scheme is one of the options that is being considered. I emphasise that the disposal of surpluses declared by the mineworkers' pension scheme or the staff superannuation scheme is a matter for the trustees of those schemes.
This is not the occasion to discuss the details of pension arrangements that will be put into place at 1228 privatisation. The Government will be making their policies clear when the main privatisation legislation is introduced. There will be an opportunity to give careful consideration to this very important subject. I hope that I have convinced your Lordships that we appreciate that the subject of pensions is a crucially important matter and that the noble Lord will withdraw the amendment.
§ Lord Clinton-Davis
I thank the Minister for that reply. I accept that she and her colleagues will think very seriously about these matters. She accepted that it was not an inappropriate debate because it is right to ventilate the anxieties of thousands of people, anxieties which have been expressed to us by the unions and by other interested parties. The noble Lady stated on a number of occasions that she recognised that these were important matters and that therefore it was legitimate to raise them today.
I note that the noble Baroness says that this is not the proper vehicle for that. I will carefully consider what she has to say in that regard before Report stage, along with my noble friend Lord Donoughue and the noble Lord, Lord Ezra. However, the noble Baroness may recall, if she consults the Hansard Reports of another place and of this place with regard to previous privatisations, that very similar assurances have been given in the past on those occasions and in a number of material respects those assurances have not been fulfilled. Consequently, I was very pleased to hear her say that some of those precedents will he taken into account. That is a far cry of course from some statements that have previously been made—that everything in the garden as far as pensions were concerned was perfectly all right, "trust the Government and that is fine". I am glad that the Government will be considering those precedents and to what extent they went awry.
I was also very pleased to hear the noble Baroness say that one of the proposals that I put forward; namely, converting the BR pension scheme into an industry-wide scheme, is on the agenda. I do not think that I could ask the Minister to go further than that, and I am comforted by the fact that at least it is an option which is being considered.
I will just repeat what our two concerns are so that the position is clear beyond any peradventure in future debates. We are anxious to ensure that all future surpluses will be used for the benefit of pensioners and contributors. They should not be used for the benefit of any private buyer, who has made no previous contribution to a pension scheme. We are concerned too, whether we come back to it in the course of this Bill or in the substantive Bill in due course, to ensure that against the background of recent events, pensioners should have a much greater say so far as concerns the administration of pension funds. It is their lives that are at stake. We believe that they should enjoy majority control as trustees of their pension funds. I believe that the Government do not agree with that, and that is a point of difference between us. Certainly we do not think that events within the last year or so enable us to rest comfortably 1229 with the idea that control of much of the administration should be outside the province of the beneficiaries.
Having listened to what the Minister has said, I should like to cogitate further upon that. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 6.45 p.m.
§ Lord Clinton-Davis moved Amendment No. 5:
§ Page 1, line 8, after ("transferred") insert ("subject to subsection (1F) below").
§ The noble Lord said: I beg to move Amendment No. 5. I believe that it would be for your Lordships' convenience if we consider at the same time Amendments Nos. 6, 20 and 21. These amendments deal with questions of competing for franchises. I recognise that the Government have produced this consultation document, which is of considerable length and complexity. However, I do not believe that certain points which we are anxious to refer to have been dealt with there.
§ Amendments Nos. 20 and 21 effectively come to this: we are asking the Secretary of State to ensure that British Rail will be invited to bid for the award of any franchise alongside any other bidders. The second amendment seeks to ensure that British Rail should itself be under an obligation to compete for the award of franchises. We really want to test the Government on these issues because they are not dealt with sufficiently, if at all, in the White Paper.
§ There are very deep concerns here which hinge on the issue of franchises. We do not object to the idea that franchises should be awarded on the basis of competitive tendering, if we are going ahead with this idea at all. We know that InterCity operations, being profitable, will go to the highest bidders. Network SouthEast and Regional Railways, because they are loss making, will go to the companies requiring the lowest subsidies. Thereafter, franchisees will rent or buy rollingstock from British Rail, bearing the full commercial risk for their operations; so they will pay track charges, rollingstock rentals, wages and other operating charges out of fare revenues. And of course they hope that they will be left with a profit. So if franchises are to be profitable costs will need to be cut. The consultation paper says that they will be free to change the working conditions of employees once the franchise is under way. I do not know what the Minister will have to say about that, but that is what the Government have put forward and we express our concern about it.
§ One issue which arises directly from that is "cherry-picking". What is the position of would-be franchisees concerning competition from cherrypickers?—that is to say, from free-wheeling operators who seek to grab traffic from the franchisee's most profitable services? That is just one of a number of serious problems.
Perhaps I may refer to some specific concerns expressed in the amendments. The White Paper envisages that British Rail should not be permitted to tender for franchises of passenger services which it
currently operates. I think that I am right in saying that, but I stand to be corrected if the Minister has any evidence to the contrary. If that assumption is right then I ask: why not? Have the Government previously taken the view that the public sector should always be tested against private contractors? For example, we have subsidised bus services and local authority services. The Local Government Act 1988 makes the provision that compulsory competitive tendering had as its aim to secure:
that local and other public authorities undertake certain activities only if they can do so competitively".
When we examine that issue, the White paper says in paragraph 3:
British Rail has made significant improvements in recent years. Its efficiency compares well with that of other European railways".
