§ 3.35 p.m.
§ The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen)
My Lords, with the leave of the House, I should like to repeat a Statement that is being made by my right honourable friend the Secretary of State for Transport in another place. The Statement reads as follows:
"With permission, I should like to make a Statement about our proposals for the future of London Underground.
"London Underground is the last of the traditional transport nationalised industries and the only major transport operator which is not in the private sector. Since 1979, we have privatised a wide range of transport businesses—for example, British Airways, the British Airports Authority and indeed London Transport's own bus operating companies. All of them have gone on to prosper, raising money from the market to invest in better services for their customers. Only London Underground remains in the public sector—its status becoming increasingly anomalous.
1048 "Most recently, of course, we have privatised the national passenger rail network—a process which has now been completed with the award of the last franchise, for Scotrail. The benefits are already becoming apparent: an increase in passenger numbers; new investment is already taking place or is in the pipeline. Railtrack have plans to spend £4 million a day on maintaining and renewing the rail network, on stations and depots and on network enhancements. By 2001, Railtrack estimate that they will have spent £1 billion more than the regulator expected. In addition, franchisees are committed to investing around £1.5 billion in new rolling stock, and over £100 million in improvements to stations and other facilities. The decision to proceed with Thameslink 2000 and the Channel Tunnel Rail Link show that major new projects can be undertaken within a privatised railway. Benefits for rail users are being achieved at a decreasing cost to the taxpayer. In seven years time, the private sector franchisees will require only about 40 per cent. of the support that British Rail estimated they would have needed to run the same services this year.
"Rail privatisation has shown that the fact that an industry is currently loss-making is no barrier to its successful transfer to the private sector.
"Against that background, my right honourable friend the Prime Minister announced in October that we would be considering whether the benefits of privatisation could be extended to the London Underground. We have now completed the initial stages of that work and the Government have concluded that privatisation is the right way forward.
"The package that I will outline to the House will deliver a higher quality Underground, at an affordable cost to passengers and at no extra cost to the taxpayer. Our purpose is to structure the privatisation so as to ensure that the Underground is brought up to modern standards as soon as possible. Our aim is to complete this modernisation and improvement programme—that is the elimination of the 'investment backlog'—within five years of privatisation.
"Over recent years, London Underground's management have raised customer satisfaction by a sixth, increased scheduled train services to a level not seen in 25 years, increased the Underground's operating surplus from nothing to around £200 million a year, and reduced the investment backlog from £2 billion to £1.2 billion. Despite these great strides, a lot remains to be done if we are to bring about the standards of service that passengers want, at a cost which they and taxpayers can afford. We believe that privatisation is the only means of achieving these goals. Privatisation will enable the private sector to invest in the network and respond to passengers' needs, unconstrained by the restrictions of public expenditure controls, and will create the stable financial environment which is simply not achievable in the public sector, with all the other competing demands on taxpayers' money. We want
1049 to privatise London Underground as soon as possible so that passengers can start enjoying these benefits without delay.
"In deciding on the detailed structure for the privatised Underground, we shall need to take account of the network's unique nature and operating characteristics, and to obtain further technical and financial advice. Specifically, detailed work will now begin on three possible models: the sale of London Underground as a single business; the sale or franchising of vertically integrated lines, or groups of lines, under which a single operator would be responsible for the stations, track and trains on each line or group of lines; or a structure like the national railways model, with a track authority owning the network and franchisees running trains on individual lines or groups of lines.
"We are already consulting London Transport and the Railways Inspectorate, and we shall now widen our discussions to involve the other key players in the railway industry, or with an interest in London's transport system, such as the London Pride Partnership and the London Regional Passengers' Committee. We also intend to start the process of appointing advisers. Our aim is to publish in the summer a White Paper with our detailed proposals for the best structural option for the future of the Underground.
"As with previous privatisations, there have been a number of scare stories in the media in recent weeks. I want to set the record straight by giving 10 commitments to passengers and employees. On safety standards, safety must always be a top priority. I shall be consulting the Health and Safety Commission in order to ensure that, whichever structural option we adopt, the very high safety standards of the network are maintained.
"Secondly, on a fully integrated network for passengers, including through-ticketing and freedom of interchange between lines, there is no question of 'breaking up the network'. Passengers will be able to use different lines for a journey and to choose the most suitable route, using one ticket in exactly the way that they do now.
