Railtrack (Hansard, 15 October 2001)

§ The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)
With the leave of the House, I shall repeat a Statement made in another place by my honourable friend the Secretary of State for Transport, Local Government and the Regions:
"With permission, Mr Speaker, I wish to make a Statement concerning Railtrack: to describe to the House the worsening financial crisis facing Railtrack which led the Government to petition for railway administration on 7th October; and to outline the further measures that we intend to take to put the interests of the travelling public first.
"The House will be aware of the history of Railtrack. When the railway industry was restructured following the 1993 Railways Act, Railtrack was created.
"It was in 1996 that Railtrack was privatised. Railtrack was the only publicly floated utility subsidised by the Government, this subsidy making up the majority, in fact some two-thirds, of its revenue.
"After the Hatfield train crash, the whole network was urgently reviewed and fundamental safety issues addressed. This added significantly to costs, with Railtrack claiming it needed an additional £700 million a year to put the track into a proper condition.
"On 2nd April 2001, Railtrack asked for help because of pressing financial difficulties. We brought forward £1.5 billion of investment from the period beyond 2006 to the five-year period beginning on 1st April 2001. The first instalment of £337 million was paid on 1st October 2001. However in May, June and July, the company's position apparently deteriorated.
"Finally, on 25th July at a meeting in my office the chairman said that the position was far worse than it was thought in April. It was clear that unless extra financial assistance was provided, on 8th November when Railtrack was due to give its interim results, it would be unable to make the 385 critical statement that "it was a going concern". The effect of this would have been disastrous. Immediately I ordered intensive discussions with Railtrack.
"In August, Railtrack's advisers came back to the department and said that there were only three options: restructuring; renationalisation; or, as they described it, receivership. So it was Railtrack's advisers who first raised the possibility of insolvency if no additional government funding was available.
"I asked my officials to investigate the restructuring option, which involved the provision of yet more funding to Railtrack. Railtrack asked for government funding to cover all its costs, plus a profit, plus a four-year suspension of the regulatory system. That was Railtrack's proposal.
"Given the company's demands, we also began to prepare for the possibility that we might feel unable to provide additional funding and that, as a consequence, Railtrack would prove to be insolvent.
"To protect the interests of passengers it was clearly right to explore the need for railway administration on a contingency basis. As a result, preliminary contact was made with Ernst & Young on 23rd August.
"There were further negotiations and various modified proposals. But it was becoming obvious that the company could not continue unless we offered to fund whatever losses it might have for a period of several years. I took the view that I simply could not responsibly enter into such a guarantee on behalf of the British taxpayer.
"We carried on discussions until 3rd October, but no way out of the dilemma could be found. Either we gave the guarantee on money or the company became insolvent.
"On Friday 5th October, I reviewed all the relevant papers and considered all the options, including Railtrack's proposed rescue package and the additional funding that would be required. Railtrack's proposals were cast in such a way that it was hard to be sure the precise sum it was seeking, but it was effectively an open-ended funding request on the Government.
"I decided that I could not give Railtrack a blank cheque. I informed John Robinson, the chairman of Railtrack, on Friday afternoon of this decision and of my intention to petition the High Court for a railway administration order if the company was insolvent. This order was granted on 7th October.
"Railtrack was taken into administration because it was, or was likely to become, unable to pay its debts. Our petition to the High Court showed that there would be a deficit of £700 million by 8th December, rising to £1.7 billion by the end of March next year.
"In granting the order, Mr Justice Lightman said: This is clearly a case where the making of a railway administration order is not only appropriate, but absolutely essential, and I shall therefore make that order immediately". 386 "Much has been made in the press of the position of shareholders. At the time of the April agreement the Government felt that we should make clear that the role of government should be to support the railway network, but that we should not be seen as acting as guarantor of individual companies or their shareholders. We therefore agreed with Railtrack a statement of principles. The first point in the statement reads as follows: The Government stands behind the rail system but not individual rail companies and their shareholders who need to be fully aware of the projected liabilities of the companies in which they invest and the performance risks they face". "To ensure that this had a wide circulation in the City it was sent out through the Stock Exchange News Service.
"The directors of Railtrack have said that they want £3.60 a share. On our calculations that would require the transfer of up to £1.5 billion of new money from the taxpayer to Railtrack shareholders. We believe that it would be wrong to make new money available. We will not do it.
"In the light of the administration of Railtrack, we believe that we should now consider reshaping the structure of the industry in a way which recognises that the needs of the travelling public must come first. We shall be proposing to the administrator that a private company limited by guarantee be established to take over Railtrack's responsibilities. Any operating surplus it makes would be reinvested in the railway network. Such a company would have the needs of the travelling public and other users as its priority. With no shareholders we would remove the conflict between the need to increase shareholder value and the interests of rail passengers.
"The company we propose would have responsibility for operations, maintenance and renewals. It would have a small professional board of executive and non-executive directors. Performance targets would be set linked to levels of service, safety and value for money. It would have a board working on commercial lines but focused solely on delivering a safe, well-maintained rail network that is fit for the 21st century.
"The company would be able to promote collaboration and co-operation around the wheel and track interface, the absence of which has been one of Railtrack's weaknesses.
"A private company limited by guarantee would need far less intensive regulation. We therefore intend to streamline the existing structure while still recognising that there will be a continued need for some form of independent economic regulation.
"We shall discuss our proposals with the industry's key players, but we are clear that it is important for the new structure to provide the following: strong strategic leadership; a cut in the burden of day-to-day interference; an end to the self-defeating system of penalties and compensation; clearer accountability; and an end to perverse incentives.
387 "The new company we will be proposing would be able to raise funds in the market. Private sector funding would operate in partnership with government to deliver the 10-year plan objectives for rail. Under our proposals, we intend to offer all existing lenders to Railtrack plc the opportunity to transfer over to the new company with no loss of principal or interest. Any debt transferred to the new company will be financially sound and have, at the time of transfer, good long-term and short-term credit ratings.
"Mr Speaker, there are many talented and motivated people working in Railtrack. They have worked with dedication, in particular over the past seven days, and I want to thank them for that. I know that they and the rest of the industry want to see an improved railway system. I believe that with the demise of Railtrack that is what they will get. The Government are committing some £30 billion to the network over the next 10 years.
"The administration of Railtrack provides us with a golden opportunity to create a railway system which is united and not fragmented; a railway industry with a shared strategic vision; a railway industry which can respond to the needs of our time; and a railway network provider that answers to the millions of passengers and not private shareholders. Our decisive action makes all this possible and I commend it to the House".