That may or may not be correct.
It goes on:
The productivity of the BR workforce is among the highest of any European railway. InterCity services and BR freight operate without direct subsidy".
That is what the White Paper has to say. According to British Rail Board's annual report for 1991–92, staff numbers in the main businesses fell by 4,000 between 1988 and 1992, from 137,160 to 133,060, while the total train miles for passengers, freight and parcels operations rose from 255.5 million to 265.6 million. British Rail generates 3.289 train kilometres per member of staff: the average for European railways is 2.320: substantially less.
§ Against that background, the Government's desire for any significant private sector involvement in railway operations is, in our judgment, flawed. It is contrary to common sense and contrary to all principles of fairness that the existing efficient operator of train services should be forbidden to tender for their continued provision. We say that it is in the interests of the public that British Rail should be permitted, and indeed invited, to tender even if franchises are eventually awarded to private operators. In the absence of a properly costed bid from the most experienced provider of rail services, against what standards are private sector bids to be judged at all? That problem would be particularly serious if, as seems likely, many franchises are sought by only a single private sector bidder.
§ If British Rail is to be invited to bid alongside the private sector, obviously its commercial confidentiality must be protected. British Rail's present exclusion from bidding permits the Department of Transport effectively to plunder its expertise to find ways of implementing the Government's philosophy. Ending that exclusion would enable British Rail's operating businesses to devote their full managerial skills to winning franchises in a competitive environment.
§ British Rail is not by any means a monopoly provider of transport in this country. It has to compete with road, air, sea and canal. I believe—and this is the gravamen of our submission—that it should have a chance to prove itself in the new internal railway market which the Government seem determined to create. If British Rail is not permitted to bid for franchises, it will become an operator of last 1231 resort, leading to lower standards on the services that it does operate. There would also be no benchmark against which private sector bids could be considered.
§ Finally, I come to the question of requiring British Rail to bid for franchises. If it is to be given the opportunity to hid for franchises just as any private operator does, then it does not absolve the company from its statutory obligation to provide a passenger service throughout Great Britain. The requirement to tender is also essential for proper comparative assessment of private sector bids. The Government may argue that this amendment is more appropriate (I have heard this argument once or twice this evening) to the rail Bill in due course rather than to the paving Bill. But decisions are being taken—I believe that this is a point which the Government have not met—in advance of that future legislation. Indeed, that was demonstrated when the Secretary of State made an announcement at the Conservative Party Conference concerning the forthcoming sale of Red Star. So it is of great importance that British Rail's role in franchising is clarified now. I invite the Government to do precisely that. I beg to move.
The Earl of Caithness
I well recall what the noble Lord, Lord Donoughue, said as regards the first amendment. He said that his party would be constructive on the rail amendments. Yet if Members of the Committee care to look at these amendments they will see that they seek to enable—
§ Lord Donoughue
I said that in the context of the separation of coal from rail. What I hung before the noble Earl was a prize which the Government chose not to take. I said that I am sure that, had they separated coal from rail, we would have been very co-operative about rail. The Government were not co-operative with us.
The Earl of Caithness
I do not believe for one moment that the noble Lord would not have moved these amendments. I am sure that the noble Lord was only too keen to move these amendments whether or not coal was in the Bill. As the noble Lord said, the amendments seek to enable British Rail to prepare itself to bid for franchises on an equal footing with potential private sector franchises. That would run directly counter to the Government's policy and the objectives for rail privatisation. In effect they are wrecking amendments.
As the noble Lord so rightly said, the amendments are not appropriate for this Bill. However, it will be worth while —and I am sure that the Committee will appreciate it—if I spend a little time saying why the Government cannot agree with the amendments as tabled.
The rail privatisation White Paper states clearly that, so far as the passenger railway is concerned, the Government believe that the private sector should be given the fullest opportunity to manage and operate existing railway services. The noble Lord will find that in Paragraph 21 of the White Paper. We want to harness the fresh thinking and innovation that involvement with the private sector will bring. The objective is to improve the quality of railway services 1232 by creating many new opportunities for private sector involvement. We would not achieve that objective if BR was also able to bid for franchises. We believe that the improvements to services that all rail users want to see can be achieved only if BR's monopoly of rail service provision is ended.
However, it is an important part of our policy to enable BR's existing workforce to take a stake in the privatised rail industry. The noble Lord will find that in Paragraph 41 of the White Paper. There will be an opportunity for the staff in BR to bid for franchises. Indeed, the Government wish to encourage that so that they bring their expertise to bear on the rail industry outwith the constraints of a nationalised industry. 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. Franchising of passenger services will be carried out progressively. BR will continue to run the services until they have been franchised, but BR's role as an operator will diminish over time.
The amendment before the Committee also suggests that BR should not disclose information that might prejudice its ability to compete for franchised services. The franchising authority will have to ensure that the same information is provided to all bidders so that the franchise competitions are fair. I am sure that the Committee will agree that it would be quite wrong to withhold information to tip the scales in favour of one bidder.
The franchising authority will obviously have to draw on information about the costs incurred by BR in providing the services in question in order to compile the invitations to tender, as well as other operational information. He will therefore have that in mind when deciding whether the private sector bids received represent good value for money.
Perhaps in conclusion I may reiterate the point with which I started. These amendments are not acceptable.
