Network Rail: Debt (Hansard, 16 December 2002)

§ Lord McIntosh of Haringey
My Lords, Network Rail's debt is treated in the UK's national accounts in conformity with the European System of Accounts 1995. The Treasury uses national accounts to define and monitor the fiscal rules. The UK's national accounts are compiled by the Office for National Statistics, which is responsible for decisions on how to classify organisations and transactions for national accounts. When applying the ESA95 rules, ONS judged that Network Rail was not part of the public sector. That decision was supported by the European Union's statistical office (Eurostat). The decision means that Network Rail's contingent liabilities are excluded from public sector net debt.

§ Viscount Goschen
My Lords, although I understand why the Government wish to keep the £20 billion plus of Network Rail debt off the balance sheet, is it really tenable for the Government to continue to shelter behind the position taken by the ONS when the National Audit Office has ruled that it should be treated as a subsidiary of the Strategic Rail Authority and that its accounts should be consolidated with that body? Is this really what the Minister meant when he said previously that the Government had been outstandingly successful in following accepted accounting practices?

§ Lord McIntosh of Haringey
My Lords, the Government have no particular desire to keep Network Rail's contingent liabilities out of public accounts. Indeed, we have never expressed an opinion on the subject. As to the view of the National Audit Office, I understand that it agrees with the Office for National Statistics that what the noble Viscount referred to as Network Rail's "debt" is in fact contingent liability. It will appear as notes in the accounts of the Department for Transport, and already appears as a post balance sheet event in SRA accounts. There is no concealment there.

§ Lord Oakeshott of Seagrove Bay
My Lords, does the Minister recall his answer to my Written Question on 8th July (at col. WA67 of the Official Report) when he said that the expenditure and borrowing of Network Rail, will not be included in public sector statistics", because the ONS had classified it as a private sector body in the national accounts? Mr Len Cook, the head of the ONS, has now written to me, saying: This classification [to the private sector] is not in itself a justification of the form of Network Rail. Such justification is the responsibility of those presenting government policy in the public domain". Since this letter stops the Government hiding behind accounting technicalities, can the noble Lord tell us what is the real justification for keeping Network Rail's debts out of the public sector borrowing requirement?

§ Lord McIntosh of Haringey
My Lords, I have had no opportunity to see the letter that Mr Cook has written to the noble Lord. Indeed, I could not have had such an opportunity. If I had asked for it, I would not have been allowed to see it. Therefore, it is impossible for me to comment on it. I repeat: the Government have no reason to seek to keep Network Rail's contingent liabilities either off or on government accounts, and have not sought to do so.

§ Lord Saatchi
My Lords, I believe we just heard the Minister say that such debts were excluded from the national accounts because they are "contingent liabilities", not definite liabilities. May I therefore take him back to our debate on the Pre-Budget Report, on 27th November, when he said (at col. 782 of Hansard) that "all contingent liabilities"—of which this is one—"over £100,000 are declared" in the Red Book? I do not know whether he has a Red Book handy in his folder, but, if he does, would he tell us on which page the £21 billion of Network Rail liabilities appear?

§ Lord McIntosh of Haringey
My Lords, in case there is any misunderstanding, the aggregate of contingent liabilities is contained in the Red Book—a copy of which I do not have with me. Much more important than that, as I have made clear to the House on more than one occasion since then, the detail of contingent liabilities—in other words, individual items—is 452 contained in the supplementary statements to the Consolidated Fund and National Loan Fund accounts.

§ Lord Moser
My Lords, on the statistical side, from many years as head of statistics I know that this kind of classification use is very sensitive. We are also again in the statistics hunting season, when the newspapers are as keen on hunting statisticians and official statistics as foxes. However, some of the stuff appearing in the media is misjudged. Statisticians and the ONS have no choice because, as the Minister said, these classifications are based purely on the European standards. Will the Minister confirm that, as long as that is the case, the traditions of following international and professional statistical rules and standards will continue, and that the Statistics Commission should fully back the statistics office in that policy?

§ Lord McIntosh of Haringey
My Lords, I can certainly confirm that. Just in case there is any doubt, the Government are concerned— as was made clear by the Permanent Secretary to the Treasury, and is made clear by the head of the National Audit Office and Len Cook in a joint letter—that there should be some resolution, for the sake of transparency, of these different definitions. That is why, since we are moving towards whole of government accounts, we shall have whole of government accounts for the national and departmental public bodies, in 2005, and for the whole of government in 2007. These definitions will at that time be reconciled. Meanwhile, it is obligatory on us to observe international rules for national accounts and to observe generally accepted accounting practice for audit purposes, as the National Audit Office does.

§ Baroness Williams of Crosby
My Lords, does the noble Lord agree that, in every country, it is very important that statistics are accepted as as honest a representation of the facts as can possibly be achieved? Given the real problem of definition outlined by my noble friend Lord Oakeshott, will the Minister agree to put before the House, as soon as he can once the figures have been reconciled, a clear indication of where matters fall within the private sector and where they fall within the public sector, so that we can all be enlightened?

§ Lord McIntosh of Haringey
My Lords, I made a lengthy speech on this subject last week in a debate on the Pre-Budget Report, which I commend to the noble Baroness, Lady Williams. There are one or two problems with it, but I can talk to her about those. Generally, however, we have been as transparent as possible. Some people seem to think that money going to Network Rail is not being declared in the public accounts. Let me make it entirely clear that subsidies and investment grants to Network Rail are reported as public expenditure. Indeed, under the previous government, Railtrack was treated as the Office for National Statistics now treats Network Rail. Privatisation meant taking items off the public accounts at a time when it was perfectly well known 453 that, in the end, you could not allow the railways or the public utilities to close down. That was the time when falsification took place; not now.

§ Baroness Noakes
My Lords, does the noble Lord agree with Sir John Bourn, the Comptroller and Auditor-General, that because the Government act as the lender of last resort and indeed provide security to the providers of finance to Network Rail, that sum should be included in the accounts? Does he agree that it is at least regrettable that the Government feel it necessary to follow some obscure European rule rather than follow the substance of the transaction?

§ Lord McIntosh of Haringey
My Lords, it is far from being an obscure European rule; it is a rule which has been accepted for national accounts for many countries for a very long time. I read Sir John Bourn's evidence to the Treasury Select Committee two weeks ago, and I read it with great care. Quite frankly, Sir John did not say what the noble Baroness. Lady Noakes, claims he said.