"Thirdly, on the London Travelcard, regular Tube users attach great value to the Travelcard, which allows people to use the same ticket to travel by Underground, rail or bus, without any restriction on the number of journeys they make. It is used by around a million people a day and accounts for over two-thirds of Underground journeys. Our proposals will explicitly safeguard its future.
"Fourthly, on concessionary fares, the existing London-wide concessionary fares arrangements, which are of critical importance to many elderly and disabled people who rely on public transport, will not be affected by our proposals.
"Fifthly, on wider share ownership, we shall seek ways of encouraging employees and passengers to acquire a real stake in the privatised Underground.
1050 "Sixthly, as far as the employees are concerned, pensions and travel concessions at the time of privatisation will be safeguarded. Again, depending on the option that we choose, we will be seeking to encourage employees to participate in management or employee buy-outs.
"Seventhly, on service levels, we shall ensure that the private sector will be required to provide a guaranteed level of service broadly safeguarding the existing level of provision. The regulatory authority supervising the privatised Underground, which will be independent of the train operators, will agree to changes in service levels only after carefully considering the benefits to passengers. Again, this is a wholly new safeguard.
"Eighthly, on station safeguards, we shall retain strong and effective statutory procedures to deal with any proposals to close stations. These safeguards will be just as rigorous as those which already apply to London Underground and to the national rail network.
"Ninthly, on fares, we shall introduce controls on fares. The guiding principle will be that, for at least the first four years after privatisation, average fare rises will be no more than inflation. This is a new safeguard—previously, Underground fares have not been capped. We also intend to restrain fares in the run-up to privatisation, by capping average fare increases to inflation plus 1 per cent. a year. Again, there has been no such explicit protection in the past, and in practice fares have tended to rise faster than this. The House will recall, for example, that fares increased by 45 per cent. in real terms between 1974 and 1979. Which brings me to the tenth commitment.
"On investment, in the recent debate about the future of London Underground, a consensus has emerged on two key principles with which I believe that the whole House can agree: first, that it must be a top priority to accelerate investment in the London Underground so as to bring the network up to the standards which passengers can reasonably expect for the 21st century; secondly, that this goal can only be achieved if we create a stable funding regime which enables investment to be planned ahead with confidence.
"We are therefore developing a special funding regime for recycling privatisation proceeds into investment which recognises the unique situation and needs of the Underground. Receipts from privatisation will be recycled in order to ensure that the modernisation of the Underground's infrastructure is completed as quickly as possible, building on the work that London Underground is already doing. Our aim is to achieve this within five years of privatisation, with the private sector operator committing himself to modernising the assets for which he is responsible, in return for a guaranteed level of government support to supplement the investment funds which he himself will raise.
"After recycling privatisation proceeds to complete the modernisation of the Tube network, the majority of any remaining surplus will be channelled into 1051 additional support for London Underground or for transport investment elsewhere in London or other parts of the country.
"As far as modernising the Underground's basic infrastructure is concerned, the House will appreciate that there is a maximum level of annual investment beyond which it is not practicable to go. At a certain point, for example, disruptions to services from renewal works across the network would become too great, or beyond the capacity of the supply industry. Subject to these practical constraints, we aim to privatise the Underground in such a way that the network is modernised as soon as possible.
"London Underground estimates that the upper limit for sensible investment in the core Underground each year is around £750 million. Of course, passengers are interested in the results of investment—punctual and reliable services—not the amounts. I believe that the private sector will be able to deliver the results that passengers want, but more efficiently. Privatisation and the new regulatory regime will be focusing on the results of investment. But if we assumed that annual investment was around £750 million, about £350 million a year would be needed to maintain the network and renew assets as they become too old. The remaining investment would be aimed at eliminating the results of the under-investment in the Underground in the 1960s and 1970s. Sustained annual investment of around £750 million in the core Underground would be significantly above what has been managed before—in real terms, over four times what was achieved in the 1970s, about three times more than in the 1980s, and 50 per cent. more than so far in the 1990s. I do not believe that this rate of progress would be possible if London Underground were to remain in the public sector.