§ Lord Clinton-Davis
It seems that the Minister forms the judgment that if he does not like an amendment then it is a wrecking amendment necessarily, which is quite absurd. As the Minister knows, the White Paper envisages that BR will be forbidden to tender for franchises for the passenger services which it now operates. He concedes that. But the Government's view hitherto has been that the public sector should always be tested against private contractors. Is the Minister saying that that is wrong? I give way to the noble Earl if that assertion is wrong.
The Earl of Caithness
It has varied from situation to situation. There has been a welcome increase in market testing. That has been to the benefit of services. Equally, we believe that privatisation through franchising of British Rail passenger services will be to the benefit of the consumer.
§ Lord Clinton-Davis
That is an assumption which the Minister makes having already, in a sense, contradicted himself. What he is now saying runs completely counter—he did not meet this argument 1233 —to the provisions of the Local Government Act 1988. That Act introduced compulsory competitive tendering with the aim of securing that local and other public authorities undertake certain activities only if they can do so competitively.
The Government have never previously sought to deny such authorities the ability to bid for their existing work. That has never happened before. Why are they now departing from that policy? We know that this is a government who engage in somersaults on a colossal scale. What is the justification and the rationale for departing on this occasion from their proven policy in the past? The Minister has not begun to answer that point. I invite him to do so before I sit down.
The Earl of Caithness
I am sorry that the noble Lord thinks that. He clearly did not listen to what I said. I spelt out exactly why the Government have taken the decision that they have.
§ Lord Clinton-Davis
That is not really satisfactory. The Minister has not answered the very specific point I made. The reason is, of course, that he has not been briefed on it, so I must not be too hard on him. But I ask him to reconsider the matter.
The Earl of Caithness
The noble Lord is quite wrong on that. I have answered the noble Lord. I have been briefed on the amendment. I repeat that I have answered him.
§ Lord Clinton-Davis
The Minister is now losing his cool, which is never very good in this House. The fact of the matter is that he did not answer the points about the 1988 Local Government Act, the rationale behind that Act and behind the subsequent policies that were applied. If he says that he has read his brief and if this is in his brief, I invite him to read it again and to take on board the point that I am now making, which is a point of substance. I do not propose at this stage to test the opinion of the Committee, but we may well wish to return to this issue in due course. In the circumstances, I beg leave to withdraw the amendment.
§ The Deputy Chairman of Committees (Lord Grantchester)
Is it the Committee's pleasure that the amendment be withdrawn?
§ On Question, amendment negatived.
§ [Amendment No. 6 not moved.]
§ 7 p.m.
Lord Donoughue moved Amendment No. 7:
Page 1, line 10, after ("shall") insert ("provided subsection (1H) below has been adhered to,").
§ The noble Lord said: In moving Amendment No. 7 which stands in the name of my noble friend Lord Clinton-Davis, perhaps it would be for the convenience of the Committee if we considered also Amendments Nos. 13, 22 and 23.
1234 I shall touch briefly upon the costs-of-privatisation aspect in amendments Nos. 13 and 22, which ask the Secretary of State to publish information on the costs of the implementation of privatisation. We wish to see the true costs. This amendment has been tabled against a background in which we know that the examinations by Select Committees in another House and by the Comptroller and Auditor-General have demonstrated that the true cost of previous privatisations has been far higher than was implied at the time. We want to know the direct and indirect costs of the privatisation of the coal industry, including the triggering of historic liabilities. I should like to draw the Minister's attention to the use of the word "precise" in Amendment No. 22 and the way in which that differs from Amendment No. 13.
Perhaps I can deal in a little more substance with the question of valuations, which is a matter of considerable public interest. I refer now to Amendments Nos. 13 and 22 in relation to British Coal. British Coal is a major landowner; but we do not know the actual value of the land it currently owns which, presumably, will be transferred. Attempts to get this information at Question Time have been resisted. Her Majesty's Government have refused to give either the acreage or the value of the land and have stated that this is a question for British Coal. However, British Coal has been equally unhelpful. If one examines its accounts—I have them in my hand —one sees that they are very general. Before this matter proceeds to a conclusion, we must have precise information.
We are asking for that against the controversial background —some believe the scandalous background—of the sales of Rover Group and of Royal Ordnance to British Aerospace. We recall that properties at Enfield and Waltham Abbey were valued at £5 million prior to privatisation; but after privatisation they were suddenly valued at £64 million. This scandal was criticised not only from this side of the House, but by the Comptroller and Auditor-General who, as a result, recommended the technique of clawback which is referred to in Amendment No. 23.
In this context, I should like to ask the Minister certain questions. Can she now or at Report Stage inform the House of the total acreage of land involved in the sale of British Coal? How much is agricultural and how much is urban? What percentage of that land is used for mining operations and what percentage is used for open-cast operations? What percentage of that land is available for disposal? Will there be an independent valuation? I draw the Minister's attention to the fact that Amendment No. 13 specifically asks for an independent valuation of the land owned by British Coal. The noble Baroness must accept that the House and the country will no longer be happy with in-house valuations of British Coal's land which may end up, as has happened previously, as a sweetener for the purchaser. How many houses does British Coal own? I believe that British Coal is one of the largest house owners in this country. May we have the number?