§ Viscount Astor
My Lords, I thank the noble and learned Lord for repeating the Statement. Before I start to attack the Government, perhaps I may express my sorrow for the noble and learned Lord who has just managed to leave the mess of the Dome only to move to the mess of Railtrack. Bad news appears to follow the noble and learned Lord.
This mess has been brought about by government bungling and mismanagement. The future of the whole rail industry is in tatters, and there is now little hope of the £34 billion of private sector investment, alongside the Government's £30 billion, required over the next 10 years going ahead. The Secretary of State has been caught out by the disgraceful behaviour of his own spin doctor. Ms Moore told a Sunday Times journalist who asked about Railtrack and possible administration: If you run that you will look like an idiot". In fact, she used words worse than that. Next day, the Secretary of State made that announcement. When will Stephen Byers follow the advice of his own senior Back-Benchers in another place and get rid of Ms Moore? I remind noble Lords of her words within an hour of an aircraft flying into the World Trade Center: It's a very good day to bury bad news stories". This is another bad news story. The Financial Services Authority is to investigate claims that the Secretary of State rigged the market for shares before forcing the company into administration. The 388 Railtrack group is considering suing the rail regulator under the Railways Act 1993 and bondholders are considering legal action. Class action suits brought by pension funds and other shareholders loom. Finally and importantly, the employees of Railtrack, 90 per cent of whom are shareholders, face losses and possible redundancies.
The Secretary of State forced Railtrack into administration without giving it the opportunity to appeal to the regulator. Can the Minister tell the House what meetings took place with Railtrack before the Secretary of State's announcement? At what date did the Secretary of State take the decision to formulate the plan to put Railtrack into administration? Is it riot true that Railtrack would have been solvent if the funding promised by government had been committed by them? This will have an effect on all the Government's other PFI initiatives. It is interesting that the rating agencies have reduced Railtrack bonds to junk status despite government promises. They do not believe the Government either.
Perhaps I may ask the Minister what the Government propose to do about the Channel Tunnel Rail Link, ownership of which is essential if the Railtrack group, as opposed to Railtrack itself, is to survive. The Secretary of State had accused Railtrack of not controlling its costs, but is it not true that those increased costs have been imposed by the regulator and the Government themselves so that Railtrack has been squeezed at both ends?
What guarantees can the Minister give that there will be sufficient public funding for the rail network in the future? The Minister said that a private company limited by guarantee would lead to less intensive regulation. Can the noble and learned Lord explain why? It will still raise funds in the market. Extraordinarily, the Secretary of State believed that this would be a good news story—a political coup—which would be welcomed as nationalising Railtrack and bringing it back into public ownership. Clearly, it is not. The Secretary of State ignored the advice of the Treasury and the Chancellor and rushed out an announcement.
But the most important group of people—the poor long-suffering passengers—have been left entirely out of the equation. The train operators do their best but in future. when passengers suffer delay, fares go up and track upgrades are put off, the Government will not need to blame; the blame will lie opposite with the Government.

