HL Deb 15 November 2001 vol 628 cc758-63

8.36 p.m.

Viscount Astor rose to move, That an humble Address be presented to Her Majesty praying that the rules, laid before the House on 8th October, be annulled (S.I. 2001/3352).

The noble Viscount said: My Lords, my main reason for moving this Motion stems from the questions asked in the recent debate on Railtrack by my noble friend Lord Hunt about a grey market in shares. Since then, I have had an opportunity to see the effect. It is extraordinary that the average turnover of shares in Railtrack was under half a million prior to the events, but on the Thursday and Friday when the Secretary of State acted the turnover was 3 million and 1 million. So it seems to me that there is certainly a case to be answered about a grey market and who did or did not benefit.

In a Statement to another place on 25th July, the Secretary of State said—

The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)

My Lords, the Secretary of State made no Statement on 25th July. Will the noble Viscount indicate which Statement he is referring to?

Viscount Astor

My Lords, I may have got the date wrong, but he certainly made a Statement. I have given the noble and learned Lord advance notice of my remarks, so I hope that he will not use it against me all the time because I am trying to be helpful to allow him to answer a question.

He said that the chairman of Railtrack had said that the position was far worse than had been previously thought, and that it was clear that unless extra financial assistance was provided by the Government on 8th November, when Railtrack was due to announce its interim results, it would be unable to make the critical statement that it was a going concern. I may have got the date wrong as to when he actually said it, but that is what the Secretary of State said. In other words, he said that Mr Robinson had come to him and asked for more money.

We know from yesterday's Select Committee meeting during which the Secretary of State gave evidence that Mr Robinson did not at any point ask for any more money. The Secretary of State said in his evidence that he merely asked for a "soft letter of comfort". I understand that such a letter was to reassure the markets following a number of derogatory comments made by the regulator. Indeed, with a soft letter of comfort, Railtrack would have been able to continue with its planned bond issue in January and not require any more money. I wonder whether the noble and learned Lord can clarify the position.

The Secretary of State was very helpful to the Select Committee, making his notes from the meeting with Mr Robinson available. I believe that it was the meeting that took place on 25th July rather than a statement. I see the noble and learned Lord nodding. I wonder whether those notes can be made available to this House.

We also have conflicting accounts with regard to the regulator. First, the regulator indicated to the House of Commons Select Committee last Wednesday that he was to all intents and purposes threatened by the Secretary of State with emergency laws to strip him of his powers if he intervened to stop Railtrack going into administration. In another place on 5th November, and again in his evidence to the House of Commons Select Committee, the Secretary of State said that there was no threat. In the Select Committee, he suggested that there was clearly no threat because the regulator did then make an offer to Railtrack to consider an interim review, but that it was Railtrack that did not want one.

I wonder whether these are the full facts. We know from the evidence given to the Select Committee by both the chief executive of Railtrack, Mr Marshall, and the regulator, Mr Winsor, that on Saturday 6th October Railtrack asked the regulator about the possibility of a review. It seems clear that within that discussion Railtrack chose not formally to ask for a review because it knew that the regulator had effectively been told that a review was not possible and that therefore the Secretary of State would introduce legislation.

I hope that the noble and learned Lord can explain—

Lord Faulkner of Worcester

My Lords, I thank the noble Viscount for giving way. In the interests of the full facts, as he calls them, would it not be more sensible to continue with some of the other comments of Mr Winsor to the Select Committee last week, such as, They had no credible alternative to administration … I don't know why they didn't oppose the petition … I believe they are the authors of their own misfortune … I believe that the core problem of the railway industry is the competence of the management of the company … It failed to understand the simple realities of its business, which are this: you do not neglect your assets and you arc not hostile to your customers"? Surely Mr Winsor got that absolutely right.

Viscount Astor

My Lords, we can all quote for ever the proceedings of the Select Committee. However, I made a separate point from that. Mr Winsor made many remarks about Railtrack. I am talking about the Secretary of State and regulation. The point the noble Lord, Lord Faulkner, made is not relevant to that.

I wonder whether the noble and learned Lord can clarify the anomalies here. Returning to the financial aspects of Railtrack, we again seem to have conflicting accounts. Following negotiations in April it was agreed that the Government would provide to Railtrack, as part of the Renewco money, £162 million on 1st October. However, that money was not on that date made available to Railtrack. What was the reason for that? If it had been made available as promised, the status of insolvency would have had to be considered in a different light. The chairman of the Strategic Rail Authority notes in a letter to the Permanent Secretary on 1st October that, with regard to the implementation of Renewco by the 1st October deadline, The SRA has played its part fully and competently in this story. We have explained again and again how all this must work … I do not suggest that the Treasury is blameless in the matter but … the primary responsibility must lie with your department". In other words, the failure to transfer the £162 million was the responsibility of the noble and learned Lord's department. Yet the Secretary of State informed the Select Committee yesterday that the problem was not caused by himself or his department, but that the money was delayed purely by the Strategic Rail Authority. Can the noble and learned Lord explain that?

Finally, there are two issues relating to administration which I should be grateful if the Minister could clarify. First, the Secretary of State noted to the Select Committee yesterday that he wants the period of administration to last no longer than a few months, not six or nine months. Yet we know from the administrator's own evidence that he felt that six months, looks like a tight timetable". Will the noble and learned Lord comment on that?