"The 10 commitments that I have given today show our determination to protect and enhance the aspects of the Underground which are valued by Tube users and Londoners generally. At the same time, privatisation will introduce private sector capital, ideas and energy to increase investment and raise standards. This is an outstanding package for Tube users and Londoners. I do not believe that anything as attractive would be possible under continued public ownership. I commend to the House the principle of privatising the London Underground."
§ That concludes the Statement.
§ 3.48 p.m.
§ Lord Clinton-Davis
My Lords, I thank the Minister for repeating the Statement made by the Secretary of State in another place concerning the 10 commitments, which are unlikely to be tablets of stone. Is it not somewhat ironical that this Statement should have been made in the very week of the misery caused to thousands of commuters by the negligence of South West Trains and the inordinate gains made by the directors of Eversholt, which the Minister characterised when I mentioned them as the politics of envy? It is 1052 not the politics of envy but the politics of inevitability under many of the privatisation schemes which have been launched by this Government.
This Statement is made at the very time that the chairman of London Transport has complained about the news of reduced government funding, leading to £700 million of cuts affecting trains, signalling and track systems. The Minister did not deal with those immediate issues.
Is it not unusual for a government to make a Statement in Parliament, not on what they propose for this Parliament but on what they intend to include in their election manifesto? Are we now to expect that a whole series of Statements will emanate out of the ragbag of ideas that this desperate and bankrupt Government propose as to their suicidal intentions? Why do the Government find it necessary to issue with such haste, despite its length, such a flimsy imprecise Statement which, upon their own admission, is not based on expert opinion—they have not taken expert opinion—and does not even declare the shape of the proposed privatisation? Will the Minister explain that blinding ray of darkness? Why was it necessary at this time?
If, as the Government assert, this will be wildly popular with the electorate, how does he reconcile that with the assessment made by Mr. William Waldegrave that London Underground will be a very difficult privatisation to sell to the public, and even, to use the words of the Secretary of State, that:it may be necessary for the Government to pay somebody to take it off their hands."?There is not one mention of that in this very long Statement. Therefore, is this not yet another example of this Government living not by reality but by make-believe? The reality is that for Londoners it will prove to be about as popular as Sir Edward Heath is with the Conservative Party at present. Can the Minister comment on the projected proceeds and subsidies and the question raised on page 6 about surpluses?
The Minister said that:After recycling privatisation proceeds to complete the modernisation of the Tube network, the majority of any remaining surplus will be channelled into additional support for London Underground or for transport investment elsewhere in London or other parts of the country".How much is that majority? Is it to be 51 per cent.? Where does the rest go? How is it to be apportioned? There is not a word; just an assertion.
What assurances is the Minister able to give that the proceeds of sale will amount to perhaps £600 million—he says perhaps a little more—knowing full well, based on past experience, that there is likely to be another grotesque give-away of some £13 billion-worth of public assets and that the subsidy to be provided—the carrot—might well exceed the net sale proceeds? That comes from the Secretary of State's own lips. What happens in that event?
Does the Minister agree with the view expressed by the Centre for Policy Studies—the Right-wing think-tank—that privatisation could lead to "the commercially advantageous" closure of stations outside Zone 3? 1053 Yes or no? What guarantees can he give that the present PFI, with all its imprecision, failure to allocate risk and huge and wasteful tendering procedures, and with the absence of national and regional transport objectives, can deliver the goods? That was the precise question raised by the chairman of London Transport.
Our belief is that the whole system needs to be restructured. It is right that private sector skills and capital should be injected, but that should be done on the basis of a much more sensible system that we have devised—the public-private partnership scheme—thereby giving real value to taxpayers. That also involves ensuring that we have national and regional transport strategies, which, perhaps conveniently for the Government because they do not wish to talk about it, are missing from the Statement.
The Government's transport policy, if one can dignify it by that term, like so much else, is in a huge mess. In their pretence to be magicians, they resemble a somewhat humourless Tommy Cooper, with all the blunders for which he was famous, but which were at least harmless. We are content to join issue with this Government on the means that they have chosen in principle—they have dealt with the issue only in principle—to deal with under-investment and the future of London Underground. We will put them before the electors and we are confident that we, rather than they, will be required to deal with these vital matters.