§ Lord Bradshaw
My Lords, I thank the Minister for repeating the Statement. As far as concerns the response of the Conservatives, they were the ones who privatised the railways and are responsible for the mess. Over 80 per cent of the delays in Great Western, for example, are caused by Railtrack. Railtrack is the root cause of the problem and is a very badly managed company.
We welcome the Statement and that users, both passengers and freight, will be put first in future. It is time that passengers were put first. The taxpayer needs 389 to come second and the shareholders some way behind. We have heard too much in the media about the plight of the shareholders but nothing like enough about the passengers and users. I hope that the Minister will be able to assure the House that there will not be a north versus south railway so there is growth under the 10-year plan in this part of the country but nothing is done in the Midlands and the North. I hope that the Government remain committed to delivery of the growth targets under the 10-year plan. We are beginning to get behind in some aspects. We want to see the railway developed but we have seen precious little of it in the past two or three years.
I hope that in future the SRA will be a purchaser of freight paths and will sell them on retail to freight users and that the gap will be met by state subsidy. We shall need to know something about land in the future. We are ready to help if the Government stick to their principles. We want a new railway and certainly do not have it now.
I and, I believe, everyone who is connected with the railway welcome simplicity, which means abolishing the regulator and loss of performance regimes which now take up as much money as we see going into the system. Lawyers may provide some benefits but the complexity that they bring to the railway is of no benefit to anyone. Access should be based on the CAA model. We should license many fewer franchises and roll them forward. We should also have franchises which are responsible for track and signalling so that blame is not passed from one to the other as in the past.
With the exception of one or two tiny areas, we do not believe that competition has worked on the railway. Competition over the same lines is not something that passengers welcome. We want to see regulation of a number of fares on some franchises and some franchises which have profiteered brought within regulation.
As to safety, within self-contained franchises we should like to see an independent safety inspectorate, not the Health and Safety Inspectorate, which, quite honestly, has cost a fortune and achieved little for railway safety. However, we support Lord Cullen in the need for independent investigation of railway accidents.
I shall not say more tonight because there is not much to say until the Government bring forward their proposals. However, we on these Benches are willing to co-operate in everything that the Government do along these lines because we believe that the user will welcome the bonfire that is to be made of Railtrack.

