Rail Privatisation: Bidding (Hansard, 29 November 1995)

§ The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen)
My Lords, the Railways Act gives the Franchising Director the discretion to decide, after consultation with the British Railways Board and the Rail Regulator, whether the board or any subsidiary of the board shall be allowed to bid for franchises. In respect of the first seven franchises, the Franchising Director has decided that the board shall not be allowed to bid. He will consult the board and the regulator each time he proposes to invite tenders.

§ Lord Haskel
My Lords, I thank the Minister for that reply. However, is he aware that some people are concerned that British Rail has not been invited to bid because the Franchising Director believes that, in doing so, he is interpreting the wishes of the Government? Will the Minister now state clearly that it is the Government's policy to enable British Rail to bid for franchises and call upon the Franchising Director to encourage it to do so?

§ Viscount Goschen
My Lords, the Government's position is very clear. We support the detailed arrangements as made in the Railways Act, which are again extremely clear. British Rail is permitted to bid, except when the Franchising Director decides that that should not be the case—at his discretion—if it would be in the interests of promoting competition for franchisers; of promoting the award of franchises to companies in which qualifying rail employees have a substantial interest; and of encouraging new entry into the passenger railway industry. Those are the circumstances that are laid down in the Act. We support that.

§ Lord Taylor of Gryfe
My Lords, is the Minister aware that running the railways is a very complex and important part of our infrastructure? Is he also aware that the people who might bid for such franchises on behalf of British Rail are experienced operators of the railways? Therefore, is it wise to exclude those operators acting as bidders for the new franchise?

§ Viscount Goschen
My Lords, the Franchising Director must weigh up the very points that the noble Lord has made. However, the House should bear in mind that, as I mentioned, the Franchising Director also has a duty to promote the award of franchises to companies in which qualifying railway employees have a substantial interest—that is, the management buy-out type of situation. With that type of situation, it is very clear that existing management is able to put a substantial investment of its knowledge into the railway 567 franchising programme. The position on whether BR itself should be allowed to bid remains as stated in the Act.

§ Lord Peyton of Yeovil
My Lords, I would like to be clear that the Franchising Director is acting on his own discretion and without any guidance from the Government. In that case does it not appear that he is being a little wooden in the exercise of his discretion?

§ Viscount Goschen
My Lords, the Government and the Secretary of State are specifically prevented from giving the Franchising Director objectives, instructions and guidance on the exercise of his powers under Section 25 of the Act, which is the relevant section to do with allowing BR to bid. We are specifically prevented from giving the Franchising Director such directives, so it is up to him to make his own decision.

§ Lord Dean of Beswick
My Lords, is not the Minister aware that British Rail is on record as saying that it will bid for franchises and that it will win? Does not the Minister accept from me that as British Rail is to be excluded from the present clutch of franchises, whoever obtains those franchises may do so at a knock-down price which is against the interests of the public purse?

§ Viscount Goschen
My Lords, I do not agree with the noble Lord. There has been healthy competition for these franchises. However, the Franchising Director must assess each franchise on an individual basis. He must assess the circumstances and consider whether preventing the BR Board from bidding in accordance with the discretionary powers given to him under the Act coincides with the duties that he has been given by the Act.

§ Viscount Caldecote
My Lords, does not my noble friend agree that British Rail managers know as much about managing British railways as anyone and that when they are freed from the shackles of Treasury control they are most likely to make a success of running British Rail franchises? Will he not therefore do a little arm twisting and perhaps give a nod and a wink behind the scenes to the Franchising Director to persuade him to allow British Rail managers to bid for all franchises?

§ Viscount Goschen
My Lords, the answer is no to both questions. I have said that we are specifically prohibited from doing exactly what my noble friend asks. We will not and cannot do that. As regards the other point, I agree that those who manage the railways at the moment have a substantial body of knowledge about the railways and they of course will be considering whether to submit management buy-outs. If franchises are won by the British Railways Board, the members of the board will not be freed from the constraints of the public sector borrowing rules because they will still be part of the public sector.

§ Lord Harris of Greenwich
My Lords, is the noble Viscount aware that we accept what he has said about 568 the position of his department giving directives, but is it also clear that there is no informal advice being given by Ministers or officials?

§ Viscount Goschen
My Lords, it is not just a matter of specific directives but also of objectives, instructions and guidance. That is the wording contained within the Act and we are therefore prevented from giving those objectives, instructions and guidance. The matter cannot be clearer than that.

§ Lord Clinton-Davis
My Lords, is not the truth of the matter that when the Government introduced the Railways Bill they did not want to allow British Rail to bid? It was only as a result of the activities of this House and of the noble Lords, Lord Peyton and Lord Marsh, in particular—

Noble Lords
Oh!

§ Lord Clinton-Davis
—as well as the Opposition of course, that some common sense prevailed. The clear will of Parliament was that British Rail should be permitted to bid. The net result of the situation is the following, is it not? British Rail has not been permitted to bid and therefore the original will of the Government is being respected by the Franchising Director. Is that not an utter disgrace?

§ Viscount Goschen
My Lords, I believe that the noble Lord has misinterpreted the situation. The will of Parliament was indeed that British Rail should be allowed to bid; the will of Parliament was also that British Rail should be allowed to bid subject to the discretion of the Franchising Director. That point was also inserted into the Act at the will of Parliament. Parliament has agreed to the Bill, which is now an Act, as a whole, and we must follow it.

§ Lord Mackie of Benshie
My Lords, will not the Minister tell us who selected this wholly objective Franchising Director who has turned down seven bids? Surely it was the Government who selected him, and their criteria used in the selection must have been useful to them.

§ Viscount Goschen
My Lords, it was a government appointment but the Franchising Director's role and duties are clearly laid down in statute. He cannot breach those and we cannot breach ours.

§ Baroness Castle of Blackburn
If British Rail was allowed to tender for the franchise for the busy Chiltern line would passengers at High Wycombe station not have to stand—as I did this morning in a biting wind—outside what used to be, under British Rail administration, their waiting-room, which has now, in preparation for privatisation, become the area retail manager's office?

§ Viscount Goschen
My Lords, I am slightly at a loss. The noble Baroness is complaining about the service provided by British Rail yet at the same time she wants British Rail to continue to run the service. The process 569 of franchising as enacted by this Act will produce substantial benefits for the travelling public, including the noble Baroness.