§ Baroness Thomas of Walliswood
My Lords, I thank the Minister for his courtesy in ensuring that I had an early sight of the Statement. Obviously it was not that early and I had a brief canter through it rather than a careful analysis. However, I have managed to gain some overall impressions.
I shall deal first with what the Statement does not contain. There is no mention of the importance of public transport in the context of sustainability, in which the Government claim to believe. That is extremely important because once one adds in the need to provide public transport in order to create a sustainable future, much of the costing and the obsession with cost which the Statement contains must be altered. Nor does the Statement give any indication as to the importance which the Government place upon public transport in general and London Underground in particular as a contribution to London as a "liveable" world city.
Another impression is of the vagueness of the plans, despite references to a "package". Perhaps it is natural that there is little mention of the price that the Government seek, because they have not thought about any of the other details as regards what they will do en route to privatisation. However, an assurance that the asset will not be sold off at a price well below the network's true worth would have been valuable, considering that it is one of the many so-called scare stories which have been around for some time. Today's Evening Standard suggests that the network could carry a price tag of about £2 billion. It will be interesting to hear the Minister's comments on that.
1054 Furthermore, there is a lack of clarity about the timing of the project. The suggestion of the publication of a White Paper in the summer may sound ridiculous—it does to me—but it points to a fairly leisurely attitude towards implementation. That may be sensible, but it raises the question of what will happen to the current investment programme during the next two years while London Underground's ultimate fate is being determined in detail. The Evening Standard suggests that the privatisation process will not be completed until 2001. That sounds about right, bearing in mind that we start on the White Paper next summer, if for this Government next summer ever arrives.
The Statement does not indicate whether in the Government's view privatisation means less or more investment within the current London Underground plan period, which also lasts until 2001. What will happen to that investment programme in the meantime? It is impossible not to conclude that Conservative Ministers may believe that even the promise of privatisation will bring them votes. I doubt whether many people would agree with that assessment.
The Minister referred, in the self-congratulatory mood to which we have become accustomed, to the virtues of rail privatisation in general. I suggest that among dispassionate observers the verdict on that would be "too early to tell". However, the verdict among many rail users is that the present situation is more or less catastrophic. In particular, in the general context of the privatisation of the railways, there never has been any indication as to how the privatised rail companies can satisfy the need not merely to attract commercially viable passengers and freight but also to play their part in ensuring that increasing percentages of passengers and freight are moved by public transport in the interests of a more sustainable economy. I believed that the Government shared that ambition.
As regards London Underground, broadly safeguarding the present levels of service is not enough. Those with a major interest in London's future health and well-being—for instance, London First, representatives of the City and the president of the CBI—all want London to benefit from a well-run, expanding public transport system which will increase accessibility, create an attractive environment and ensure the movement of goods and employees. They fear that otherwise they will be overtaken by other capitals where those benefits are provided. The president of the CBI has specifically called for a combined public and private investment programme, whether or not London Underground remains in the public sector. It may be that he agrees that proposals to privatise the Underground are irrelevant to the desperate need to maintain and modernise London's vital transport system.
We should like to see a fresh initiative to bring in capital investment to provide the nation's capital city with a modern metro, meeting the needs of the business community, Londoners and the millions of tourists who visit this city each year. We need to follow the example of every other modern industrial country. We must free London Underground from the dead hand of the Treasury under the cloak of the PSBR. London 1055 Underground should be able to raise capital in the market by issuing bonds in partnership with the private sector.
It is certain that a steady and stable funding system is essential.
§ Baroness Thomas of Walliswood
My Lords, why should I not read? The Minister read his Statement. Why should I not read what I have to say as well?
§ Baroness Thomas of Walliswood
My Lords, it may be boring but I am standing here, I have the Floor and unless somebody gets up and makes me sit down, I shall continue to hold the Floor.
It is certain that a steady and stable funding system is essential to the future of London Transport and the London Underground—the very point that London Transport made to the Transport Committee hearing which dealt with London Underground's finances and investment on 19th February. No doubt the Government will respond to that point when they meet the committee tomorrow. That seems to me to be another aspect of the curious timing of this Statement. I await with great interest to see how the Minister will respond to the points made both by myself and by other speakers in the debate.