§ Lord Falconer of Thoroton
My Lords, I am grateful for the support for the steps that we have taken from the noble Lord on the Liberal Democrat Benches. I am also grateful for his recognition of the past difficulties in relation to the structure and the fact that he takes the sensible approach of seeing what happens next.
390 I am surprised that the noble Viscount did not mention that the Conservatives were responsible for privatising the railways and caused Railtrack plc to be set up. I am absolutely amazed that he did not see fit to refer to that as part of the cause of this problem. I am also interested that, although he had a political rant at the start of his contribution, he did not dispute one of the propositions in the Statement that I repeated, in particular that on 25th July the chairman of Railtrack said that in order for Railtrack to survive—that is, not to become insolvent—he needed a blank cheque from the Government for the next few years and the suspension of all regulatory control and after that he would consider the position. I do not believe that any sensible government, having investigated the position as thoroughly as we did, would accept that.
The noble Viscount asked whether, if we had given the £1.5 billion that had been agreed between the Government and Railtrack on 2nd April, Railtrack could have survived. If he had listened to the Statement he would have heard that Railtrack, in particular its chairman, said that it would be insolvent at the time of its interim accounts on 8th November if additional sums of money over and above the £1.5 billion were not given. Attempts were made to discover from Railtrack how much that was. It proved impossible to find out how much extra, over and above the £1.5 billion, would be required to keep the company solvent. Therefore, the answer to the noble Lord's specific question is, "No, it would not have been possible to keep the company solvent with the £1.5 billion". That is on the word of the chairman of Railtrack.
The noble Viscount asked various other questions. He asked when the plan was formulated to put the company into administration. After the distressing news on 25th July, the Secretary of State rightly instituted contingency plans in order to see what needed to be done if it was necessary to put the company into administration. That was in parallel with the detailed discussions that were going on with Railtrack to investigate the position fully. Those contingency arrangements were started on 23rd August when Ernst & Young, the company from which the administrators were appointed, was approached. The final decision to put Railtrack into administration occurred on 5th October.
The noble Viscount asked about contacts with Railtrack. There were contacts between the department and Railtrack in May, June, July, August, September and October during which all of these issues were thoroughly discussed. So far as concerns the Channel Tunnel Rail Link, Railtrack Group Plc has a contract with London & Continental Railways Limited, which requires it to buy section one of the Channel Tunnel Rail Link. That remains the position.
With regard to less intensive regulation, the reason for that is because there will be no shareholders whose interests need to be balanced when one has a company limited by guarantee.
391 We wholeheartedly agree with the point that there should be no North versus South railway. In relation to growth targets and the 10-year plan, as the Secretary of State made clear in another place, we stand four square behind the 10-year plan and behind proposals that will bring about a much better railway for the travelling public.

§ Lord Clinton-Davis
My Lords—

§ The Earl of Onslow
My Lords—

§ Lord Williams of Mostyn
My Lords, perhaps we can start with the noble Lord, Lord Clinton-Davis, and then continue with the noble Earl, Lord Onslow.

§ Lord Clinton-Davis
My Lords, first, in view of what has been said by the Opposition today, is it not surprising that it was Railtrack itself through its senior managers which in July suggested that the company should be placed in administration? Is it not surprising that not one word of that has been mentioned by the noble Viscount today? Secondly, does the Minister remember any occasion when a senior rail manager showed any concern for the rail network or for its passengers? Thirdly, is it not clear that Railtrack could not continue, either in law or for any other reason at all, as at present, and that the Government have taken the right step in applying to the court for administration?

§ Lord Falconer of Thoroton
My Lords, first, I agree with the proposition of my noble friend that it was surprising in the light of the venom with which the noble Viscount made his remarks that he failed to refer to the fact that it was indeed Railtrack which first mentioned "receivership" rather than "administration".
Secondly, I do not agree with the proposition that there is not one senior manager in Railtrack concerned about the network and the travelling public. There are a great many people working for Railtrack who are concerned about the travelling public and the network and who are keen to deliver as good a service as possible.
In relation to my noble friend's third point, I am sure that the focus should be on getting a structure that delivers just that.

§ The Earl of Onslow
My Lords—

§ Lord Peyton of Yeovil
My Lords—

Lord Willliams of Mostyn
My Lords, I thought we had agreed that it should be the noble Earl, Lord Onslow, next.

§ The Earl of Onslow
My Lords, is it not true that Railtrack during its existence carried more passengers, increased passenger use of the railways and had a better safety record than did British Rail in the 392 equivalent time before it? Is it also not true that this is nationalisation by the back door? Furthermore, is it not also true that someone said that this old Labour, but at least old Labour paid 3.5 per cent bonds when it nationalised the London, Midland, Scottish and Southern Railways, LNER and LMS?
Furthermore, is it not true that what the Government have done is what Talleyrand said of Napoleon when he said that a gentleman may cheat on his wife or may run into debt, but that if he cheats at cards he is not trusted by his acquaintances and friends? It looks as if the Government have cheated at cards. When the Prime Minister is doing his level best to put on the high moral authority against terrorism, for the Government to look as if they are cheating at cards does not stand very well in their favour.

