HL Deb 24 November 1994 vol 559 cc380-7

4.23 p.m.

The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen)

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

"With permission, Madam Speaker, I should like to make a Statement about the future of Railtrack, which, since April this year, has been a government-owned company responsible for rail infrastructure.

"The Government intend to privatise Railtrack within the lifetime of this Parliament. We will do this using the powers provided by the Railways Act 1993. Although the precise details and timing will be announced later in the light of market conditions, I can confirm that Railtrack will be floated on the stock market and that everyone will have the opportunity to buy shares.

"The Government believe that privatisation offers the best future for Railtrack, for passengers and freight and for train operators. It will allow greater use of private sector skills in managing the network; in improving Railtrack stations; in delivering efficient track maintenance; and in encouraging investment in the upgrading of railway lines. It will provide even greater scope for private capital to be injected into better facilities. Railtrack will be better able to deliver improvements in the service it provides to operators and therefore to passengers.

"Privatisation has been one of the great achievements of this Government since 1979. It has transformed former state-owned industries and brought real improvements for customers and employees alike. It has brought new management techniques and new sources of investment. It has spread ownership throughout society. Indeed, Britain's example has been copied around the world.

"The Department of Transport has been at the forefront of this programme. National Freight, Sealink, National Express, Associated British Ports, the British Airports Authority and British Airways are all thriving in the private sector. This announcement paves the way for the creation of another important private company.

"The privatisation of Railtrack will be the most significant single step in the overall process of transferring the ownership and operation of Britain's railways to the private sector. The Government have set the target of franchising a majority of train services by April 1996. That target remains. The franchising director will shortly start the pre-qualification process for the first franchises. The Government will be selling the rolling stock leasing companies next year. Privatisation of British Rail's infrastructure services units, British Rail Maintenance Ltd. and other businesses is already in progress and the transfer of British Rail's domestic freight services to the private sector should be completed by the end of 1995.

"Privatisation will enable Railtrack to provide a better service, bringing substantial benefits to train operators, passengers and other rail users and to investors. My announcement demonstrates this Government's continuing commitment to privatisation. It demonstrates our continuing commitment to railway privatisation. It demonstrates our continuing commitment to improving rail services. Above all, it demonstrates our continuing commitment to passengers and to our national economy."

My Lords, that concludes the Statement.

4.26 p.m.

Lord Clinton-Davis

My Lords, I thank the Minister for repeating the Statement, which constitutes a series of uncorroborated assertions and winds up with what purports to be a policy. It is difficult to whip up for this Government even the enthusiasm that was revealed by Teddy Roosevelt for his presidential opponent, William Howard Taft, when he said: "He means well, feebly".

This statement has to be seen in its true context: the foundering of the Government's other flagships, Royal Mail privatisation and the timetabling for the franchising of rail services under the Railways Act, which is now hopelessly adrift; and also the need seen by the Government to attempt to pacify what Mr. John Maples unerringly described as the Tory parliamentary yobbos who are apparently to be unleashed on Mr. Tony Blair but who all too often, as we have witnessed, unleash themselves on their own Prime Minister. Above all, the Statement is nothing but a crude attempt to make way for tax bribes by flogging off Railtrack's assets.

I should like to ask the Minister a number of questions. Does not this announcement—there is not a word about it in the Statement—totally reverse the Government's previously announced plans for Railtrack? Was it not made clear by Ministers over and over again in this House, in another place, and in the media, that Railtrack, despite its plainly inadequate leadership, was to remain a publicly owned company to enable it to plan an investment programme over some 10 years? What is the Government's explanation for the fundamental change that they have announced today? It is pure expediency, is it not?

Secondly, is it not a fact that the privatisation programme has gone utterly awry? Was not the incorporation of the first six franchises to be completed by October? Has there been little or no interest in acquiring the franchises? If I am wrong, what evidence is the Minister able to put before the House today? We know of 25 shadow franchises. But what about the substance? With this change of policy, will not the much trumpeted incentives to be offered for management-employee buy-outs have to be shelved?

Thirdly, is it not clear that what will be attractive to speculators is not the 11,000 miles of British Rail's track and rail services but the huge property portfolio that Railtrack enjoys, with its many prime city centre sites? The price to be paid will be a drastically reduced national rail network serving only parts of the country?

Fourthly, what are the estimated costs of this privatisation? We know that the Government have already squandered £700 million in their preparation for privatisation so far without providing a single extra train, a single piece of track or any signalling—to say nothing of the fare increases which have beset London commuters in particular, with very much worse to come.

So what will this new element of privatisation cost? Will the Minister say something about the timetable? The Secretary of State, in a note to the Prime Minister dated 9th November, wrote: We have agreed our target date for the flotation should be the first quarter of 1996, but our public stance"— represented, of course, in this Statement— should be only that Railtrack will be floated during the life of this Parliament". What do they mean? Is not this a deception, and a deliberate one at that?

Sixthly, would the Minister concede that there is already growing evidence of what we predicted in our many debates on the Railways Bill; namely, the fragmentation of the national network? Travellers in some areas are already bemused when one timetable is replaced by three versions for three operators which list only their own trains. Will not this policy add to that confusion?