1235 Underlying these questions is the thought that the value of the assets being included in the package is of great relevance. The scope for the kind of rip-off that has happened in the past relates to the value of those assets. We are in a tricky situation. The actual operations of British Coal—the mining operations—may be valued very low. Some people have referred to sums of about £250 million. It might be possible to buy the whole of British Coal for £250 million; yet potentially included are pension funds of £13 billion and thousands of acres of land and of houses which may well be worth hundreds of millions of pounds —if not billions. We need some precise numbers on all this. I beg to move.
§ Lord Clinton-Davis
My noble friend Lord Donoughue has dealt with the aspects relating to coal; but similar issues—although not precisely the same
affect railway property. The trouble is that we know that railway property could easily be exploited and given over to non-rail use. Indeed, it is not inconceivable that railways could be acquired simply to enable the sale or development of the property assets which they own. These are immense. The railways own a number of city centre sites and considerable greenfield land between cities. The land that is occupied by station sites and tracks could be worth billions of pounds if developed. Thus, the anxieties which have been expressed in relation to coal are also applicable to railway land.
If railway land were to be privatised at its nil value, this would give incentives for closing and developing railway routes. That sort of thing happened in the United States in the 1950s and 1960s. It could mean station closures or resiting them to less accessible areas. It could also mean line closures or reductions in the number of tracks.
We have already observed—and the Minister has noted—that there have been difficulties in relation to previous privatisations and in other contexts. After bus deregulation, bus garages and bus stations were sold. Cheap asset sales in that and other privatisations attracted considerable criticism from the House of Commons Public Accounts Committee and the National Audit Office. But pricing rail land at development value would make the rail industry still less attractive to the private sector.
We believe that the implications of the Government's proposals for stations, land and property need to be explored in some detail and arrangements need to be put in place to ensure four particular objectives. First, land which has potential for future rail development should not be disposed of to meet short-term financial pressures. Secondly, the disposal and development of land adjoining rail infrastructure and stations should reflect transport and land use policy. Thirdly, developments at and near stations should not prejudice operational requirements, including possible future development. Fourthly, the interests of local authorities in land and developments that they have financially supported should be protected, the protection being based on the current value of assets rather than outstanding loan debt.
Investment in railways is obviously a long-term 1236 proposition. The advantages of sites close to railway stations are enormous. But facilities such as station car-parks can be pivotal so far as concerns transport strategies, including the promotion of rail-based park and ride schemes. It is essential that short-term pressures for realisation of capital should not outweigh longer-term operational and policy requirements. These are matters which we are asking the Government to address. We are probing the Government's intentions on these matters. It is not too early to do that. I therefore await with interest what the Minister has to say in response to the amendments.
§ Baroness Denton of Wakefield
The noble Lord, Lord Clinton-Davis, said earlier that he had heard the argument several times that the matter under discussion was not for the Bill. I fear that he will have to hear it again. I should say at the outset that this is not the correct forum for discussion on valuations and property issues. They are not relevant to British Coal and British Rail preparing for privatisation but rather to the main sale process itself. However, as both noble Lords have wished to air these matters, perhaps I may rehearse the answers.
As the noble Lords rightly said, British Coal and British Rail hold substantial portfolios of property. They are vast and wide-ranging holdings and include everything from working pits and stations to domestic property and farm land. The proposed amendments would mean that British Coal's and British Rail's land holdings together with any other assets which are to he transferred on privatisation would have to be valued and that value published within one month of the proposal to transfer assets. The scale of such an exercise would be huge and I doubt whether it would be possible in the timescale. The cost of valuing everything from estates of land to rolling stock to miners' lamps would be a vast commitment and would run into many tens of millions of pounds. I am sure that the proposers of the amendments and I share a common ambition to obtain value for money from the sale of public sector assets. That is certainly the Government's aim and Ministers have to answer for their actions on this score to the Public Accounts Committee.
I ask the Committee to consider what the relevant value of a piece of land or property actually is. An item must be worth what one can get for it—nothing more. A coal mine or a rail freight yard is worth what purchasers, be they trade buyers or shareholders, are prepared to pay. A blanket valuation exercise is therefore very costly and unnecessary. The valuation that the market puts on an asset is the one that matters.
Certain circumstances have arisen during past privatisations when the Government have wished to make use of property valuers in order to fulfil their value for money responsibilities. They have been principally cases where the market might not work properly. There have, for example, been circumstances where the alternative use value of a piece of land is very much higher than its existing use value. A site 1237 which has been used as a warehouse would be worth more to a purchaser if its use as a supermarket site was intended in the future.
On previous privatisations the Government have sought to flag up high alternative value sites and to impose clawback provisions to ensure that they are maximising proceeds. Previous privatisations have tried to ensure that the Secretary of State participates in any windfall profits realised from the disposal of any interests in certain real properties by privatised entities. Such a windfall might occur if property prices rise sharply after privatisation.
Clawback in the past has ensured that half the capital gain on the property disposed of by the privatised entity less corporation tax is paid to the Secretary of State and requires a valuation to determine the base value of the property at the time of sale. On electricity, clawback was imposed by a mechanism imposing on the privatised entities the obligation to pay the clawback amount, if any, to the Secretary of State and providing security against non-payment. As regards the British Technology Group, clawback was imposed by means of a contract. In no previous privatisation has clawback been included by means of a statutory compulsion in the Act.