§ Lord Falconer of Thoroton
My Lords, that was a very intemperate account of what happened. Yes, of course Railtrack, by comparison with a number of things that British Rail did, has shown improvements. But on 25th July 2001 Railtrack ended up in a position where it said that it required an unspecified amount of money and a guarantee from the Government in order to remain solvent. Of course people who invest in shares recognise that they are taking some risk. It was for the Government to decide whether in the circumstances which presented themselves on 25th July it was right to commit the British taxpayer to an unlimited guarantee over a number of years, or to face up to what had happened; namely, that Railtrack was then insolvent. In those circumstances, the consequences for the shareholders were bad. However, I have no doubt that it was correct for the Government to face up to those consequences. That was not remotely cheating; it was facing up to what had happened.

§ Lord Faulkner of Worcester
My Lords, does my noble and learned friend agree that the problem at the heart of the Railtrack privatisation was the incompatibility between serving the public interest and enhancing shareholder value, despite the fact that the Railtrack licence says quite clearly that the public interest must come ahead of the shareholder value? Is it not that which led to the huge escalation in the cost of investment projects now calculated at anything between 2.4 and three times what similar projects used to cost pre-privatisation? Furthermore, as a result is there not a much overdue need for a new company along the lines which my noble and learned friend described in the Statement, and will not that be widely welcomed not only on these Benches and on the Liberal Democrat Benches but by the millions of people who use the railway system as well as by the thousands who work on it?

§ Lord Falconer of Thoroton
My Lords, it is possible to debate for some considerable time the precise causes of the problems. The structure, to which my noble friend referred, plainly has a part to play. But, whatever the precise causes, on 25th July and in the few weeks that followed we ended up with a company that 393 could not identify the amount of money it required to remain solvent. That is not a basis upon which it would be possible to provide the travelling public with the service that they are entitled to expect.

§ The Earl of Mar and Kellie
My Lords—

§ Lord Peyton of Yeovil
My Lords—

§ Lord Williams of Mostyn
My Lords, shall we try the noble Earl, Lord Mar and Kellie, first and then definitely the noble Lord, Lord Peyton?

§ The Earl of Mar and Kellie
My Lords, can the Minister confirm newspaper reports that the Government want to experiment with the vertical integration of the industry in Scotland? Can he also confirm that there will now be more chance of an expansion in the network, particularly, for example, the reopening of the Stirling Alloa Dunfermline Railway?

§ Lord Falconer of Thoroton
My Lords, the intention is to have a company limited by guarantee. That company will deal with the operations, maintenance and repair functions of Railtrack. That company will be able better to deal with the interface between wheel and track. Larger projects will be dealt with by special purpose vehicles. I do not think that it is right to go further than that at this stage because one needs detailed discussions with the industry on how to take the matter forward.

§ Lord Peyton of Yeovil
My Lords, I hope that I take the Minister with me to the extent of saying that perhaps the last way of dealing sensibly with a matter of this complexity is the one that we are using now. It will not work. Perhaps I may remind the Minister that I never thought that Railtrack was anything but a pretty dud idea. When the government who introduced that company departed from office, I was fairly confident that the then opposition party would rush to put things right. But it did not do that, and I suspect that the reason why it did not do so was that it knew well that an industry that was pretty much bankrupt would simply resort to relying on the Treasury to act as a banker. That is a death warrant for any venture.
I hope that the Minister will accept that I think the Secretary of State is to be envied in one matter alone; he has had at his disposal the noble and learned Lord's skill in defending the indefensible this afternoon. I hope very much that we shall have a proper debate on this matter, opened with a much fuller explanation from the Minister. It is easy to pretend that all was well, but I simply cannot credit it that the Minister concerned is not putting his own skin above every other consideration. I do not refer to the noble and learned Lord; I refer to the Secretary of State, whom the noble and learned Lord at the Dispatch Box has had the heavy burden of representing today.