§ Viscount Goschen
My Lords, first, I thank the noble Lord, Lord Clinton-Davis, and the noble Baroness, Lady Thomas, for her far from boring intervention. I should like to pick up a number of points which they made.
First, there was an attack on railway privatisation from both the noble Lord and the noble Baroness. Remarks were made about independent commentators and where they feel that the success or otherwise of railway privatisation has led us. I believe that there is now a firm recognition across the country that rail privatisation has worked. We have seen massively increased investment; we have seen better and more services; we have seen new and imaginative service levels; we have seen statutory protection. All that is added to a steadily reducing cost to the taxpayer. Whatever one's political beliefs, that must be good news, and I believe that where there is good news, it should be welcomed.
The thread of that goes directly to the views of the parties opposite about London Underground. It is clear, and most people will realise, that something major must be done about London Underground to bring it up to modern standards. Considerable quantities of fresh investment are needed. It is equally clear that government are not going to be in a position to provide all that investment. Therefore, let us consider proposals put forward by the parties opposite. I heard none this afternoon.
1056 The noble Lord, Lord Clinton-Davis, complained that I had come to the House with a Statement clearing up what the Government intend to do about London Underground—and yet only a few weeks ago I was asked by the noble Lord himself and by others in the Chamber what the Government's response was and what we intended to do. It is entirely appropriate that I should come to this House and make a Statement first to Parliament. Ministers are criticised regularly by the Opposition for not doing that.
The noble Lord complained that my Statement was too long and then again that it was not long enough. I have attempted to bring all the detail that we have to the House at an early stage because it is important that Parliament should know about this.
The simple fact is that this package has taken a number of people by surprise because of the additional safeguards that it contains—the 10 commitments that people did not anticipate—and there is surprise at the bold claims that we should be able to promote a new and modernised London Underground within five years of privatisation.
I was asked about value and the subsidy. On the amount of ongoing subsidy, it is too early to say before we have decided on the model. But we shall ensure that the taxpayer gets good value for his contribution and that the Tube passenger benefits from a better service. That has happened in relation to rail privatisation, and there is no reason why it should not happen as regards tube privatisation in just the same way.
The noble Lord, Lord Clinton-Davis, asked me to say a few more words about the recycling point. We shall require the private sector to modernise the Underground's infrastructure as soon as possible, as I have outlined. That will entail a given amount of government subsidy, the amount to be tested in the market. The subsidy will be recycled from privatisation proceeds which we receive. If, as we expect, proceeds are left over, a majority will go to additional investment in London Underground or for other transport investment.
§ Viscount Goschen
My Lords, the noble Lord asks me what is a majority. My understanding of the word is that it means more than half.
I was asked about closures. Again, what I have outlined should be welcomed by the House. Just as in the case of rail privatisation, firm and rigorous procedures will have to be followed if there is any proposal to close a station. Those procedures exist for the national rail network and they have worked.
The noble Lord attacked the private finance initiative as being wasteful—and yet I understand that that is the sole plank of his policy and that he intends to broaden the PFI. The PFI has been a success. We have managed to attract private investment into the Underground network and also into many other areas. But there is a limit to what can be achieved through that device. We 1057 believe that a major structural change in terms of privatising the London Underground is what is required to produce the benefits which we seek.
The noble Baroness asked whether I could give a commitment as regards public transport. Of course I can. The Government believe that public transport is very important indeed, and particularly for London. That is why we have come forward with these bold proposals.
I do not know what the noble Baroness's objection is to bringing forward a White Paper in the summer. That would seem to be an eminently sensible way of proceeding. There is still a lot of work to be done. We need to decide on the model. I am sure that noble Lords will accept that. The fact is that the proposals that I have outlined today are very exciting indeed. For decades noble Lords and other commentators have been asking how we can attract more money and innovation to the Tube network. This is the way that that can be achieved and this is the way in which we can achieve a better Underground system for Londoners and for all those who travel on it.
§ 4.7 p.m.
§ Lord Taylor of Gryfe
My Lords, does the Minister not have any anxiety about this vast undertaking that he has just announced, particularly as it affects the infrastructure of the country's capital city?
