British Rail: Privatisation Subsidies (Hansard, 2 March 1994)

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Mackay of Ardbrecknish)
My Lords, the size of the grant payable to support passenger services and external finance limits 985 for Railtrack and British Rail will be announced in the transport report to be published later this month. Taken together, they will be consistent with the overall provision for railway expenditure in 1994– 95 of £ 1,262 million announced in the unified Budget.

§ Lord Clinton-Davis
My Lords, will the Minister indicate whether that is in excess of the figure originally contemplated by the Government or below that originally contemplated? In the absence of that knowledge, and without any proper study or consultation having been undertaken in order to prepare the country for this situation, how could the Government with any degree of seriousness go ahead with their utterly fallacious proposals in relation to rail privatisation?

§ Lord Mackay of Ardbrecknish
My Lords, a great deal of work has gone into the financial provisions which will be made available for British Rail and Railtrack. I can confirm that the external funding level announced in the Budget of £ 1,262 million will be the one that will emerge when the figures are produced concerning the total amount of subsidy to be provided to the Franchising Director.

Lord Bruce of Donington
My Lords, will the noble Lord give the House an assurance that when the information becomes available it will be announced by means of a separate Statement in both Houses, and will not be issued in an Answer to a Written Question put down for answer on a Friday afternoon?

§ Lord Mackay of Ardbrecknish
My Lords, I am surprised that the noble Lord is sitting on the Liberal Democrat Benches. I wonder whether that represents a shift in the direction of Europe. As the noble Lord knows, his question is a matter for the usual channels who deal with Statements and the like.

§ Lord Ewing of Kirkford
My Lords, is the Minister aware that he should not be surprised at my noble friend being on the Liberal Democrat Benches? After all, when all is said and done he might have ended up there himself in his earlier days in Scottish politics.
Does the delay in relation to the Scotrail franchise for the east coast route in Scotland have anything to do with the external finance which is at present under discussion, or is there some other problem which the Government are withholding from your Lordships' House? What is the problem which is being kept secret? Surely we are entitled to know.

§ Lord Mackay of Ardbrecknish
My Lords, there is no problem which is being kept secret. The question of the franchising of Scotrail will be considered within the timetable which ha:; already been laid out. Clearly one of the important factors will be the announcement in the transport report of the amount of money available for supporting passenger services. I can assure the noble Lord that there is nothing to be suspicious about. I am sure that, when privatised, Scotrail will be a huge success and will be shown to be a step in the right direction, just as I believe that my own step many years ago was also a step in the right direction.

§ Lord Clark of Kempston
My Lords, does my noble friend agree that those industries which have been privatised have been of great benefit to the taxpayers of this country? Is it not the case that, instead of paying subsidies to the old nationalised industries, the Exchequer is now receiving corporation tax from the profits that those industries are now making? Does he also agree that in many cases the privatised industries are charging lower prices in real terms than the nationalised industries?

§ Lord Mackay of Ardbrecknish
My Lords, my noble friend is absolutely right. Over the past 15 years the privatisation programme in this country has been hugely successful. It has been followed by many countries all around the world. So far as I can tell, in successive pledges made by the party opposite over the years, the one pledge which has always been missing is the pledge to renationalise the last successful privatisation.

§ Lord Holme of Cheltenham
My Lords, can the Minister let us know how the franchise application process is going? Are lots of applications being received?

§ Lord Mackay of Ardbrecknish
My Lords, that question is a good deal wide of the original Question. I do not have the answer to hand.

§ Lord Barnett
My Lords, if the Minister's estimate of the cost of the subsidy turns out to be too low, will the shortfall come out of the much reduced contingency reserve or will he reduce access to the rail network following privatisation?

§ Lord Mackay of Ardbrecknish
My Lords, we do not believe that the figure will be too low. A great deal of work has gone into the calculations which are necessary in order to come to a conclusion not only about the financing limit announced in the Budget but also about the subsidy which will be announced in the transport report later this month.

§ Lord Clinton-Davis
My Lords, even taking into account the Minister's somewhat convoluted thinking, does he not accept that this will almost certainly be one privatisation too far? More specifically, can he explain what will be the cost in terms of public expenditure of setting Railtrack's initial rate of return at 5 per cent. for the next couple of years instead of 8 per cent.? Will he also indicate what is the likelihood of increases in the price of rail fares, because he ignored that question when it was posed earlier?

§ Lord Mackay of Ardbrecknish
My Lords, I do not recall that the question of the price of rail fares was posed earlier. The calculations on return on asset base have been agreed. The calculations which we have undertaken in respect of the external financing limit and the announcement to come are based on that 5.6 per cent. return on asset base. I noticed that the noble Lord thought that this might be a privatisation too far. Dare I suggest to him that that suggests that he now agrees that previous privatisations were not?