§ Lord Falconer of Thoroton
My Lords, I should correct what I said from a sedentary position. I am sure 394 that it is right that the noble Lord, Lord Peyton, opposed rail privatisation throughout the time that the proposals went through Parliament. He has been completely consistent in saying that it was a bad idea since it was first adumbrated. I think that few people would now disagree with the views that the noble Lord expressed at the time.
We thought that the right thing to do would be to try to make the system work in order to deliver good services to the travelling public. The noble Lord has stated that we are now going about it in the wrong way. Our hands were considerably tied by the simple proposition that, once it became apparent that Railtrack was insolvent, there was no option but to make that fact public and then make arrangements to protect the creditors. As the Statement made absolutely clear, if the choice was between a blank cheque from the Government to be issued for years to come or to face up to the insolvency of Railtrack, we think that the right course was to face up to that insolvency. I have not yet heard one dissenting voice in the Chamber in regard to that decision.

§ Lord Palmer
My Lords, I am concerned and mystified as regards how the new company will be able to raise any capital. Perhaps the noble and learned Lord would be kind enough to give the House some clarification as to how he envisages such a vast amount of capital will be raised.

§ Lord Falconer of Thoroton
My Lords, the new company will be able to raise capital on the basis that it will be a company limited by guarantee, with certain assets guaranteed by certain people. In that way, the company will be able to raise money.

Lord Berkeley
My Lords, I congratulate the Government on their move to put Railtrack into administration. I believe that it is an event which has been coming for a long time. To that end, I cannot understand the complaints being made by shareholders who say that they did not know anything about the problems. Can my noble and learned friend confirm that if any shareholders had read the technical press or had listened to comments about Railtrack's performance over the past year they would have been able to form their own judgment? Personally, I do not believe that they deserve much compensation.
I am pleased that my noble and learned friend has confirmed that extensive consultation will be carried out with the industry. This is a complex situation and I am glad that my noble and learned friend is keen to see that the trains continue to run.
I declare an interest as chairman of the Rail Freight Group. Perhaps I may put a question to my noble and learned friend. Rail Freight is in the final stages of a regulatory review of freight access charges which, it is said, will reduce those charges by around 50 per cent. I believe that the regulator is due to announce that any day now. Can my noble and learned friend confirm 395 that this arrangement will stand and that the Government will guarantee that finance? It is extremely important for the rail freight industry.

§ Lord Falconer of Thoroton
My Lords, as regards the position of Railtrack shareholders, I think that it would be wrong to make any specific comment save to say that my noble friend is right. The difficulties in which Railtrack found itself had been widely reported in the press. While it is true to say that the precise extent of those difficulties might not have been known, it was clear that a question mark and a risk overshadowed Railtrack.
Perhaps I may write to my noble friend on the issue of freight charges.

§ Baroness Scott of Needham Market
My Lords, the Statement contains a wonderful phrase that I should like to repeat: The company will be able to promote collaboration and cooperation around the wheel and track interface, the absence of which has been one of Railtrack's weaknesses". From that it would appear that the Government agree with those of us who believe that the separation of rail infrastructure from rail operation was a major flaw in the way that the rail industry was privatised. In the light of that, does the Minister believe that the ability merely to promote collaboration and co-operation will be enough to deliver the kind of changes which everyone knows are needed in the rail industry? It would be a grave mistake to think that simply removing shareholders from the equation and creating a "Son of Railtrack" will make a significant difference.

§ Lord Falconer of Thoroton
My Lords, the promotion of collaboration will not be sufficient; collaboration itself is required here. We have indicated and outlined the kinds of proposals that we think should take the matter forward. But, as I have said, proper consultation now has to be carried out with the stakeholders, including those experienced in the running of railways.

§ Viscount Goschen
My Lords, in the Statement the Government made it clear that they felt that they had acted properly and with perfect propriety. However, it is clear that in the City of London there is a substantial body of opinion that takes exactly the contrary view. At a time when the Government are looking to the private sector to raise equity funds to support our public services, notably the National Health Service, do they recognise that tremendous damage has been done to their credibility as a partner with industry and with financial institutions? Only a relatively small group of companies and banks have the potential to become involved in PPP or PFI projects. What will the Government do to remedy the undoubted damage that has been caused, whether or not it was intentional, to their ability to persuade the private sector to participate in public projects?

