HL Deb 28 February 2002 vol 631 cc1532-4

3.16 p.m.

Lord Bradshaw asked Her Majesty's Government

How much they estimate they will have to spend, apart from track access charges, in order to get Railtrack out of administration.

Lord Filkin

My Lords, that will depend on the length of the administration. However, the Government made a short-term commercial loan facility of £2.1 billion available to the administrator to pay Railtrack's creditors and keep the rail network running to the end of March.

Lord Bradshaw

My Lords, I thank the noble Lord for that reply. It is a fact that since privatisation the cost of rolling stock has actually fallen in real teens. However, the cost of work on the track and signalling has multiplied two to three times. Is that due to inefficiencies in Railtrack, overhearing safety considerations, performance regimes or some other matter because it certainly does not manifest itself in the returns to the contractors who actually carry out the work?

Lord Filkin

My Lords, I should be most interested to see the evidence on that matter to which the noble Lord, Lord Bradshaw, refers. I refer to the range of reasons that he gave and to the matter of equally competitive supply markets. However, I suspect that the issue on which he focuses is the quality and skill of procurement on the part of the train operating companies by comparison with Railtrack. Be that as it may, I shall be pleased to investigate the matter further if he will give me the details.

Lord Berkeley

My Lords, will my noble friend help a little more as regards the time-scale of Railtrack's administration? Does he agree that the first stage is for the administrator to set up an information room so that bidders can see the quality and state of the assets? Will he confirm that that is supposed to be done by the end of March, or will he give an alternative date?

Lord Filkin

My Lords, my noble friend is right to emphasise the creation of a data room so that potential proposers are well aware of all the liabilities and assets against which they would submit bids in accordance with the guidelines laid down by the Secretary of State at the end of October, shortly after the administration order was issued. That is a substantial piece of work. I am told that the administrator will be working to the end of March, or thereabouts, thus enabling invitations for bids to be issued in April, with a potential submission date some time in July.

Lord Geddes

My Lords, how does the Minister interpret the words "will have to spend" in the Question of the noble Lord, Lord Bradshaw? Does he interpret that phrase to mean "need to spend" or "to have available to spend"? There is a bit of a difference between the two.

Lord Filkin

My Lords, given where the costs will eventually fall, that is probably a sophisticated but academic question.

Noble Lords

Oh!

Lord Filkin

My Lords, bear me out! In respect of the loan facility, there is a further technical complication about state-aid funding, with which I shall not bore the House. That will effectively mean that Railtrack, underwritten by a government guarantee, will be able to replace the funding that it has from the Government in the short term with commercial funds. That will eventually be a charge against the assets of the company, as one would expect. Likewise, the costs of the administrator will again eventually be a charge against the company at the eventual settlement and, I hope, when it moves out of administration.

Baroness Hanham

My Lords, in view of that reply, I ask the Minister to advise the House whether there have been any requests to the Government so far to guarantee or underwrite the finances of a proposed company limited by guarantee for Railtrack. Can he say in principle whether the Government would be agreeable to such an approach and, if so, will there be any limitation to the support that they would be likely to give?

Lord Filkin

My Lords, this is one of the situations in which I can say with honesty, "Not to my knowledge". As noble Lords well know, the Government regard a company limited by guarantee as being one possible way forward. It will ensure that when the rail administrator invites bids, there will be at least one bid on the table which is clearly in the public interest. The SRA is supporting the development of such a proposal. Clearly, that is at arm's length from the final decision that will be made by the administrator, who will put a proposal about what he believes is the best way forward to the Secretary of State.

Baroness Thomas of Walliswood

My Lords, on the question of Railtrack making information available, is the Minister certain that Railtrack can provide an accurate list of the size and value of its assets?

Lord Filkin

My Lords, I would be mad to say that I was confident, on the basis of the knowledge that I have, that due diligence would be perfectly fulfilled in the circumstances of which we are aware. The administrator has a particularly challenging job in that respect. One reason—not the sole reason—why Railtrack went into administration was because it was not aware of the scope and extent of its assets or liabilities. The fact that that happened after a period during which it was a company is astounding. The second reason, as noble Lords know, involves the unbelievable cost overrun on the West Coast Main Line. I am certain that the administrator is doing his best to fulfil his responsibilities to the court to ensure that bidders have a full and fair picture, so that we do not have a repetition of the complete mess that we have seen previously in relation to Railtrack.

The Lord Bishop of Hereford

My Lords, is the Minister aware that Railtrack is having to continue to advertise for new staff? Is he satisfied that, despite the uncertainties of the period of administration, it is able to recruit people of adequate skill and calibre in engineering and administration?

Lord Filkin

My Lords, I am certain that Railtrack is having to advertise for new staff—it is a substantial business and it is continuing to operate. That was the purpose of having an administration order rather than a winding up order. I do not know in detail whether it is having any difficulty recruiting staff. However, most people believe that, given the Government's commitment to establishing a strong railway industry in this country and to remarkable levels of capital investment over the next 10 years, many able people in the public and private sectors will be keen to join the rail industry. We saw that in relation to the success of the recent Chiltern bid and extension of that franchise.