These amendments propose that valuations and the imposition of clawbacks will be required on all proposals for property transfers. I can assure the Committee that the Government will in due course consider both alternative use valuations and clawback valuations in the light of their responsibility to ensure value for money, but I cannot see that the valuation of all British Coal's and British Rail's properties as proposed by the noble Lords would be a valid use of government time and resources.
§ Lord Donoughue
I have obviously not quite understood the noble Baroness. Is she saying that there will not be an independent valuation of British Coal land and houses before disposal, or is she simply saying that this is not the appropriate stage to propose it? If she is saying that there will not be a valuation, that is absolutely outrageous in relation to a business where the assets are almost certainly worth far more than the going business.
§ Baroness Denton of Wakefield
I started my remarks by saying that this is not a matter for the Bill. I was trying to be helpful by rehearsing the answers to the questions, which in the first place were not relevant to the Bill. I was saying that an overall valuation of everything within a month did not represent good value for money.
I was about to suggest that there must be certain de minimis grounds to prevent clawback being imposed on the transfer of trivial items. There can be no point in retrieving windfall profits of £100 on the sale of a piece of equipment or land if the drawing up of a clawback contract costs £5,000 in solicitors' fees. Secondly, the valuation of all the corporation's assets would involve very significant expenditure. It must be 1238 right that clawback is only introduced on those items of property where the market is such that there is actually some potential for windfall gains to be made.
§ Lord Donoughue
Does the Minister accept that clawback, although useful, is not a substitute for a proper valuation? Apart from anything else it gives a 50 per cent. gross windfall potential. We welcome clawback, but it is not a substitute for a proper valuation.
§ Baroness Denton of Wakefield
I was trying to indicate how, in some instances, the decision concerning which properties would be under question. But I would again confirm that these are decisions which must be made nearer the time of privatisation. The Government will of course have to justify their decisions in due course to the PAC.
The amendment also proposes that the cost of transferring the property to the private sector entity should be estimated and published. An estimate of the cost of transferring property would be difficult to produce and would be likely to be misleading because of the problem of identifying in advance to what extent there would be difficulties in relation to title and because it would cover only part of the sale process.
I repeat that the costs of privatisation can be considered only when the process has been completed. I remind the Committee that the Government will be asked to defend the costs before the PAC. The amendments are not relevant to the Bill and do not improve the prospects of securing value for money on privatisation. In fact, the reverse is true. Therefore, I urge the noble Lord to withdraw the amendment.
§ Lord Donoughue
We have heard what the Minister has said—that this is not the appropriate stage to deal with the matter. We said that these were probing amendments. We should put down a marker that these are matters that we consider to be important. Should we ever reach the stage where we both agree that it is appropriate, I trust that the Minister's answers will be more forthcoming. We shall reconsider what the Minister has said and decide what to do on Report. I therefore beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Clinton-Davis moved Amendment No. 8:
§ Page 1, line 10, after ("include") insert (", provided the conditions specified in subsection (1K) below have been satisfied,").
§ The noble Lord said: I shall speak also to Amendment No. 24. The White Paper envisages the outright sale of the freight and parcels businesses and the transfer of passenger service assets and staff to franchisees. Existing BR employees are entitled to know what kind of potential new employers they will be dealing with. Of course, no one will deny that there are many good employers in the private sector of the transport industry. Many recognise trade unions for collective bargaining purposes. Many have properly structured career development programmes. They offer fair wages and decent conditions of service and respond positively to questions of staff and public safety. Consequently, I argue that when one comes to operators of that standard bidding for sections of the 1239 railway industry they would have nothing to fear from the scrutiny of their records by the public and potential employees.
§ The most prominent of the potential new operators of passenger services—I understand that negotiations based on the first proposal that was made have now ended—is Richard Branson's Virgin organisation. As an employer in the airline industry it has a good record. It is generally willing to respond constructively to requests for trade union recognition. It offers fair employment terms and salaries and is conscious of the need for safety. What would he, for example, have to fear from a disclosure of the record? However, not every employer would bear up to such scrutiny. The public and existing BR employees are entitled to know what lies in store for them.
§ Working conditions are linked inextricably with questions of safety. The Hidden Report into the Clapham rail disaster highlighted excessive working hours and constant overtime working as a clear minus factor in relation to safety. In consequence of that, British Rail sought to introduce its own guidelines, and when it could not immediately implement its own objectives interim arrangements were brought into force. That of course is something upon which it is entitled to he complimented.
§ The public is entitled to know what provisions would be made by the new service providers and to have an assurance that they would not go back on the arrangements—I shall not rehearse them at this hour —which British Rail made to balance its books. I take some comfort from what the Government have to say in the White Paper about safety, but, nevertheless, I still believe that the points I have made, which I have made at the request of a number of people, should be replied to.
§ I say that most particularly in the light of other assurances that were given when bus deregulation was proposed, because the situation that has been revealed in the five years since bus deregulation is inconsistent with the assurances that Ministers then proffered to both Houses. In fact, average hourly rates of pay for drivers have fallen by nearly 5 per cent., while the average increase for all industries was 8.9 per cent. Hours worked increased by 2.1 per cent compared to a national average increase of 1.6 per cent. So the auguries in that regard are not good. How do the Government propose to put those concerns at rest and how will they go about doing so in terms of the processes that they envisage in the White Paper, while taking into account the fact that their own position was debased to some degree as a result of experience in another privatised industry?
