HL Deb 30 June 2003 vol 650 cc591-4

2.43 p.m.

Viscount Goschen

asked Her Majesty's Government:

Whether the performance of Network Rail is satisfactory.

Lord Davies of Oldham

My Lords, following the problems created by years of under-investment and a flawed privatisation, Britain's railway infrastructure is now under the new ownership and strengthened management of Network Rail. Working with the industry as a whole within the strategic direction of the Strategic Rail Authority, the company is concentrating on its core priorities of operating, maintaining and renewing the railway to demanding performance targets—for the benefit of passengers and stakeholders, not shareholders.

Viscount Goschen

My Lords, I thank the noble Lord for that reply, although I could not work out whether he responded with a "yes" or a "no"; that is, whether or not he believes that Network Rail's performance is satisfactory. Perhaps he could tell the House.

Does the noble Lord agree with the view of his own rail regulator that the explosion of costs at Network Rail is a direct function of the fact that no longer is there any shareholder equity in the company? Further, do the Government now agree that the governance structure, which was forcefully argued for by the noble and learned Lord, Lord Falconer, when he was at the Dispatch Box, is in fact fatally flawed? As the rail regulator has himself pointed out, it is far more difficult to regulate a company with no shareholders.

Lord Davies of Oldham

My Lords, the answer to the first question put by the noble Viscount is that Network Rail has been fully in existence only since October of last year. It is, therefore, somewhat premature to ask how well it is doing set against such a limited perspective and against the Government's 10-year strategic plan for transport. Let me assure the noble Viscount and the House that the Government do not intend to throw money at Network Rail. However, over the 10-year period the Government will carry out the necessary investment to ensure that we have a modernised and effective railway system. I think that all noble Lords will recognise that there is much to be done.

Lord Bradshaw

My Lords, does the Minister agree that the contractual structure that has been wished upon the railway system is fatally flawed in that one cannot force a contractor to deliver at the very highest levels of quality? What is Network Rail doing to ensure that we do not have a railway which is maintained in bits and pieces and whose quality does not give us the type of service that we want?

Lord Davies of Oldham

My Lords, I accept what the noble Lord says. It is necessary to have a coherent structure in the development of the railway system, and that is what Network Rail is charged with providing. The contracting system requires Network Rail to establish a sophisticated system of monitoring. As we all know—recent events have emphasised the fact—that monitoring needs to be carried out with the greatest care. I do not believe that anything in the structure of the signing and development of contracts militates against Network Rail being able to succeed in its overall objectives.

Lord Faulkner of Worcester

My Lords—

Viscount Astor

My Lords—

Noble Lords

This side!

The Lord President of the Council (Lord Williams of Mostyn)

My Lords, this side.

Lord Faulkner of Worcester

My Lords, does my noble friend agree that, while the railway system obviously still faces the most appalling difficulties, we can at least welcome the fact that the various elements in it are at last talking to each other in a constructive way, unlike the days of Railtrack when they were simply at each others' throats? Will he specifically welcome this morning's announcement by the Strategic Rail Authority of the route utilisation strategy for Midland Main Line? That demonstrates how the parties to the industry can work together for the benefit of all the people who work on it and use it.

Lord Davies of Oldham

My Lords, I appreciate very much what my noble friend indicated. In fact, there have already been some signal successes to which we can pay due regard and in which we can take pride. But we recognise that the problems of the past have been ones of coherence, particularly, as I mentioned earlier, in relation to the flawed privatisation. We now have a structure where, as my noble friend said, all the crucial players in the industry are talking and working together effectively.

Viscount Astor

My Lords, is the Minister really proud of the fact that the Byers bungle over the unnecessary administration of Railtrack has cost the taxpayer £70 million in fees and costs? Further, we are now told that by 2006 Network Rail's costs are to rise by £12 billion over budget to £27 billion. This year alone, services have been cut, delays have increased, fares have gone up and the passengers have suffered again. Is the noble Lord really proud of that record?

Lord Davies of Oldham

My Lords, I believe that some noble Lords will also recollect the costs of the botched privatisation process. Frankly, although a not insubstantial sum, the amount of £70 million must be set against the colossal costs to the nation, particularly in terms of transporting passengers and goods, of an ineffective railway. It is still early days as we attempt to recover from many years of substantial under-investment. Surely the noble Viscount recognises that what was handed over to the incoming administration in 1997 was a railway replete with problems, which will not be solved overnight.

Lord Berkeley

My Lords, does my noble friend agree that one of Railtrack's problems was that, in its seven years of existence, it did not manage to create an asset register and thus did not know what it owned or the condition of what it owned? Does not that problem still face Network Rail? Therefore, does my noble friend welcome the fact that maintenance of the Swindon to Paddington section of the line has been taken in-house, together with knowledge of the assets, so that at least control is held over that? Whatever contractors do, if they are not managed correctly, nothing right will happen.

Lord Davies of Oldham

My Lords, characteristically, my noble friend, with his great knowledge of the railway system, has hit upon a crucially important point. The failed structure of Railtrack led to a situation where the organisation was unaware of its assets. Network Rail is making significant progress on that point. It is a crucial building block in running the railway system effectively.

Lord Brooke of Sutton Mandeville

My Lords, is it an inherent part of the logic of a not-for-profit company that it is not entitled to make a profit but is entitled to make a loss?

Lord Davies of Oldham

My Lords, it is certainly the case that a considerable amount of the investment in Network Rail will repay only over a substantial period. I believe that the noble Lord will recognise that investment which is designed to produce the outcome of the main points of a 10-year strategy cannot be judged at present. But Network Rail is fully accountable to the Strategic Rail Authority and, therefore, the monitoring of its activities will be kept under the strictest review.

Lord Stoddart of Swindon

My Lords, with regard to the necessity, or otherwise, of having shareholders to be accountable to, is it not a fact that we shall spend £54 billion of public money over the next 10 years? I calculate that to be roughly £1,000 per person. Therefore, is it not correct that the rail shareholders are the general public—those who pay their taxes? I, and the country, need to be assured that that money is used properly to build a first-class railway system in this country.

Lord Davies of Oldham

My Lords, my noble friend is right. Members of the public represent the most substantial group of shareholders in the railway. Particularly significant is their role as taxpayers, given the considerable amount of government money invested in this area. But my noble friend will recognise that Network Rail and the Strategic Rail Authority have structures of accountability and they will be held to account. He will also recognise that nothing will serve the general public and taxpayers worse than for us to tolerate a railway that is well below modern standards.