In my view, the Government would do well to heed the words of Mr. Maples—at least the few words that are relevant to this matter. He asserted: What we are saying is at odds with [the voters'] experience". What they are doing to the railways is at odds with the voters' experience. Could they not bear in mind that, while it is not forbidden even for this Government to repeat their errors, it is not mandatory to do so?

Baroness Thomas of Walliswood

My Lords, we greet this Statement with grave concern. In particular, the uncertainty cast over the whole process of franchising is the basis of that concern.

At the present moment, as I have good reason to know, it is true to say that the various bodies involved in franchising and their representatives—OPRAF, the rail regulator and the train operating companies—hardly know how the other bodies work. Is it not ridiculous to insert into this process, with all its current uncertainties, yet one more uncertainty, when we were promised in the past that such uncertainty would not be injected and that there would be a period of stability?

One of the problems attendant upon this process is that the ability of the franchise operating companies depends upon the cost of operating over the track. I should like to know what reassurance the Minister can give us that those costs will not rise. What is the Minister likely to do if the costs do in fact rise? Does he simply contemplate that those costs will be passed on to the eventual customers, the rail passengers? Or is he proposing to put additional subsidies into the hands of OPRAF, the rail franchising authority?

I believe that there are good grounds for retaining Railtrack in public ownership for some considerable time. Indeed, it is possible to argue that it should remain in public ownership altogether. There is a major question connected with this matter. When will the Government recognise their responsibility for leading a joint public and private investment in the infrastructure of the railways? If, at some time in the future, they do privatise Railtrack, what will they do to prevent the rail network itself from being broken up?

Potential passengers—the customers, the people out there —are in intense doubt about the future of their railways. It is partly the privatisation process itself and partly the fear of the break-up of the network, as happened with bus privatisation, which causes those concerns. Perhaps the Government remember that rail privatisation has been called in the past "poll tax on wheels". How confident are the Government that the timetable for rail franchising can be met?

The Statement makes much of the benefits of privatising Railtrack. Personally, I am doubtful about the wide extent to which privatisation has spread share ownership, though I accept it in the short term. The Government may find that the lottery money, about which we were talking earlier, substitutes not so much for donations to charity as for speculative buying of share issues in privatisation processes.

What sort of price do the Government think that they are setting on this very valuable asset? Estimates that I have seen speak of £1.5 billion. That is 1p off income tax for one year. It seems to me that, although the process of the privatisation of Railtrack may not be very beneficial to the customer or to the rail franchise companies, it might be beneficial in the very short term to the Government.

In view of what is happening in another major privatised company, my last question is this: what controls or indications will the Government give to the chairman of Railtrack as to the type or level of remuneration that he should seek in a privatised Railtrack?

Viscount Goschen

My Lords, I was very pleased to hear the comments of the noble Baroness, Lady Thomas, for the first time on a Statement. I welcome her presence as the Liberal Democrats' transport spokesman.

The Statement made today, as I said, demonstrates our commitment to the railway industry and to bringing it into the private sector. It has always been our policy that we would privatise Railtrack when we considered that the time was right to do so. The noble Lord, Lord Clinton-Davis, cast doubt upon that commitment and said that we were making a U-turn. I do not believe that to be the case. I feel that it is in order to quote the words of my noble friend Lord Caithness during the passage of what is now the Railways Act. On 15th July 1993, he said: We have made it clear that Railtrack's existence as a government-owned company will last only until it is feasible to transfer it to the private sector".—[Official Report, 15/7/93; col. 354.] That is fairly straightforward and addresses that point.

The noble Lord went on to ask about a wide variety of questions which centred basically around the reasons why we should privatise Railtrack, what benefits it will bring and where we have reached at the moment in terms of the timetable. In terms of the timetable, shadow franchises are now being operated successfully. Considerable interest has been expressed. Until the pre-qualification process starts, we cannot expect firm, definite, binding expressions of interest for individual franchises. That is an important point, as I said in my statement. I mentioned when we expected it to go through.

The noble Lord, Lord Clinton-Davis, pointed out that Railtrack owns a lot of property. He felt that there was a danger of asset stripping, for instance through line closures. I do not believe that that will be the case at all. There are statutory closure procedures which are very much part of the Railways Act 1993 for closures of lines and stations. Such procedures cannot just be taken at the whim of the new Railtrack plc, as it were.

The noble Lord went on to ask about the cost of the privatisation process for Railtrack. We cannot be sure at this stage but we are confident that the Railtrack privatisation will offer the best value for money to the taxpayer. It is important in the long-term interests of the railway to obtain the best railway we can, delivering cost-efficient and overall safe services to the taxpayer and the travelling public.

The noble Lord, Lord Clinton-Davis, went on to ask about a specific document. I am sure the noble Lord is well aware that we do not now and never have made it our policy to comment upon any document which may have been leaked. The timing of the flotation of Railtrack will depend on market conditions. However, I made it clear in my Statement this afternoon that that will be within the lifetime of this Parliament.

