HL Deb 07 December 1994 vol 559 cc921-3

2.55 p.m.

Lord Taylor of Gryfe asked Her Majesty's Government:

What is the total expenditure incurred in consultancy, legal and accountancy fees in the privatisation of British Rail, including Railtrack, and the anticipated expenditure on franchising.

Viscount Goschen

My Lords, total expenditure on external consultancy fees for railways privatisation, including legal and accountancy fees, incurred by the Department of Transport, the Office of Passenger Rail Franchising and the Rail Regulator between 1991–92 and 1993–94 was £19 million. Consultancy costs incurred by BR and Railtrack are a matter for them, but I understand that they were in the order of £30 million up to March 1994. Total planned expenditure by the Office of Passenger Rail Franchising for 1994–95 is £7 million.

Lord Taylor of Gryfe

My Lords, will the Minister accept that I was very interested in the figures quoted? I understand from the annual accounts of British Rail that it has taken 50 per cent. of those costs and the 50 per cent. in its accounts represents £40 million. That suggests that the total amount of fees that I mentioned in my Question are in the region of £80 million. Even if we accept the Minister's figures, does he consider it a reasonable contribution to an efficient railway system when, at the same time that those substantial fees are being incurred, the investment budget of British Rail last year was reduced by 21 per cent.? The public service obligation, which is the subsidy for the day to day running of the railways, apart from investment, was also substantially reduced. Can he justify the expenditure on consultants' fees while there is a reduction in investment in new rolling stock, etcetera, which will make the railway efficient?

Viscount Goschen

My Lords, it is extremely important to put these sums in the context of the major transition that is taking place in the railway industry. It is a major privatisation and we simply do not believe that it would be good value to maintain the kind and level of specific expertise within the department for what is a short-term transition period. That is why these moneys have been spent on consultants. We see them as being good value.

Lord Marsh

My Lords, will the Minister address his mind to the extent to which British Rail, or Railtrack, will have to carry the cost of these consultancy fees— which arise wholly and solely out of government policy—in their accounts, which presumably will have a direct effect upon levels of subsidy that have nothing to do with this exercise? Alternatively, can he give the House an assurance that those very large sums in regard to either Railtrack or British Rail will not be taken into account in any way when addressing the levels of subsidy in those companies?

Viscount Goschen

My Lords, the noble Lord is right and the levels of subsidy are another issue. They will be based on the services that the franchising director will require, which will be based broadly on the existing timetable and the contracts made with the train operating companies. The consultancy fees represent the provision of very specialised services, which we do not believe exist within the department or within Railtrack, British Rail and the Office of Passenger Rail Franchising. That is why we brought them in and why we feel that they are good value.

Lord Ewing of Kirkford

My Lords, will the Minister answer a simple question? Who will pay the consultancy fees? Will it be the British taxpayer or the railway companies?

Viscount Goschen

My Lords, at the moment, of course, the taxpayer pays everything for the railways. That is the historic position. As the noble Lord knows, we are now going forward to a position where we are putting the railway companies into the private sector. Once those companies are in the private sector they will be responsible for their own costs.

Lord Clinton-Davis

My Lords, is the Minister aware that the figures he put forward seem to coincide more with Disney World than with reality? It was reliably estimated that the total costs of actual and projected expenditure in relation to privatisation, including the costs borne in the City, are nearer £1,000 million than the figure he stated. Whatever the position, does he agree with the statement made by the chairman of British Rail, Sir Bob Reid, on 4th December that the Government would have to make a long-term commitment to subsidise the railways if Railtrack is to be saleable at all? Is it right that the taxpayer should provide this life support machine for the franchisees?

Viscount Goschen

My Lords, the figure quoted by the noble Lord totally misrepresents the situation. He was talking about the total cost of privatisation, which is by no means the same as the total cost of consultancies. The larger figure includes the smaller, but I dispute vigorously his assessment of the larger figure. It is grossly overstated. The noble Lord then asked a supplementary question which had nothing to do with the consultation cost. We stated that we will provide a subsidy to the railway industry, as long as it is needed, to provide the services required by the franchising director.

Lord Clinton-Davis

My Lords, if the Minister disputes my figure, what is his view of the total cost of privatisation?

Viscount Goschen

My Lords, British Rail estimates that it has incurred reorganisation costs of £102 million up to March 1994 and that includes £30 million consultancy costs.