§ There is one other point to which I should like the Minister to give his attention; that is, the EC acquired rights directive. What effect will that directive have with regard to workers who change from being employed by a public utility to privatised companies? There is a recent ruling in the European Court of Justice which indicates that the United Kingdom regulations which put that directive into operation restricted protection to workers in commercial ventures and that that was unlawful. I understand that the Government's view is that the regulations had 1240 always covered the public sector. I should like to know what the position is and whether the Government have satisfied themselves that they can now take proper account of the view expressed by the court. I beg to move.
The Earl of Caithness
The amendments would require British Rail and British Coal to secure details of employment practices and records of potential transferees before—I underline the word "before"— exercising the powers in the Bill. Such an amendment would be unworkable. I do not see how the noble Lord sees it working but, given its wording, the amendment would be unworkable. There is much work that British Coal and British Rail need to carry out well in advance of the implementation of privatisation and before potential transferees will have been identified.
No powers of transfer are included in the Bill. Such powers will be included in the main privatisation Bills that will be brought forward later this Session. It is only when the main legislation has been passed that the question of potential transferees can properly be addressed. Although the amendment is not appropriate for the Bill, it raises an important issue and one that we may find ourselves discussing again—I shall change the wording to "almost certainly will find" ourselves discussing again, not just during this Bill's passage but when the main privatisation Bill is before us. We shall all be well accustomed to the arguments by then.
The Government attach great importance to the maintenance of employees' rights, and in respect of coal and rail employees. This has been underlined on numerous occasions during the passage of the Bill and again today. The Government have stated repeatedly that they will ensure that pension entitlements of existing contributors and of past employees of the coal and rail industries are properly safeguarded. We have given similar assurances concerning existing concessionary fuel entitlements earned as a result of service with British Coal and concerning concessionary travel arrangements earned as a result of service with British Rail.
These assurances were also given in respect of British Rail in the rail privatisation White Paper, paragraph 86. As the Committee knows, no decisions have yet been taken on the future structure of the coal industry or on the form and timing of privatisation. So neither the Government nor British Coal can know who might be the potential purchasers of the industry.
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.
The Committee will understand therefore that to require, as these amendments seek to do, employment records and practices of potential transferees to be made available before British Coal and British Rail can exercise the powers conferred on them by the Bill is not an option.
When I come to the European directive and the transfer of undertakings (protection of employment) 1241 regulations, otherwise known as TUPE, I can assure the noble Lord, Lord Clinton-Davis, that very serious consideration has been given to the implications of that.
§ Lord Clinton-Davis
As regards the last part, I wonder whether the noble Earl would undertake to write to me before the next stage of the Bill with regard to the directive. I mention it late in the day and clearly the Government must consider its implications. But it would be helpful if the Minister could give me the undertaking that he will write to me on that point.
The Earl of Caithness
If there is anything more that I can add, I shall be only too pleased to write to the noble Lord.
§ Lord Clinton-Davis
The Minister said that the Government were considering the implications, therefore it appears that their final decision has been made. We hope that the noble Earl will be able to write to us before the Report stage.
§ On the other issues, I note what the Minister said and will consider his observations. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 9 not moved.]
§ 7.30 p.m.
§ Lord Clinton-Davis moved Amendment No. 10:
§ Page 1, line 10, after ("anything") insert ("subject to their having considered the document published in accordance with subsection (1U) below").
§ The noble Lord said: I beg to move Amendment No. 10, and with it perhaps it would be convenient to the Committee to discuss Amendment No. 33. These amendments bring us to the objectives for rail freight. I concede at once that the White Paper has dealt with this issue rather more emphatically perhaps than some of the other issues to which I drew attention in an earlier debate.
The White Paper, paragraph 45, states that:
The industry faces the twin challenges of coping with significant restructuring in its traditional core businesses such as coal and steel, and exploiting the new opportunities offered by the Channel Tunnel and the development of intermodal technologies".
That is a fine statement; but what is the clue to the progress that will be made? We know that already there has been one unhappy experiment concerning Charterail. I ought to disclose an interest here, since the firm of solicitors for whom I am a consultant advised Charterail. It was an unhappy experiment which does not indicate that this area of policy and progress will be wholly successful. I wish to know from the Minister what his view is about the experiment and why it failed.
Paragraph 46 states:
Rail freight will be able to meet these challenges only if it is efficient and responsive to the demands of its customers … The Government's policy is … to establish a competitive and privately owned rail freight industry in the course of this Parliament".
That is all very fine, too; but there is no hope unless rail is dealt with on—to use the frightful expression, if it can be used in this context—a "level playing field" with road transport. The situation at the moment is
that there is no comparison in the treatment of the two. Overwhelmingly, opinion has been produced to the Government not simply from the Opposition but from those who are familiar with the day-to-day operations of rail freight which make that point very clear indeed.
Then the White Paper goes on to say in paragraph 47 that:
The Government will require BR to reorganise its freight operations for transfer to the private sector
That is fine so far as concerns the Government's policies. But we need signposts rather more clearly pointing that out than are in the White Paper.