Both the spokesmen for the parties opposite asked about fragmentation. It is worth reminding them and the whole House that Railtrack is to be floated on the stock market as a whole; it is not to be sold off in a number of different pieces. That process will in no way lead to fragmentation. We firmly believe that the process which we have undergone and of which Railtrack will be a major part, will result in a much more efficient railway, providing better services for customers.

The noble Baroness, Lady Thomas, asked how charges were to be regulated and whether Railtrack would have a free hand. It is important to mention that charges are the basis of negotiated and agreed contracts with the train operating companies and those contracts have all been passed by the regulator in terms of charges. The question of salaries was also raised. The best people will be sought to take the best jobs. No doubt the shareholders of the new company will exercise their authority to ensure that the board members are paid at an appropriate level.

To return to the centre of what we are doing today, we are preparing to privatise Railtrack within the lifetime of this Parliament. Our objective is to improve the quality of rail services for the travelling public and freight customers through private sector ownership. We see Railtrack flotation as the logical next step in that process.

Lord Clinton-Davis

My Lords, before the noble Viscount sits down, perhaps I may respond to his suggestion that I may have—even inadvertently—misled the House. Let me remind him that on 25th February 1993 Mr. Roger Freeman said to the standing committee that Railtrack, at least for the foreseeable future, would be in the public sector. That is consistent with what I said and not consistent with what the Minister said.

Viscount Goschen

My Lords, it is worth saying that I in no way suggested that the noble Lord, Lord Clinton-Davis, misled the House in any way. I merely pointed out to him a factual quotation made on 15th July 1993. That quotation was made by my noble friend Lord Caithness. It is on the record as being the Government's position at that time. Nothing more can be said in that regard.

4.43 p.m.

Lord McIntosh of Haringey

My Lords, during the passage of the Railways Bill, no Minister said that the Government had changed their mind about the status of Railtrack. Why was no statement made regarding that change of mind?

Viscount Goschen

My Lords, the question of when Railtrack is to be privatised is a matter of judgment for the Government. I would not dispute the comments made by my right honourable friend Roger Freeman. Subsequent to that, further statements were made which merely re-emphasised the policy. That policy is very clear.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that many of us who have had connections with the railways over many years welcome the Statement? The indication that Railtrack is now being put wholly into the private sector we find extremely encouraging. In the private sector there will be a freedom in respect of both investment and administration which is impossible under state ownership. Many of us feel that Railtrack will therefore have a much brighter future than it appeared to have up to the making of this Statement.

Perhaps I may add a personal comment. As one who was a Member of the other place when the Bill to nationalise the railways was taken through Parliament, it is a matter of particular pleasure to me to see that silly job being undone.

Viscount Goschen

My Lords, I am pleased that my noble friend is so happy today; indeed, I am happy too. My noble friend is right. The privatisation process offers great opportunities for the railway system of this country. He is right also that Railtrack is currently constrained under our PSBR rules from borrowing money and operates under a number of other constraints in that regard. Railtrack is also constrained in not having access to private sector initiatives in funding and private sector management. I am entirely confident that the new privatised railway will be a great success and that my noble friend Lord Boyd-Carpenter will continue to be proud of it.

Lord Monkswell

My Lords, I must first declare an interest in this question, in that I am a rail user. One of the interesting things we learnt this afternoon is that the Government's perspective of the "foreseeable future" is less than a year. If that is so, what hope have we that the investing public will take an even longer view?

Bearing in mind the lack of investment over many years in the infrastructure of British Rail by this Government, and bearing in mind that Railtrack will probably be bought by private sector investors with a view to making short-term profit—that appears to be the only perspective available either to the Government or to the City—what confidence do we have that the new owners will see fit to invest real money in improving the track facilities on which trains are currently run? To improve our railways it is important to improve the track and rolling stock. A number of us both in this House and in another place have been pressing hard for west coast main line modernisation. Depending on what scheme is adopted, it could cost anything from £400 million to £1,000 million or more.

If investors in the City pay for Railtrack with a view to making a short-term profit, what confidence can we in Parliament have that they will invest vast sums of new money to improve our railway system?

Viscount Goschen

My Lords, the statements and questions of the noble Lord, Lord Monkswell, are based upon a misconception. I do not believe that the sole purpose of any investor, coming into what is a long-term deal, does so just to make what the noble Lord suggests is a "quick buck". What can be seen are long-term finance streams and the benefits of long-term investment. We are talking of contracts of a substantial length with train operating companies. It is not at all as the noble Lord suggests.

In terms of investment, the new privatised Railtrack shareholders will have considerable incentives to invest in the network in order to provide better network services for the company's customers and to develop a better business base. Privatisation will enable Railtrack to explore more widely available sources of private finance to fund infrastructure investment schemes in which hitherto it has not been able to participate. Railtrack will publish annually a 10-year investment plan which will be approved by the regulator after privatisation. Railtrack's investment programme will be commercially driven and will derive from its discussions with its train operating customers and with the franchising director, who will determine service levels and, therefore, subsidy provision for specific services. I believe that all that adds up to a privatised infrastructure operator who will invest for the future of the network.