The Minister justified this on the basis of the success of the railway privatisation. Is it not too early to make that assessment? Would he come with me, away from the comfortable Benches of Westminster, to King's Cross station and wait for two hours, as was the case during a two-hour delay two weeks ago? The following day there was a delay of three hours and the day after that there was a delay of two hours. Does he have any feeling about the frustration which is suffered by the passengers who line up at Waterloo only to discover that there has been a management error in dismissing drivers from that particular route? There is a considerable question mark over the success of that privatisation and in any case it is far too early to judge.
Will the Minister advise the House as to who are those expensive advisers who will work on this great undertaking? What amount is likely to be spent? Will it be the same advisers who sold off £19 billion of public assets for £2 billion? As a result, vast profits were made by the people who invested in these give-aways.
The Minister said that railway privatisation has inevitably brought increased investment. But that is not what the regulator says. He has said that Railtrack has fallen down on its investment programme. All we are getting now in the glossy booklet from Railtrack are promises of additional investment. What kind of guarantee can the Minister give us in that respect? Further, is the Minister aware that his right honourable friend the Chancellor of the Exchequer said today that he expects to get assistance in paying off the national debt by the sale of London Underground? However, it has been said that the proceeds of sale will be invested in modernisation. Can the Minister say who is right and how much is involved? Perhaps the Minister can just 1058 think for a moment that this is a vast undertaking and he should hold on a little to see how railway privatisation works—and I hope that it will—before embarking on such an exercise.
§ Viscount Goschen
My Lords, the noble Lord, Lord Taylor, says that it is too early to say that railway privatisation is working. However, I recall his noble friends condemning it before it even started, so I believe that there are strictures that can be put both ways. If one takes, for example, investment, we see that Railtrack now plans to invest some £10 billion on the network by the year 2001; £4.9 billion on renewals, £0.7 billion on property maintenance, £4 billion on day-to-day maintenance and £0.9 billion on developing the network, £600 million of which is committed expenditure on identified schemes. These are very bold plans and, indeed, represent massive figures. British Rail had no such plans. In reality, I believe that the noble Lord does welcome Railtrack's bold plans.
The noble Lord referred to what the regulator said. The regulator was concerned that Railtrack had not spent all of the investment that it had planned for the first year. That is indeed correct. Railtrack had fallen short of its target. Nonetheless, for the period that I have outlined many times in the House, it had spent over £100 million more than British Rail had in the comparable period beforehand. So these are improvements. The noble Lord criticised Railtrack for the rate of improvement. Nevertheless, I believe that he really recognises that we are talking about very significant improvements.
The noble Lord also mentioned the services offered by the train operating companies. Another interesting statistic is that complaints from passengers are down some 30 per cent. That is a huge figure; indeed, it is a truly remarkable figure. I believe that that represents good news and something that we should all recognise. The noble Lord pointed to trains being late. Of course it is always very regrettable when trains are late. However, I certainly do not think that the noble Lord will stand up and tell me that he was never late on a train in the old days of British Rail. If he does, I am sure that there will be plenty of other noble Lords who take a contrary view.
This privatisation is working. One has only to look at what independent commentators are saying about it. Yes, it has been a political hot potato but now we have seen the party opposite withdraw from their commitments. The Opposition have no policy regarding any plans concerning the railways. They have not decided whether they want to take certain bits back into public ownership. Therefore, there are no alternative plans from the Opposition. We firmly believe that we can produce the benefits that we have from rail privatisation and build them into the Tube network.
§ Lord Dixon-Smith
My Lords, I listened with great care to the Statement repeated by my noble friend the Minister and listened with equal care to the responses from the noble Lord, Lord Clinton-Davis, and the noble Baroness, Lady Thomas of Walliswood. I found myself thinking that rational Members of this House must 1059 welcome the Statement. Having said that, I also found myself for a moment wondering what the reaction would have been if my noble friend had made the Statement and then said, "Oh, by the way, we intend to do this next week." That seems to me a response which is perfectly legitimate in view of the criticism of the timing of the Statement. In fact, I personally would prefer my noble friend to do it next week.
I should like to spend a little time talking about money. The noble Baroness, Lady Thomas, said that we must get London Underground out of the hands of the Treasury. Of course, the purpose of the Statement is to do precisely that. Therefore, the noble Baroness really ought to support the Government. The noble Lord, Lord Clinton-Davis, talked about public/private partnerships in finance. I do not know quite what that means. However, I do know—as we all know—that the private finance initiative, with a great deal of promotion and hard work, has not yet been able to produce the sort of funding that businesses like London Underground require.