§ When dealing with freight interests, people often say, "Well, should we not try to switch much more freight from road to rail?" But the Government's reply is that this would not be of assistance to the environment, because if rail freight were doubled, it would not reduce road freight by more than a small proportion. However, a good deal of research has been carried out on the issue by Transport 2000. With respect, that argument is not correct. The heaviest articulated lorries which involve the worst damage environmentally also travel the longest distances. The average length of journey exceeds that for rail. As regards short distance bulk traffic, that is also a matter which should be considered more suitable for transfer to rail and to water, where appropriate. But the Government give no indication of their thinking along those lines and how those environmentally advantageous arguments could be met.
§ How might the switch from road to rail and water be brought about? Clearly, a package of measures would be needed. Public funding for rail and water freight facilities, and infrastructure to put them on the same basis as road and to recognise their environmental advantages, would have to be provided. Releasing rail freight from its requirement to make an 8 per cent. return and substituting a cost benefit approach to investment would be required. Full taxation of heavy lorries reflecting the full environmental and social costs which they involve would also need to be considered. Putting lorry taxation on a mileage basis on the polluter pays principle might be something which the Government should take into account.
§ Strict enforcement of regulations governing lorries, including driving hours, vehicle maintenance, overloading and speeds are all matters where there are serious irregularities so far as the enforcement of the law is concerned. That too could have an effect. Local restrictions on access to urban areas by the heaviest lorries should also come within our contemplation.
§ If we can proceed on the basis of a policy for freight along those lines, such measures would give incentives to transfer long distance freight from road to rail and to use more environmentally friendly vehicles for local deliveries. There is no indication in the White Paper or in any other document with which the Government have provided us except aspiration. At the end of the day the Government merely hope that there will be a greater use of freight by rail. That aspiration will not be realised unless positive measures are undertaken. 1243 So we take the view that the Government ought now to spell out rather more effectively than they have done in the White Paper whether they propose to meet the requirements and whether they believe that there is any point in simply offering aspirations without the necessary infrastructure of ideas which would make those aspirations come to reality. I beg to move.
The Earl of Caithness
I am grateful to the noble Lord, Lord Clinton-Davis, for raising such an important issue. If I cannot agree that the amendment tabled is either necessary or appropriate for the Bill before us, I can certainly share the spirit in which it was tabled. The Government remain committed to maximising use of the existing infrastructure and are keen to see greater use of rail for the transport of freight.
We must, of course, keep this issue in perspective. Our industry is inevitably largely dependent on road transport to meet its freight needs. Even a 50 per cent. increase in the amount of freight carried by rail is equivalent to only the year's growth in road transport between 1988 and 1989. Nor should we forget the contribution made by shipping, which accounted for 26 per cent. of domestic freight movements in 1989.
The Government have approved BR investment in preparation for Channel Tunnel freight services, and committed investment now stands at some £390 million. We have widened the assessment criteria for freight facilities grants to assist in removing lorries from environmentally sensitive roads and we are continuing to encourage companies to take advantage of the scheme; since 1979, we have awarded grant-aid equivalent to £100 million in real terms for 140 schemes. This has removed over 2.5 million lorry journeys a year from our roads and accounts for some 10 per cent. of all freight tonnage carried by rail.
The improvements we have made to the grant assessment criteria have generated a great deal of interest. There have been over 150 specific enquiries and 80 meetings with firms to discuss their proposals. And we have encouraged the development of joint ventures between BR and the private sector. The Committee will be pleased to know that some 40 per cent. of freight rolling stock is already in private hands. Of course we cannot compel people to use a particular mode of transport for the carriage of freight, so the emphasis must be on making rail more at tractive to freight customers. This is certainly one of the objectives of our privatisation proposals. To achieve this objective a more radical approach is needed, involving the development of competition between rail freight operators and the introduction of private sector financial and management freedom. This is what our policy of privatisation and liberalisation is designed to achieve.
We are currently considering a number of measures to encourage industry to consider rail for its distribution needs, and external consultants are currently working on options for the privatisation of rail freight. Their final report is due in February and the Government will publish the conclusions shortly thereafter.
I can assure the Committee that the Government are fully seized of the valuable contribution played by 1244 rail freight and the importance of encouraging its further use. My right honourable friend the Secretary of State has already said in another place that the Government will consult on the privatisation proposals in the new year.
The noble Lord, Lord Clinton-Davis, also asked about Charterail. He asked me why it failed. Far be it from me to comment on a company such as that. I should have thought that, if anyone in the Committee should comment, it would be the noble Lord, given his firm liaison with that company.
§ Lord Clinton-Davis
With respect, as regards Charterail, I was not intimately involved with that company. I wondered what the Government's reaction to its failure was. It is not a question of why it failed but of the consequences of that failure. Is it not a fact that if, in conflict with what the Minister has said, that were to establish a precedent, there would be a real danger of an even greater move from rail to road? That is the concern which is being expressed widely in the press, not simply following Charterail's collapse but also in relation to the generality of opinions that have been expressed about the need to move from road to rail. The Minister himself has expressed that view.