§ Lord Falconer of Thoroton
My Lords, it is most important to set the facts on the record as regards what 396 has happened. The vital fact here is that a decision had to be made by the Government in the face of Railtrack's need for an uncapped guarantee in order to avoid insolvency. That has been made clear in the Statement delivered by my right honourable friend in another place and which I have repeated in this House. I think that the noble Lord is saying that a guarantee of that kind has to be given in such circumstances because it was a privatised company. We do not think that that follows. We think that the right course was to take steps to protect the company from insolvency by appointing an administrator. That involves a very significant reduction in the value of the shares in Railtrack Group plc, but there is nothing remotely improper about that course; far from it. It was the course which the law required.

§ Baroness Gibson
My Lords, can my noble and learned friend confirm that the new company will have at its heart questions of health and safety? Bearing in mind the atrocious record of Railtrack over those issues, that is now much needed. Perhaps I may declare an interest as a former commissioner for health and safety.

§ Lord Falconer of Thoroton
My Lords, I can confirm that health and safety will be put right at the heart of any new arrangements made in relation to the railways.

§ Baroness Park of Monmouth
My Lords, I shall declare a non-interest by saying that I do not hold shares in anything. For that reason, I recognise that the noble Lord who spoke a little earlier in our debate knows more about the need for shareholders to read the relevant press reports and to keep themselves informed on what is taking place. However, I understand from newspaper reports that many of the shareholders are people who have worked all their lives for Railtrack. They believed in what they were doing and invested their not overly large savings in it. While I recognise that the Government cannot take on everyone's mistakes, I hope that something can be done in consideration of those people who thought it loyal and sensible to invest in the industry for which they have worked all their lives. I hope that that group will be helped in some way.

§ Lord Falconer of Thoroton
My Lords, I hope that nothing I have said reflects anything other than regret about what has happened to those shareholders. But we must return to the basic dilemma faced by the Government: should an uncapped guarantee be offered, lasting for years? That would mean that taxpayers' money would have to be spent. Alternatively, should steps be taken to protect the company from insolvency? We have taken the view that the company should be protected against insolvency.
There is some value in Railtrack Group, which is the company quoted on the Stock Exchange. It is dramatically less than it would otherwise be as a result of the insolvency of the plc. Only time will tell what is the residual value in relation to that company, which is where the shares are. So it may be that there is some value there.

§ Lord Tugendhat
My Lords, the noble and learned Lord referred to issues of health and safety in answer to a previous question. Can he say who is in charge of safety now? The Minister has made it quite clear that the person who calls the shots in this business is his right honourable friend the Secretary of State. He also referred to the administrator, who is, as I understand it from the Statement, running the business. Is the administrator now the person where the buck stops in relation to safety, or is it the Secretary of State?

§ Lord Falconer of Thoroton
My Lords, the company which is in administration continues to have the legal obligations in relation to safety. It is supervised in relation to that by the Health and Safety Executive. So the arrangements in relation to safety remain, legally, exactly as they were before the administration.

§ Lord Watson of Invergowrie
My Lords, as one who declares an interest only in a return to a situation where I can use the West Coast Main Line between London and Glasgow, which has been run down under Railtrack to a state where that is no longer a pleasant proposition, I echo the views expressed by the noble Lord, Lord Bradshaw, when he stated that it is important that whatever emerges from the restructuring—which I believe will be widely welcomed—does not serve only London and the South East but has wider benefits.
This may be an unfair question to ask the Minister, but I shall ask it nevertheless. Given the dissembling, I use the term advisedly, of the chief executive of Railtrack in terms of "ambushes" and apparently forgetting that it was Railtrack's own advisers, Credit Suisse First Boston, who first raised the question of insolvency as long ago as August, can my noble and learned friend assure the House that if the chief executive demits the post—I am not sure whether that has been confirmed—he will not be given any kind of golden handshake? Failure must not be rewarded.

§ Lord Falconer of Thoroton
My Lords, I repeat what I said in answer to the noble Lord, Lord Bradshaw. We fully appreciate the importance of a rail network which serves the whole country. Anyone who lives outside London knows very well how important is the rail network outside London, just as it is to the people who live in London and work in London.
It would be invidious of me to comment on any arrangements that are matters for Railtrack and the administrator.