As to the question of the sale price of the assets, I should point out to the House that you can get valuers to value businesses in all sorts of ways. But I have never yet been able to discover the value of an asset when it is losing large sums of money. I give way to the noble Lord.
§ Lord Richard
My Lords, I am much obliged. I should like to make one point. In my brief experience in this House, I had understood that there are 20 minutes after the Statement and Front-Bench responses within which Back-Benchers are supposed to ask questions. I know that the House is generous and flexible in its attitude towards its rules but, with great respect, the speech that we have just listened to does not seem to me to accord with the convention.
§ Lord Dixon-Smith
My Lords, I apologise to the House. For a moment I had forgotten the rules. I shall put my question. Will my noble friend the Minister agree that, in what we heard in response to the Statement, there was nothing likely to provide a viable long-term future for London Underground?
§ Viscount Goschen
Yes, my Lords. I agree that we heard no proposals from the party opposite—just a faint attempt to answer the question of how to produce a modern railway system for our capital city. My noble friend asked about the timing considerations and the use of a Statement to Parliament at this time. I should like to re-state the position. I am sure that noble Lords opposite would be complaining very loudly if announcements were made other than to Parliament concerning such a major move. The complaint is normally that too little notice is given rather than too much. We are confident about our plans and we feel that it is appropriate to announce them to Parliament. It is most unusual to be criticised for taking that approach.
My noble friend also asked about income streams and the removal of the influence of the public expenditure round on the financing of an organisation such as London Underground. My noble friend is right to draw 1060 attention to that point. Indeed, it is the point that the management of London Underground makes over and again: what it needs is stability. The only way that the Government can guarantee that and remove it from the public expenditure round is by the device of privatisation. Not only will it deliver a stable investment climate for the first time for this railway; it will also allow the private sector to bring forward its own management practices and raise its own investment.
My noble friend also asked about the private finance initiative. I certainly agree with him; it has certainly been a great success. We have seen large amounts of private finance put into public projects. Moreover, the party opposite has picked that up and now agrees with it but in a modified form. There is of course a limit to what can be achieved through the PFI. For this major undertaking we firmly feel that privatisation is the best option.
§ Lord Ezra
My Lords, I wish to ask a question on investment. The noble Viscount did not answer the question put by my noble friend Lady Thomas of Walliswood; namely, what will happen on investment in the Tube system between now and the time that privatisation comes about if the Government were in a position to do it? It would take at least two to three years. In the meantime, as the noble Viscount is surely aware, a recent press statement by London Underground management shows that it is short of £150 million in the current financial year and will continue to be short in the succeeding two financial years. As a result, it has had to put 200 maintenance projects on hold, and it cannot answer for the basic efficiency of the system following the cuts in what it had originally expected to receive. Is it the Government's intention that in the run-up to privatisation part of the strategy should be to continue to run down the capability of the system?
§ Viscount Goschen
My Lords, the noble Lord asks a valid question. I apologise if I did not answer it the first time around when it was asked by his noble friend. I can of course give details about this year's settlement. It left provision for the London Transport core business in 1997–98 unchanged. With PFI investment, total investment in the core business over the next three years should total around £1.5 billion. This compares with London Underground's estimate that £350 million needs to be spent each year on average in order to prevent the Tube's backlog getting larger. We have heard of the success in reducing the backlog from around £2 billion to £1.2 billion. Therefore, considerable progress has been made. We recognise there is a large backlog still to be addressed. That is why we believe that the only long-term solution is privatisation. However, for the intervening period we have detailed our investment plans in this year's settlement.
My Lords, does the Minister recall my supplementary question of several weeks ago? I am glad that he has taken my suggestion on board. Is he aware that the possibilities for employee participation that he mentioned will be welcome to the employees of that business? Does the Minister agree that London 1061 Underground enjoys stable demand which is the envy of many capital intensive industries and which would make it easier to raise funds in the private money markets rather than from the Treasury? Does the Minister also agree that most of the questions that have been put to him illustrate exactly why these measures are so desirable?