The trouble is that not only the Minister but also his colleagues in the Department of Transport have failed to meet the essential point, which is that there is no hope on this issue unless there is a much greater measure of parity between the way in which infrastructural costs are charged for road as against rail. The railways essentially bear their own infrastructural charges, and therein lies the real difference. I am sure the Minister is familiar with representations that have been made to him on this point not simply from the Opposition but from many other people. However, the Government seem unwilling to make any concession on this point. As long as they remain unwilling to do so, I fear their aspirations for a greater move from road to rail will founder. I hope I am wrong but I believe we have to look to a much more positive assertion of what the Government's role is in relation to this matter than we have heard tonight.
However, it was my intention simply to probe the Government on this point. I feel sure we shall wish to return to it in further stages of this Bill. Meanwhile, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 7.45 p.m.
§ Lord Clinton-Davis moved Amendment No. 11:
§ Page 1, line 10, after ("which") insert ("satisfies the conditions specified in subsection (1M) below, and").
§ The noble Lord said: In moving Amendment No. 11, I wish to speak also to Amendment No. 26. As regards historical records, it is quite clear that British Coal has a large, extremely valuable collection of archives which are very important to social and industrial historians. These archives also represent an important source of planning information. They disclose the locations of old mine shafts and future 1245 coal reserves. They are important as regards identifying subsidence dangers and who is responsible should subsidence occur.
§ What we are anxious to establish is who will hold the archives in their possession. Further, we are anxious to establish that they will be responsibly and safely maintained. That costs money. Who will be responsible for that? Further, we are anxious to establish that there will be easy access to them, most particularly as regards local authorities, as they would require that access for planning purposes.
§ I know my noble friend Lord Donoughue was anxious to move this amendment himself. He is a professional historian and he knows much more about this matter than I. Noble Ministers opposite will of course say, "Hear, hear!" to that. However, he could not remain in the Committee this evening as he had a prior engagement of some considerable importance. I am sure the Committee will excuse his absence. Having said all that as regards the coal industry, I should add that precisely the same arguments apply to railway archives. I beg to move.
The Earl of Caithness
I am sure we would all agree that the rail and coal industries represent an important part of our industrial and national heritage. This has been recognised by both British Rail and British Coal, which have both made significant contributions in ensuring that relics and artefacts are preserved. One only has to look at the National Railway Museum in York to see that that is the case. I therefore understand the concern expressed in this amendment that any collections and individual items still in the possession of the corporations should not only remain intact but should continue to grow following the privatisations of the coal and rail industries. It is a concern that the Government share and I hope I can give the Committee the assurances that it seeks on this matter.
So far as our railway heritage is concerned, as the Committee may know, there is statutory provision in the Transport Act 1968 governing the transfer and disposal by BR of historical archives and relics. The Government wish to ensure that provisions for the preservation of Britain's railway heritage continue to be safeguarded in legislation. We are therefore considering very carefully the best means of achieving this in the rail privatisation Bill.
In some respects, however, the existing legislation is outdated. We believe that provision needs to be made for the Secretary of State to introduce a scheme which more closely reflects the day-to-day arrangements which have been established by British Rail and the collecting institutions and which also takes account of the fact that new rail operators will be coming into the rail industry. Although wider in scope than the noble Lord's amendment, the scheme would provide for similar safeguards against the inappropriate disposal of historical records and relics. We are, of course, consulting interested parties and will continue to do so as we develop the details of the scheme.
British Coal's records are public records. Under the Public Records Act 1958 and the Coal Industry 1246 Nationalisation Act 1946 British Coal is obliged to make plans of its workings available to the public. In addition, it is the custodian, on behalf of the Health and Safety Executive, of many plans of abandoned mines, which are vital for safety reasons. The Government recognise the importance of maintaining those arrangements. The precise mechanisms for doing so will be addressed in the main privatisation legislation.
I can understand the intention behind the proposal of the noble Lord, Lord Clinton-Davis, that transfers of historical records and relics should require the approval of the Secretary of State for National Heritage. However, I hope that he will understand from what I have said that the measures taken by British Rail and British Coal to preserve their heritage go well beyond the requirements of any legislation for which the Secretary of State for National Heritage has responsibility. Therefore, I hope that, with the assurances that I have given as to the importance which the Government attach to preserving that heritage and our intention to ensure that it is properly dealt with in the main legislation, the noble Lord will agree to withdraw his amendment.
§ Lord Clinton-Davis
I am not sure whether I heard the Minister correctly because that was a rather rushed reply. Am I right in thinking that it is within the contemplation of the Government that, in relation to railway archives, the costs would not necessarily fall on British Rail but would be extended to other interests which would be involved in the privatised industry? I understood that to be the purport of what the noble Earl said, although I accept that, as he said, this Bill is not the right vehicle. Leaving aside vehicular arguments, am I right in making that assumption?
The Earl of Caithness
I can assure the noble Lord that the right vehicle, to which he will seek to attach his wagons in the future, will come along as soon as possible after the Bill receives Royal Assent. We shall be able to discuss the matter in the right context then.
I did not mention costs specifically, but I said that we are discussing this matter with other institutions in addition to British Rail and British Coal. I shall bear in mind what the noble Lord has said.
§ Lord Clinton-Davis
I am grateful to the Minister for that reply. I sought merely to raise the matter tonight. I note with interest that the Minister is taking the matter seriously, as I am sure is the Minister with responsibility for coal. In the light of what the noble Earl said, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Amendments Nos. 12 to 26 not moved.]
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.
§ House adjourned at five minutes before eight o'clock.