Secondly, will the noble and learned Lord explain how the Secretary of State will be able to make a neutral decision on the replacement of Railtrack—as he said in yesterday's evidence to the Select Committee—when at the same time he will be the architect of one of its proposed new models? How can we be assured that other companies, which I understand are considering making offers, will be given a fair hearing for their proposals? Will the noble and learned Lord confirm that Railtrack was put into administration for purely financial reasons and therefore the Secretary of State will consider proposals from the private sector should they come forward? Is it not the responsibility of the administrator to procure the best offer? I hope that the noble and learned Lord can respond to those points and clear up much misunderstanding that has surrounded this issue. That would certainly help all of us who have an interest in it. I beg to move.

Moved, That an humble Address be presented to Her Majesty praying that the rules, laid before the House on 8th October, be annulled (S.I. 2001/3352)—(Viscount Astor.)

Lord Elder

My Lords, before the noble Viscount sits down, will he help us by telling the House whether or not he agrees with Railtrack's board that shareholders should get £3.60 a share and, if so, where does he believe the extra money—which may well be about £1 billion—will come from? Should it come from the taxpayer or from rail users through higher fares?

Viscount Astor

My Lords, I have sat down. When I speak later I may deal with the noble Lord's question.

Lord Bradshaw

My Lords, I intervene to say that we on these Benches have no special sympathy for the shareholders of Railtrack. It was a thoroughly inefficient company which from its very beginning wanted more money from the taxpayer. We see no reason why the taxpayer should pay that money. If wrong has been done, it will be found out. However, we believe that the Secretary of State in another place has a duty to ensure that new arrangements which are put in place fully serve the interests of the people who are paramount in this; that is, the rail users, who were never properly considered by Railtrack, as has been said. I want to make that clear before the Minister replies.

Lord Falconer of Thoroton

My Lords, these rules make possible fewer applications being made to court and, therefore, make it cheaper for all involved. Nevertheless, the noble Viscount, Lord Astor, prays against the rules. I cannot believe it is in order to increase the costs of the administration. He asked eight questions.

First, he read from an undated statement made by the Secretary of State and said that something inconsistent with that statement was said by the Secretary of State in the evidence he gave to the Select Committee yesterday. I refer the noble Viscount to Answers 845 and following in the evidence given by the Secretary of State yesterday to the Select Committee. I do not think that it is worthwhile to make forensic points of the kind the noble Viscount made.

Secondly, the noble Viscount asked whether the notes would be made available to this House. As he knows, because he will have read the evidence of the Secretary of State to the Select Committee, he would have offered it the notes if the committee found that helpful. It is a matter between the Select Committee and the Secretary of State as regards what happens to the notes.

Thirdly, the noble Viscount asked about what he called threats. He knows, because he has read the evidence, that the Secretary of State denies that any threats were made. Indeed, it was made clear by Mr Winsor, the regulator, that he told Railtrack that if it wanted an interim review, it would be considered and it would be possible for Mr Winsor immediately and publicly to announce that he had begun such a review. That was made clear to Railtrack on the Saturday. Again, that evidence was made clear in the Select Committee.

The fourth question the noble Viscount asked concerned the £162 million that he said was due and payable on 1st October. As the noble Viscount knows, as he will have read the Select Committee evidence, the position was that an agreement had been reached in April that best endeavours would be made in order to make the sum payable on 1st October. The SRA and Railtrack in good faith sought to establish that those conditions would be met by that date. They were not met because the Office for National Statistics had not made a decision about whether the particular arrangement would be on or off balance sheet. Therefore, the payment could not go ahead.

Fifthly, the noble Viscount asked about the length of time the administration would take. The Secretary of State said it would take a few months; the administrator said that time would be tight at six months. I shall not try to predict how long that kind of thing will take.

Sixthly, the noble Viscount asked how the Secretary of State could make a neutral decision about bids. As the noble Viscount will know, guidelines have been issued by the Secretary of State. He will also have the advice of the administrator before he makes a decision.

Seventhly, the noble Viscount asked whether the administration order was made by reason of insolvency. The noble Viscount will have read the reasons given by the Honourable Mr Justice Lightman for making the order. He said that such an order was necessary because of a deficiency, which means that Railtrack was unable to pay its debts at the time that an administration order was made.

Eighthly, the noble Viscount referred to the circumstances in which private sector bids will be considered. He asked whether the administrator would act in pursuance of the best interests of Railtrack. The administrator will have to act in accordance with his duties under law.

Viscount Astor

My Lords, I am grateful for the noble and learned Lord's response to my points of which I had given him prior notice. He has replied to most of my points, for which I am grateful. However, on a couple of points he did not go into as much detail as I should wish, but I am sure that we shall come back to them.

I say to the noble Lord who asked about the shareholders that that is purely a matter for the administrator. He has the statutory duty to do the best he can for Railtrack and the shareholders. I have absolutely no view nor, indeed, knowledge, of what might happen in that regard. That is a matter for him. I find it surprising that the noble Lord should even speculate on it, because it is a duty of the administrator.

A little more light has been shed on the subject. We are concerned that a false market existed in the trading of the shares. There is ample evidence that there was substantial turnover in the shares just before the Secretary of State's announcement. That will have to be looked into. I am sorry that the noble and learned Lord said that he did not want to look into some of the aspects in great detail. I give him warning that we shall have to come back to that in the future.

I am sure that the Government Chief Whip will be pleased—I see that he has a smile on his face—to hear that I shall leave this subject for the moment. I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.

[The Sitting was suspended from 8.51 until 8.57 p.m.]