§ Viscount Goschen
My Lords, I certainly recall the noble Earl's supplementary question during Question Time a couple of weeks ago. At that stage I was not able to give the answer that I can give to the House today. I thank the noble Earl for his support. I believe he is right to recognise that none of the other alternatives we have heard offer a long-term solution to the problem, which we all agree exists, of how to bring massive investment into London to modernise the Underground. Certainly, share ownership is an important point. The Government have long felt that increasing share ownership and broadening the shareholding base is a good measure, particularly within a business such as this. We shall concentrate hard on the issue and bring forward as many innovative plans as we can on that basis.
The noble Earl mentioned stable demand. Clearly, he is right. The London Underground is heavily used, particularly at peak periods, and train frequency is high. For many journeys there is little alternative to the Underground. It is extremely popular with Londoners, but they recognise that major improvements need to take place. I believe that they will welcome the Statement.
§ Lord Berkeley
My Lords, I congratulate the Minister on one of his 10 key "commandments"; namely, that passengers will be able to use different lines for a journey. It is so blindingly obvious that the same words were used in the privatisation of the railways four years ago. Since then thousands of passengers have been prevented from doing that on the railways through the break-up of the system and there have been many complaints. Similar commitments were made at that time. The Government have reneged on the pensions provisions for the railways. Will the same happen as regards the Underground? Will the Minister explain how the House or the public can believe any of these commitments after all the commitments as regards railway privatisation have been reneged on in the past four years?
§ Viscount Goschen
My Lords, I do not accept any of the criticisms that the noble Lord puts forward. The network benefits have been preserved for the railways. There is nothing to justify what the noble Lord said. We have heard some criticism about, for example, the selling of tickets. I recall a discussion on that matter in which I believe the noble Lord participated. We are clear that the inter-availability of lines and tickets occurs on the national rail network. The noble Lord mentioned pensions and the railways. The Government have not reneged on what we said in that regard. Indeed, our provisions are built into law. I recall clearly the passage of the Railways Act 1062 through your Lordships' House. One of the major concerns was the rights of pensioners. Indeed, this House made changes to that Bill to guarantee the rights of pensioners. We take extremely seriously the pensions of employees and pensioners. We have given a commitment even at this early stage—it is widely recognised that we are at an early stage—that those rights will be safeguarded.
§ Baroness Seccombe
My Lords, the noble Lord, Lord Clinton-Davis, spent much time talking about other privatisations and the effect on the taxpayer. Does my noble friend agree that we should never forget that before privatisation nationalised industries cost the taxpayer £50 million a week and now those same companies are bringing £60 million a week into the Exchequer?
§ Viscount Goschen
My Lords, the privatisations that have occurred in so many different sectors of the economy have resulted in benefits. Indeed, we have now seen a lack of political opposition to those privatisations which were opposed tooth and nail by the party opposite. If we had caved in to that pressure, those privatisations would not have occurred and the £2.6 billion a year in taxes which privatised companies now contribute—they paid only £37 million a year when they operated in the public sector—would not have been received. We would not have had the benefit of that. We recognise the dogmatic opposition to privatisation of the party opposite. Of course we accept that its political views make it opposed to this measure. However, I am sure that the practical advantages that privatisations have given to the country are now widely recognised.
§ Lord Ponsonby of Shulbrede
My Lords, is the Minister aware that this morning I bought an annual season ticket for zones 1 and 2 which cost me £628? In the ninth commitment he gave earlier, he said that fare increases would be capped. Why cannot he give a commitment to reduce fares and thereby encourage greater use of the London transport system as a whole? There may even be a few votes in it.
§ Viscount Goschen
My Lords, I always take the noble Lord's recommendations for electoral advantage extremely seriously. I am glad that the noble Lord has invested in London transport by purchasing his ticket. I believe that the noble Lord, as a user of the service, should welcome the fact that fares will be capped. Inevitably, there is a balance to be drawn between those who use the service and the general taxpayer. A level has to be set at which the Government feel that an appropriate balance has been drawn between those who benefit from the service and the general taxpayer. We hear a lot about Scottish taxation these days. Perhaps people in Scotland might object to subsidising the noble Lord's rail or Underground travel card. That is an illustration that a balance must be drawn between the general taxpayer and those who benefit from the service.